CPI Preview | Bloomberg Surveillance 1/11/2023

CPI Preview | Bloomberg Surveillance 1/11/2023

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At the end of the day, we have this set of circumstances where the Fed is intent on reigning in the labor situation. The higher that prices remain. That's going to force the Fed to raise rates higher and potentially Ukraine's higher for a longer period of time. We're expecting just a 25 basis point rate hike, and I think the Fed might even be able to pause from there.

We're kind of moving totally out of the inflation regime, moving into something new. Disinflation in the second half of the year will kind of filter through into core and the picture will look very, very different. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz waiting for inflation data in the CPI Thursday just around a corner. Tom, are you excited?

It's not CPI. Thursday, Sam Goldfarb of the Wall Street Journal nails it. It's super core CPI, super, super core CPI. This is where Chairman Paul is in a lot of other people's services, ex housing, maybe services, ex housing access.

David Rosenberg's rolling over in his grave up in Canada saying you don't disassemble inflation. It's the sum of all these different parts. We'll do that tomorrow. I'm not sure that Brandon is going to work life from New York City this morning. Good morning. Good morning. Our audience worldwide. This is Bloomberg Surveillance alongside some keen I'm Jonathan Ferro Lisa Abramowicz for a couple of days. Bremmer is going to be back with us on Monday. Equity futures right now only S&P 500

positive two tenths of one per cent. T.K., the gloom out there. Does the gloom stack up with what we're seeing in this market? I went through the numbers this morning in equities, back in a bull market. Copper prices back through 9000 European banks. Eurozone banks time are up more than 40 percent from the lows of last summer.

Make sense of that? The mat of the gloom. Three weeks ago. I'll let you decide. Four and a half weeks ago, whatever it is, and you list all these different items we see on the Bloomberg terminal. We have an extension of car accommodation today, John, out. A positive number are two point zero, six standard deviations. All you need to know that confirms all the good news you're talking of. Is it a conundrum for Chairman Pat?

This family is a massive conundrum. Does it come up against a Bank of America says it's not. This doesn't have to be a major problem. They shouldn't obsess over the fact that this market's pricing in rate cuts. I agree. But, you know, nobody cares about my opinion. I'm going to state that the accommodation we're seeing and the good news we're seeing here is something he can't deal with until he sees inflation break.

We may see that tomorrow. We get that tomorrow morning. I have to say today, light on data like some facts speak. Maybe that's good news for many of you right now. Let's wait for the price action. Equity futures up two tenths of one per cent on a S&P 500. Yields come back in on a 10 year down by about four or five basis points to 357 24.

We've got to talk about foreign exchange in a moment. Some euro dollar one a seven for a up a tenth of one per cent there. Just a renewed optimism of the last couple days off the back of maybe that Goldman note suggesting that we can escape recession in the eurozone.

I do. In the roof. Would you like to take a breather? What's coming up? What you. Here's a brief. It's a federal case in brief. Bram always so gone. Gareth Bale, retired. I'm sorry. John kicked the ball from outside. I don't know anything about soccer. I love this guy. He's like Grayling.

They just make things happen. Early 30s, very young to retire. Very, very young to retire. Bad news like Bobby or now I think he's fed up with the game and wants to play golf. That would be my personal opinion on the matter.

I don't think it is well respected around Madrid, despite how much he won. You know, that wasn't loved by the fans at all. Oliver Brown in the Telegraph wrote Read every word and that's what he's ugly. Found out with the club and it looks like he's got border plot someplace. Seven minutes. Well, he did play for time for a little bit, didn't he? He went back there.

Yeah. Come back. I don't think that's what Antonio contacts looking for right now. We've never briefed like this. This happens sometimes. Sometimes players just kind of leave. Gym members sit down, walking away from

from house. I like the 2000 captain and he didn't get along with Bill. I wrote just a beautiful player when he coached the team. Yes. Yes. Yes. Yes. I didn't think we'd doing this today. This is a brief. That's the truth.

That's not the brief shares. Right? They're just not the brief that Brahma is proof. Don't get that on my tongue. There we go. Delicately over a terminal. The Sedition Acts joins us now at a European affairs strategy. It sets a precedent.

Let's talk about that in the face of all this global recession. So the market's having a different conversation, isn't it? Oh, absolutely. I think to a certain extent, these forecasts about recession are a bit outdated and they're based on a number of forecasts that were produced back in Q3 and beginning in Q4. This is not to say that they're not going to be a number of economies that are going to experience a sharp slowdown or even in recession. The U.K. being one of them. But I think there's been a significant and massive change in the market narrative. In Q4, the initial headlines about

China reopening morphed into concrete and very quick and swift action. There's been further support in the housing sector in China. And I think what we're currently seeing is that this drastic mindset, a change in mindset which caught me by surprise as well to support growth in China, is basically shifting the focus of the market into a rerating of global growth expectations higher.

I think this is precisely what, you know, equities are telling us. This is what relative equity performance is telling us. And that's definitely what the dollar market is telling us. Well, let's push it through the affects market. The peak of the US dollar was late September.

The low in euro dollar around the same time that low on the euro was about 95, 95 cents on euro dollar. Right now, we're back to one of 750. What kind of upside are you thinking about in a single currency now besetting us? Well, I think right now we're at very critical levels. I think 1 0 7 18 is going to be a level that has proved to be in the past quite a strong resistance area. If we clear that level, obviously we're going to see a lot of leverage, money buying into further upside. And potentially this is going to imply that real money accounts are also going to fall through. But then again, fundamentally, you know,

you have to take a step back and say, what do our fundamental models suggest, fair value models suggest? And I think right now we're gravitating towards fair value range of 112 to 115. Clearly was still pricing a risk premium because of the Fed, because if we're not certain how that China reopening is going to pan out. But I have to say, first of all, I don't think that a 25 basis points repricing higher or lower in the Fed is neither here nor there for the market and for the foreign exchange market. And assuming these and assuming that we get a relatively smooth China reopening, which implies a pickup in domestic demand and therefore Chinese and imports. Yes, I think we can gravitate towards

this level over the course of the next year or so. That's right. Where I wanted to go and I'm talking about you and your great efforts team, but also all of Citigroup and including Ed Morris has world class call on oil last year. Are we fighting the last war or are we fighting right now intellectually, the 2022 war and the World Bank? Is China growing at four point whatever percent and at home and in Evercore ISI of China growing at 6 2 percent. It seems to me right now there's a whole not Bloom crew and honor Brimmer, but just a cautionary crew, not modeling in the potential upside of two thousand twenty three. Oh, absolutely.

I fully agree with you. And you know you know what? I think you hit the nail because a lot of of the discussions I have been having with especially U.S. clients, you know, if I measure the time that I spend about talking about the Fed, I take it consumes about 65 to 70 percent of our discussion.

And that was the big market theme back in 2022. But since Q4, we have had a massive shift in market narrative. It is pretty much all about China right now. And if this thing pans out relatively smoothly, as I said, it will have hiccups, especially in Q1, which is going to represent, let's call it, the trial period of how things are going in China.

I think you can prove that the change in the mindset in Beijing can actually bail out global growth and morph into an upside in global growth and upside in global trade as well. So is this the repeat of the post financial crisis playbook for Citi? I still remember that when China bailed out bailed out global growth. Is this a repeat of that? To a certain extent, it can be. Look, I don't want to draw parallels

with the great financial crisis, of course, largely because we were hit by completely different shocks back in the GFC, we were hit by endogenous shock. Right now we are being we initially were hit by an insurgent assault, which was Covid, which started building, you know, a lot of saving buffers and eventually meant that we had to deal with extremely high levels of inflation. And during this time, during this past two years, China has been completely shocked, or at least to a large extent shocked from the rest of the world. And all these bottle necks, I think, are going to start, you know, getting released. They're going to start becoming less of a hurdle into the various trade chains and trade channels. And I think this is a big positive for global growth.

The sinister nexus of set a brilliant. It's just fantastic. Brad Stone over a sexy little bit more constructive on the outlook. When we talk about China, we've done this a few times on this program over the last several weeks. You've got to break it down just quite

simply. Demand side questions, supply side questions. On the supply side, does it deliver supply side relief and the weight of us expects it to? Or does it lead to further supply side dislocations off the back of that big demand that we're expecting? I'm going to go to Jonathan Spence one at one. They have one mandate within their totalitarian regime, and that is to marginally employ the people. And that means fiscal stimulus and particularly a bailout of their domestic real estate business. And that statistic yesterday from Julian

Emmanuel and I'm one of six point two percent China CPI doesn't get you to the gloom of a good institution, World Bank. We've got Malpass coming out and looking forward to my definition. They have to look back. I get that John Tucker is looking forward and seeing a better day. Malpass is looking at maybe a one handle on global GDP. The price action is not confirming that outlook in any way, shape or form. I will always defend these institutions, their institutions.

They have to look backwards and that's what I saw yesterday where I get all of that. So for investors right now, you got answer a simple question. Tom Keene I've been asking it should you price in a global growth rebound off the back of China reopening or should you price in a global growth slowdown off the monster financial China? You should tune into Bloomberg Surveillance tomorrow at eight thirty where we will look at super core inflation along with everyone else. And these are the drip Spanish inflation, French inflation, three other inflations. I can't remember, John, even the United

Kingdom with the war in Europe, maybe a better nat gas pricing in Europe. These are accumulative good losers and disinflation. With you though, I think this conversation can completely change. 831 Eastern Time tomorrow morning. Yeah, completely. You get an upside surprise. The conversation switches in for are not they not deemphasize deemphasizing the inflation report? You're not going to do that. We're not going to deemphasizing the

stuff should report to visit us. His point, his frustration about the conversation being dominated by the Fed. You get an upside society's bias, he said. I said we're going to talk about 65 percent of his shares consumed. I say consumed by budget. That's almost as bad as you say. He thinks it should be 80 percent Jihye

Lee. Now it's 80 percent with you, you reckon? Yeah. Fed chair trying to grab me ram. I was trying to lean a little bit more into the China conversation. Is retail equity futures right now six cents of one per cent on the S&P. That's round it up to down by four or five basis points. Your 10 year 357.

Keeping you up to date with news from around the world with the first word. I'm Lisa Mateo, president. Biden says he was surprised that classified documents were discovered in an office he used before he was elected. He says his lawyers did the right thing by calling the National Archives, which took possession of the papers the next day. Congressional Republicans are promising to investigate. The US will bring Ukrainian soldiers to Oklahoma to train on the Patriot air defense system. About 90 to 100 Ukrainians will take

part. Normally, training on the Patriot takes several months. The U.S. is looking for ways to speed that up. In the UK, ambulance workers are on strike again today. Members of the two unions are walking out as part of a dispute of pay in the National Health Service. The public's been warned they may have to wait longer for emergency services.

Bloomberg's learn that Apple will start using its own custom displays and mobile devices as early as next year. That's a blow to partners such as Samsung and LG. The company plans to begin by swapping out the display in the highest. And Apple watches by the end of 2024.

And after years of scandals and multibillion dollar losses, Credit Suisse is tightening its belt. Bloomberg has learned the Swiss lender is considering cutting the bonus pool for 2022 by about half. The move would bring the amount down to about one billion dollars, with some employees likely to receive no bonus at all for last year.

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 Matteo. This is Bloomberg. People know I take classified documents, classified information seriously. They found some documents in the box. You know what? Cabinet or at least a closet. And as soon as they did, I realized

there were several classified documents in that box. And they did what they should have done. I was briefed about this discovery and surprised to learn that there were any government records that were taken there to that office. But I don't know what's in the document. The president of the United States, just in a touch of hot water, would pick up on that in just a moment. Live from New York this morning.

Good morning. About 25 hours, 26 hours away from a CPI report in America, the feds speak pretty quiet today. The dates are pretty quiet as well. The market pretty quiet. See, the equity market looks like this equity features positive, a little more than a tenth of 1 percent. Yields come back down by four or five

basis points, 357, 24, crude, 75, 42. Watch out for this a little bit later. We're up four tenths of one per cent on tubby shy. Watch out for stockpile data a little bit later today, Tom, because some evidence perhaps the stockpiles have been climbing. So that's one to watch for later. Great Southern zygotes. Brent crude rounded up to eighty one dollars a barrel, even though the moves are small, John, I would say they continue the trend of accommodation, of optimism, of a constructive view forward. And I'd say this mostly junk as the VIX was 21 22, wouldn't move in yesterday with a vengeance, came in to twenty point seventy five.

At least that's a a shift in this gentle trend. Never mind the VIX. Hello, Jeff Carrier, Goldman Sachs and copper prices over in London on the anime back through 9000 for the first time I think since last summer. So we're still trying to express that China reopening story, pushed it through the effects market, pushing it through equities, pushing it through commodities and base metals. Tom, in a big way. We'll get a briefing now in Washington,

the turmoil, the tumult that we all witnessed on the floor. Whatever your politics, it is a most interesting January in Washington. Greg Valliere is chief U.S. policy strategist at EGF Investments and joins us. Greg, there's like 14 ways to go here on

your new Washington. But one has to be the quote unquote, big bipartisan win for Speaker McCarthy on China. How big a win was that? I mean, we're going to go after China.

Is that news? I think it was pretty clever, Tom. He knows there's great antipathy toward China in both parties. So he played on that and he got a huge victory, bipartisan victory yesterday, creating a committee that's going to look at China, stealing our intellectual property and trade violations, blah, blah, blah. But I do think he puts a lot of pressure on China and he shows that he can get some votes from Democrats. Where else can he get votes from Democrats? Call me crazy.

And many have. But I don't totally rule out an immigration deal. I don't think Biden would be a big player. His policies are incoherent, frankly, on the subject. But I think you've got a lot of people in both parties who would like to get something done. I don't totally rule that out. Greg, starting to see some restrictions

come through from various places to restrict Chinese investment in real estate. See that in Canada? Would Trudeau making an effort there? Heard this morning in the last 24 hours that come to its senses might make the same push over in Florida. You're going to see more of that? I think so. I think there you go around the country and talk to business leaders and to a person. They will tell you that in competing with China, that China doesn't play fair, that they cheat, that they steal things. I'm not saying I believe it, but you

hear it from everybody. So, yeah, I think there's going to be more. And of course, Trudeau got a smackdown from Xie a month or so ago. So the relations between North America and China are going to stay very rocky. Well, I think attention that wreck is obvious. Less obvious until recently has been the tension between the Europeans and the Americans over the investment around things like Evey. Greg, if we reconcile any differences

over the last couple of weeks now, really, I wrote this morning, I thought the summit in Mexico was a total dud, just platitudes. Nothing really accomplished, including no deal on Eve Evie's, which has a lot of countries upset. There's some big issues in Latin America, Brazil, Haiti, the war with Mexico. But I thought this summit was was useless. Greg, what did the progressives, the far left wing of the Democratic Party. What did they learn from the McCarthy speaker fiasco? What did they what lessons were taken from the strength and negotiating power of the far right over by the far left? And two things, Tom.

Quickly, number one. Some people in the Democratic Party, you know, feel that this gives them an opportunity to continue branding these extremists as a real enemy that might help them. But I think the bigger takeaway is that this is going to be a tough fight. It's going to be a. This year, there's gonna be hearings. I think there's a chance Trump could get indicted later in in Georgia later in the month. It's gonna be a really nasty year. And I think the Democrats got a wakeup call by what they saw over the last week. We've had a nasty year.

I'm going to go back to Alien Sedition Act 18 0 1 8 0 2 0. This is normal in American politics, scope and scale that back across our history. How nasty is nasty? Well, I mean, Glenn, when I started I mean, you saw the fights over Vietnam and Watergate and it's continued to go. Go on beyond that. I mean, not to sound like a warrant, but it's about the fundamental role of government is a reduced role. Is it a big role that's going to be dominant this year? Greg, on the front here, house up in New Hampshire, you got a big, big poster that says we're first in the nation.

Help me with the primary fiasco. You're in New Hampshire literally by I believe constitutional law has to be first in the nation. Is this just silly politics or is there some substance here for our viewers and listeners? Oh, I think that there's real substance and that there will be a delay. And certainly in Iowa, I think they're going to get a delay, maybe New Hampshire as well. But knowing people in my home state, I think you'll probably see that as the first armored. Already. Lots of Democrats are on their way up, including Phil Murphy of New Jersey.

Greg, can you see Jon Ferro at the Radisson Hotel up there in Concord dressed? Oh, L.L. Bean. I mean, I'm sorry. I mean, it's just no. A sight to behold. He lost me in Addison C. CAC. Not not unless there's room service just. Right. It s him, Greg.

Greg Valliere of IDF Investments. Hey, Greg. Thank you. Developing story right now in the United States. America cannot build on that for you. Just briefly, this off the back of reporting from Reuters. So I'll bring you that story. The bottom line, the US Federal Aviation Administration system that alerts pilots and other flight personnel about hazards or any changes to airport facility services and relevant procedures was not processing updated information. The Civil Aviation Regulator's website

showed today over 400 flights were delayed within and into or out of the United States. As of Wednesday today at 531 Eastern Time, flight tracking website Flight to West showed it was not immediately clear if the outage was a factor. Information still coming through, Tom. That's the reporting that came from Reuters in the last 30 minutes or so.

Looking at the premarket moves, the airlines are a little bit soft and a real drama here. We're down about a half of 1 percent on American on United, down a third of one percent. Southwest, which has had its own troubles with some systems over the last couple of weeks, is down two point eight percent. You make jokes about it, but it's not funny. There are airplanes in the air. They're international flights coming in. It's boom times 6:00, 7:00, 8:00 a.m. on the East Coast.

For all those international flights to drop in. And, you know, I don't know the details of it, but these are busy skies just with what's up there. Now, even if they're grounded on the ground, when we get more information, we'll bring it to you. But that's the latest from the reporting from Reuters this morning. Asked where the equity market is just a little bit firmer on the S&P 500, up by two tenths of one per cent. Futures advancing care.

Your next big stop, your next scheduled stop for equity markets. The bond market affects as well as CPI tomorrow morning. Equities up got into it. Some yield slumber by 5 basis points on

a 10 year 357. Services and goods, goods and disinflation even. I've seen some charts drop dropping down on the edge of deflation and negative statistic and some of the good subsets.

But services just hasn't given way. You've got to come back down to a 3 percent normal. I'm using as a very general statement, John, but you've got to get services down.

Not to zero, not to 2 percent is a fed statistic, but some. They're on a blended basis with goods that moves them in the right direction and we're just not there yet. We may get a vector, a trend that gets you there, but we're not there yet. So let's talk about the trend. Last week, headline data claims exceptionally low payrolls, pretty decent unemployment. Three point five percent just as softness in wages. Maybe that reduction in hours worked.

Maybe that gets your attention. Some real data. Jim Glassman, the other optimists out there, they look they look really smart going into a recession. It's out there somewhere. Excited to catch up with Chris Verrone, a strategic guest very shortly from New York. This is pulling back. Coming off the back of a decent day of gains on the S&P 500 yesterday, having a look at building on the equity futures up by a tenth or two by zero point one six per cent on the S&P, up a tenth of 1 per cent on the NASDAQ in the bond market ahead of CPI tomorrow morning. Yields come back end by four or five

basis points 357 your two year 423, 67 yields in there about a basis point the optimism around Europe. You've heard a million times in the last 24 hours, haven't you, all of a sudden from sub parity ninety five point ninety five for the end of September and back to one of 745 on Eurodollar hair, up about a tenth of 1 per cent, some stocks to watch in the premarket. I think we're all over the airlines right now.

I'll go through some of the reporting out there at the moment. Reuters first out this morning saying the US Federal Aviation Administration system that lets pilots and other personnel about hazards or any changes to airport facility services and relevant procedures was not processing updated information. The latest reporting from NBC News is that all flights in the U.S. have been grounded. I got a 400 number after this lef a outage. Tom, so we are down on American by about one point six percent on doubted by three quarters of one percent united, some down a half of 1 percent and Southwest for all its own troubles. Here's potentially some more stocks down

by 2.8 percent. We aim to please. Jan, no terms. NATO has indicate real time an abnormal status impacting every user concerned the establishment condition and change of facilities hazards in the system. No terms have a unique language using special contractions to make communication more efficient. This is the inside language of the FAA that's just got a tweet from the FAA, Tom. So I share that with our audience as

well. It reads as follows The FAA is working to restore its notice to our mission systems. We are performing final validation checks and reloading the system. Now, operations across the national airspace system are affected. We will provide frequent updates as we make progress.

The latest, Tom, from the Federal Aviation Administration going no further on the rebooting. It sounds like what they're doing. We will continue to come back on a serious matter. Folks with an estimated 400 floats by Reuters grounded right now, not grounded, as Chris Verrone, partner, head of trend, technical and macro strategy at Baird. He and I are on the same page. Forget stochastic trend matters. Which trend chart?

Chris Verrone right now matters. Well, Tom, it's a great question, and I think when you look at the market in totality right now, you could make two very compelling cases on both sides. Let's take what I think are some of the problems with the bull thesis right now. When you look at the problems to the bull trend, I would say it's gold has been better than stocks.

The largest stock in the world, Apple has broken down and the yield curve is still wildly inverted. So that's the problem with the bull case. What's the problem with the bear case? The problem is the bear case is caterpillars at a 52 week high. LVMH is at a 52 week high. And industrials, all of the world are

breaking out. Right. So we're in this very, very disparate market, you know, 20, 22 as a monolith. I don't think 20, 23 is a monolith. But you know what's interesting here, Chris, running, you know, under setups, you could have a number of trends to confirm. Does time heal the confirmation room

wound? If I've got a certain trend belief and I have, do I go out February, March, May 2, get confirming trend, is that going to happen? Well, I think, Tom, I think to that question. I think the best trends or the bull markets out there are in what no one owns its metals and its mine. I mean, look at the breakouts we've seen in Rio and BHP and Valet and Freeport. Right. There's a message there.

It's just a really small part of the market that I think is wildly under owned. And then conversely, when you look at the stuff that people do own still in size. Relative top in Apple, relative top in Microsoft. So it's a very split tape from that perspective. The bull markets are in what no one owns right now.

Well, let's go through one by one. And Chris, I want you to tell me what you'd sell em. Equities back in a bull market. Copper back through NIKKEI. You mentioned Rio is up almost 40 percent from its lows in late October. Look at the banks in Europe.

They're up 42 percent from the July lows. You can look at high yield spreads in the United States. It's not just the stuff abroad. High yield spreads in the US and the tightest we've seen going back to August. They're more than 100 basis points off the whites.

What's a sale here? Chris, going through those things. Well, what I hear you describe that, John, I think what you're describing is money's coming home, capitals being called home for the last decade. You were really only rewarded if you park money in the US.

There was a lot of various ways to do that. When I look at U.S. market cap as a share of total market cap, it's topped. It's declining. Right. So there is a change where money is

going back to where it originated from. You see that notch for the European banks. You see with the Japanese banks. What's the message there? You see it in the strength in the Chinese one. Right. So everywhere I look, you know, we've talked a lot about regime change now entering its second year. Capital is being called home.

I think that's a really, really important theme moving forward. Chris, let's build on it. What do you say to the people here in the United States with a home price? You think we're one right kind of way from regaining leadership and the USP in the rest of the world? You know, I think all this focus on the pivot is missing, the actual pivot in the actual pivot, what happened in Japan in mid-December? The actual pivot, it's what's going on in China right now. I mean, look at the response to the equities or the quarters of the market that are related to those stories. Then the move in the Japanese banks.

You're talking about a decade long breakout, a 20 year breakout in some of the Japanese banks. That is how a market should respond to a meaningful pivot. You've seen it in Japan. The move we're seeing, I think, with these big basic resource stocks would also be suggestive of a major shift in China right now.

And then when I look at the U.S., all this anticipation for a pivot and you have rates down and you have dollar down. And the big weights are still underperforming. So I think the market is speaking very clearly about what the real pivot is and what's the fallacy. Chris, it's true. Tig is buried. If I want to express a belief in the recovery of China, maybe even Japan and the Pacific Rim.

How do you best express that? Do you do it through ETF? Yeah, well, I think there's a couple of ways. And, you know, we certainly run ETF strategies and try to capture the macro thematic elements of of what's going on. But I would also just add to that, you know, the thing about China, I want to own something where I don't have to be perfectly correct on China. And that's why I like these big basic resource stocks. I think there's other stories there. I think the China reopen is part of it. But when I look at Rio or Valet or BHP

or Glencore, I think there's more than just the China story there. So, you know, in emphasizing what are the best charts around the world, those are certainly high on our list. You know, there's certainly those who've told me about the tax. You say they're beleaguered, they're still over loved in all that. There's still got massive revenue growth. There's still, I believe, going to have product. They're going to make, you know, the

profitable ones are going to make margin. Do you ignore them or just hold them? I think you still sell them. We're in the I think, still early innings of what will be a multi-year move out of these stocks. And Tom. It'll have two phases. And I think we probably have seen the first phase in the first phase was these names going down more in a down market. But the second phase is almost more paralyzing.

It's these stocks going up less when the market goes up. I mean, that was the lesson of 2001, 2002, 2003. You know, the big tech stocks went down more as the index fell. And then they went up less than the next bull market that I think is so important to remember here. Chris, on the same day, the week on a 52 week low on Caterpillar. That was the same day the dollar peaked.

Now, Chris, I imagine you don't think that's a coincidence. What's driving what? I think that is not at all an accident. You know that the deflation of the dollar here or the popping of the dollar bubble, I think is a very big story for 2023. And we are now in the short term. I would say dollar is very oversold

here. It would not surprise me to see a bounce. We're going to put in what I would call in my world a right shoulder in the dollar. I would be a seller of dollars. Right. But think about it this way. Over the last, let's call it 12 weeks growth, investors and growth stocks have gotten every single thing they wanted.

Rates down, dollar down. Softer inflation. And they have nothing to show for it. Gold is up more than triple Q's over the last twelve weeks. So that's a problem. I think if you're counting on some change in the macro or some relief in the macro to be the catalyst for the restarting of the growth bull market.

Chris, this was great. Christopher on that shitty guess. Just look at those charts. And Chris, I have to say, you mentioned those miners before the new year. It's not just this new thing.

It just looked at a chart right now. It's been a top story for the last several months. We've got a new headline I just want to bring it to our audience tells United Airlines all the flights are grounded amid this FAA system failure. That headline crossed in time just minutes ago. Thanks for your concern about Bruno. I just want you know, she's in Morristown. I thought she was a teacher, bro, but she's at Morristown with the Gulfstream.

She trying to travel this morning over. Jets are on the ground, too. She can't get off. You know, it's just it's it's they're united. We're in here from a lot of others as well. And what's important here, folks, is I don't have within the zone gazed any indication of the duration of this, do you, John? No idea. I don't get any indication that it's it could be whatever.

All we know so far is that there has been a failure of a key pilot notification system operated by the Federal Aviation Administration and ABC a little bit early this morning reported that all flights have been grounded. We're going to company after company and waiting for confirmation of that be United Airlines. And those flights have been grounded amid this FAA alert system failure. You can see the moves in. The stocks in a pre market is a real drama. Right now, we're down by one point six per cent on American on United Vedanta, half of one per cent on Southwest, as I keep saying, which has its own problems.

It has a new problem. Southwest is down by 2.5 percent cent. And to your point, Tom, a lot of this is going to depend on how long this goes on for its soft, remember, tied into the system. And what I would suggest is not the danger at all over accentuated, but all the flights that are in the air, I don't know that statistic right now.

How many flights when this occurred are in the White House? American answer is a big number. As you know, this is a very risk averse business. Yeah. As you know. So when we get more information, we'll bring it to you. But right now, that's the latest from United flights grounded amid the FAA alert system. Failure in the stocks a little bit softer.

So if you are looking at traveling this morning, no doubt reach out to your airline and work out what on earth is coming on this morning, because I don't think a lot is going on. Tom, based on what we've seen so far. Well, we're just gonna have to see what I would suggest as there's still an airline boom. All summary I have is no one expert in this is talking about an end of the boom. The one area is domestic business. Travel maybe hasn't come back like it should have. But other than that, would you agree with me? Joel Weber.

trans-Atlantic international business is huge. Glenn Beck has talked about it with us a million times and it's asking the outlook for this year was was pretty great. Yes, some of these airlines still. But the stocks really haven't come back. I mean, they've come back off the gloom of the pandemic, but they've got you know, there's a lot of people out there with some real enthusiasm about people like, you know, developing story. As I say, we keep building it. The latest headline from United Flights Grounded I the FAA Alert System Failure. Coming up next, a Beamish chief economist, T.S.

Lombard off the back of this monster China reopening story. We keep asking, should you be pricing in a growth rebound off the back of China reopening or a growth slowdown off the back of much of the rate hikes over the last 12 months? Which one is it? From New York, this is blowing back. Keeping you up to date with news from around the world with the first word. I'm Lisa Matteo. Well, as you just heard, flights across the U.S. being disrupted this morning because of the failure of a key pilot notification system operated by the FAA. Now, there's no estimate for how long it will take to restore that system. And scores of passengers due to fly

domestically. They're reporting delays all across social media. In California, more drenching rain is on the way as a historic drought gives way to flooding. Three more storms are set to hit the state through the weekend since the end of December. Storms have killed at least 15 people and closed highways and sent residents fleeing for their lives. Fixed income manager Jeffrey Gundlach says if investors want to know where interest rates are headed, don't pay attention to the Fed.

Instead, he says, they should look at the bond market. Fed officials indicate they expect to lift rates to more than 5 percent. But market suggests the peak will be less than that. Wells Fargo has announced a new strategic direction for mortgage empire that once was the largest in U.S. banking. It will stop funding home loans arranged by outsiders and shrink the portfolio of debts and services that caps years of efforts to clean up a business that in tangled Wells Fargo and regulatory probes and lawsuits and shares of luxury goods company LVMH hit a record high. Today, the company named new CEOs at two

of its brands, Louis Vuitton and Christian Dior. Now, the deal, chief, is Delfin or no? She's the daughter of LVMH CEO Bernard Arnault. LVMH is already up 13 percent this year. 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 Matteo. This is Bloomberg. When you see that the gas prices are going down, you can expect that the consumer bills are going to go down. But that indeed is the key thing, because that's what is driving inflation.

That inflation that is driving up, especially in countries with automatic indexation such as Belgium, is driving the wages up, which is actually hampering our competitiveness. And so prices going down is good, but it will take some months before the consumer will see it. We're not out of the woods yet, is the message from the Belgian prime minister sitting down with Maria Tadeo in the last 24 hours. If you are just tuning in, good morning to you. Equity futures just about positive on the S&P through much of this morning.

Equity futures right now look a little something like this, up three tenths of one per cent on the S&P 500. It's come in for a five basis points on a 10 year to 357 24. If you can bring up the allied stocks, that's going to get a ton of attention this morning. Here they are on the free market. Southwest down 2.5 per cent, unites it down by a little more than 1 per cent this morning.

United Airlines temporarily grounding all flights to all destinations off the back of this story, some that developed in the last hour, the fate of a key pilot notification system operated by the Federal Aviation Administration is going to take a long time time to work out what's coming on here. But we haven't got the information as to how long this might take. We're learning about this in real time. We're not any smarter than you are,

folks. And I know you're going to go to our reporter. And there's Joan in London, but just one Satya Nadella. This is from the FAA. Did you know that you should always check 25 nautical miles to either side of your full route of flight to ensure relevant no terms? That's how tight this is. There's six jets up there at 35000 feet or whatever and up and down. You know, whatever it is. And they're looking at with a 25 mile perspective that that's what doesn't work. Right.

According to the latest reporting, the FAA said on its website a hotline has been activated. So this one's going to be a busy morning, maybe the morning that some of you out there didn't want. If you're looking to travel this monarch, stay.

Joining us now is Bloomberg, Siddharth Philip said. I want to just start with your latest reporting on what you've learned in the last hour. So, yeah, in the last hour, we have learned that United Airlines has temporarily grounded all its flights to all its destination. And that's because of a failure of the keep pilot system that is basically called and not on noticed air mission system, which basically conveys important and urgent information that essential for flight operations. So the no time system is basically what keeps pilots informed about any of normal sort of changes along the route. And it's crucial for safety and operators operating flight safely.

And from what the FAA has put out on its website, the system failed at about 28, 20, 20, 28 last night. And since then, there's been no new north terms or amendments that have been processed. And the FAA hasn't really given up a timeframe on when it plans to restore the system. The test technicians are working to restore it. But there's no there's no estimate for when that might actually happen. And if activated, a hotline to sort of mitigate against this in the Mohamed El-Erian said, how unusual is this? Do we have any experience with this kind of thing shutting down? It is fairly and it is very unusual for a system shutting down.

Again, it is crucial for airline operations. So getting it back up and running again is absolutely essential. All right. Let's do able to see if we take off and land planes. You said you've got great experience in

this, both in the United States and based out of London, running all of our aerospace coverage. And I'm absolutely fascinated by when I'm on the Heathrow flight path there and I'm over for him. And, you know, I get that there's all the rules of the United Kingdom. But the answer is, I'm seeing airplanes out there all over the place. Do you assume as a pro that the U.S. system of No TAM is superior to Europe? Is Europe superior to America or is it all the same one big computer thing? It's all many little computers, but essentially it is the same safety system and it's that no time system is common across the world.

Every sort of aviation regulator operates them across the world in Europe. Yes, sir. So it is something that's crucial across the board. And I don't think that any system that's superior to the other.

I mean, this one is definitely a massive blow to the US at the moment. And I'm sure there will be some sort of investigation as to what went wrong. I said, great to catch up. And if you get any more information, bring it to us. Set up, Philip, that blend back.

Thank you. No estimate on when the FAA will restore services, Tom, or flights in the United States appear to be granted at the moment. Where does he really continue? How their coverage will let you know about any of the headlines here that we see from George Ferguson, from Mary Schilling and Stein and the rest of our aerospace team in the United States. This is a very important conversation and becomes ever more important with the surveillance news flow of the last two days. There are beginning to be estimates of a

China recovery. Fred Beamish is chief economist at T.S. Lombard in his borderline encyclopedic on the Chinese economic experience. She joins us this morning. Evercore ISI free of Florida's yesterday with a six point two percent recovery statistic for China GDP. Can you get there? T.S. Lombard. Not not quite to that extent.

We do think that growth this year will be in the 5 percent range, which I think is still a little bit above consensus. But we have to be really careful that what we mean by consensus because our estimates are coming off a lower base for this year. So the official statistics are not really telling you the full details of how weak growth is. This year we had contraction and we're probably going to have another Q on contraction in Q4. So we get about 5 percent next year purely because of the the timing of the reopening and because of the low base last year. But I think kind of taking a step back here and recognizing that this reopening trade has has got some steam behind it is is a is a decent thing, especially when you take into account the how low interest rates are in China. And that means that the retail investors

will get in on it. They have space to leverage up and kind of buy into this trade and are going to sell your expertise. How does that new growth in China, that recovery diffuse across the Pacific Rim and indeed over to America and onto Europe? So there's this China is really the risk in a number of different ways to the global story because it has decoupled from the shorter term story off of the reopening that China is having that much later than than other other markets. And then also because the secular story in China is at odds with the with the secular story in the rest of the world, almost in a zero sum type of way. So the short term story, the biggest kind of underappreciated risk that emanates from China is just that we have continued worries of supply disruptions in the in the short term while while Covid is still running, raging through the region, through the population. And that would be a very serious thing if it were to cause the price of core goods to start rising again.

All about forecasts, and I'm sure those of others are based on the idea that the price of core goods is going to be flat or falling. And that's what gets you to a kind of 3 percent or 4 percent quarterly, a three month annualized rate of core inflation in the U.S. CPI case by by Q2 of next year and a markets so I think are priced off of that. So if we start to get supply disruption and the price of core goods fails to fall or stay flat, then that's that's a problem. That's not our base case at the moment, but it's a significant risk when you actually get to the reopening itself.

I think that will prove to be disappointing. By all means. Now go for the tactical story. But in when when you get the data coming through in the middle of the year and certainly towards the end of the year, I think A that the reopening itself will be disappointing and be that the structural slowdown will then start to make itself apparent further down the line. I got 60 seconds on the clock. I want to squeeze this just on the supply side. And I know your down.

No, you down to understand your base case and the sequencing golfer. You seeing further supply side dislocations off the back of this China reopening before we see supply side relief. It's not our base case at this stage, but I'm just very aware that my own forecasts are extremely dependent on that core price, that the price of core goods staying flat in the CPI and in in developed markets. So if there was disruption to that, then that would be a problem.

And I think if if we get the the actual numbers coming through on the on the GDP side in the middle of the year, that'll be disappointing because the consumer is is is not doesn't have the kind of firepower behind it that the developed markets, consumers do. And because the property market, the strong structural answers have not been provided by the authorities on how the property market problems are going to be solved. And therefore, all of this this kind of jubilance over the commodities, the hard commodities that normally rally with with China, I play it for now. But when you get to the hard data, just be a bit more careful seeing that in copper right now for FEMA. Shifty Islamabad Fred.

Thank you. T.K. is going to be the story 2023. Looking at a year ahead, China reopening. Yes, I do agree with that. The focus is on inflation on a global basis in which to live. But on an aggregate basis, there is no other story coming up. The British edgy identity of the ISE research will catch up with him in the next hour.

At the end of the day, we had this set of circumstances where the Fed is intent on reigning in the labor situation. The higher that prices remain. That's going to force the Fed to raise rates higher and potentially keep rates higher for a longer period of time. We're expecting just a 25 basis point rate hike and think the Fed might even be able to pause from there. We're kind of moving totally out of the inflation regime. We're moving into something new, disinflation in the second half of the year. We'll kind of filter through into core

and the picture will look very, very different. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz. It's a busy morning. We expect it like from New York City this morning. Good morning. Good morning for an audience worldwide. This is Bloomberg Surveillance on TV and radio alongside Tom Keene. I'm Jonathan Ferro. Your latest news on the flying front in

the United States, America. Not much of it going on. The Federal Aviation Administration, a key pilot notification system operated by the FAA, disrupted air travel across the country this morning with United Airlines temporarily granting flights to all destinations. The latest update that we're getting this morning from the FAA reads as follows out on Twitter. Cleared update number two for all stakeholders, the FAA is still working to fully restore the notice to our mission system following an outage. They go on to say some while some functions are beginning to come back on line.

National airspace system operations remain limited. The stocks of those airlines here in the United States through much of this morning in the premarket, T.K., just a little bit softer, but no real drama so far. The drama here is the uncertainty. And I'm getting a lot of different numbers. I really don't even want to quote how many flights are delayed, you know, home media, ballet, this in developing story. You know what? It's down. That's a developing story.

It's not working. And if you're at the airport, you're miserable. Maybe you're not miserable, like over the holiday season and the disaster is Southwest and other airlines, to be fair. But the answer is this is serious and it has to do with the logistical structure of the integrity of the country.

Flights granted. To your point a little bit earlier, you ask the question, how long is it going to go on for? Absolutely no idea. I can only bring you the latest data from the year history. Sure. We stand on the water in the ocean. We're know it's not gonna go to the

airport like a stone reporter store report. Let's not do that. Let's not do that. The FAA just moments ago. Just to repeat what they said, while some functions are beginning to come back on line. National airspace system operations remain limited.

Again, I get the information. I'll bring it to you. That's the latest. Tom, we also need to talk about what's happened to this market, just a return of optimism. We closed that 2010 study slightly on global recession cause. And we'll catch up with David Malpass of the World Bank a little bit later this morning, who has a handle on global GDP growth.

And I have to say that one handle on global GDP growth is not captured in many of these markets right now. And what's important to remember is well past was the optimist who was on the edge of Neil Doted when he was at Bear Stearns. So for him to deliver a sub 2 percent statistic is just generally painful for Mr.

Malpass. What I see is a follow through here, John, and my headline off the data yesterday was finally the equity market really nudged through with the VIX coming from a 22 handle down to twenty point seven five. That's like halfway to maybe where it ought to be right now, given the honor for sitting in the chairman's hand and say much will light on Fed speak today. Set some economic data today, maybe like he wanted to wait for CPI. It's just possible inflation data just

around once you see it. You think he's. I don't actually know the answer to that. I might ask my there. Maybe he's up at Ben's Chili Bowl unused. You think he's sitting there? I don't think there's a cyclical secret below in public in the restaurant. At least he shouldn't be doing that at yachts.

And he joins us now. Have you got any research, the president and founder? And can we stay on this international story? Just not that just got a little bit deeper. What do you make of it? Just the rally was sinking a.m. in base metals, in copper and elsewhere,

too. Well, last year there was a lot of talk about a recession around the world. We started out last year with a lot of concern that if the Fed was, in fact going to tighten and inflation was going to be persistent, that the US might fall into recession.

And there was a lot of chatter in the first half of the year when real GDP was down. But there was also a lot of talk about Europe going into recession because of the war in Ukraine and what that energy supplies in Europe. And then, of course, China has been struggling with another wave of the pandemic. So you put it all together and the outlook was for last year for the global economy to be weak. Now, I think there is the market forces are signaling that the plunge in natural gas prices in Europe suggest that Europe may not have a recession after all. And now with China abandoning the Covid policy opening up, there's a perception that we may get a terrible wave of the pandemic for a few months, but then it should abate and China should open.

So the outlook for the world economy, I think, is. Improving, so end of these trends. You want to write the Randy was saying, Kenny, I'm equities. Randy was saying at a minus in base, man. Yes. Yeah, absolutely. Especially since we started out the year ended up last year with sort of a consensus view that the market was going to go down and make a new low. The stock market in the U.S.

would make a new low by the middle of the year and then would provide opportunities. I think we made a low on October 12th in the market. I think that was the end of the bear market. And I think we're back in a bull market,

not straight up. A lot of volatility, but I think the markets are telling us that the world economy is improving as you're doing. Thorsten Slack moments ago to Apollo brings up the heart of it, the calculus, which you studied at Yale few years ago. And the basic idea here is we've been fixated on the level of inflation right now. The market and the pundits and economists like you are switching to the first and second derivatives, the change of the movement, the dynamics of inflation. How does the Fed adapt to that focus and

that change? Well, I think the Fed recognizes and is embarrassed by the fact that they made a mistake at the end of 2021 and early 22, that they turned out to fall way behind the inflation curve. And I think they're trying to make up for that mistake by possibly making another mistake. But look, I don't tell the Fed what to do. I try to anticipate what they're going to do. And right now, certainly it looks like they're going to do another 75 basis points, maybe in 25 basis points increments in the first half of the year, even though the data may suggest that that's really not necessary. And then they intend to keep it there at 5 and try 5 4 percent. I have no problems with that, really.

I think the economy is resilient. I'd love to go DAX. That's a point you're in. You know, in your youth ad, we face this. So if we get up in the 5 percent range, in the key phrase from you, doctor, you, Danny, is and we stay there. There's a lot of punditry that the world will come to an end, as we know.

Push against that. Well, that's not my my style. I rarely think that the world's going to come to an end and quite the opposite when I see a lot of people talking that way. My contrary instincts come out. And I think that we may actually be as seeing a change from the new normal of unconventional monetary policies, all for easy monetary policies that we had from 2009 to 2021 back to the old normal. I would be great if we could get back to kind of an environment where interest rates are not zero, where we don't have monetary poli

2023-01-15 06:24

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