‘Bloomberg Surveillance Simulcast’ Full Show 8/15/2022

The CPI and the CPI reports yes it was positive but I don't
think it is any kind of game changer for the Fed. The Fed needs to keep expectations for Matt Miller rates to be all way. The
next hike is gonna go back to inflation targeting not average inflation targeting but plain old inflation targeting. The
historical data does not suggest that the Fed is terribly adept when it comes to landing the plane gently. We're not in a
recession now but it's coming and there's going to be a calm before the storm.
This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz.

Stay tuned for three hours of being abused for
taking vacation from New York City this morning. Good morning. Good morning for our audience worldwide. This is Bloomberg
Surveillance on TV and radio alongside Tom Keene and Lisa Abramowicz. Some Jonathan Ferro features negative half of 1
percent. T.K. let's save the vacation banter for a moment. That data out of China. Wow downside surprise. The downside surprise.
So much to talk to your leg. Good band leader says it's the quietest week out there. It's before Jackson all before this.
And we needed China to give us a pick me up.

John this is important there. Their economic experiment it fails. Well maybe
a reality check. Take the rally we've had in this equity market. It's been pretty stunning. We added it to again last week I
think. What's that for weeks against now. This last week winning streak of the year. So fast forward to gains. Listen I cover
that with completeness with Kailey Leinz last week John. And you know we saw that the upfield of the market but it was the way it
was up. There was a persistence of the big John that you could see in Naples in Rome up to ADM. I know you saw AC Milan. It was
a good trip around the continent. I was watching Chelsea Spurs yesterday too. Tom we can pick up on that a little bit later.
Just come through the data retail sales industrial production ugly ugly ugly unemployment for the youth in that country.

now in China that is not a pretty picture. Six a Communist Party 16 to 24 year olds. The unemployment rate is nineteen point nine
percent. Basically one in five young people in that country do not have a job. How much does this really affect what the
People's Congress is going to do later this year and the end of 0 Covid as well. Because how much can stimulus really shape a
market that is dead from a complete lack of transactions because of the zero Covid plus a weakness in China. Lisa you throw in
Europe as well. The global economy with exception of some of the data we've had from America the global economy is in a difficult
spot. Which raises a question of how much the U.S. can remain in an exceptional spot. And this is something we heard from a lot
of the notes overnight. There was a little bit more constructive tone to some of them not of course Morgan Stanley saying that
actually it's getting closer to their bear case being a reality of likelihood of recession in the U.S.

And a high likelihood in
Europe. What my Wilson side say the risk reward remains unattractive. Good to be back. Well she said that she missed it
last week. I saw that Marco over at J.P. Morgan trip stocks. Well a little bit. Yes very similar. Bullish. He trimmed stocks
but he was so bullish. You just saying it's good to hedge with commodities because they'd gotten beaten up. It was this really
nuanced. I'm not perish. I'm still very bullish but maybe reduce risk. I was on the Bloomberg anyway. I got excited just for a
moment which is negative. A half of 1 percent is in the airport in Edinburgh on your way to Milan. What else you can do. Look at
Bloomberg on the Nasdaq down four tenths. That's what everyone does tell me. He holds up not even a basis points to any 367 on
a 10 year looking at euro dollar.

When I take a look at below Crete and copper for that matter as well. We'll pick up on this
a little bit later. Lisa WTI 88 30. And how much does this really stem from exactly the story you were talking about that
weaker than expected economic data out of China having pretty big ramifications for the global appetite at least the perceived
one for commodities.

Eight thirty a.m. here's we're looking at August Empire Manufacturing. This is basically the first read on
the manufacturing activity after a PPA report as well as the ISAF data that came out over the past few weeks actually showing
a bit of an upside surprise. Small business optimism though has been dead in the water. You've seen a slight uptick but you
really have not seen this faith that things are going to get better. How much do you see that reflected in perhaps a tone of
optimism in the Empire Manufacturing Survey or not.

830 AM this to me.
I was watching over the weekend. Yesterday Saudi Aramco reported blockbuster earnings. They reported a record revenue. Just to
give you a perspective quarterly net income rose 90 percent to forty eight point four billion in eight thirty a.m. They give
their earnings call. How much insight they give to the demand picture.
How much can we get. Both demand cooling and still prices were painting high because there just aren't the supplies to really
meet that demand even at a reduced level. And at 10 a.m. we get the latest read on homebuilder sentiment. We get the August and
HP housing market index. How much do we see that starting to tick up stabilized. And it's been basically a steady straight
line down as a result of the high mortgage rates and just where prices are down.
Given that people are starting to have a little bit more discretion with what they buy.

A quieter summer schedule coming
up this week. For once in my life I used some that are basically there. There's no news. I'm not criticizing.
Later this week just a little bit of peace and quiet Jackson. Maybe it's a good week to regroup and recalibrate before Jackson
holds a September meeting. I'm sorry. How many people John have missed this bull market. Plenty. Is that what you called in this
town. There's not a whole on it. I'm just you know when you're in triple leverage cash you really don't care if it's polar
bear. I'm just checking in. CAC joins us now. Chief ethics strategist this suction kit. The first line in your note this
morning markets listening to the Fed and ignoring them or just not listening Kate which one is it.
I think that I think they're choosing not to listen until markets are
listening to the fact that they're not really hearing the message or you know that there's a there's a disconnect between
some of the kind of optimism that a little bit less inflation means we'll get less from the Fed and a Fed that's looking at
high inflation anyway.

I mean way way way too high on a labor market which is just incredibly tight now and then. So they
really have nowhere to go. And I will be surprised if we don't end up pricing a 4 percent Fed funds peak into this market
before we're done over the next few weeks because it seems to me that the message from the Fed is it cannot soften at all. At
this point what is the message of strong Swiss franc and particularly euro. Swiss breaking through point nine seven point
nine six. What is a signal of that sticking out like a sore thumb on a Monday morning.
It tells you a little bit about risk aversion. I mean it tells you something about the fact that the Swiss decided that they
wanted to get rates back into positive territory if they ever got a chance and that that they've got some inflation that they
need to fight. And if they have to sacrifice all attempts to keep the currency down in the process it's fine because dollar
Swiss isn't the problem.

So so domestically you can see what they're doing. But yeah I mean it's it's an extension of the
China story from this morning that says the US economy might still be doing well so long as we don't look at the yield curve.
And don't worry about the the things that don't don't gel well with the US economy. But if we look at the rest of the world
that's just a world of trouble out there. Kate you're talking about how perhaps this market is not listening to the Federal
Reserve. And I wonder in this quiet summer week whether Wednesday will be a pivotal day in terms of Fed meeting minutes
whether they try to signal hey wake up 4 percent Fed funds rate is actually a reality.

Do you believe that this will be a
catalyst for some sort of dollar strength for mortgage market disruption as people kind of start to hear what Jay Powell was
saying. Hard to know for sure because I think I think what the I think. I think the last FOMC meeting was about stepping away
from excessive forward guidance. So if they want to come back and steer us too huh. I think Jackson holds a different story.
But but I think that they have a they have a problem with the degree of over precise forward guidance we've had from central
banks in a very complicated and chaotic global economy. It just doesn't make sense. They should take the fact that the facts as
they are when they get them and move they should have hiked in June last year. And so on and so forth. So I would I would be a
little bit depressed if I thought that they were still using FOMC minutes to micromanage expectations.

I would be more
encouraged if they came out having seen that having seen the payroll data and having seen everything that we've seen since
this month. If they came in here in Jackson Hole and I'd say look you know we have to get inflation back in its box and we
can only do that by putting some slack into the labor market and financial institutions just keep on easing.
And that's been problematic.

Lisa I was reading through the notes last week and pretty much every single note said the same
thing. It looked like to me at least that we were equating peak inflation Lisa with peak fed hawkishness. I'm not sure whether
you can do that. And a lot of people came out and basically said the Fed put is still a Fed call and that the more that stocks
rally the more that the Fed's going to have to step in and do something to aim to cause this to reverse. And how much is this
going to become the reality on the talking point of the next few weeks. Would you summarize it as follows. As Lisa just called
it. Is this a Fed call now. And is this Fed have to respond to this aggressive rally we've seen in this equity market this
aggressive tightening we've seen in credit spreads. I don't think is. I think the market helps the Fed.
But the reality is that inflation that with the labor market where it is in wage growth where it is as a result of that
inflation may drift lower over the course of the next 6 9 months but they'll still have a problem because it's not going up back
under 5 percent easily from here.

So you know there's a two stage show. So I think I think the Fed's messaging in sense of
the problem is the Fed's problem is they don't have a choice. The inflation mandate requires action more action. The market
does what it does. The concern is that as soon as the market thinks they might have done enough that that that's what you
look at it and you think no they just haven't. Not until the data improves. Just quickly as an Arsenal fan did you enjoy to
other London clubs just beating each other up for 90 minutes yesterday.
It was good entertainment. Whatever else it was CAC juice is such an asset.

Thank you T.K.. What. Your Tarts Antonio Contact
Group. I mean it works. What's so cool about it. We were talking about baseball. Joel Weber. Your guy in baseball doesn't start
like this. It's the second week of the season. Thank you very much. There's like eight other stories. CAC thanks so much for
joining an arsenal. But you look at the collapse of man. You you look at Nottingham Nottingham Forest as that's the one you're
eating you know. The guy went from Richmond over to West Ham and that's exactly what happened. Go out. And you know I look at. I
mean I'm sorry. Look at Thomas San Antonio. It's just sort of like Bloomberg Surveillance. What I love about what you do when
you talk about football Lisa it's what he does when he talks about markets too. He just blends the fiction with the reality.
We'll talk about the Premier League this same time.

Ted Lasso somehow ends up in that great job. There was an outrage at the
end of the season when that lowlife went over the West. That was an outrage. They deserved to lose and not. By the way still
talking about Ted last. I just sort of John Micklethwait a lovely Susannah over at Morgan Stanley. I don't keep that a
secret. I think she's absolutely brilliant. Here's the line from Lisa. Shout at Lisa. You'll love this. Let's get real here
people. Let's get real people is the quote from Lisa Charlotte this morning. I love this because it really highlights this push
pull right out between the bears which are Morgan Stanley has been solidly in the camp for the bulls. That's a look at the
technicals. Look at where we are. Things aren't that bad. And how much do we end up with one or the other winning out over the
Fed pushing back against some of optimism. I keep going back and we go. Lisa Shannon your best of friends.
I would have predicted t case get to be back.

Thanks for such a warm welcome. Tom Keene. It's a wonderful surprise with Jonathan
Ferro. Thank you Terry. Thanks again. Grandma has gone on vacation on Wednesday so that's right to make for a mirror hold
two days. Futures down a little bit on the S&P from New York City this morning. Good morning. Coming up I'm told Annmarie
Horden has a new studio down in D.C. I'm gonna see what that looks like. And I'm told it's better than us.
I'm looking forward to that. I'm looking forward to this in just a moment. This is Bloomberg.
Keeping you up to date with news from around the world where the first word news.

I'm Liane Karen's in China. The central bank
unexpectedly cut its key interest rates. The People's Bank of China's ramping up support for an economy that has been hurt by
Covid lockdowns and a deepening property downturn. New data shows that home prices fell again in July. Meanwhile industrial
output and retail sales were weaker than expected. Another US congressional delegation this one led by Democratic Senator Ed
Markey is visiting Taiwan. China says it is fighting back by adding more military patrols around the island. The
congressional trip comes in less than two weeks after the one by House Speaker Nancy Pelosi which led to unprecedented Chinese
military exercises.

The climate crisis is compounding Europe's worst energy downturn in years. In Germany the water level at
the key waypoint on the Rhine River is set to steady at an extremely low level this week. The Rhine is Western Europe's
most important river. For the transport of fuel and other industrial goods the river is now at a level where barges find
it uneconomical to transit past that waypoint. It is a giant shift for Wells Fargo the bank that once churned out one and
every three home loans in the US. Now plans to shrink its vast mortgage empire. Bloomberg has learned. Wells Fargo is no longer
committed to ranking number one in the business. That comes after years of struggles to avoid costly probes and hits to the
banks reputation. People need 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred
journalists and analysts and more than one hundred and twenty countries. And they aren't guarantees. This is Bloomberg. No one is above the law.

Donald Trump is not above the law in
the trenches. Garland is not above the law either. And Congress has the powers of oversight. He needs to comply. The law is
king. The President isn't king. And I would add to that the former president isn't king.
Everyone has to follow the loss. I'm urging all my colleagues don't prejudge what we don't know about yet. And I'm also urging
all my colleagues to understand the weight of your words and support law enforcement no matter what. Reaction from Congress
to a former president in some hot water line from New York City this morning. Good morning.

With some cane and Lisa Abramowicz
some Jonathan Ferro market shaping up as follows. Futures down by half of one per cent. The data out of China weak weak weak on
the Nasdaq 100 were down about a third of one per cent coming off the back of four weeks of gains on the S&P the longest
weekly winning streak of the year so far. And some we've taken back 50 percent of the draw down of the highs. So we've taken a
big bite out of that market rally. Yeah the Tom Mackenzie an hour for full discussion a full description.

John I'm not a big
fan of Fibonacci retracement. Just so everybody understands. But it was made a big splash of
when you were I don't think Europe malign yet. You were still in Rome. But it was a big deal that we went through. The 50 percent
retraced quite run. So we're going to pick up on that a little bit later.
Also talking about what's happening in the commodity market. So I want to keep hitting the drum on that crude. 88. Yeah by four
point three percent. It's not just crude it's copper to sell commodities today.

Just on my plane back screen a lot of red
some getting off of China. And again West Texas Intermediate eighty eight point zero six is stunning. Down for large dollars
right now to move forward to a Monday morning after the shock of all we learned last week about this that or the other thing with
former President Trump. Annmarie Horden joins us from Bloomberg in Washington with a morning briefing.

I like with The New York
Times said this morning Emory they sort of move the story forward by talking to people that were actually in the offices.
John Bolton was scathing in Maggie Haberman article that he knew nothing about any of the shifting stories we hear from President
Trump simply on the desperation of the moment for various parties. What's next.
Well when you talk about the desperation the varying parties you see the Republicans try struggling to really coalesce on how
they are going to message this in a unified way. You saw some temperament over the weekend from some representatives saying
that this needs to be justified and why they decided to go into the former president's home.

But many of them including
represented Fitzpatrick who was an FBI agent in his prior life was saying how we should reserve judgment until we get more
information. Because what you also have over the weekend is the FBI and the Department of Homeland Security issuing a bulletin
letting law enforcement individuals know and also government facilities people who work in courts etc. that there are
potential threats against them. What we are seeing right now. Well what when. I mean you just mentioned there when there's
more information for anybody on whatever side of this argument they are is when Tuesday is when September is when a thousand
twenty three.

Well we don't know. I mean it. But what you can see by large is that there is a bipartisan effort. We saw that
from Senator Warner alongside Senator Rubio. They're both chair and vice chair of the Senate Intelligence Committee asking for
the information that was in these confidential documents. Eleven sets of confidential even above that clock confident. Classified
documents because they want to see for the Republicans whether or not the raid was justified. But for the Democrats it's really
about the gravity of this type of situation and the questioning of whether national security was in fact compromised.

But we
don't know when. There's a big question of if we'll ever see the affidavit. If the panel could see the likes of this kind of
information. But there's no timeline. But NYSE to your point that you started with how much pushback is there within the
Republican Party to tone down the rhetoric substantially in order to avoid some of the threats and law enforcement that
we've been seeing especially because they are the party traditionally of law and order right in them.

Democrats are
taking every moment they can to pounce on that saying I thought this was the party for law and order. We are going to in fact be
the ones that want to make sure that we are protecting law enforcement officials. I mean the spectrum is very wide. You
have Representative Mark Taylor Green that's campaigning fundraising on merchandise that says quote defund the FBI and
then you have others obviously much more tempered like we just heard from Representative Fitzpatrick on CBS Face the Nation on
Sunday talking about that. Both sides should really withhold judgment until we get more information. And that is the struggle
right now for the Republicans more than the Democrats. Both sides are trying to use this ahead of the midterm elections. How
is it featuring into some of the polling that we've been seeing in terms of either giving a boost to the Republicans.

still definitely think of former President Trump as a leader versus the Democrats who are trying to use this to rally people
for the law and order kind of side of things. Yes it is. So far what we've seen is that they're using this as
a messaging tool. I think until there's more information it'll be hard to see exactly how the electorate feel. But by and large
they are showing up on party lines. The Republicans really want justification for this raid.

They say it's unprecedented to go
into a former president's home. The Democrats say it's unprecedented for a president to take home 11 sets of these
highly classified documents. So the polling is likely going to the Democrats are going to poll definitely on the messaging
they're going to have is definitely going to be based off off of the fact that they do not want to see another President Trump
come into office. They could be using this towards that towards their case for that. But for the
Republicans it's going to be really an attack on the Democrats. And the fact that they think that this is a politicized version
of what the FBI and Attorney General Merrick Garland are doing it makes before you go. We've promised the world a tour than a
studio. Can you give us a sneak preview before we get a little look.
They are going in the cash studio AMH Ton named after Amery down in Washington D.C. which I think that that's Jan
the desk T.K.

For the full DLC radio. Her desk is the desk at the Eccles Building for the Federal Open market. Very cool. Can
we go down there Talman. We get some Fed officials round a table. Oh yeah a little chitchat. Lisa Constantin what did you
do. She really thinks about the Federal Reserve from what we've been up to the last couple of years.

I think you should do that.
We should settle down there. You know and join studio and rate AMH. Thank you. It looks
awesome. Looking forward to the coverage down at D.C. as we approach the midterms and some developments over the weekend.
Just wow a lot of people watching this play out. I think I was the right answer. I think it was a nation John with our question
in shock last week. Just real truly just simply historic. And the question is the path forward here. And I would say this
morning and particularly when you look at The Washington Post this morning was essentially no articles on this on the front of
the fold on the Internet.

There's a whole mystery here developing what's next. And I'm much more leaning towards going
to no Tuesday or Wednesday. Well Grandma I think they're all hungry for some more details aren't we. Without those details
it's hard to talk to intelligently about this which is a reason why people are calling for a bit of calm in some of the rhetoric
on all sides. But a calm this morning futures down let's call it half of 1 percent on the S&P on the NASDAQ down four tenths of 1

A life in New York City this Monday morning. Good morning. Ahead on radio seen on TV for our audience worldwide.
This is Bloomberg Surveillance. Allow me to bring you a snapshot of this market right now. Good
morning to you. We are slightly negative. We're down a half of 1 percent on the S&P on the NASDAQ 100 are down four tenths of one
percent. Underperformance on the Russell to small caps down three quarters of one percent outperformance.

Some of this
equity market over the last four weeks though four weeks of gains on the S&P the longest weekly winning streak of the year
so far and about 17 percent off the lows of 2022. Now on the S&P 500. And finally I get to say this and I think we can all say
this good news is good news. If you put together a decent paper I go with a downside surprise
on inflation. I don't think there's any other way of coloring it. Lisa good news is good news and that's what this market's
been responding to. Now whether Lisa you think it's overreacting and going too far in the other direction that's a separate
debate. Just a little piece of you die saying good news is good news.

Very happy sad news. I can't wait to say is good news is
good news except good news is good news for everything including bond yields going lower which sent a different signal. So right
now there's some pretty conflicted signals going on even as good news for stocks is good news. You know heard from Citi and Bank
of America last week and both of them picked up on that inflation report. Elements of it still pretty harsh pointing to
some stickiness through the rest of this year. And a Fed that's got more weight today that's picked up in a yield curve. Let's
be clear about that. Let's take a look at two tens and 30s teens versus tens.
The difference right now still negative about 40 basis points or so. Tom we are still in pretty mistress world with a two year
three year five and a 10 year that's 283. I'm really glad you frame this the path through. So I don't know if you're aware of
it John but the misery index of two's 10 spread went out almost 50 basis points a solid negative.

Forty nine basis points a
curve inversion. It's come back to a negative 43 basis points. And still that would be headline making except we had that surge
out in your 50s. A little bit of data later this week. Well it's retail sales to maybe confirm better spending with gas prices
coming down. Look to the control group for maybe a snapshot of that. And we also got to talk about this commodity market. Brent
crude is down almost 5 percent copies down almost 3 percent. And that's something to try to China's just ugly. And I'm not sure
that rate cut is going to get it done for any. Well it's about economic right. People can't take holidays. And of course Lisa
what this amounts to is when you take a one day hauls and you extend it across Europe is John did you know him from near full
time. I wouldn't take vacations. I know. I have to go back to the European work ethic to New York City and I'm not

John Micklethwait AC Milan. I mean there's a lot that said we're back to where we did well. That's nice. Good
game country. Thank you so much. Seriously we begin our Jackson Hole coverage. This is not a normal Jackson all this year.
There's something in the air. You won't know what it is until that Wednesday that Thursday when we begin to gather on that
beautiful truly extraordinary leak with a representation of the Kansas City Fed. Peter Hooper joins us. Global head of economic
research Deutsche Bank. Peter I want to vamp off Neal Sharing who I thought had a great noted Capital Economics where he
trotted out the aggregate supply and aggregate demand curve.

And we're not going to go into the vertical nature of supply here.
But he said supply supply supply. Can a supply shock be cured. That can come to the rescue for Chairman Powell.
Tom supply shocks are always tough for the Fed. You know put down inflation up. But contrary to the view that supply is the
driving factor right now our numbers are telling us it's really become demand. Supply was a factor last year. My colleague
Justin Weiner's has been doing a really nice job of sort of getting into the data and detail and finding that as this as
this year has gone on it's really much more a demand driven inflation. We're dealing with and that is the Fed can in fact
handle. Dr. Hopper explain to our listeners our viewers why buoyant demand is a bad thing. Eighty two point four or five
percent of them think economists and German are nuts. If demand is a bad thing.
Well what's the bad thing is what people feel the pain that people are feeling at the grocery store the pump and just about
anywhere you're trying to shop these days.

Excess demand when they when you do have some supply problems especially is really
what's what's behind this this inflation fire that we're dealing with right now.
And that's our view for some time has been that this is driving us into a recession eventually. The Fed is going to have to
tighten it enough to deal with it. So yes demand is a good thing but too much demand is really unwelcome at this point.

So Peter
given that how much conviction do you have that we have seen peak inflation as so many people said last week.
You know the market has rallied around there's a sense that headline headline CPI has come down. Core CPI has continued flat
at a high level and underlying inflation. The trimmed mean numbers continued up. So. So yes there is some there is some
good news out there. But the market they think is ignoring at least several factors that are really a problem right now that
underlying inflation number one. Number two inflation expectations. We had a little good news from the New York Fed
recently but Michigan is still is up. And in the survey professional forecasters is up substantially. So our underlying
our our measure of the Fed's common inflation expectations index is not good news. And then add to that the labor market is still
on fire.

I mean the latest blast the labor market report gave us wage inflation that continues to march upward and unit labor
cost inflation is approaching double digits year over year which is really a problem. So
there's been some little good news out there but we're not paying attention to the really serious news that's going to be
driving the Fed going forward. There are a lot of potential risks for the U.S. economy but arguably there are many more for
the rest of the world in particular Europe. There have been a number of economists the crowd. It's basically consensus that
Europe will go into recession as it tries to combat inflation.

That's north of 8 percent. Do you agree that Europe looks like
it's in a much worse position than the U.S. or do you think that it's more nuanced than that.
My esteemed colleague Mark Waller chief U.S. economist for Europe has been calling for a recession for a while and we do
see things turning negative second half this year into next year. Overall a
negative for the year as a whole in 2023. And that is the combination of the energy crisis the gas crunch hitting Germany
and others pretty hard. The tightening of financial conditions as the ECB has gotten
into the act and there they're not going to be backing off from inflation. That's actually running even higher there than it is
in the U.S. right now. So Europe. Europe is headed for a downturn. We're fully on board with that one. Peter over what's
the ramifications of another 75 beeps up let's say in September October November when ever I guess we approach neutrality.

don't know where it is. I don't know where it is. But what is the actual ramification to citizens of the country of another
big lift in rates. Well you can be thankful that the Fed is on the is on the case here and in a way that they should be. They
are moving back as you say toward neutral. And we think though we'll be somewhere in the neighborhood around the end of the
year maybe first half next year certainly. And that's going to as we get above neutral that is going to slow the can begin to
slow the economy enough to begin to deal with this inflation. The cost of the course is for the average U.S. household is
going to be some pain on the job front. We are going into a recession
but the wider effect of high inflation is something we really have to deal with.

So yes Fed raising money. We think we think
it's a close call between 50 and 75 at the next meeting. We've been on 50.
But certainly the risk we think still toward 75. And that's going to get the Fed back where it needs to be sooner which is
better news for the economy down the road. Peter just quickly here Stephen Major over at HSBC put out a note for you said one
reason why perhaps the terminal rate will not go as high as many people had previously expected for the Federal Reserve is
because of the amount of debt currently outstanding. It is just too painful. We've already seen it with the mortgage
rates. How much do you see that as a constraining feature and how much you think that perhaps that's overplayed.
I think it's overplayed. I think certainly at households how household sector balance sheets are looking very solid at this
point. Banking sector is looking pretty strong. Yes. National debt is is a problem and that's going to be pain as rates go up.
But we have to deal with the inflation problem.

That's a bigger issue. I don't see the recession is coming. We think it's going
to be by historical standards on the milder side in part because household balance sheets are pretty firm at this point. Peter
always great to catch up with you sir. Peter Hooper the Deutsche Bank Securities and Lisa State major proponent of that theory
for a long long time. And I felt into this idea that in the bond market for treasuries too there is a self fulfilling self
limiting element to it that the high yields got them all. They have to back away. Because ultimately the debt path that you
described which is reason why so many people have come on and said they have conviction in the longer term yields even if in
the short end perhaps you could see that rise.

The reason for the inversion the reason why people think that we could go far
south of Preah Miseries 50 basis point of inversion 40 basis points of inversion and get to 80 or 100 akin to 1970s. Are we
excited for Jackson Hole next week. I'm yeah. Sometimes it's a snooze fest. This time around John Roland say so.
Yeah. I mean you know I was talking to Muhammad Larry Olivier this weekend and you know they're upset. They're not invited.
That's my question. So that's the number one question I have. I don't know if they are or not. I hope they are because otherwise
this is a convention for the people who will rank in Jackson Hole.

Jackson Hole Wyoming respectful than you. I think Michael
McKee has our best relationship with the good people at the Kansas City Fed. But there's a tradition to this John which
borders towards boring academic papers. But then it does blow up based on events. I don't think it's rude to say that largely at
the FOMC has gotten a lot of inflation wrong as a whole. So how do they present the balance. A counterbalance to their views.
How much of a back and forth do you see in some of the academic research. To me I actually will find that fascinating.
The academic research in particular whereas the emphasis the risk of going too quickly now and torpedoing economic growth or
the risk of 1970s on repeat you know that to me is going to be a massive indication to market.

I love that quite from some. I
will be more respectful and get that in the small print for the shuttle and fly to the less. Just went on there because I just
want to talk Nottingham Forest. I talk about forest. She's talking about forest to Jackson Hole and West Ham. Yeah well I
think Nottingham Forest and I think the natural sound should you know is that going to be a the year.
The Detroit Tigers should be relegated.

I'm sorry. You've said that for a while. Michael Barr not gonna be happy about. I know.
But you know come on. It's exciting to see Nottingham Forest take out. NIKKEI Mohammed in West Ham reaches down a half of 1
percent from New York. This is pulling back. Keeping you up to date with news from around the world with the
first word news. I'm Liane grins. China has added military patrols around Taiwan after another US congressional delegation
visited Beijing said it was fighting back against a trip led by Democratic Senator Ed Markey. The visit came less than two weeks
after the one by House Speaker Nancy Pelosi that set off an unprecedented wave of Chinese military drills around Taiwan. Now
Russia's president Vladimir Putin is offering to expand relations with North Korea.

Peking sent a message of
congratulations to Kim Jong un's regime for its liberation day holiday. North Korea has been stockpiling artillery for decades
and this has led some analysts to speculate that it could supply weapons for Russia's war in Ukraine. In Russia lawyers for
American basketball star Brittney Griner have appealed for her 9 year prison sentence for drug possession. Reiner was convicted
on the 4th of August. She was arrested last February after vapor canisters containing cannabis oil were found in her luggage.
Saudi Aramco has posted the biggest quarterly profit of any listed company.

Aramco followed other big royal oil rivals
reporting a surge in earnings due to high crude prices. Net income rose to forty eight point four billion dollars in the
second quarter almost double what it was a year earlier. Tributes are pouring in for unto Jane the Cantor Fitzgerald
president and former co CEO of Deutsche Bank. Jean's death was announced on Saturday after a five year battle with cancer. He
spent two decades at Deutsche Bank and transformed it into a global trading powerhouse. Untrue. Gene was 59. 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
one hundred and twenty countries. This is Bloomberg. They are projecting at the moment without knowing what's going
to happen globally that the price in the fourth quarter of this year per gallon will probably drop to about three dollars and
seventy eight cents.

So we hope that that's true. But again it can be impacted by what's happening globally. We all hope that's
true. That was Jennifer Granholm now the U.S. energy secretary speaking to CNN over the weekend live from New York City. Good
morning to you. Here's a snapshot. The price action this Monday we are down a half of 1 percent on the S&P on the Nasdaq with
down a third of 1 percent. Crude and copper commodities having a tough time of it this morning 87 70 on WTI were down by about
four point seven per cent. I can tell you the data out of China just ugly ugly ugly.

Downside surprise after downside surprise
and a little rate cut in the mix as well. Some in response to some of this. It's a mix and it's also the calendar towards a
party Congress. Elizabeth economy is CFR thinks it's been brilliant ideas. John I'm sort of surprised equities aren't down
more. I mean you know you mentioned that half a percent move on the Dow show percent move. I didn't mention. You did. I'm with
you. OK. Dow futures down 166. You'd think they'd be down 300 points of China. Well the weakness in China is not secret. Some.
It's not secret. Yeah. Seen a lot of it through this year so far on oil.

Ellen will join senior fellow at the Atlantic Council
and really quite good on particularly the mix of what's going on in Saudi Arabia. Ellen thank you so much for joining us today.
Should we get used to oil at 80 or 90. Or are you with a school of thought that normal is much higher and we're just on borrowed
time down here. Well sure. Them borrowed time. But I do think that for the
current the current picture that yes higher is definitely a new normal. And when you look at the changes that are going on in
the U.S.

In terms of oil production and new regulations and different corporate outlooks towards increasing production there
is definitely a trend towards less dynamic responses to the market. The higher costs in terms of production are slower
increases in production. And so I think we definitely could be looking at a somewhat higher basis in terms of oil. And as
you've been mentioning inflation also does play a role in that. And it can't just pick up on some of this and ask you how
durable this decline is going to be. We're south of four dollars a gallon for gas in this country right now. On average we've
seen numbers decline decline decline every single day going back to the middle of June. It's pretty impressive stuff. Secondly
Granholm over the weekend to CNN hoping it continues. Do you have that same feeling that it will continue.
Well I think there you also have to remember that seasonality is still a very important component in gasoline demand and gasoline
prices. And generally around this time we do see a slight dip in demand. School is starting for large portions of the country and
the summer driving season is coming to an end.

But I think that what will really give us a good sense of where things are headed
in terms of gasoline prices and demand is as we hit the fall as we hit September when refineries have to go into their
maintenance season I think we'll get a good picture of whether demand is still strong whether it's pointed to drop off because
typically prices decline. And will refineries feel secure enough to even go offline to do maintenance or will they feel pressure
to keep churning out more and more barrels and kind of put off needed maintenance. And that could be a significant factor for
gasoline prices for the rest of the year. How big of a swing factor alone is Covid 0 and China ending that after the National
People's Congress later this year.

That would be a huge deal if China ended its Covid zero policy
because essentially the market is always kind of on edge. Is China going to shut down. Is this major city going to shut down.
What's demand's going to look like out of China. And to some extent you get a little bit of a sense when they issue their
import quotas especially for the independent refineries that how much oil they're going to be importing. But at the at the stroke
of a pen they could basically crush domestic demand. And so I think that if they do get rid of this zero Covid policy I think
that will be quite telling for the market especially for the next year. Well how tight is production right now. How tight are
supplies. And that's I guess would be the question that I have is how resilient is the market to a potential shock and demand
one way or another.

Right now we're seeing cooling demand. How low would those prices be if it weren't for that tightness. Yeah
I don't think I think we could definitely potentially see prices you know down in the 60s if it weren't for that tightness. But
on the other hand part of the tightness is what is causing prices to to cool down the fact that they were so high because
things were. And then we did see some demand destruction we are seeing continued fears of global recession. You know even if we
do get more data out of Europe in Europe does plunge into recession which I think most people think is going to happen.
That doesn't necessarily mean that there's still not going to need more oil because prices electricity prices there are still
so high and that could cause them to switch to to some oil. The distinction to me in say a given 100 page research report is
a potential demand of the Pacific Rim and even the Pacific Rim ex China.

Do you believe in that that they're going to have the
buoyant boom over one year two years three years. It's going to pop oil to a permanent above one hundred dollars a barrel.
I don't believe that that's necessarily going to be the case. I definitely think that there room for an economic boom there. But
I wouldn't say that that's definitely going to cause oil to stay above 100 especially if you're looking at say a major decline in
in European demand.

If you're looking at economic weakness in America those could all be significant factors. And also
remember that when the middle of December comes out early December that's when these sanctions on Russian oil are supposed
to take effect. And I think that that will be very telling for where oil's going in the next year and in 2023 and how well
these sanctions are actually enforced or adhered to. The coast isn't clear. We've heard that a lot haven't we. And in wealth
there at the Atlantic Council the Britain. Adam Walt on the latest. And I thank you. If you're just tuning in on TV and
radio worldwide this is Bloomberg Surveillance of course. You know that already looking at the data out of China. It was just
terrible industrial production. The downside surprise retail sales big downside surprise.

And off the back of that promote
commodities. Just ugly ugly ugly this morning. It was retail sales. It was employment. It was every aspect of the data out of
China. And then it was the response. You talk about a rate cut 10 basis points which is basically window dressing indicating
they're going to have to do a lot more. But a lot of analysts are saying they can't really achieve real momentum real growth
with monetary policy. This requires something else potentially even the end of zero. What do you make a 10 basis points a rate
cut of 10 basis points. It's not going to be a failure rate. It's not going to get it done. No one thinks it is. Is it more a
signal that more is to come T.K.. I think for you this has been front and center more than anyone. You've talked about it. Covid
0 0. And without understanding where that's going can we really put together a solid outlook. And that's where I am in full
disclosure folks I'm current car colored by family members in China.

But John I'm sorry. Nothing matters but their garbage
Covid policy. Nothing matters. You calling it that. Some. Yes. Right. Bad medicine. I'm not calling that Amish adalja of Johns
Hopkins and others of you know all the different good people. We talked to her logic. Medical pros say this is nuts. I hope that
he has actually said that's a shot with him to fight it. I'll set it down a half of 1 percent
on the S&P on the NASDAQ was down about a quarter of 1 percent.

The losses easing just a a year away. When he grows older. I'll
be here. T.K. you're going to wait to Jackson Hole Wyoming with you. We called in that vacation. Or was it next week.
That's right. That's work. Okay. I mean you had a court case and I had. The CPI and the CPI reports. Yes it was positive but I don't
think it is any kind of game changer for the Fed. The Fed needs to keep expectations for IBEX Haidi Lun rates could be over
where the next hike is. That's gonna go back to inflation targeting not average inflation targeting but plain old
inflation targeting. The historical data does not suggest that the Fed is terribly adept when it comes to landing the plane

We're not in a recession now but it's coming and there's going to be a calm before the storm. This is Bloomberg
Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz. The band is back together. It's a beautiful thing. Live from New
York City this morning. Good morning. Good morning. To our audience worldwide. Thank you. Promote not get getting that
fancy CAC with Tom Keene and Lisa Abramowicz some Jonathan Ferro negative four cents on the S&P Tom Keene the longest weekly
winning streak of the year so far. Yeah as it continues. And we're going to talk we'll talk football hero talk Jackson Hole.
Big theme coming up for us. But John you're right. It is all about the equity market.
Huge differences of opinion. And to start strong this hour with David Bianco is a good looking forward to that. Tom was a great
quote on this program last week. The difference between a bear market rally and something more durable hindsight. Apparently
we've seen quite a run over lives haven't we agree.

No I agree with that. You know I'm watching the mumbo jumbo go forward
here. And I think a huge amount of this John is just how on loved this market was on June 16th June 17th in the easy money
has been made. Now what. This rally is not loved. Let's be clear about that. This band it. Yes. In some places including over at
Morgan Stanley with Lisa Charlotte Lisa she said get real. Mike Wilson said the risk reward remains unattractive. So how much of
this has to do with fundamentals the earnings that were not terrible. They've crossed the bar for the lowest potential
outcome but not phenomenal. But then also how much is this squarely about the Federal Reserve the fact that you see people
piling into longer duration treasuries. You have a yield coming down. This is basically easing conditions. How much is this
counterintuitive kind of result completely antithetical to what the Fed would like to see and driving a rally that is
unsustainable on its face because the Fed has got to push back and say no just stop Evercore with Page at least as gospel this

This is what he says. A tug of war over financial conditions leaks. So they go on to say right now the Fed is
losing. Well we think it will need to pull harder in the period ahead to avoid conceding more ground. Vonnie Quinn. Go ahead.
That's a huge deal. I'm going to interrupt Lisa because the Bloomberg Financial Conditions Index is really really good math.
And this morning John. It sustains ever more accommodative. That's a fact. You interrupt every five minutes.

Is nothing
original about that. This is the region. I mean I mean I'm getting set for. You can't go to Jackson Hole Lisa that gloomy.
No you can go to the day. If you go to the Death Canyon Trail Michael McKee takes it every year. It's pretty hazardous. I mean
Death Canyon Trail is no small feat but the pro chip out there is don't pat the wild animals. Was going to be out there John.
Oh good. The little bear that was from I was gonna do. She's got to put the little baby grows and then grizzlies going to show up
on a family hike. Is that we will see. And I think we should call it DAX. That's what we do in front of our grill to this.
And then Jason Kelly is the large RTX and all bar. That's my. Can't wait. That's your prime. I think she's down 40 cents on
the S&P on the NASDAQ 100 with negative 2 by quarter of 1 percent.

We should record it sound pay per view subscription.
Fine fine. How about yields to 82 76 if you're just tuning in the data out of China. Actually we're gonna be talking about
that all morning. And off the back of some of that ugly data Lisa crude lower copper lower WTI 87 88. I love it. That's the
new martial art. Is ISE trying to take a family hike with a bottle of Tang. OK here's what we're looking at. This week is
gonna be an interesting one when it comes to retail sales when it comes to the Fed meeting minutes on Wednesday.
A bit softer in terms of some of the data. However today we are looking at Empire Manufacturing for the month of August.

It is
usually the first initial read on what's going on in the month. It comes at eight thirty a.m. at the same time that we get Saudi
Aramco as earnings call after reporting record profits. Just giving you a sense of how high these profits for our
quarterly net income rose. Ninety percent to forty eight point four billion dollars that is
net income. And it comes as they see demand continuing to increase for oil. Despite some of the schools trying to reduce
fossil fuels. You are seeing prices rollovers. John you were talking about because of what we're seeing with China but how
much I keep wondering this how much is this tightness in the oil market going to continue to drive prices higher or at least keep
them where they are despite a lack of demand that today and we get the latest read on homebuilder sentiment with the August
NAHB housing market index.

How much does it start to stabilize as we see stabilization and
even a decline in mortgage rates. For John this really goes to the heart of the issue.
Mortgages are starting the rates are starting to come down even though the Fed has not backed away from its easing. How does
this make sense. Is this going to come off too soon at a time when rents are so rising at a pace that is way beyond what the
Fed would like to see. ISE Evercore said that is that tug of war over financial conditions into Jackson Hole next week.

thank you. Joining us now let's get straight to it David Bianco CIO for the Americas at D.W. West. David your words.
You think this is a bear market rally. You think we're going to retest the lows later this year. So David I need the why and
what should we do in between. Well the why is is fairly simple. The Fed's not done doing its job. They need to hike further. The
economy is going to slow likely contract and the U.S.

Economy is kind of the best show on the planet. The world economy is in
tough shape. So our view is that unless you believe the P E multiple of the
S&P can be sustained at 20 or higher with the deceleration in earnings growth that we see ahead to no better than the
inflation rate it's not an attractive reward for the risk reducer things that investors can pick up here and there.
But our view is that it may be a soft landing for the labor market.

It's likely to be shaky and shaky year for GDP.
Risk assets are still quite at risk for a hard landing. What's your conviction right now David considering that people are
saying this but then they're staying in their positions. Are you starting to sell some of your riskier positions or are you
basically just staying where you are. Well we have depressed earlier in the year.

We've stuck with that position. And we
think investors should keep cash at higher levels until we get past the autumn.
The thing about corrections we've already had a sharp one this year corrections kind of love company. They come in pairs they
come in bunches. You can go for years without. Then all of a sudden you get a few. I think we get one more this year from
there. I do think the S&P can rally to forty one hundred forty two hundred by the end of the year. But I'm also still concerned
that the longer term outlook for the S&P is no better than inflationary type gains. For the next several you want to see is
a narrowness here of some would say a partition. But what I would do is take it to sector analysis are wrapped around factor
analysis wrapped around the fact qualities winning right now.

Can you have a bull market of only a little bit of the market
goes up. Well you need tech to rally and it sure did the past several weeks which is why the S&P. But if I get tech to rally
into 2023 is that a bull market. I'm not sure it is. Well everybody would appreciate some breath and some alternatives to
the big cap. Tech names have done so well and including in this rally. I am a macro minded investor. I'd like to find macro
factors and I tend to translate that into sector and industry preferences. I would point out what I what I think is one of the
most underappreciated macro plays out there. Utilities electric utilities. In a world where natural gas is
the essential commodity for the twenty twenties in a world of electrification of vehicles and in a world where people want
inflation protection and income the dividends. Right now utilities are the low hanging fruit. And what is still a very
risky macro market was the combination with rates that David a high correlation particularly with real interest rates.
But part of the reason why the equity markets done well over the past several weeks is that 10 year tips yields came off their
highs and you know 30 40 basis points versus 70 80 basis points earlier in the summer.

So I'm not too worried about interest
rates affecting utilities however because of the sensitivity of technology stocks I think that's so still a relationship to
monitor. David I want to get to a macro factor that is being discussed particularly this morning China's week. Europe is
going into recession. Everyone's on board with that theme into year end. What does that mean for American markets. Can we
decouple from the rest of the world. Remember that conversation of 10 years ago.

Do you see that taking place. That's right. The
Decouple were not supposed to use it but there has been very much a deep linkage between the US and the Chinese economy.
And I think it's important to remember that this decade is very different from the decades the past couple of decades past.
And while there are energy shortages and the risk of disruption for natural gas into Europe this is not a commodity boom from
the demand side. We already see oil below 100 dollars a barrel. I pick your spots carefully within commodities and I'd pick your
exposure to China very carefully.

We like China Tech for the long term and brave at heart. But China's economy is slowing
down greatly. David DAX brave the regulatory kill. You're not concerned about that. Well we are. You put money to work in
China on the tax rate. Aren't you just giving. I'm warning. Yeah I would. As I said for the long term and for those who believe
in peace and rational actors amongst policy setters in China and the United States take a tack here and take a broad
very sensitive to rational policies.

It takes a lot of faith right now that's for sure. David thank you. David BIANCULLI.
Think FTSE U.S. with a trade for the brief least at the end of that conversation. I love the way that he framed that basically
saying if you believe in peace if you believe in prosperity. If you believe in democracy. I mean how much are you looking at
everybody from investing going forward not just when it comes to China but even in terms of what the new normal will look like
that it will replicate something akin to the old even in a place like the United States. Just to paraphrase David Bianco that the
US economy the best show on a planet in rough shape at the moment I believe.

You know you've. John is like a broken record
on a Monday morning from me I believe corporations will adapt. It's all there is to it. And frankly the nation will adapt. We
haven't even addressed massive legislation by the president. Will you love it or hate it. Whatever the politics is in some
form that's going to be a fiscal stimulus or Tom Keene drowning in a different kind of politics done in Washington. Well that's
my problem. I am sure you will touch on that. I believe you're human. Emery coming up from our new studio in about five or 10
minutes time futures right now negative four tenths on the S&P on the NASDAQ down about a quarter of one per cent.
We have taken out about 50 percent of the correction of the year.

The draw down so far Lisa. And we're getting a lot of
pushback. Uncomfortable about the idea. Hindsight's the only way you're going to know it's a bear market rally. But it does seem
highly uncomfortable given that the economic data hasn't turned around the way at least when it comes to inflation that many
would like to see the price in the right direction. Over the last couple of weeks that's for sure. Futures down 410. Sunny
S&P off the back of this back data out of China.

The NASDAQ soft by two tenths of one per cent. Yields aren't giving me much were
unchanged at 282 58 on a 10 year. From New York City this morning. Good morning. Coming up a little bit later Lisa Hornby
a Schroders. Looking forward to that. Up next it's AMH down in Washington. This is Bloomberg.
Keeping you up to date with news from around the world with the first word news.

I'm Leon Guarantees. Another US congressional
delegation this one led by Democratic Senator Ed Markey is visiting Taiwan. China says it is fighting back by adding more
military patrols around the island. The congressional trip comes less than two weeks after the one by House Speaker Nancy Pelosi
which led to unprecedented Chinese military exercises now in China. The central bank unexpectedly cut its key interest rates.
The People's Bank of China is ramping up support for an economy that has been hurt by Covid lockdowns and a deepening property
downturn. New data shows that home prices fell again in July.
Meanwhile industrial output and retail sales were weaker than expected.
Members of Congress are putting pressure on the US government to tell them what was in classified documents seized at the former
president Donald Trump's home. Senate Intelligence Committee leaders have made a bipartisan
request to the Justice Department and the director of national intelligence.

They ask for an assessment of potential risk
caused by the documents mishandling. It's a giant shift for Wells Fargo the bank that once churned out one in every three
home loans in the US. Now plans to shrink its vast mortgage empire Greenberg has learned. Wells Fargo is no longer committed
to ranking number one in that business. That comes after years of struggles to avoid costly probes and
heads to the banks reputation.

Cable news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven
hundred journalists and analysts and more than one hundred and twenty countries Emily Chang guarantees. This is Bloomberg. Merrick Garland would not be the president's lawyer. He would
not be the vice president's lawyer. This is about the American people and doing what is right for the American people. The
Department of Justice when it comes to law enforcement is independent as CAC jumpy ever.
The White House press secretary on ATSIC APC over the weekend from New York City this morning. Good morning. Alongside Tom
Keene and Lisa Abramowicz. Some Jonathan Ferro features on negative four tenths of a one per cent on S&P 500 off the back
of four weeks of gains on a S&P 500. We have taken out 50 percent of the draw down with 17 per cent off the lows. It's
been quite a run in both the Nasdaq and the S&P over the last month or so. Yields unchanged this morning.

Get to 82 76. I'll
keep coming back to the commodity market for you because it's pretty brutal this morning off the back of some of the weaker
Chinese data out of China. Downside surprise downside surprise. Brent down about 5 per cent. WTI crude down about 5 per cent
copper down by 2.5 per cent some WTI 87 and about 60. It will cover that through the morning here and again through the week.
Retail sales extremely important this week. Really. That's the John don't you agree. That's the headline story something you've
just got to look for any reading this week. Come retail sales ex gas. Yeah try and get a feel for the underlining underlying
story in the control group will dive into that this week. In the last hour were there Annmarie Horden our Bloomberg Washington
correspondent we mentioned Department of Justice and of course the uproar over the former president.

Now I'd like to take a
different tack. Emery what I saw on the Zeit guys this weekend in a sleepy August not as hard as a steamy July that we had was
discussions of civil war. Give me the tone that you see in all your reading and reporting of not a linkage of Biden to Lincoln
but just this impending sense of where we are maybe like the autumn of 1859 where are we right now in this nation with this
perky elation of a potential civil war. Well I think you have to go to the Friday bulletin that the
Justice Department and Department of Homeland Security sent out to their teams to law enforcement around the country saying they
are seeing a spike in violent threats mostly coming. A lot of this from social media and also what you saw in Cincinnati last
week outside an FBI headquarters. And this is concerns what they see in these threats are terms talking about taking on militias
and a civil war.

So there are these concerns and you can see it just from the bulletins that the FBI and Department of Homeland
Security is issuing to their departments. You know the question is whether or not this continues to be a concern or does start
to die down. What does the power of the middle ground right now dashing through the first Tuesday of November. I think we can
talk about the middle ground of the Democratic Party maybe represented by the president. But what is the power of more
moderate GOP or have they just given it up. Well it's difficult right. And you're talking about the
primaries if a big one tomorrow in Wyoming. And you have a lawmaker Representative Liz Cheney who the polls show is likely
going to lose her seat to a very much so President Donald Trump backed contender. So it's really this big divide within the
Republican Party. You see that through the number of primaries we've seen amongst Republicans and whether or not how far these
candidates were willing to go in terms of showing their fealty towards the former president to get his backing and whether or
not that helped him or not.

And it's kind of a mixed bag. I think tomorrow will be one of those highlights where you do see
a candidate that strongly supports the former president questions many of the things like the select committee that is
trying to show his involvement in January 6. So you have this division within the Republican Party. And I think what you're
seeing in terms of what's going on in this search and seizure as Mar a Lago is they are struggling right. Because as Lisa
mentioned the last hour this is the party of law enforcement the party that wants to back and fund law enforcement. And they are
in this very tricky precarious moment because members of their party are talking about attacking those individuals and
defunding them. So amid this domestic political soup and Marie how do you place the international to the soup of politics for
you've got representatives from the United States heading back over to Taiwan not an unheard of thing. Nancy Pelosi was the
highest ranking. But why are we having this in the mix right now with China now saying that they're going to extend some other
military drills.

So a lot of analysts will say that when U.S. lawmakers from the United States go over to Taiwan it's a lot of
virtue signalling back home. Right. This plays very well into the politics especially ahead of elections to talking tough on
China. For the past year there's been about 33 lawmakers are under the
Biden administration has been about 33 lawmakers that went over to Taiwan. You don't always hear about it. It doesn't always get
the kind of coverage that we saw from Speaker Pelosi because obviously of her ranking being third to the presidency. And this
trip is very much so getting highlighted in the Chinese press because it is less than two weeks since Speaker Pelosi was there
and we saw all the blowback coming from Beijing which was sanctions on Taiwan as well as live military drills which likely
included firing ballistic missiles over the island even into Japan's economic exclusion zone. And what you are seeing today
is the Chinese military talking about the P.A.

LEI the People's Liberation Army preparing still for war and they are now going
to have more patrols given that you do have this delegation there. I'm sorry. What does Taiwan think about all of this. Well
it's mixed race. Taiwan has to. Two of their parties right now the one that is in power definitely leans towards the rhetoric
of independence. But there's a number of people in Taiwan that really want to keep the status quo. They understand that they
are tiny compared to China. Also China is their biggest trading partner and they don't want
to see a war. And what they would like to see is the status quo.
And our reporter Samson Ellis I think put it very well. A few weeks ago when Speaker Pelosi was on that trip and he said the
repercussions will not come to United States repercussions will be faced by the people of Taiwan.

I may stand in D.C. Armory.
Thank you. A Emery's point just to build on that. This is not new but what is new is how China is responding to
it. And they're responding to these visits with much more aggression. And it's surprising that we're not hearing more
rhetoric about how concerning that is. It doesn't seem like there is a feeling that there's going to be
war. How many articles have you read how many analysts coming out and saying said it doesn't want a war. Neither does the
U.S.. Both of them are diffusing things the sides. There still is a talk of a Biden G summit. How do you then place these
sorties over Taiwan and the escalating military drills. Complex moment. Tom if you want a decent read on this the former
Australian prime minister Kevin Rudd. Yeah an op ed piece over the weekend in The Wall Street Journal.

Pretty tiny piece. Xi
Jinping reach exceeds his grasp. Yeah. Mr Rudd has been more than vocal about this. And of course Australia has a unique
position in this. You know I was talking to Qantas about this and of course the view from Perth on Rudd is Perth Road is you
know a little different. But he has a real international weight here and his comments are important. It's just to be clear you
weren't speaking to the airline. He was speaking to your Australian producer. No but not all Qantas is you know his
parents named him. No I was speaking to the airline. It's either an Indian tribe or a species a koala bear.

I don't know which it
is. Honestly if you don't follow the show regular you get confused pretty good too. Pretty quickly. Okay. We've talked
about Matthew and of course. Yeah we'll do that. Futures down. Lord knows this is Bloomberg. This equity market rally is confronting a wall of doubt. Lisa
Shannon of Morgan Stanley saying get real. Mike Wilson of Morgan Stanley saying the risk reward is unattractive. Futures this
morning down about a half of 1 percent on the S&P after four weeks of gains on the S&P 500 the longest weekly winning streak
of the year so far and taking out about 50 percent of the drawdown in 2022. I believe we're close to 17 percent or so off
the lows. The message from the Fed. The message from Citi from Bank of America. We have more work to do at the Federal Reserve.
And the yields look like this two stents and 30 some year to year your tenure you look at those two versus each other still
negative top about 40 basis points.

pexels photo 9786304

Some dig dig deep inversion in that yield curve relative to draw down. You mentioned John
and that's always a media gloom. Let's look at the draw up right now John. You've got your math really well done. Speaks up a
solid 17 percent. Dow doesn't do quite as well in the Nasdaq John from the bottom in June up 22 percent. You call it the
media gloom some. But it's not just the media. It's the whole of the south side as well with the exception of maybe Mr. Klein
Covid over at J.P. Morgan. And I'd also say Chris Harvey of Wells Fargo sometimes he's been very good. Yes. Basically said
that weakness you're looking for in this economy push it out to only 2023. There's been a couples is going to come until the
first time at twenty three. John Storefront publishes moments ago with Up Go and he makes clear this is a market for the bears
the skeptics and the nervous. And you know you wonder why I this.

I remember BNP Paribas on the last couple of weeks saying
that maybe this can generate some crap again. And I'm pretty sure over the last couple of weeks that more and more people are
getting that itch getting that itch. What do they say. Price shaped sentiment. Sentiment does shape price and all that good
stuff. Very good as the bond market not my likes. Some in the commodity market we look a little something like this. We are
down downside surprise in China after downside surprise in China ugly ugly data. And before we got that data they came out with
the smallest the rate cuts. Crude is lower 93 on friend. Copper is lower but down two point three percent in copper. That is
also on radio.

That's London. That's what we do. Hit some copper tubes and international feel. Yeah I know. ISE International.
All right. Juliette Saly Asset Price Action. Jonathan Ferro. Single names based out of London. Operating elsewhere. That is
Brammer. Oh OK. Operating on the other side of the room. I'm taking a look. Just spinning off the commodity complex.
This is the story of the day both with respect to the macro as well as the micro. And John was talking about that rally that
comeback particularly in the broad index says look under the hood.

There's been a whole lot of pain in the commodity sector.
All of the miners Rio Tinto BHP Group and Freeport Mafia. Right. Have all been down more than 20 percent. Freeport
Freeport-McMoRan ran down 27 percent before today even since June 7.
This has been driving a lot of this feeling that perhaps we've hit peak inflation. This has been driving the fact that perhaps
you have if you have a Fed put or a Fed call rather you have a commodity put on the market giving it when you could see this.
Also in the oil complex seeing all of the major oil companies also declining in the face of lower oil prices today.

You could
see for example if you if you get a sense today of those movers Exxon down two point six percent Chevron two point four percent
Devon Energy down at three point six percent. All of these also down in between eight to 14 percent since that time. So giving
you a sense Tom of just how much you've seen these come off a reverse of the trade that we saw for the first half of the year
how much is this driving sentiment. How much is something that we have not been able to predict. And there's normally been a
pain trade to try to gauge the price of oil to gauge out where metals are going to go. How much is that with dictating the more
benign mood in risk assets. The headlines this morning 5 percent move down in oil 87 56 on American West Texas Intermediate.
They've not gotten enough credit.

Credit Suisse at the bottom. Amid the gloom was forcefully optimistic. They've done a great
job in equities and across a fixed income space in getting the post pandemic rally right. Leading their foreign exchange charge
global head of ethics strategy and credits his sharp. Jonas joins us right now. And part of that optimism is strong dollar.
You don't mince any words about it. Dollar gloom is not in order. No. For us the framework remains the same as it has been
really for the past year ever since the Fed made a hawkish tilt in June of last year. So what we're seeing at the moment is
still clear U.S.

Outperformance when it comes to the likelihood of avoiding recession. There's a lot of talk about U.S.
recession risk but the truth is the problems seem much more gloomy in Europe. And look at the jacket. So the Chinese numbers
we just had as well. How many other central banks do you know that that are cutting rates. Today we had one from China. Was
two Swedes.

That is your dollar resiliency about capital flow into the United States or is it about interest rate
differentials. Well the two coincide quite often. So definitely there's a rate differential story that's still very dollar
favorable. So that does tend to bring money into the US but we've also like the dollar from a terms of trade perspective as
well you've seen. Explain that. Well obviously the high energy prices are coming off now but the high energy prices that we've
had they've done tremendous damage to the trade balances of many countries Japan Korea the European Union as well overall. And
all of that has obviously caused lots of damage in terms of trade. And that's something that gets overlooked sometimes when
we're looking only in terms of a recession risks and where interest rates are.

So there's two prongs to this. And for now
that's not likely to change in a positive direction if oil prices keep coming off. We will see seeing that maybe a sign of
change. But if the reason they're coming off is weak demand globally that also doesn't tend to help the likes of China or
the euro. For example on the currency space well it's the dollar China into the mix. You've got a target a 695 sharp after the
data and the policy response. Do you feel a bit better about that trade this morning. I definitely do. Clearly we thought
there might be some kind of a short term correction in favor of the renminbi. Once the heat died down a little bit around the
geopolitical risk over the past week. But clearly the economic data there remain even weaker than we were expecting to be
honest. And the rate cut today has surprised most economists out there.

So I 695 call for ISE still seems appropriate. And really
I guess as I mentioned that was based above all on a divergence story. And as I said with all the focus we've had on the US
recession risks maybe the market's taken its eye off the ball a little bit on what's going on the rest of the world. So for us
that still seems the path of least resistance to go higher in dollar NH. SHARP What is the character of this downturn in China
and does it go beyond just this Covid zero policy we've talked so much about.
I think it does in the sense that clearly that's that's a big part of it. But there does seem to be once you look under the
hood some sense that certain sectors are in trouble for different reasons. For example the property sector. That's not
entirely I guess about zero Covid. There's an element of it but there's other issues to do it over leverage and really wants to
create a problem like China has by creating a weak growth dynamic.

And in fact it's quite difficult to get out of it. And
you can see that really when you look at numbers like credit growth that we had on Friday there were very very weak ones.
That credit multiplier turns off. In essence it's quite difficult to reactivate it. That's what we're finding. We've
seen that in many other economies as well. And I think that's where the Chinese are right now. If you add on top of that the
ever present geopolitical risk story now that you know seems to be something that's not going to go away anytime soon. That also
obviously casts a shadow over the future too.

So I think there's many different issues in play here is not simply a zero Covid
story. So amid all of this gloom why is it that the carry trade in emerging markets has done so well continues to do so well.
Will it continue to do that to the remainder of the euro will become something a lot more painful.
I think some areas of emerging markets already are in deep pain. If you look at for example Sri Lanka that's been in the
headlines not in any kind of a positive way.

There's other countries like Pakistan and Kenya. So countries not more on the
frontier side of emerging markets. They've already been suffering. So this carry trade that you mentioned is definitely
there for some larger economies that have benefited maybe from the terms of trade perspective the likes of Brazil. We have very
high interest rates as the central bank tries to take control over inflation. But actually there are few and far between the
number of markets that have really benefited from this flow. Are we looking at the likes of Brazil Mexico some extent South
Africa but I wouldn't say the wider emerging market space has been doing particularly well nor benefiting from a general sense
of carry inflows.

I think it's a very select group of countries that we're talking about here. Jim just quickly just back to
China just to wrap things up. How should I respond to what they did this morning with rates. Should the signal be it was only 10
basis points did not have much here. Or should the signal be this is the first play of more to come. Well the Chinese tend to
move in small increments when it comes to interest rate moves. You don't you tend not to see 50 basis point 100 basis point
moves like we see now for example in Europe and the US. So I think it is the direction of travel. That's the more relevant
factor here particularly in a world where everybody else is busy hiking rates aggressively. So I think that's for me the key
takeaway from this and that keeps this divergence theme in play.

And that's the most relevant element as far as currencies go
which is why again we have the 695 the Senate job Jana Noosa Credit Suisse quite call some 678. Well I was thinking about
that. I'd like to get up to 7. 7 yuan is really something I mean. I mean if we see that kind of weak resume remember that
really strains out a lot of different people. But I'm not sure John how managed that is.

I mean you know I go back and forth on
that. What is the currency pair like that one move seven tenths of one per cent on something you pay attention to Joel Weber.
Yeah. Yeah. Yeah. I mean it's been an evolution. I mean if you get the chart up on you as do CNY the fact is it's been an
evolution. Here is a deal with us. I go back to the front and center. Thing is everybody else has dealt with Covid some good
some bad. We've all got her stories United Kingdom etc.

And China just stands out in getting it wrong. So she has a great
point though. And a finish is important Tom. And with your focus on Covid 0 police it to Sharp's point it's more than that going
on this massive demographic issues. There's real real estate problems that aren't just gonna be solved by Covid zero on off
whatever it is. And there's also this goal to deleverage. They're not as willing to throw leverage into the system to try
to support growth. And you've seen that the 10 basis point move really tepid yet might signal more to come but it doesn't
necessarily signal a roaring all in that perhaps had been the past and that 7 level we had seen in 2019 and 2020. Head of the
pendulum and one man who is awesome on all of this is Bill Leak the chief economist at the Milken Institute. We'll catch up with
him in about 50 minutes. We'll do that at 830 Eastern Time. Features down a half of 1 per cent on the S&P and the Nasdaq
were down a rat about a third on the Nasdaq 100.

Was not doing much to 40. And off the back of that terrible day in China crude
getting hammered. Eighty seven dollars a barrel on WTI from New York this is pulling back.
Keeping you up to date with news from around the world with the first word news. I'm Leon Karen's. China has added military
patrols around Taiwan after another US congressional delegation visited Beijing said it was fighting back against a trip led by
Democratic Senator Ed Markey. The visit comes less than two weeks after the one by the House Speaker Nancy Pelosi that set
off an unprecedented wave of Chinese military drills around Taiwan.

Now Russia's president Vladimir Putin is offering to
expand relations with North Korea. Peking sent a message of congratulations to Kim Jong un's regime for its liberation day
holiday. North Korea has been stockpiling artillery for decades. That has led some analysts to speculate that it could supply
weapons for Russia's war in Ukraine. Minutes from the last meeting of Federal Reserve policymakers may reveal their
inclination on the size of the next rate. Tight banking and financial markets has swung between 50 and 75 basis points. The
latest jobs report boosted the odds of a big rate hike while the CPI report decreased them. The minutes are released on
Wednesday. Saudi Aramco has posted the biggest quarterly profit of any listed company. Aramco followed other big oil rivals
reporting a surge in earnings due to high crude prices. Net income rose to forty eight point four billion dollars in the
second quarter almost double what it was a year earlier.

And tributes are pouring in for and shoot Jane the Cantor Fitzgerald
president and former co CEO of Deutsche Bank. Jane's death was announced on Saturday after a five year battle with cancer. He
spent two decades at Deutsche Bank and transformed it into a global trading powerhouse. And shoot. Jane was 59. Global news
24 hours a day on air and on Bloomberg Quicktake. This is Bloomberg. We debate how much China has held down U.S. inflation over the
past 20 years but it's been significant in as supply chains are disrupted by China and other developments around the world as we
move from offshore to onshore. Good luck in getting inflation down from exporting inflation to exporting deflation or vice
versa. Stephen Roach of Yale on the latest situation with Tom Keene and Lisa Abramowicz. Some Jonathan Ferro futures right now
down a half of 1 per cent on the S&P and the Nasdaq 100.

We are down four tenths of one per cent yields unchanged at 282 22 and
crude takes another look lower. Guys we're down by more than 5 per cent now. 87 32 time on DAX Mark Gurman 87 32 and Brent
distant from 100 distant from 124. John 93 94. Brent a dip under 90 would be a huge big turnaround. Not just create some but also
copper as well. I mean that's not right. Kailey Leinz Shukla there in Chicago. Early trading copper 355 dipping under three
fifty six. John I'd also note gold off 25 dollars back again under eighteen hundred.

Doesn't make it that south China. China.
I just think it's like oh M.G. there's the China data. Let's do that now with under current Bloomberg chief Asia economics
correspondent. And let me ask the Prussian question. Was this a surprise. That was because July was meant to be the month of
recovery. Tom the third quarter was meant to be all about China hauling itself out of the big lockdowns of the second quarter
getting growth back on track and getting some momentum going. But we saw weakness across the board. Retail sales came in much
weaker than expected. Investment was solid unexpected in fact private sector investment well behind public spending. We saw
industrial output weaken which was a bit surprising. Giving the export story we had more weak data points on the real estate
sector in terms of investment on new home prices. And of course all of that together. Time is what forced the central bank to
cut its key interest rate for the first time since January.

Now that move in and of itself would certainly not be a game changer
for the economy. The problem in China is not that the price of of money. It's a fact that nobody wants to borrow. But it does
speak to the idea of the Chinese economy now is slowing much faster than expected. Like I said at the start. July was meant
to mark the beginning of a turnaround. But today's date has certainly corrected that narrative. And how would you read that
10 basis point rate cut.

I read a number of analyst reports saying on one hand this suggests just how dire things are.
Considering that they do not want to ease policy they do not want to fan the flames of inflation even though it isn't as
significant or severe over there. Other people saying it just indicates they're prepared to do so much more going forward.
Which side you weigh in on. I think it has to come down the latter Lisa. I mean they haven't
cooked this right since January despite everything that's happened. Economy.
That's partly because there's no shortage of liquidity in the financial system for example. In fact they even drained some
money from the money markets today.

And there's no shortage of loans available for banks and companies. The issue is that they
don't want to borrow. It's not about the lending rate. It's an offer to them. I think what it does symbolize though is that the
authorities and I was starting to pull whatever lever to have available to them. And on the central bank side really that's
just about what they can do. The money markets about trying to bring interest rates down and maybe take some pressure off say
they need to save borrowers. But the big focus now is going to be on where will the policy pivot come. Will it come on Covid 0.
And all the messaging on that has been no way or they wants to public health dividend. They're not going to U-turn on that at
least not before the Congress.

So then you have to ask well what's going to happen in the real estate side of things. Are
they going to come in there and rev up those developers finish those unfinished property projects and get some money flowing in
that part of the economy. These are the big questions going forward because a lot of economists said today that the July
numbers were so weak it's now changing their views for the rest of the year.

Already August is looking weaker than they expected
in the back half of this year is already going to be weaker than what they thought a few weeks ago. So what about the social
aspects of this as well. We were talking about how basically one in five members of the Chinese society of aged 16 to 24 are out
of work. How significant is this for the people's Congress heading into
that meeting later this year. Obviously all important and nothing is more crucial for the
Communist Party's mandate on you know the the social contract of of economic uplift and jobs being created for everybody.

So when
you have this bracket of young people that poses long term structural challenges for the economy of course that pose a risk
of long term damage to their earnings and potential it's not helped by the fact there's a record amount of graduates coming
on on the recruitment scene is here. So it certainly is a bit of a crunch that China is not an outlier in youth unemployment.
Youth unemployment globally because of the pandemic is still higher than where it was before the pandemic. That's according
to the ILO. So John isn't an outlier. But nonetheless certainly mission critical for the party is creating jobs have said so
policy time and again this year on day I wouldn't be surprised. We do see more of a focus now on job creation schemes for about
16 to 24 bracket in the months ahead. And you now. And I want to get back to it. Park the data from this morning. Park the
central bank response got back to Friday. Get financing out of China. Is this a liquidity trap. And how on earth do they
confront it.

Well that's what all the conversation is John. I mean it goes back to the money markets by the way. They actually
took money out of the financial system today. That was lost in all the news that speaks to highway runs to the idea that
there's so much money floating around in there. That's not where the problem is.
The problems are more either no more structure linked to this Covid zero policy on how did a back out of the corner it out
they are now in or of course longer term structural around the real estate story. Where are they on the deleveraging debate.
Are they willing to tolerate more debt. Are they willing to tolerate more risk on their highways. Are they going to rival
that. And then the bigger picture question about well you know what happened the whole consumption story it was meant to be all
about China transitioning to a consumer driven economy.

But consumers clearly are nowhere to be seen in this recovery. So a
lot of people are saying there is now risk of a liquidity trap. We're seeing that in terms of what's happening with the lack of
appetite for lending. We're seeing that in the credit data. And that's why a lot of economists think second half of this year is
going to be pretty bumpy unless there is a kind of a policy pivot a fairly major pivot by the authorities. But so far we're
not getting those signals. And awesome as always great coverage from you and the team on a very complex situation and the
world's second largest economy. Anna Coren there at Hong Kong. Take care. Credit takes right out China. That's the bright
flashing light for me. That's the most important signal we've seen. I don't get it. I
agree. In the real estate up and down there has been there for well over a decade. John I would really emphasize that the
outlets that people have for investment within China sent around two things real estate and more real estate.

So that's sort of
how they got to this mass. And you know we play up the abandoned cities the abandoned skyscrapers. But the fact is it's a mess.
It doesn't obscure the fact that they have a medical plan if you will a medical strategy that clearly hasn't worked. I mean how
alone are they in their Covid policy now. Even Japan is trying to open up a way from Covid era that some would call this the
prospect of a balance sheet recession wouldn't wait. It's good Francine Lacqua. Their answer is they're going to grow their way
out of it if they figure out Covid. I mean their playbook has always been employed people through exports that 30 years of
discussion. Let's see your take on this. Well they wanted to transform away from that. They wanted to create a more Zen
master economy. And this has been the problem is how do you do that when you've
curtailed that growth.

And you're not necessarily seeing a smooth run there especially
with the overhang of the mortgage market and everything there. And what you're seeing is perhaps Iraq year end to that than
people had expected. What are the implications for global growth then if you start
talking about it to handle under sub sub three much anything you mean. Well right now this is looking potentially more like you
have to game it out. Commodities difficult today with down by almost 5 percent on WTI 87. Handle on WTI crude coming up
shortly. Lisa Holmby have showed us looking forward to that conversation and write some credit on bonds just around the
corner with equities down six tenths of one per cent on the S&P on the Nasdaq would have four tenths of one per cent from New
York this Monday morning.

Good morning to you. They are just pulling back. I think the market is reacting to the positive sign that we've
probably seen the peak in inflation. We've finally seen inflation roll over. The rally that we've seen in the market
over the last month was really just driven by lower yields. The key is to really focus on two things. It's the focus on
valuation and it's the focus on earnings power. Markets need to be on guard and need to be vigilant. Everything we're seeing
really just a return to kind of economic volatility. They used to be the norm. This is Bloomberg Surveillance with Tom Keene
Jonathan Ferro and Lisa Abramowicz. Good morning everyone. Jonathan Ferro Lisa Abramowicz and Tom Keene. Thank you for
being with us on radio and television on a Monday. We recalibrate towards Jackson Hole. We do it with futures off a
bit. Oil John crushed crushed by weak data out of China.

Some downside surprise after downside surprise and a central bank
response of rate cut of what 10 basis points. Bottom line credit data in China. Not great. We saw that going into the weekend.
What can they do about it and are they confronting a liquidity trap right now. We talked to end occurring there about the
opacity of information data John the call of the year with a World Trade Organization calling for sub 3 percent global
growth. You gotta believe in August were there weaker growth. But directionally things have improved in the last couple of
weeks. And a monster upside surprise on payrolls. We had a downside surprise on CPI. You put it together time we said early
this morning. Good news for this market was good news. We've had quite a run for weeks of gains. So many S&P 500 Dani Burger the
VIX 32 down to 21 is well the makeup of the earnings reports have been quite good.

John I really like what Julian Emmanuel
has done over at Evercore ISI. I think it's with 90 percent plus of the earnings in. I'm sorry. It's been a surprise. What a
shock. You mentioned Evercore some the work from the rights team the Fed watches over Evercore. Alisa can speak to this Tom. It's
a tug of war right now between this fed this market to continue read financial conditions of course so much more easier over the
last few months.

And it's not just equities it's credit to credit spreads are aggressively tighter. Well let's go let's go
to that. Lisa help me here with financial conditions. A Bloomberg financial conditions index going from one standard
deviation GRIMM into a much better negative point to zero. And you see that in IAG and in high yield as well. Right. It's easy.
Yes. You are seeing that across the board. There's been an aggressive rally to John's point.

How much do
you say this is foolhardy and that this is a bear market rally. How much do you say there are fundamental his fundamental
reasons for this. In addition to the better than expected or the weaker than expected inflation data just simply the life that
we've seen in commodities how much pressure does that take off. Some of the gains. And really I just keep going back to that.
You asked Tom earlier why aren't stocks down more on some of those Chinese data. Well at what point is it that it reduces
demand from the commodity complex which alleviated some of the tension for U.S. company. Let's start the data chart by saying
104 percent of our listeners and viewers think oil.

West Texas. Eighty eight dollars a barrel. Brent crude. Ninety
three dollars a barrel. I'm sorry. Exactly. Why is that a bad thing. I'd also note this morning John Chicago copper 356 down 3
percent is down 5 percent on Brent. And I'd say Tom it's a bad thing if it's driven by weaker demand and not greater supply.
And I think we can make that read across today off what's happened with China yield to lower by couple of basis points to
81 31. It's such a good thing for this White House. He wants to see this carry on and some gas prices keep coming down. Euro
dollar 1 0 2 let's call it wanted to negative six tenths of one per cent some real dollar strength out there off the back of
some their and features Tom. Yes softer. But with both of you it's not a major move. More than six tenths on the S&P and the
Nasdaq were down half of 1 percent. The VIX twenty one point zero seven out one point five four points.

Some of the tensions
off of China this morning. We're going to get a brief have been very visible. Lisa Hornby joins us head of U.S. Multi Sector
Fixed Income at Schroders. And Lisa I really want to go to a general sense buried in your note. The value was there for a
decade and bills notes and bonds. The value is extraordinary. Discuss that. Why is price cheap in fixed income. Well to be
fair we wrote that note about four or five weeks ago. That's fair. Let's admit it. But you know when we look at bond yields
today in the longer term over the longer term there is much better value that there has been. Certainly anytime in the past
decade. And in fact if you look back even going back 20 years where at the sort of top 25 fifth percentile or so. And so you
know in our view the first six seven months of this year that quite painful in return space. But what you look forward we've
now set the landscape for much better returns.

We actually have income in fixed income. Now for the first time in a while we
couldn't make that case a year ago. Lisa spreads have tightened aggressively. You've seen that we've gone from close to 600
basis points on high yield to threatening to break 400. Lisa can you help me understand. Just dissect that rally for us. When I
spent this. Is that an up and quality trade is it. Everything what's happened here.
I think it's a I think it's a few things. I think the main one for us actually is that people have a bit more certainty in the
rates volatility scenario.

And what what I mean by that is I think you get back three or four months ago people didn't know
where the terminal rate belonged. I mean you heard strategists talking 3 4 5 6 percent to me. There were there were lots of
expectations out. There are lots of various scenarios. And that led to extraordinarily high rates volatility and of course the
subsequent impact on credit spreads and equity markets because if you can't price the risk free rate how can you price
everything else. And I think what happened was not only did sentiment get so poor
that positioning was perhaps a bit offside but what happened was the Fed was perceived to do a slight pivot and showed that they
are willing at some point to slow the pace down and that they think that they're getting fairly close to perhaps perhaps a
neutral rate over long term. But people got comfort in the fact that the terminal rate is
probably not 5 or 6 percent. It's probably 3 or 4 percent.

Lisa the Fed has said we haven't pivoted no pivots going on here. And
basically we're expecting that here that the minutes. Is that going to reverse some of the spread tightening that we've seen.
I think it will. I think that the market narrative shifted a bit and that lower vol regime is positive for risk assets
especially. It's more positive when sentiment had gotten so far off sides. I mean we looked at that. We look at that Credit
Suisse paddock euphoria index it was negative 5 panic for 4 months almost. Now it's back actually in positive territory. So
there was a massive swing in sentiment. I think that coupled with that perception that the Fed became a bit more perhaps
dovish led to the rally that we've seen. To your point Lisa in our view this is a feed. I don't think that the I don't think
the outcome that the market is painted which is one if you look at what's priced in that yield curve is inverted. That's points
to a recession. You look at what's priced into Fed funds rates.

It's basically
the Fed stops in February or March hiking and they basically do an out about face and start cutting rates in the summertime. I
think that's a that's a fairly unlikely scenario unless there's a really big downturn which there could be but then should risk
assets be priced the way that they are today. We saw the bond markets as well as the Fed all just trading and operating around
an oil market that's in flux.

Oil is one part of it certainly that's you know that's going to
lead to the headline inflation sort of gyrations. Oil came off and so we saw a big big drop down in CPI headline CPI. But I
think core inflation is more important and that's really where the story is. Just that's a bit more concerning. Yes there was
maybe a little bit of moderation but the sticky components of core inflation are still running north of 5 5 6 percent. And so
to us that's the that's the real challenge. Yes oil well puts and takes. That will drive headline. But you got to get core
inflation down to more reasonable levels. And I think that's what the Fed is focused on. Lisa just listening to that final
comment there that just sounds like you think this debate over terminal rates is unresolved that it's too early to get ahead of
this story.

I think it's too early to be discounting Fed cuts certainly.
I think it's too early to be discounting. The Fed has has pivoted. I think that's that's not not done yet. I do think that
they probably moderate their patients temper to 50 probably. You know they could do a couple 50 years. They could do a couple of
20 fives. I don't think that five or six percent story is the one that you
know people were fearful of at the very front of the year. I don't think we're getting there but I think the market is
pricing in this very specific outcome where we head into a very moderate or mild recession. The Fed is able to stop hiking and
then start cutting and that just seems unlikely historically. They don't cut when inflation is at elevated levels unless
growth is really really bad.

Employment is much higher. Unemployment excuse me is much higher than where we are today.
So you know I think the markets is is getting a little too excited right now to be honest. You know I've always called that
Lisa a bedtime story to have equity market both sleep well at night. And that's what that is right now. Lisa don't be that a
schroeders Lisa Abramowicz.

It's just this really cute story about how this is all going to play out. Don't you think did a
great piece on this going into the weekend. If you get inflation to moderate you allow terminal pricing to come down.
Maybe that's what we've seen. But I think you could equate peak year over year inflation. This idea that we've seen peak fed
hawkishness and then soft landing comes after that. There's a lot of things that we still need to resolve here. One is whether
inflation is going to remain really sticking to your rent or not. And that's going to reintroduce this debate about whether
we have ready whether we can really can price out terms of pricing the way that we have least in the last couple of weeks.
And this goes to the question of of the core rate which we did not see decline as much and rents and some of the wage increases
that we continue to see which should be all other things being equal a good thing.
But in this case proved pretends perhaps a stickier inflation rate going forward not something the Fed's going to want to see.
Too cute to price in rate cuts.

Lisa seems to be the takeaway for many people. Some futures are down dollar stronger. What he
said and effects what I'm seeing across here is a search for joy. As you mentioned John we had job joy we had CPI joy. And I
think to reaffirm what we've seen for four weeks going to find the economic joy. Maybe there are weeds in the retail sales

What I really see is a real sense of risk out there witnessed by Euro Swiss. He has just lagged stronger. And John
is back to where you'd have 2015 were. Then we were getting near on euro Swiss Re zero point nine five. We're not there yet but
we're getting there rapidly. I can't decide whether that's depressing or not. Some sense for sure. I think they deserve it
from grocery loopholes like someone who hasn't taken enough vacation does. That's going to take some time off till we can
arrange. I'm not taking time off. I don't have a life. So American of you have children but just down six tenths of the
S&P with Tom Keene and Lisa Abramowicz. Some Jonathan Ferro heard on radio seen on TV. This is Bloomberg Surveillance.
Keeping you up to date with news from around the world with the first word news.

I'm Leon Guarantees. Another U.S. congressional
delegation this one led by Democratic Senator Ed Markey is visiting Taiwan. China says it is fighting back by adding more
military patrols around the island. The congressional trip comes less than two weeks after the one by House Speaker Nancy Pelosi
which led to unprecedented Chinese military exercises now in China. The central bank unexpectedly cut its key interest rates.
The People's Bank of China's ramping up support for an economy that is being hurt by Covid lockdowns and a deepening property

New data shows that home prices fell again in July. Meanwhile industrial output and retail sales were weaker than
expected. Members of Congress are putting pressure on the US government to tell them what was in classified documents seized
at the former president Donald Trump's home. Senate Intelligence Committee leaders have made a bipartisan request to the Justice
Department and the director of national intelligence. They asked for an assessment of potential risk caused by the documents
mishandling. Iran is promising to respond to a draft text to revise the 2015 nuclear accord by tonight.

Iran's foreign
minister says if the US shows a realistic approach there could be an agreement in the next few days. A deal could let Iran
resume oil exports to global markets. It's a giant check for Wells Fargo the bank that once turned out one in every three
home loans in the US. Now plans to shrink its false mortgage empire. Bloomberg has learned. Wells Fargo is no longer
committed to ranking number one in the business. That comes after years of struggles to avoid costly probes and hits to the
bank's reputation.

Cable news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred
journalists and analysts and more than one hundred and twenty countries. This is Bloomberg. This year we're probably lucky to get to see two to three per
cent growth in the Chinese economy. Once Xi Jinping gets through the 20th Party Congress this October November will it be a
course correction on the economy or not. That'll depend largely on who gets appointed as premier as head of the economic team.
Bam. Briscoe wasn't even listening. Kevin Rudd that Kevin Rudd great. The former prime minister of Australia was listening to
Brammer in that promotes some bam. Rick Scott said With so much hate within just despite fine features down to half of 1 percent
I let it go and that's that 100 down to 34 percent. I won't although I've been terrible in those promos take the last few

You know it's down to basis points to maybe on a 10 year bit defensive out their data out of China. Ugly. We've got crude
down by more than 5 per cent some 80 sell on WTI in the nuance here.
John let's go into this right now. It's important the bit defensive part. John I would suggest as in commodities they just
ebb away through the more totally Tom Keene round of London on the anime down about two and a half per cent this morning. So
yeah we see with some dollar resiliency I'm watching Sterling 120 86 which bears watching may be a bit idiosyncratic to say
the least.

This is well-timed. Elaine Kamarck joins us right now senior fellow at Brookings definitive on presidential history
and the cadence across decades. Elaine I want to go to your glorious colleague one William Galston over at Brookings who has
written a timely piece of which you are expert on is an exhausted America whatever our politics.
Are we ready finally for a third party. My dear colleague Bill posed an interesting question but I think
he also answered that question which is we are not ready for a third party. Third parties don't succeed in American politics
because of the basic structure of American politics. We have winner take all systems. So getting picking up a couple seats
here or there coming in second coming in third as you would in a parliamentary system get you nothing. And so the real effect of
third parties historically has been simply to detract from one party or the other.

And historically third party movements have
then been incorporated into one of two major parties. That's that's it. It won't work. That never has worked. It won't work.
Now you are expert at the sprawl of our history. I mean folks this is someone who could tell you what actually happened in the
four years before Grover Cleveland's effort. I mean to be direct Lane has ever
been this divisive in the country. Do we all need to read up on alien sedition and need to know too well. Remember we had a
civil war. You don't get much more divisive than civil we mentioned. Yeah yeah. I mean so yes we are in a period of
extraordinary divisiveness. It even has aspects of violence around it which is frightening. But we have been through these
periods before and survived and hopefully we're not headed to a civil war.

Elaine you have three different prongs right now that
are really dominating the headlines heading into midterm elections. You have on one hand gas prices going below four
dollars. And just as general inflationary environment that does seem to be cooling just a tad at least for certain items. You
have these social issues with the abortion ruling and then you have the latest bombshells around Trump in some of the papers
that were confiscated from Mar a Lago. What are you watching most closely for. What could impact more significantly the
midterm elections. The most important thing I think I'm watching is the abortion in
intensity of the people who are appalled by the Supreme Court abortion decision. We saw an early indication of that in Kansas
where on a referendum there was a presidential level turnout and a 20 point a 20 point victory for the pro-choice side. I think
there's a lot of pent up anger about this and I think we're going to see it as these midterms roll out.
If the economy was already baked in. In other words if you're Republican you thought this economy was terrible.

If you were a
Democrat you thought it was bad and think it was Joe Biden's fault. So that was that was already baked in. And of course the
Trump supporters they love Donald Trump no matter what he does. You know taking state secrets home and and jeopardizing security
they'll make an excuse for it. So those other two things were baked in. The new factor is the abortion decision. I think it's
going to have a lot more energy lead a lot more energy for the Democrats than we ever thought.

So killing that forward. Going
to the midterm elections how do you think that's going to shape the outcome in a way that perhaps is unexpected.
I think it will help the Democrats keep the Senate. I think that's the big. I think that's the big takeaway. The combination
of the abortion decision and the Republican choice of some less than great candidates. And the two I'm thinking never. Mehmet Oz
in Pennsylvania and Herschel Walker in Georgia. I mean the Republicans had better choices than they ended up with. Thank
you. Donald Trump. So I think that the combination of the energy around abortion and some poor choices probably bodes well for
Democrats keeping the Senate the House. I think the Democrats will still lose but I don't think it's going to be a tsunami. I
don't think it's going to be a 60 three vote margin in the House.

I think it'll be a much narrower margin than people are
expecting. I think. Mike Allen thank you. Appreciate your perspective as always. Allen came off of Brookings. Some
certainly votes to pick out one point right now. It would be in the commodity market not just with crude lumber today but just
gas prices coming down the way they have done. So it's not a bad thing. I think it's a good thing for this White House. I think
we could say that without a doubt. I agree. I mean I really I gotta be careful here John because while you were gone and your
one day holiday that turned into a week I mean I gotta be honest John. The level of gloom I'd never seen. It was amazing. Was the
gloom coming from strategist gas whatever. World's coming to an end. He could be boom. Up we go. Was there tension. There was
tension. You know CAC you know you can reliably resolve any of that. No I

John can you explain Manchester United. The thing of the we can translate this for the American audience. Here's his
venerable firm which we know through Jim Lord O'Neill look great. I've never seen the essays on menu and their collapse
like I've seen this week. What's happened to the ownership of the club is where the focus is at the moment something I don't
think it should just be on the ownership of the club. Those plans at home are not performing at all and they've got a really
tough game next week against Liverpool and that could be three losses.

Three losses right now. But is this soldier equivalent
seriously to the Yankees being in last place. It's not just the Yankees it's the Cowboys. It's the same thing as a massive
franchise and they just haven't been able to get any success whatsoever. But the Glazers Tom. That's where the focus is. They
have not had the success of Mania Night. The people wanted to see the company. We can call it a company because this one has
been loaded up with debt.

He has spent a lot of money on players and those players haven't delivered. I'm so dumb as Matthew
Liverpool next Monday. Is that a derby that is considered somewhat of a derby but it is not a local derby in the sense of
they're not from the same city. But it is a big big game for the country. Phil is Matt Miller. It's not really a derby. Okay. I
don't think that word anyway. Futures are down.

A little bit of economic data in America just around the corner
might NIKKEI dropping by to get you up to speed on that commodity futures on negative. We're down a half of 1 percent on
the S&P on the Nasdaq 100 down a third of 1 percent. And that is an ugly ugly number. Might NIKKEI. Walk us through it. Yeah. We
don't normally give the Empire Index a lot of airtime but today Empire has absolutely collapsed for the month of August.
This is the first major manufacturing indicator that comes out during the month and it's down thirty one point three points
down to thirty one point three. I'm sorry. That's a collapse of 42 points.

It fell. The the numbers show
that only 12 percent of respondents indicated conditions had improved during the month.
44 percent say things worsen. New orders fell 36 points to twenty nine point six.
Shipments fell forty nine points to twenty four point one. Even employment fell ten point six is still positive at seven
point four. But that's a very low number. The only relatively good news
prices paid falling eight point eight points to fifty five point five. But this is the second largest drop in the Empire Index in
its history only behind what happened right when the pandemic broke out in April of 2020. So a major fall in the numbers for
the Empire Index kind of a tertiary index but it is a very interesting drop.

Well the bond market had you
Mike. You could see lower by five basis points on a ten year to 278. Equities are doing okay still. Basically where they were
but down a half of 1 percent on the S&P is certainly a reaction in the bond market to some of those commodities already lower
off the back of the terrible data in China. Mike the regional Fed manufacturing readings have been pretty rough for time now
for the last couple of months. Mike how does that stack up with the other data points.

The ISE Sam the PMI ISE. Well it's
interesting because the the PMI ISE have been down. We've seen that. But the ISF numbers have remained in positive
territory and there hasn't been a great explanation for it at this point.
But it does suggest manufacturing overall is slowing down. Even the ESM numbers have come down some. But the economy still has
some residual strength. We get Philly Fed later in the week and I'm sure that will garner a lot of interest after this one now.
Mike how much is this being perhaps a little bit distorted by the inventory build that we've heard so much about the fact that
a lot of companies in manufacture are affected and retailers have needed to hold on to more to avoid the kind of disruptions
that we saw immediately after the pandemic started. Well it may have something to do with it.

It's a little hard to necessarily
put it on the auto in on the inventories in the sense that New York is not a big manufacturing center for garments and things
like that. So it isn't it isn't the centerpiece of what's been happening
within countries but they know they show inventories are not coming down. So it is still some bad news there that is going to
have to be worked through sending you to lower. That's for sure. The front end with down about 4 basis points on a two year let's
call it 320 on a 10 year were down about 5 basis points to seventy eight. Equities. Okay we're down about a half of 1

Batik and that data ugly. No other way of putting it. The maximum weight data out of China this morning. Yeah I'm
making even more important the retail data that we're going to see later on 70 percent of the economy might keynote there. John
is it's a tertiary piece but nevertheless the magnitude of that move is jaw dropping. Right now we're gonna rip up the script.
We can do this with William Lee. He is chief economist at Milken Institute. We are going to talk
to him about the empire statistics but said let's take advantage of his encyclopedic knowledge of the Pacific Rim and the
dynamics of China.

Of course Dr. Lee has all of the efforts he's done at the International Monetary Fund over the years and
Citigroup and of course was a sugar oil shingle out at the Milken Institute. Right now Bill Lee I want to go to the party
Congress right now. Elizabeth economy of the Council on Foreign Relations in her beautiful book The World According to China has
the view of China looking out.

How does Beijing and their leader in Beijing how does he look
within giving the grim data of the day. Actually President Xi has made a major campaign of his to start looking inward. It's
called the deal circulation strategy where he wants to have the domestic economy become the primary focus for China and the
source of growth going forward. Unfortunately so much has collapsed within China that the
domestic economy is nowhere to be found especially in the private sector where the only store of wealth the middle class
had. The property sector has completely collapsed and had about a year of declining real estate prices.

So so so right now the
the rest of the world is the only hope for China. And even that's collapsed because the latest data show the export numbers
are nowhere to be found. So China really has nothing to hang onto going into the party clubhouse. How does she Bill Lee
prosecute decisions logistics the. Process of it to Shanghai or to Chengdu. How does Beijing actually get the message out.
You know right now there's a tension between the the center the central government and the municipal governments because right
now the only place for revival is to have the municipal governments go in there and do infrastructure building and just
start pumping out fiscal policy. Unfortunately every municipality out there is so indebted they can't do it. And so
so the only thing that Xi Jinping has to to have to save face going into the party Congress in October is to have some prayer
of saying we will have a revival in the second half of the year. These numbers today have put that to rest and there's no chance
for that.

On top of that Speaker Pelosi has slapped him in the face and the loss of face
going into the party. Congress is going to be something that's going to be very hard for him to recover from Bill Gates. Time
on in a moment. Just on the economy. You describing a balance sheet recession in China.
A balance sheet recession for short in the private sector because the only source of saving for the households has been
real estate and very volatile stock market.

And so with the collapse of the real estate market and the hilt that huge youth
unemployment it's very hard for households to have a positive outlook for the future and start buying things like consumer
durables and other other items. So. So the balance sheet recession notion is very much in play in China not least
monetary policy impotent doesn't it. And it fell. If that's the case. I'm just trying to account when it leaves the global
economy off the back of a dynamic stock to public service just a little bit more. The only place monetary policy can have a play
here would be regulatory policy to somehow ignore all of the holes that are in the real estate sector and say OK guys go on a
bill. We're going to backstop all of your your bad debt and all of those empty apartments of yours.

That's the only place to
launch repulsive is the regulatory side. And China is likely to be able to do that because the regulatory sector the rate the
real estate sector is in such bad shape. So what are we looking at Bill in terms of GDP growth for China.
I hear two handles going into the rest of the year and so in order for China to get to his 5 percent target it has to have 7
or 8 percent for the rest of the year.

And right now it's exactly going the opposite direction as the rest of the world
economy factor that in all likelihood in your idea that you could see a two handle for Chinese GDP growth.
I think that notion has gotten out especially among my my friends who are a China chief economist out there. They can't
publish it because they could be banned from China. But I think the notion is among the among the investors of the world. Well
this may be temporary and China will somehow be Covid because it always has.

But the structural problems I just pointed out are
just so severe. I think there is going to be a lot more work to be done for China to regain anywhere near its investor
status. What about the asset pricing though globally. And we're just talking about the Empire Manufacturing Survey severely
disappointed. Biggest second biggest drop in this history of this index.

The second biggest just all in level that we have
ever seen in this index is history. How much how are we looking at a global recession really putting off the slowdown in China.
Well manufacturing is really at the core of the globalization. That's the one sector that's most affected by globalization and
China in particular because it's been the nexus of manufacturing. So we would expect any kind of slowdown in China
that affects the global supply chain to kill the manufacturing sector before anything else. And we have seen that in the data
now. So that's not so surprising. What is going to be difficult with the how the rest of the economy where the global economy
will adapt its global supply chains in a way that takes China out of the picture or at least become less important part of the
picture. If you said something moments ago I'll paraphrase that said some people can't publish things because they'll be thrown

The country now built. There's an element of truth in that in the minds of a lot of people. And I wonder if these things
start to deteriorate just a little bit more build where I look for reliable data on what's actually happening in that economy.
Well I hate to say this but my supplier myself my colleagues are kind of constrained. I'm lucky to be at Milton where I'm not
constrained to see what I think. And I think it's going to be very difficult to find hard intelligence about China outside of
private sources.

That's tough. Bill thank you. Bill Lee of the Milken Institute. T.K. that's what we've got to confront these
diamond dynamics these issues that we're talking about right now. Some things that we typically associate with a balance
sheet recession which is what I was talking about in the Chinese economy. Yeah it can be a balance sheet recession. But I think
it's so unique. And you see it with the information flow there. The lack of clarity on data is well that I'm in the camp.

it's more than just an economic analysis. We're a unique time. I know any ability to predicted other than to say I could see the
three of us travelling Kenya showing us in Asia in November the Courtney Donohoe the party Congress. Are we gonna be able to
talk about what's happening in that economy. You hear what Bill Lee just said that he doesn't expect to get the real insight
from his Southside colleagues. Know that that's been known for years. And sure emblematic hits that we can and some real issues
in that economy. I think that Dr. Lee is speaking the reality that isn't spoken
by anyone on global Wall Street. That's experience. John I've personally experienced it numerous times in China. There's a
larger question here though which is our economists that are looking at the U.S.

Manufacturing jobs that are use it looking
at the U.S. factories the U.S. retailers factoring in a 2 point something GDP for China. How do you then factor that in. And if
that's the case are oil prices reflecting something that other risk assets are not yet because of the slowdown in demand. And
that I think is a bigger sort of question for markets and how manufacturing is brutal to get to catch up with Mike NIKKEI off
the back of that.

I can tell you what the bank of their futures still lower down about six tenths on the S&P on the NASDAQ 100
down four tenths of 1 percent. Where we saw the response was in the bond market yields down heading south lower negative 4 basis
points on a 10 year to about 278 let's call it to 79 and lower at the front end at a curve as well. Coming up in the open.
Looking forward to getting the seat back from grandma. Claim your Lisa. Lisa was maybe Tom going to take it away from

Do you want it. You can have it times if you want. Victoria Finance Cross. Mark's gonna join us. James RTS Aberdeen
Asset Management and Jim Carey Hall of Bank of America. Looking forward to doing that. Maybe just injecting a little bit of
optimism after I don't know what happened last week. Thanks a lot. The balance in the conversation NASDAQ is completely fair
and fair and balanced. Gloom gloom gloom. As we count down to the opening to counterbalance from me the
is keeping you up to date with news from around the world with the first word news on Liane guarantees.
China has added military patrols around Taiwan after another US congressional delegation visited Beijing said it was fighting
back against a trip led by Democratic Senator Ed Markey. The visit comes less than two weeks after the one by the House
Speaker Nancy Pelosi that set off an unprecedented wave of Chinese military drills around Taiwan.
Russia's president Vladimir Putin is offering to expand relations with North Korea and sent a message of congratulations
to Kim Jong un's regime for its liberation day holiday.

North Korea has been stockpiling artillery for decades. That has
led some analysts to speculate that it could supply weapons for Russia's war in Ukraine.
The UK has granted the world's first approval for a Covid vaccine tailored towards an all the common variant. But donors
updated based. It contains a half days of its original shot and the other half targeting an earlier version of the COIN
variants. The company says the vaccine has also been found to generate a
good response against the latest sub variants. Saudi Aramco has posted the biggest quarterly profit of any
listed company. Aramco followed other big oil rivals reporting a surge in earnings due to high crude prices. Net income rose
forty eight point four billion dollars in the second quarter almost double what it was a year earlier. 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 one
hundred and twenty countries. I'm UN Gardens. This is Bloomberg. What I think the market wants to see here is it wants to see two
things it wants to see the inflation genie going back into the bottle and that's somewhat obvious.
I also think that the market wants to see some deterioration in the labor market.

David it's J.P. Morgan on inflation. Genie
back in the bottle. And right now the inflation genie is back in the bottle because oil Lisa Abramowicz oil now plunging well
under five dollars five point six percent. West Texas Intermediate moments ago dipping under eighty seven dollars a
barrel. Lisa that gets your attention especially after the Chinese data that came out overnight that were weaker than
expected with Bill Lee of the Milken Institute just coming on and saying it is very likely to see GDP growth in China in the
two handle level very much opposed to what we are hearing from the main street
from Main Street. Economists parachuted in a perfect time with Gina Martin Adams chief energy to buy it at 124 dollars a barrel
and at Bloomberg Intelligence running all of our equity coverage over the last 10 days I've been shocked by the amount of gloom
interviewed the interview that I've read.

Is sentiment still gloomy or if we had a bull market in equities where the gloom
has drifted. Yeah it's so difficult to measure frankly because one of the things that I think has really surprised the
consensus all year this year is to get the degree to which the investor is willing to persistently invest. Flows into the
equity market have been somewhat stable and significantly stronger than many people had anticipated. I would this diamond
where are. Well they usually do. Usually one of the indicators that you find is as the market is falling the investor is
capitulating and flows are negative. And that is a confirmation of very negative sentiment. We've missed that this entire cycle.
And the reason I think that they've stopped as frankly they've learned some lessons from the last several corrections which in
which the investor has largely taken money out of the equity market at exactly the wrong time struggled to get back in until
the equity market.

It was already somewhat overvalued and really mis timed it.
So hopefully some of this is a reflection of the education of the investor population. I want to move away from sector
analysis and bull and bear analysis to factor analysis. Certainly we have factors out there that will allow a part of
the market to be bullish like even if the rest of it is bury like factors that allow for example quality large cap yet to do
better than good.

Well so far this year the factors that have done incredibly well has value the value stocks like the low the
long end of value relative to the short end of value has outperformed tremendously. Quality has actually been an
underperforming factor because quality is closely linked to low value quality. Stocks tend to be the most expensive stocks in
the market. Those are performed very very poorly over the course of 2022 reflecting a new inflation outlook and rising interest
rates. That said the factor that really screens is somewhat attractive to us and our factor work right now is still

Momentum stocks doing very well relative to the other factor families and low volatility also doing relatively well.
The combination of value and quality is very messy as we contend with this environment of peaking inflation and still raising
interest rates which is a reason why Gina Martin Adams so many people are just looking at the Fed and saying it all depends on
what's going to happen with interest rates and that the rally that you've seen in big tech which has really driven the gains
that we have seen is off the heels of this ratcheted back expectation for how high yields can go. How much can we really
attribute that to the rally versus what Tom is talking about which is faith in the ability to continue to grow profits at a
time where they've been incredibly resilient. I think it's entirely due to interest rates frankly Lisa because this group
even though profits are somewhat resilient long term this is a group that is showing the greatest negative estimate revision in
the S&P 500. So when we look at the big cap TMT stocks in particular those that are more communications focused as opposed
to the apples and Microsoft of the worlds those stocks are producing the greatest negative estimate revision in the S&P

At the same time they're reinflate ing. So that would tell you that the entirety of the market sort of movement in favor of
this group specifically is related to the outlook for interest rates and some pullback in expectations or at least a full
pricing of expectations for the Fed. Now keep in mind that when we looked at this in back in June these stocks were inordinately
cheap relative to their long term average. They're now somewhat expensive trading at about a 20 handle on forward earnings
relative to their prepay endemic five year average of seventeen and a half.

So this is a group that has now somewhat expensive.
If the Fed does move to the degree that the market is anticipating we would expect the script to trade closer to 15
maybe 16 times forward earnings on a on a longer term basis. That's a far cry from where we are today. So I think this is
still a group that accepts some degree of risk. And probably create some downside pressure in the short run as we rotate to
more sustainable gainers too over the longer term. What's the next pivot point then for equity traders that are looking to the
Fed. Look I think the next further point is obviously the next Fed meeting. That said most people are largely anticipating
somewhere between 50 and 75 basis points over the next meeting. The really big question marks come into play into the end of
this year because there are a lot of folks that think the Fed won't hike pre midterm election. There are a lot of folks that
are counting on economic data sort of deteriorating significantly following Labor Day. And that creates something of
a pause at the Fed by early 2023.

Will that actually happen is a huge question mark. The Fed themselves also appears to be
getting a little bit frustrated with the degree to which the market has traded post the last Fed meeting and has been very
vocal in suggesting we are not going to drop the ball on this. We have very strong conviction with respect to policy and really
battling the inflation genie if you will. And so the Fed is guiding us to expect them themselves to remain very vigilant and
very happy. Just 30 seconds on a Monday and nobody's watching because August is sleepy and that everybody got wrong.
The resilience of revenue and earnings growth Q2.

Why is Q3 any difference.
The biggest difference going into Q3 is that much of that revenue and earnings growth resilience was due to the commodity
space. And since we've gone through the course of second quarter
earnings we've seen commodity prices pullback tremendously. Yes. So there has been a lot of rotation out of the commodity trade
and price capitulation in commodities which may risk the outlook in the short run for some of those more resilient segments of
the market. And then we've got a lot of inflation volatility to contend with
still in the second half as well. Mark Gurman is getting a stern reminder here. Thank you so much Lisa. Don five dollars on an
oil barrel. What are we going to get. We're going to get under three dollars on a gallon of gas for halfway there.

Well we're
hearing from this administration that they expect oil prices to continue decline with gasoline following. How much does that
really hinge on. What we saw overnight from China called a new low for the futures and negative 30 Dow futures at negative to
21 and the VIX twenty one point one for what it is doing Monday setting us up for retail sales on Wednesday. Please stay with
us. This is Bloomberg. Welcome back to a special Western and Southern Open update for
Bloomberg TV and Radio from Tennis Channel. I'm Jimmy Maggio. The stars of the ATP and WTA Tours head to Cincinnati the final
stop on the road to New York.

The Neil Medvedev heads into the tournament meeting just two wins to secure the world number one
ranking through the U.S. Open. But the 26 year old could face Jenson Brooks be in the third round before potentially running
into the red hot. Nick Kyrgios in the quarters. Rafael Nadal returns to the tour for the first time since Wimbledon. And the
Spaniard could deny Medvedev the top spot if he lifts the trophy next weekend on the women's side. Look no further than the
blockbuster first round clash between Serena Williams and the reigning U.S. Open champion Emma Roddick canoe. The twenty three
time major winner recently announced that she'll retire from tennis after the final major of the year at Flushing Meadows.
I'm Jamie Maggio..

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