Jobs Day Preview | Bloomberg Surveillance 10/06/2022

Right now the market really has been
held hostage by technicals by sentiment by politics by geopolitics.
It's the uncertainty factor that's keeping markets on edge.
The markets have to go through the earnings season for us and I would
expect that to be a volatile environment.
I think there is a concern in the broader financial markets that something
might happen within the US markets.

We're very much looking out for that
U.S. recession coming through because that's
the key turning point for the Fed. This is Bloomberg Surveillance with Tom
Keene Jonathan Ferro and Lisa Abramowicz.
Next stop payrolls line from New York City for our audience worldwide.
Good morning. Good morning.
This is Bloomberg Surveillance on TV and radio alongside Tom Keene and Lisa
Abramowicz. Some Jonathan Ferro features negative
six tenths of one per cent jobless claims a little bit later this morning
T.K.. Then on to tomorrow the payroll tax
holiday. Something changed this week and it is as
we heard from her on her server at Citigroup and many others as well.
Tomorrow all of a sudden really matters for the Fed meeting going on.
But far more than that it has to confirm that jolts statistic from earlier this
week. The job market is two good days but then
status we really haven't pulled back and negative this morning and some pushback
from Fed speakers all over the place.

Rameau yesterday.
I went through the Fed speak for today and I just kept scrolling down.
I have come here getting very CAC Kurumi Mori who's not speaking exactly.
Pretty much everyone except preventative health.
Perhaps he's going to be the one that's gonna be saying the same thing.
And all of them are probably going to reiterate what Mary Daly said yesterday
which is stop thinking we're going to raise rates to a certain point and then
we're going to just cut them. And they're basically continuing to push
back against this idea of rate cuts and 2023 and the market.
Keep saying you're wrong.

And basically that's what you want to
signal. That's not what you're going to do
exactly is basically the pushback. Basically people are getting more
pessimistic on the global market and they're saying the Fed's going to
ultimately cave. And guess what.
The market's been right. And this is sort of the perverse
consequence of years of the Fed getting it wrong the market being more correct.
I mean this is where the credibility. That's the FASB.
Let's talk about the controversy around OPEC class crude.
The previous three days Tom up almost 11 percent.
Yeah last week I did a lot of technical studies this morning on the economy.
Clear has not broken resistance but boy has it gotten there quickly.
Controversial.

In the pushback from the White House I
was surprised you were ahead of this. I mean I was like yo well so what.
Well all of a sudden it's controversial but it's really controversial.
About one thing. I think there's an election in November.
That's all this is. It's Operation Mid-term without a doubt.
The White House Lisa came out and said the OPEC plus was aligning with Russia
kind of stating the obvious because the clues in the name it's the plus in OPEC
plus. And the Russian energy minister was
there in person in Vienna. I mean it's not that much of a stretch
but then that the response would be to release more of the Strategic Petroleum
Reserve potentially into November. What convenient timing to your point
about what's going on with the election raises some issues about stability in
the market going forward.

If they've really used all of the
reserves at a time when you aren't necessarily seeing the crisis level
depletion of some of the worst unstuck. Is that the best use of the SPRO
operation midterms. Are you really going to ask me.
I'm ISE David Westin I'm going to get anyone else.
Range of today that questions across you know some people could say perhaps give
stability to the economy in a time when you're laughing at me.
I'm just trying to provide the other argument.
I'm just smiling. Okay.
I'm just saying as I'm always like okay I'm just saying you could make an
argument. However a lot of people are concerned
that at a time when you are seeing two interlinked demand they're going to use
the SPRO at a time when you've seen those reserves fall to record lows.
Very diplomatic in these shell openings now.
Very diplomatic because we're all trying together.
What do you think. I agree.
It's sensitive and we're closer. I agree.
It's all about what's cool. As we came into this new set folks and
remember this we brought the Bram or Cam with us.
The pictures right now negative seven tenths of one percent on the S&P.
I'm going to whip through the price action for you last couple of days
before yesterday were really really big.

Then as Tom pointed out things have
calmed down rolling over again. But we both deeply negative yesterday
and we took a big chunk out of that before we got to the close.
Futures down about 25 call it 26 points lower down seven tenths of one per cent.
It was just a little bit higher by 2 basis points 377 euro dollar giving me
nothing. 98 87 totally unchanged after all the
drama of the previous three days as we got that OPEC plus cut of about 2
million barrels a day. Lisa crude down nowhere.
Eighty seven dollars and 70 cents. And we can get into during the show
exactly how much they're actually going to be cutting because they're not
actually meeting the production targets as is.
So it might be about a 1 million barrel cut and it might be a little bit less
than that depending. So there's a lot of vagaries here as we
see a meandering price action there 730 a.m.
we get the ECB monetary policy account John.
Why is it called an account rather than minutes.
Because there's no detail whatsoever.

Okay great.
You don't get the sum the all account poll.
They don't really go there. OK.
So we're not going to get any detail that people can be looking for it anyway
especially after the ECB speech that we heard yesterday.
Christine Lagarde talking about several consecutive rate hikes the following
meetings after there was a little bit of pushback from some of the doves on the
ECB yesterday German 10 year yields jumped by more than 16 basis points the
most going back to March 2020. Yes this was the reversal of what we saw
the potential pivot over the first two days or the earlier days of the week as
of Australia's central bank. I don't know you make your example but
other people speculate it has to do with the gas prices natural gas prices in
Europe. Eight thirty a.m.
U.S. initial jobless claims.
How much does this give the tealeaves of a strong labor market albeit with signs
of slight weakening around the edges. Honestly some of the projections that
we've been hearing on Bloomberg Surveillance are pretty dire in terms of
how low unemployment claims would have to go before the Fed starts to either
accelerate or how high some of the jobless rates have to go before they
pull back.

And these are some of the questions
heading into tomorrow's non-farm payrolls.
And today this is for you. Fed speak includes drumroll each
Minneapolis Fed President Neel Kashkari. Chicago Fed President Charlie Evans.
Fed Governor Lisa CAC. Fed Governor Chris Walla.
Cleveland Fed President Loretta Method. Anyone else on the Federal Reserve who
wants to speak. They're welcome to come on this show
John. We will make room for them.
You get Kashkari twice the Mr. Twice as well.
Think twice. You do that twice in a day.
Busy. Right.
I think all these ridiculous things that we don't need to waste time on this
medical. You think it's wasted.
It's I think a way over communication. I think it's actually the president
wants to get a nice speech yesterday. This worthy of being read.
OK. So take a look at that facility.
Tanaka's joins us now. The head of European Affairs Strategy at
City. The city was going through your
estimates for cable for euro sterling cable parity below euro sterling likely
to get to about 95 maybe above this.

Yes.
Can you walk me through where that next leg of sterling weakness is going to
come from. Oh it is.
It is coming very soon. Look and Morgan has been on a sugar high
over the last few days likely to a certain extent of a broad based dollar
weakness because of the fact that there were quite a lot of short
positions and there inequities in bonds and some longs in the dollar.
And these are being pared back. And that's what we're seeing.
It's a it's a tactical rally to bear market rally.
It will soon come to an end either through an exhaustion of positioning or
through a catalyst which could be the NFP tomorrow.
But I think the big picture remains for being dollar bullish now as far as
Sterling is concerned. Look I think what we've learned in
recent days is that you could get government still going ahead with that
plan to boost growth which is is entirely
unfounded.

Apparently no government has ever been
able to target and achieve a certain level of growth.
And apparently it will be going ahead with increased borrowing.
We haven't really had anything to suggest that we're going to be in a
massive U-turn. I hope that we will.
But if if that does not happen I think the
boring trajectory of the U.K. is going to be really bad both for gilts
as well as for Sterling. So we also look at both today the guild
the Tenure Guild and also Sterling as John mentioned South which is the horse
in which is the card just SFX follow fixed income or just fixed income follow
the currency market. Well I think typically what you're going
to get is that the effects will be following years.
We'll be following the effects of the fixed income market.
But I think when when you are in situations where there is a crisis of
confidence because I think this is the environment that correctly describes
what's happening in the UK you get simply a confluence of factors that move
things together. Effectively what's happening is that
you're getting the repricing higher risk premium.
And when this happens you get both yields higher and the exchange rate
lower.

But from really a medium term deep deep
fundamental perspective the issue is going to be that Sterling is going to
may remain the main shock absorber. You look back in
the previous year in 1972 similar tax cuts in size and eventually led to to
the chancellor floating pound and the pound lost about 38 percent.
It acted as a shock absorber. But then right now you have even bigger
current account deficit. So I think it is unavoidable.
If these policies carry on and save that trajectory that we're going to see big
depreciation. Sterling.
What does the Bank of England do on October 14th.
That's a very good question.

Look
I'm going to reverse it. I'm going to answer with a question.
Does it really matter that much. Because if you see over the past six
days the past six days wouldn't have been blind that they could have actually
purchased up to 30 billion sterling in long dated gilts and they
have actually purchased less than 4 billion.
So effectively yes when we had the news there was some headline impact and we
saw a significant decline. But let me highlight the following.
A 30 year yields in the UK went from 5 percent all the way down to three point
eight percent on the announcement at 28 120 basis points.
So far they have recouped about 50 basis points of that and they are trading
close to four point three percent.

So my bottom line is yes the BBC can do
certain things. I think that we're pretty explicit that
they're going to terminate them on the 14th of October.
But these things are only going to last in the very near term.
The history it is abandoned by examples that unilateral central bank
interventions moves actions cannot reverse
when when you have a big crisis of confidence.
Selling ISE.

Thank you sir.
As always facilitate an orchestra of city working through some big issues in
the European markets. Course we don't know what the
counterfactual is do we. What would you hope to be if they
weren't in the market if they didn't have a package that size.
Correct. And basically he's saying it doesn't
really matter and it's going to weaken no matter what.
But then does it mean that longer term yields will be much higher.
Does that mean it's a very tricky issue which is a reason why some people don't
really know what's going to happen. The phrase that a monarch comes from
hyper convexity out on Twitter strategic mid-term reserve.
You like that. I think that seems pretty accurate.
It's not the SPRO it's the strategic mid-term reserve.
The SMI can have that conversation later.
Denmark is going to join us from BNP Paribas.
Looking forward to that in the next hour.
Futures down seven tenths of one percent.
Live from New York this is pulling back.

Keeping you up to date with news from
around the world with the first word and we see Mateo the price of oil is holding
steady. A day after OPEC plus agreed to the
biggest production cut since 2020 the alliance plans to slash daily output by
2 million barrels. And that would move.
That move would drew a rebuke from the U.S.
which has been seeking more oil from producers.
Meanwhile Russia repeated a warning that it won't sell any crude to any country
that adopts a price cap. North Korea is ratcheting up attention
in the region. It fired two suspected short range
ballistic missiles toward waters where the U.S.
aircraft carrier Ronald Reagan had been deployed earlier this week.
Kim Jong un regime launched its first rocket over Japan in five years.
North Korea criticized the U.S.

For redeploying the Reagan carrier group
to waters east of the peninsula in the UK.
A new study says millions more Britons will be dragged into higher tax brackets
over the next three years and that will cost twice as much as Prime Minister Liz
Truss's personal tax cuts. The report comes from the Institute for
Fiscal Studies. The government is reducing the rate of
income tax but it's also freezing the threshold where people start paying.
And that will force them into higher tax brackets.
Atlanta Fed President Rafael Bostic says he favors lifting interest rates to as
high as four and a half percent this year.
And then he wants to keep tightening in place to reduce inflation.
Bostic view is in line with the Fed's policymakers.
Markets are projecting the likelihood of a 75 basis point hike.
The next meeting in November global news 24 hours a day on air and on Bloomberg
Quicktake powered by more than twenty seven hundred journalists and analysts
and more than 120 countries.

I'm Lisa Matteo.
This is Bloomberg. Today came as a result of a collective
suspension in order for us to be tentative.
We have to be assertive preemptive and we have to be cuts.
It could be. But it has to be Abdulazeez said Ben
Salomon the Saudi energy minister. Fantastic job from Manus Cranny the team
over in Vienna Austria covering OPEC plus life from New York City this
morning. Good morning.
Features negative six tenths of one per cent on a S&P 500 has the price action
this morning in equities bonds and foreign exchange.
A bond market yields higher by a couple of basis points on a 10 year to 376 92
euro dollar not due in March 1984.

Crude is done a whole lot over the
previous three days up by almost 11 per cent I think it was on my screen.
Crude WTI up by almost 11 per cent over the previous three days.
This morning we're down by about a tenth of 1 per cent to eighty seven dollars
and 67 cents. Getting some headlines some comments
from the Kremlin spokesperson Dmitry Peskov speaking on a conference call.
Here's a taste the flavor of what he had to say.
The output car is aimed at stabilizing markets.
The decision is not a sign of solidarity with any country.
There are some pushback against the White House there.
The price caps on Russian oil is destructive and it hurts everybody.
The comments from the Kremlin just moments ago comes to the Kremlin.
Nothing on the war advance on Ukraine.

I was stunned that they had blown
yesterday of people begin independent that Ukraine could go after Crimea from
2014. But certainly Russia deflecting the
story as clearly. The price cap story that the Europeans
are pushing is complicated the OPEC plus effort in the last 24 hours.
And that's kind of blurred the lines I think for a lot of people.
Well there it is. And it's an opportunity as men are still
in view.

And I think he still has to work late.
Yeah I saw him there early this morning. Right now we go to Annmarie Horden in
Washington. She is focused on the election.
An opaque plus Maria Tadeo is not. And she is in Prague this morning.
Maria away from the narrowness of the US debate moving out to the first Tuesday
of November. What is the response to open plus across
Brussels in continental Europe. Well Tom the reality is oil is a
conversation for the United States and here.
There hasn't been much reaction because Europeans were focused on gas as you
know and you're going to allow me to get technical.
But yesterday the head of the European Commission Ursula Funder Underlying sent
out a letter to the 27 heads of states in which she said we will intervene in
the gas market and prices need to go down.
And what the Europeans were focused on is the gas price gap.
That's her main focus.

But this is an incredibly complicated
situation because when you talk about a price gap I can tell you there's at
least five different formulas where that could work.
And then of course you have the Germans who say they worry that any intervention
would kill the little supply that's already in the market.
So not a lot of reaction on the oil for them.
This is very much a gas story today. I'm sorry.
I want your response to all of this hyper convexity out on Twitter.
That phrase not mine but I'm gonna use it all morning.
The strategic mid-term reserve is not about to get tapped through the rest of
this year. Well if you look at the statement
closely from Jake Sullivan and Brian Deese yesterday they said that this is
something the president could do.

He could once again tap the SPDR.
The issue with that Jonathan is at the moment and we should note that already
additional sales they have from that will be coming down the pipeline in the
next few weeks. But we should note that the SPDR right
now the levels they're at are the lowest they've been since the early 1980s.
And there's a lot of pushback from the Republicans that the SPDR has been
politicized by this administration because it is not an emergency situation
is not disaster relief. It is used to push prices down.
And the White House also talks about the fact that they were able to get prices
down from five dollars in the peak in June to right now they're going up a
little bit but just under three dollars and 90 cents a gallon on the national
average. So this is something we could see
because this OPEC plus decision has really put them in a bind because they
still have to deal with the fact that gasoline prices inflation are top of
mind American voters.

We should also note Americans are voting
now. In some states early voting is open.
This is a big issue. And the timing and the optics of this
was a huge snub for the White House. Anne-Marie this is a reason why when you
have the Kremlin saying that this is not political people will say this is like a
company saying we're not about to collapse.
These are things that no one wants to ever say.
And I'm curious from your perspective how much pushback there is to Saudi
Arabia from the U.S. because of the snub because the fist
bump didn't work. The discussion didn't work.
Now Russia's there.

All of this kind of pushing against an
agenda. Yeah it is.
The timing of it is terrible in terms of the president just under three months
from that fist bump from his landmark trip to Saudi Arabia.
And then of course this comes right before the midterm elections.
But what I would say is that there has been U.S.
officials obviously leading up to this reaching out to their counterparts in
the Gulf to advise them against this. But I think what is clear is that Saudi
Arabia put the price of oil above their relationship with the United States with
this decision. Maria I want to give you the final word
on the path forward here. I hear much more from people that we've
secured the energy we need to get through this winter.
But in doing so we've made 20 23 incredibly fragile.
Can you walk me through how people are talking about not just this winter but
next year as well. Well it is because Jonathan when you
look at storage is 90 percent and yesterday one of my contacts actually
told me that they expect to hit 100 percent of storage across the EU sooner
than anticipated.

So you could be looking at potential in
the next two to three weeks. So that is good for this year.
But when it comes to next year. Well this is a complicated situation on
the volume especially if you do see that countries like Russia we've had the
Nordstrom explosions Ukraine whether that pipeline is going to hold or not is
still a big question mark and then you have the price.
So this is going to be incredibly complicated going forward.
But I think for a lot of European leaders what they focus on and remember
they also had their domestic agenda is getting Europe through the winter.
Maria Amari unmatched the two of you.

Thank you Maria.
And Annmarie Horden. Lisa tell me this is where the
conversations that he CAC goes beyond just this winter.
It's what his next year looks like. And if you feel shaved the storage
numbers you want to achieve for this winter.
How do you repeat the act in 20 months in a gas oil separation or it's about
gas in Europe and over there. It's a very discreet conversation.
Has he started out with in the U.S. it's about the election.
And I'm told Nevada is one of the two key Senate elections now in the last 30
days. A gallon of gas in Las Vegas from four
dollars 82 since just under five dollars 54.
And that's germane. That's that's a substantial jump.
We've looked at the chart. We were talking about that state's gone
the wrong time right.

Yeah.
Lakes. We've seen that in the last couple of
days. How much is is actually going to be
something that will remedy that with more release from the Strategic
Petroleum Reserve versus some of the frictions in the refineries.
I mean there's a lot of complications here in order to get lower even lower
energy prices. And then here's the flip question.
What happens if the output cut does not raise prices.
What does that say about the global economy.
And that's actually something that a lot of people were really wondering after
some of these moves.

I go back to what Tom said though.
Oh yeah. And I think it's so so important.
What happens if China drops Covid zero comes back.
Klein I'm all over it. I mean I looked at the Hong Kong flights
yesterday. United Airlines announcing they're going
to start up in January. Old Cathay Pacific still doing it but
boom that opens up 10 airlines. Off we go.
That's the big change. It's not their flight from New York
City. Is lower.
This is pulling back. Live from New York City this morning.
Good morning. The price action this Thursday morning
shaping up as follows. We're down seven tenths of one percent
on the S&P similar script to yesterday morning.
And then we switch things around almost by the close.
Futures down about eight tenths of one percent on the Nasdaq NASDAQ.
Two stands in 30 shaping up as follows. Can we see some calm in the bond market.
Come on. Some calm after this.
Harvey of Wells Fargo said Governors are trading like cryptos.
Yields are up by a couple of basis points on a two year 470 in a couple of
basis points higher in a 10 year 377.

Crude has been absolutely surge in over
the previous three three days on the S&P 500.
Energy stocks are up more than 12 percent over the last three days.
Over the same period crudes up by around about 11 per cent right now.
Crude just an inch lower down a tenth of one per cent 87 69.
Brent crude 93 28 were down a tenth of one per cent.
Now that a bit later this morning some going to catch up with Francisco Blanch
at Bank of America looking for today really low.
That's really an important conversation. He's been very informative as an.
I have to point out if we can get Ed Morris back on you nailed 70 to 80
dollars Shery Ahn what he thinks. Great call here right at the resistance
level. This is a really important conversation
with Pantheon Macroeconomics. Ian Shepherdson always sharp on a global
view distilled down to the central Bank of the United States.
Ian you talk about the importance of Fed persistence here.
If we get data that persists this is a Fed that will blink.
Walk us through how you perceive the data trail to be forward to where the
Fed has to make a decision.

Yeah.
So. Well December I think is shaping up to
be potentially a very interesting meeting.
So remember the new Fed dot plot shows 125 basis points of hikes.
November December together. And it looks to me that if we get more
data that look like the JOLTS report that came out earlier this week showing
a really big drop in job openings. And we also got a couple of decent CPI
inflation reports. Actually we get three before the
December meeting. My guess is they're going to be much
better than we saw last month.

If that's the case then I think the
Fed's really going to struggle to convince markets that it needs to do a
total hundred 25 basis points in those last two meetings of the.
But let's be clear about this. We need both of these things to happen
because the Fed's been very clear a ton of speakers this week.
And of course part of the last meeting at the press conference saying look
there's not just about the current inflation rate.
And by the way one good inflation number isn't going to do.
We need to see a run. Fair enough.
But it's also about the labor market because what they're concerned about is
that even though some pretty strong downward forces on inflation you know
there's this bullwhip effect in inventories is going to be quite a big
deal over the next year or so.

They're looking at wage growth of 5
percent plus and saying look you know even if inflation comes down quite
rapidly by next spring we're worried about where it will be later and 23 and
24. If wage growth doesn't moderate.
So I do think they want to see some moderation in the labor market as well
as some better inflation numbers. But here we are on now with the
possibility of that happening as soon as the end of this year.
So this this December meeting I think is going to be extremely interesting.
I'm just wondering even whether in November the case for going by another
70000 has already been weakened as well. You know maybe that that you know that
that jobs number was a bolt from the blue.
Nobody writes back and anything like that.
You know you've got a 12 percent drop in job openings in one month.
So some things are starting to move.

The Fed speakers aren't moving yet.
But you know there are a few more weeks of numbers like this and there will be
movement. John this is from November 2nd to
December 14th which has shown Newcastle really decides the rest of their season.
Do you think that's the critical part. That's a critical part of the term
friends in November.

The Christmas period is usually the
critical part of the reason I think I'm becoming a sophisticate.
Ian what you're saying about December now is what you said about September 3
months ago. What we've been surprised by.
Yeah. Yeah.
Well what what what pushed them to the 75 September.
You know we had that horrible inflation numbers and that made it impossible for
them to do anything less than than put the sledgehammer down again.
But I think that's a very good chance that things changed now.
You know we're seeing now so many retailers talking about how they've got
far too much inventory.

It's not just Wal-Mart anymore.
You know Nike have said it. And now we're hearing from the car
business that that inventory is rising again and that's allowing sales to rise.
But it's also seeing real downward pressure on prices.
You know used car prices are down 13 percent since January.
And the rate of decline at auction is accelerating.
So there's some things that I hope would happen by September that didn't are now
happening.

And they're in the data.
But we need more of them. You know it's just a snapshot of a few
good numbers isn't going to be enough. I think Powell and his colleagues have
been very clear about that. But the thing is December still a long
way away. Three more hours of inflation reports
three more people ISE three more CPI is two more P.C.
reports. That's a lot of inflation data.
And I think that we're kind of reaching this tipping point now where the
bullwhip effect that all these companies are talking about is going to become
visible in the hard data. And at that point that puts the Fed into
a different place especially if at the same time the next couple of jolts
numbers are like anything like what we just saw this week.
I mean that really was was very startling.
Mohamed El-Erian has don't fight the Fed.
It turned into the Fed is just wrong and we're right.
I mean basically you're seeing the market say we could say we could hear
from 15 more Fed speakers today and 25 tomorrow and they could all tell us
we're not going to cut rates next year.

You're still going to cut rates because
the data is moving faster than you're acknowledging.
Joel Weber. Do you think that the market is right
and the Fed is wrong. Well they've both got a point.
So here's the thing. You know rates have gone up so much over
the last year that under normal circumstances I'd be screaming about a
recession. I'd be screaming at the Fed.
Please for goodness sake stop all this hawk this hawkish talk.
Stop the tightening. You know very soon you're gonna have to
signal an easing. The difference there is I'm not saying
that. So you know as ISE I would be normally
isn't.

The fact is that the household sector in
the U.S. is still sitting on one and a half one
or three quarter trillion dollars of pandemic savings which they are clearly
being willing this year anyway to run down in order to maintain their
spending. And that's offsetting some of the hit
from from interest rates. And similarly in the corporate sector
there's a lot of cash as well. So you know again in a normal economy
with rates of this much I say yeah you've definitely done enough and you're
in real danger of overdoing it real danger of triggering a recession that we
really don't need I think. But the consumers holding up extremely
well. Housing notwithstanding.
And the corporate sector looks OK as well.
But there's enough straws in the wind here now.
Now you can see it in for example some of the regional Fed surveys and capital
spending intentions have really weakened a lot.
You can see it obviously in the housing market and you can see it in the jobs
numbers and you can see it in some of the some of the other business surveys
on the consumer surveys as well just saying that you know maybe things are
beginning to wobble a bit in some sectors.
It's not a collapse.

It's not a rout of the economy.
Definitely not. But is it the sort of economy where you
still need to be hiking by 125 basis points of the next two meetings.
That is far from clear to me at this point.
What I'm really hoping is that by the time this is done in December it will be
clear and that'll be clear to them that they don't need to keep going so
aggressively because every every incremental hike here now I think is
raising the risk of triggering something that we don't need because the U.S.
economy to me doesn't need a recession. OK triggering something that we don't
need.

The U.S.
doesn't need a recession. Other people would disagree with that
including some people perhaps in the Federal Reserve base and some of the
forecasts that they have currently in play.
What's your view though if we do get a recession of the depth of it based on
the trajectory of rate hikes that we see based on how quickly the data is
changing to accept some of the weakness that people were expecting to see
earlier in the year. Yeah so my general rule is that
recessions are proportional to the imbalances in the private sector that
preceded them. I mean the whole point of recession is
to force the private sector to change its behavior from doing things that are
overstretching it to coming back to normal.
So if it's not very overstretch then it doesn't need a deep recession.
So you know I don't expect anything like 0 8.
Be much more like 1990 or 2001. So mild and brief.
But I don't think we need one at all because I think there's bullwhip effect
in inventories and the crushing of margins that is going to impose on the
retail sector is going to bring inflation down faster than the Fed
thinks.

Even without any meaningful rise in the
unemployment rate. So now I realize we've never seen
anything like this before. We've never seen on the upside with the
speed about margin expansion and we've never seen anything on the potential
downside that we've got coming either. This is very much uncharted territory.
But you know when you're in uncharted territory you already hiked along.
You know maybe the prudent thing to do is to ease off a little bit and just
have a look around. You know that's the thing when it's
uncharted. You don't know really where you are.
So maybe pause. Have a look around.
Give the data a couple of months to break.
One way or the other. If they don't then OK carry on hiking.
But if they do break to the downside. Bearing in mind monetary policy works
with really quite long lags. If you're still hiking aggressively in
November and December and yet the inflation picture's already breaking to
the downside then what you've done is imposed disinflationary forces on the
economy for the whole of next year which it probably doesn't need in the last 10
years as a top 10 finish.

Uncharted territory for Newcastle United
in Wow was seventh. Now they've just been May 17th in
Boston. I've been whining for years as a
complete amateur about more goals. Manchester City is doing that.
How are they changing the games. Let's let's rephrase that.
Holland is doing that for Manchester. I leagues like the Boston Bruins with
Bobby or are they changing the way the game's played.
I don't see the change in the way the games change least.
I think we've just gonna bought the most prolific score in world football.
Is that pretty much the most American thing required.
I mean she may. Good point.
I want more goals because it's not CAC to give a damn.
That's my point. Yes that's quintessential.
I can respond. Goals.
Four point points.

You should get points for a goal.
We should teach. Should we do a road trip to new points
for a government Dr. Shery Ahn.
You actually said no I'm not mocking American sports.
I love as a toilet basket. It makes a ton of sense in Jefferson
County the game in Newcastle it's like you gotta see the tape.
You go to a game in Newcastle. That's a real atmosphere.
It's like old ball. That is a real atmosphere.
I'd love to come watch a game up there. We should make that happen.
So do people there say we'd like to see more points.
They'd like to see more points.

That's the conversation majorities have
after every game. Frankly to tie this in to pack Jan RTS
take NIKKEI is just taken up by new owners controlling the Saudis.
Send in what is their attention. Their attention.
I think between them and the rest of the league at the moment about where the
money's come from but a certain football clubs have questionable sources trying
to make this a legitimate business source of capital.
Well good effort. Do you want me to make this a legitimate
conversation about NYSE. But also good.
And we have it. Can we pause for Mr.
Plant over at Blue Crest and just go through here.
Yes. Wow.
I mean seriously 2016 50 percent up 17 54 18 25 19 50 per cent 20 95 per cent
21 30 percent. And in 2022.
That team apparently reportedly has put together gains of 114 per cent and it
comes after they closed their fund. Tell me kind of outside investors
because they wanted to be more aggressive and take more bold bets and
not have to adhere to some of the standards of certain pensions etc.
And guess what.

They've cashed out.
Can you think of how many different market regimes have played out in the
last six years. I think that my policies on life just
crushed it. Those guys don't just next level.
I've actually level the job I've actually looked at this very hard to get
beyond year three is statistically it's on one hundred and fourteen percent in
2022. Well that doesn't surprise me but it is.
You say there's a sequence of Excel I'm on and it's like like I reject that.
No it's just it's incredible.

It's incredible credit to their
features. Down seven cents on the S&P.
From New York this is back. Keeping you up to date with news from
around the world with the first word. I'm Lisa Mateo.
Well it looks like President Biden's fist bump with Saudi Arabia's Crown
Prince Mohammed bin Salman and less than three months ago didn't pay off.
Instead the Saudis snub the president and aided Vladimir Putin with that OPEC
plus oil production cut. President Biden had hoped his visit to
Saudi Arabia would encourage the Saudis to pump more oil.
Shares of Shell dropped after the energy giant pointed to a weaker third quarter
performance and that's likely to end a run of record earnings.
Shell's refining and chemicals business showed signs of a slowdown and that
could be a worrying sign for Europe where major industries are buckling
under the pressure of soaring natural gas prices.
Global foreign currency reserves are falling at the fastest pace on record.
Reserves have dropped by about one trillion dollars this year about seven
point eight percent.

And part of the slump is due to
evaluation changes. But the stresses in the market are
forcing a number of central banks to intervene to support their currencies.
In the U.K. at least 340 billion was wiped out from
the nation's stock and bond markets in the first month of Liz Truss as
government. The September selloff on concerns about
tax cuts saw the pound hit a record low. Bank of England intervention and
eventually a government U-turn. And one strategist says investors tell
him the UK market is investable. Global news 24 hours a day on air and on
Bloomberg Quicktake ISE least Matteo. This is Bloomberg. ICR says raising to a level that we
believe is restrictive enough to bring inflation down and then holding it there
until we see inflation truly get close to 2 percent and demonstrate that price
stability is restored. President Mike McKay sitting down with
Mary Dailey the San Francisco Fed president yesterday.
Life in New York City this morning.

Good morning to you.
Well your market shaping up as follows on the S&P deeply negative yesterday
negative again this morning just like we were yesterday morning.
Then we are race much of that by the close.
Yesterday futures down by about seven tenths of one percent yield time by a
couple of basis points. The US 10 year 377 euro dollar unchanged
at 98 83. And after a surge in crude over the last
three days 87 23 this morning on WTI. We are down negative by six tenths of
one per cent just getting some headlines out of Sweden on the damage done to Nord
Stream. Just gonna go through a few of them for
you. The security service says Nord Stream
damage is from detonation. The ghastly crime scene probe has been
concluded.

Suspicions of sabotage has strengthened
the probe. Some showing signs of detonations.
The latest from the Swedish security service.
And I guess we'll see more. I mean I know how deep it is but it's
not that deep to begin with. And they go down the cameras right as we
get more headlines. So yeah share them with it.
I don't think that's all there is to it. Futures negative 27.
The VIX remarkably stable over the last number of days which has been noted by
those looking for a cathartic move. It hasn't happened.
Right now Julie Norman joins us. We're going to right the ship here on a
lot of the discussion of the war in Ukraine.
She's co-director of the UCL Center on U.S.
Politics and as noted for a real understanding of war in terror.
Professor Norman. Good morning.
It's been a topic on the show. And frankly I think it's out in the Zeit
Geist as well. The response that any institutions
should have to what happens in a war never pretty.
But then there's torture. How do you judge or gauge the reports we
see from Ukraine of keenness ex.

Well Tom we've seen reports of heinous
acts from Ukraine really since the very beginning.
And I don't think we should sugar coat that at all.
Obviously it's hard to verify all information all stories that are coming
out in a conflict situation. But we have seen just so many patterns
from Russia's atrocities in this war in different parts of Ukraine.
And it matches a lot of their tactics that they've used in previous conflicts
as well. So this is part of a pattern for Russia
and it's one that I unfortunately expect that we will continue to see more of as
the war continues.

Even today we saw targeting of civilians
which is a bit different from other atrocities we've been focusing on.
But that will continue. Whatever anyone's politics in the movies
versus the Geneva Convention what conventions are now.
How do we institutionally respond to this.
Yeah well we always have these international law documents.
We have a convention against torture which has a lot of sign on to it.
But all of those are only as strong as the will to to to enforce them is.
And unfortunately that is somewhat minimal.
So I think we'll see more in Ukraine. What we've seen already is trying to
change the larger course of the war rather than focusing always on these
isolated events. With that said human rights groups are
doing excellent job of documenting it. There will be a public record of this
that my sense is that there probably will be some kinds of attempts for
litigation after the war on some of these human rights issues.
But the focus for most of these international institutions if you will
right now is on the broader conflict and trying to put Ukraine in the best
position to close this in a way that's advantageous to them.
Julie as we see as we get further away from the farce that was this referendum
in certain regions in Ukraine by Russia has that proven to be an escalation or a
de-escalation in terms of are we closer to some sort of nuclear conflict or on
the other side closer to some sort of end yet with annexation was certainly a
provocative move by Russia.

I'm one that was somewhat flagging
expected in these recent weeks. And the interesting thing is that
Ukraine has responded pretty much by saying you know we are still going to
continue with everything we've been doing in terms of the offensive
operation and are continuing to make gains at least in some areas.
And the really the entire international community has has seen these guys so
far. So they've fallen somewhat flat.
I think the next moves will you know there are still so many options
available to Putin. And I think we need to be clear eyed
about that. Ukraine has made gains.
They're in a good position going into the winter.
But this war is still far from over. The buzz that we're hearing about a
potential of Putin being put in a corner discussion of what would be the impact
of using something like a tactical nuclear weapon which is very small scale
nuclear weapon that would still be massive.
Most analysts I think do not see that as imminent.
But it's something that is certainly possible and is very much into focus
right now for the U.S.

And allies of what that might be and
what kind of what kind of response there might be to something like that if it
were to take that course. Given this backdrop Julie how do we take
the fact that Russians energy minister went to Vienna to join the OPEC plus
meeting that they're agreeing to something that on the margins is viewed
as beneficial to Russia at a time when this conflict the war on Ukraine is only
protracted some of the animosity here between the western nations and Russia.
Oh absolutely so we saw yesterday. Plus obviously choosing to cut the oil
production. This is a slap in the face to Ukraine to
the US and certainly to the EU who also just yesterday was trying to put forward
a price cap on on Russian oil.

And this will completely you kind of
even that out if you will. And so I think we see from this act the
fact that OPEC states especially Saudi is still playing this very much to their
own interests. They are looking out for themselves in
this. Biden's visit in the summer obviously
had little if only perhaps a very short term effect.
And it shows that the politics was the economics of this conflict are still
very much in Russia's favor with some of their allies and with some states around
the world. Gentlemen as always thank you.
The UCLA Center of US Politics a shining light on something is not being
discussed off the back of this opaque decision.
I don't think it's been discussed enough.
Spare capacity as some of these nations is really problematic.
Q They had a cap on output. They weren't hitting it to begin with.
And when we talk about a 2 million barrel a day cut Amari is set up a few
times in the last 24 hours approximately.
It works out basically at about 800 K because they weren't head the one they
had before.

Did you see where the Oxy CEO had to
say. On the sidelines of an event that week
we howled over in London said this. The world is at risk of living with a
shortage for a while that will drive up prices.
The lack of supply is going to continue to manifest itself as China starts to
open up from Covid. It's a really uncertain moment for these
or any other side journey. There is a dampened demand because of
Asia and Pacific room. JP Morgan's effort and you have
Francisco Blanch leader of Bank of America.
Same idea. The migration to a persistent above 100
dollar a barrel is based is a generalization on Pacific room
burgeoning demand. We're here now.
Yeah without that west demand next year. Yeah.
Whereas Amanda Lang Covid China kicks back him west demand.
So sure it's embarrassing politically Lisa for this White House.
We could talk about that all morning. But what is the demand backdrop actually
looked like next year. And I've got no idea.
Nobody has an idea.

There's another element to this.
And Chrystia may lack of JP Morgan yesterday was really highlighting this
which is it's getting more expensive for oil producers to increase production.
People the salaries are bigger. A lot of the investment a lot of these
oil wells are not as productive. So how do they game that out with world
oil prices ought to be. Brent crude right now 92 and 92 on
Brent. Slightly negative this morning from New
York City with futures lower for our audience worldwide.
This is Bloomberg Surveillance. Right now the market really has been
held hostage by technicals by sentiment by politics by geopolitics.
The uncertainty factor that's keeping markets on edge.
The markets have to go through the earnings season for us and I would
expect that to be a volatile environment.
I think there is a concern in the broader financial markets that something
might happen within the US markets.

We're very much looking out for that
U.S. recession coming through because that's
the key turning point for the Fed. This is Bloomberg Surveillance with Tom
Keene Jonathan Ferro and Lisa Abramowitz live from New York City for our audience
worldwide. Good morning.
Good morning. This is Bloomberg Surveillance on TV and
radio alongside Tom Keene and Lisa Abramowicz.
Some Jonathan Ferro futures down about six or seven tenths of one per cent on
the S&P. Jobless claims later this morning.
Then the big one tomorrow morning. Payrolls Friday just around a corner.
See CAC payrolls Friday there in claims Jan 270000 for week moving average on
claims. It's pretty incredible.
It's a fully employed America. And let me get this right.
The Fed wants us not to be fully employed.
Scarlet Fu other while the Fed might get something extra.
And maybe we can dream about a soft landing.
I say maybe you can decide how skinny that landing strip actually is.
Some 200 K claims job openings down more than a million.
Look we have to talk about the totality of the data over a series of months of
course.

But it got people hope and didn't it.
It got people talking about the pivot which I know Tom is going to keep
thinking about. It's going to kill you.
And then it starts talking about bad news being good news and good news being
bad news. And this is sort of trickling into this
eight guys to tears. Your win again of the markets that said
going forward Fed speak has been consistent.
They are going to keep going until they see inflation go back down to 2 percent.
There is no Adam Posen pivot to 3 percent kinds of calls.
This is very clear cut. So either the Fed speakers are wrong
show or the market's wrong. They're going to cut in a recession.
That's my number one question right now. President Bostic in a speech yesterday
got all the way to the bottom in a speech because it's on the one hand this
on the one hand that at the bottom in the second to last paragraph.
Listen to this. If economic conditions weaken
appreciably for example if unemployment rises uncomfortably it will be important
to resist the temptation to react by reversing our policy course prematurely.
Just think about that sum.

What that means if you start to get a
downturn in the economy and unemployment starts to inflect higher uncomfortably
that they are not willing to reverse course three point seven percent or
we're looking for I believe tomorrow. And John you know three point nine you
go to four. Okay fine.
Four point nine. You go to five is non-linear.
And that's a different conversation of four point nine percent.
Now granted I take that there is a difference.
I understand the difference between what the Fed wants to signal right now what
they may end up doing next year.

And we've seen the market doubts.
Yeah they say this now. This is what they want to say but
ultimately this is what they will do. There's also a question about when this
starts to feed into the economy. And we've talked about this before but a
lot of companies have pushed out maturities but those maturities start to
come up at the end of next year. They have to refinance.
Refinancing at a four to four and a half percent Fed funds rate very different
than refinancing at a 1 3 2 3 0 percent refinance.
If you find any buyers of that triple C unsecured debt sale that a few banks are
going to be interesting to push around.

I've heard about a couple of places a of
bowing out exiting stage left and we're not going to hear a non news of the last
24 hours unheard of. Just what's the name.
We haven't heard a thing on Twitter frankly.
The wait for earnings. Yeah well let's see how much they got a
pay tweet. This what you can.
They're going to basically cancel out the fees.
Once this is all said and. Well and I would just speculate right
now there are fevered discussions amongst some legal teams I think some
banks to give you some good short. Dana Telsey always with the good news
and retail Luis Vuitton her price targets up 28 percent on a 21 percent
lift in 2022 sales. And I'm you know is this the market.
No it's luxury. It's fancy and all that.
But nevertheless we go into earnings season with stories like this earnings
season with stories like that may be but also with Nike with FedEx with a report
around Apple. Well FedEx thinks wicked important.
Chris RTS of Wall Street was expecting the weakest weakness in the running the
front half for next year.

And now he's talking about it happening
right now. Yes some companies are having some
trouble adapting and adjust. Chris Harvey Week.
We hear about some corporations struggling to adapt and adjust.
Well the Bremmer camcorder. That's OK.
They will adapt and adjust. Can we just say strategist come and go.
Mike Wilson's been front. So Harvey's a hell of a week.
He's all over everywhere in the zone. I haven't seen him.
Yeah. Well I mean him is right.
You know he's gone right now but he's good.
And you get rid of and it's criminal. I'm learning good.
Christian futures down a half of 1 percent on the S&P.
I went through this price actually briefly.
We're down in the equity market a little bit soft.
We've had a few really decent days of gains to kick off the week then kind of
treading water yesterday that a half of 1 percent on S&P 500 tire by a couple of
basis points on a 10 year three 77. Can we.
What we talked about in the last hour sterling is bad gilts are was trust.
Trust is not free and clear on this at all.
We talked about bandits didn't we.

Not permanent solutions.
Are they going to get a rating cut as they go through warnings.
Possibly. If we ever cared about.
Right. I agree.
We don't. I can't buy three dates right now.
October 14th when the guilt mark operation ends November 3rd when we get
a bank giving the decision. And whenever the budget takes place at
the end of November Mark Gurman out there is it re downs around the world as
Lawrence Summers says as well. How does the mess in your country affect
our country's spillover so that in the last week or so didn't we.
Lisa wants to go through the Fed speak to the ECB talk as well.
I'll go. Lisa how much of that if we go we have a
bunch. And I will say that I'm looking forward
to a lot of important dates but today's also important 730 M we get ECB monetary
policy account. This is basically the overview as I have
learned of their previous meeting.

Interesting to see some of the hawkish
Fed speak particularly out of Christine Lagarde.
10 year German yields yesterday surged by the most going back to March of 2020.
This is yes. Because of the hawkish speak.
Yes because of perhaps reversals from recent moves but also on the heels of
the natural gas increases the price increases I should say and some concerns
around that 830 am. We get us initial jobless claims.
We've been talking about this the tea leaves to figure out what will it take
for the Fed to pack away from some of the rate hiking expectations.
We are seeing those claims just dwindle around to near all time low levels.
Has that rise today. We also get a host of Fed speak.
Let's go through this. This is really fun.
Many ISE Minneapolis Fed President Neel Kashkari twice.
Chicago Fed President Charlie Evans. Fed Governor Lisa CAC.
Fed Governor Chris.

While our Cleveland Fed President
Loretta M. twice.
John to work for everybody. I can't wait.
Is that enough fed speak for your time. There's too much.
Yeah. In less than two ISE Kashkari twice
that. A bit more tomorrow.
Sprinkle around Friday after pay rose which Paul would speak more or should
give more formal speeches where we could have you know like Economic Club of New
York where we could answer more than. Yeah.
Well every time he has spoken we listen to him.
Then a week later we're talking about something else and a pivot again.
Yeah well we're pivoting. Dan Morris is the chief market
strategist at BNP Paribas joins us right now.
Dan it feels like June at least the first couple of days did of the end of
this week June when we bounced off the lows aggressively.
And if one starts talking about a pivot. Is this a bear market rally this week or
something more durable. What's different between now and then.
Well I think we have to keep in mind what might be the driver for a I don't
want to use words sustained rally but at least rally for a few weeks.
Right now we appreciate it.

On one hand of course sentiment is very
bad. You look bulls bears put call ratios.
No one likes equities. No one likes risk.
But at the same time because that sentiment is so low you get a bit of
good news. And I think you can see some of the
price action that we've already had. So going into the third quarter earnings
season and if we have some positive surprises the market's looking for good
news. I think it'll react.
Daniel the heritage of BNP Paribas I hear you've got a car wreck Adana now
and this goes back to Dr.

Coronado years ago is incredible passing
of GDP. What's the part of gross domestic
product in Europe in the United Kingdom in the United States that you're focused
on. Well it's really going to be the price
in this news because we know all these discussions that we're having it all
comes down to how inflation of oil in the months ahead.
Because everything depends on that. So even when we talk about growth
slowing it doesn't matter if we don't see it through to the inflation numbers.
So it's looking at the price indices within the national accounts and in
particular looking particularly in the US you know what's happening with
services inflation goods inflation and then so importantly rent inflation
because we appreciate that. So when that's going to be the most
sticky and the one that may require the Fed keeping rates higher for longer.
As they've said they're going to do what a tough time for HREOC for anyone
particularly for this bank.

Credit Suisse says a headline for you
milling outside investor in the investment bank spin off the stock
trading just a little bit higher in Swiss trading.
The bank is considering the boutique model for advisory and deal making.
Credit Suisse talks are reviving the First Boston name.
Those talks aimed at reviving the First Boston name advancing.
Talk to us about the legacy of that seek.
The first Boston name.

Oh well it's a magical legacy as to say
the least but it is just some so far ago.
I get it. Maybe you change the curtains.
And now what I would focus on John is the most important guy in the block
today for the bank from Zurich. Christopher truer twice.
See you each. You see each other.
He exited to HSBC. They have a hemorrhage on a loan
electoral tower as they did it first Boston years ago.
This is what happened with with Deutsche Bank a few years ago.
This is the problem. And I don't go through the Lehman
comparisons because it was benchmarked to Lehman.
Don't we know it's not Lehman.

It's okay.
And I think that's ridiculous. They've got their struggle was when a
bank goes through these problems. Attracting talent retaining talent is
problematic. Retaining clients and attracting clients
even more problematic and cutting your way to growth becomes increasingly
difficult. I was speaking about this with a couple
investors yesterday who said it's not a Lehman moment.
And you know saying that is sort of looking at this in a simplistic way.
It's more an issue of what cushion at banks is shrinking.
People who thought financials would do well in a rising market are perhaps
mistaken. Credit Suisse its own story.
But on a broader level there are these idiosyncratic issues that become more
prevalent when all of a sudden the dealmaking pipeline dries up.
Dan Morris can I get you in on this conversation.
I understand the delicate part of it that you can't talk directly to what's
happening with Credit Suisse. But walk me through how difficult the
banking system still is in Europe. While we still have these problems
across the continent and in Switzerland to.
Well I don't know if the outlook is necessarily so negative.
I mean for example in our multifaceted portfolios we have an overweight to
eurozone investment grade credit even in an environment where we appreciate you
know we're facing a recession this winter.
And one of the reasons for that is even if we do appreciate interest rates are
higher.

You talked earlier about companies
having to refinance at higher rates. The good news is if you will on one hand
with high spreads you're being compensated for the risk you're taking.
And that risk might be lower given that companies have been able to raise a lot
of cash at much lower interest rates balance sheets.
Generally speaking in good shape. So that should be through to less
problems potentially for the banks than the lending that they've made.
Denmark's BNP. Dan thank you sir.
Credit Suisse trading higher in Swiss trading up by three point four percent
for 25 suck. Some still trading at 425.
I think we three real you know Swiss franc but still one of stocks under five
a year in the banking business is Jihye Lee.
It's not good. Got some news out of Pentatonix when I
bring you the rapid has on one. Last night I got off at that workout.
I got off things you never want to say. The CEO to Dow Jones the turnaround
founds the company likely not viable on a Sunday morning.
That's still to come.

From New York this is Bloomberg.
Keeping you up today with news from around the world with the first word.
I'm Lisa Mateo. The price of oil is holding steady.
A day after OPEC plus agreed to the biggest production cut since 2020 that
the alliance plans to slash daily output by more than 2 million barrels.
That move drew a rebuke from the U.S. which has been seeking more oil from
producers. Meanwhile Russia repeated a warning that
it won't sell crude to any country that adopts a price cap.
North Korea is ratcheting up the tension in the region.
It fired two suspected short range ballistic missiles toward waters where
their aircraft carrier USS Ronald Reagan had been deployed earlier this week.
Kim Jong un's regime launched its first rocket over Japan in five years.
North Korea criticized the U.S. for redeploying the Reagan carrier group
to waters east of the peninsula over the UK.
A new study says millions more Britons will be dragged into higher tax brackets
over the next three years and that will cost twice as much as Prime Minister Liz
Truss's personal tax cuts.

Now the report comes from the Institute
for Fiscal Studies. The government is reducing the rate of
income tax but it's also freezing the threshold where people start paying.
And that will force them into higher tax brackets.
Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than
twenty seven hundred journalists and analysts and more than 120 countries.
I'm Lisa Mateo. This is Bloomberg. From New York City this morning good
morning to you all your equity markets slightly negative on the S&P 500 taken
off Thursday as trading negative on the S&P with yields not doing much on its
own year up a couple of basis points 377 92.
Equities down a half of 1 percent.

But a news corporate news one from
pallets on another piece of news from Credit Suisse.
Just want to cover palettes on quickly pallets on cutting its workforce by
roughly 500 globally or about 12 per cent.
The CEO saying the bulk of our restructuring work is complete.
The sector Dow Jones. This headline came from Dow Jones about
15 minutes or so ago. Lisa this is the one that jumped out to
me at the turnaround. How's the company likely not viable on
its own. What a turnaround in the last two years.
I mean considering how much the shares got absolutely blown up during the pan
down Maria Tadeo positive way and then absolutely deflated.
But this is the fourth round of layoffs this year.
Just to give you a sense leaving with about half the number of employees
globally at this is the Hail Mary to get to a point where they actually are
viable in the new era where people are going back to Jihye Lee Mark Gurman.
We're making jokes about this.

I'm the worst offender.
Forget about the jokes. Jason Kelly is the Fed over.
Is it just that simple. I think to some extent Manus Cranny I
mean I think people still love the bike is Tommy it's not about the best way of
saying this. You can have a product you love.
It doesn't make a good business. I think I still love the product.
They still love Peloton. There's also a point at which a lot of
these companies were able to raise money and every which way during the pandemic
when a lot of people's expectations were reset.
And now we are having a reassessment of how much money costs and where those
investments go. And some of these companies are finding
that the investors just are not there perfectly put like triple C unsecured
debt from a social media company. Yeah right.
Which you'd like to go for it. Eleven twelve percent which might have
to go 15. We can talk about that another time.
Now I'm just fuck.

Okay.
Which companies you're looking at. The latest news from Credit Suisse still
trying to bring in right. An outside investor to inject money into
a spin off of its advisory and investment banking business.
They do not want to go into an equity race anytime.
There is no way under five Swiss francs per share offer.
London and Zurich does with Maria Tadeo Meyer in Zurich.
Joining us now their leader Michael Moore who has terrific perspective on
what banks do when challenged.

Michael Moore I'm going to cut back to
the future that you and I lived and I'm going to drive it forward.
There was the government. There was a company called Bear Stearns.
And as Mr. Diamond too is a monstrous regret says
J.P. Morgan came to the rescue whereas the
Swiss government and whereas the JP Morgan in this discussion of Credit
Suisse. Well you have to think that the
competitors are looking at the share price and asking the question of when
does this make sense as an acquisition target.
But you know if you're Credit Suisse you made the point you don't want to
sell shares at this kind of level.

So I think you have seen some ideas
floated out there of could we bring in some capital in a different way and a
more creative way to allow for what will likely be a fairly dramatic
restructuring of the investment bank. And how do we fund that.
And so this seems to be one possibility. It is this idea of a spinoff.
And you know Credit Suisse has had a long running banking franchise.
The big question is does that brand name or even a new
bringing back the first Boston brand name help or has it lost too much talent
to attract an investor.

Michael I want to talk about the urgency
because we'd heard about a turnaround plan that would be announced at the end
of the month. Does it have to be within the next week.
Because you are hearing and Bloomberg has reported of certain clients pulling
back and some of their use of Credit Suisse of more departures from the
talent that they have. How much is this being expedited by the
reaction in markets. So I think you know there has been that
chatter out there. I think the company would like to stick
to the you know date it put out there of third quarter earnings October 27 coming
out with a robust plan. I think they don't want to rush
something but there is that you know market speculation out there.
You've seen the shares down quite a bit this week.
But you know they the company keeps pointing to the fact that they have over
200 billion in liquid assets.

So there is not the same fear that we've
seen in past cycles about look like Michael you've got encyclopedic
knowledge of this. Is this discussion being driven by the
board. Is it being driven by the chief
executive officer. The chairman by who.
By the Swiss government. Who's who's driving the car right now
for Credit Suisse. I think you've got a few parties and
we've we've reported in the past that you know the board has somewhat been
split on how dramatic to be on the investment bank.
I think they're they've gone through the process of coming to a consensus.
They have assigned a special committee of the board to look at the future of
the investment bank and how big it needs to be.
Michael Klein is a major player there. He's obviously a longtime investment
banker. Blythe Masters another name that is
involved there. Christian Meissner on the executive
side. So you have a number of experienced
voices in the room. But I think you know you're also seeing
that there are a lot of you know opinions here.
And I think the Swiss government probably has its own view.
Michael Moore thank you sir.

And thanks to the team here at Bloomberg
for the latest report and Credit Suisse as pharma.
Just a little bit higher in Swiss trading cut by a little more than 2
percent. Tough time to restructure a company
palettes on trying to make the effort to.
I heard a great podcast in the last week or so with Jeff Curry and Matt Saber.
And Jeff made the point that this was the revenge of the old economy.
It's a line you've heard him say a few times before.
And to your point just to fold in this low interest rate story to say from
pallets to opaque Jeff's point was basically that we've had zero rates for
so long that what did people do. They make these long duration
investments that were just putting money into things like Uber things like food
delivery things like pallets on went and they put the money in the ground to
drill to really build out things like refiners and all of that.
And to his points.

But a conclusion on it it's the revenge
of the old economy. There's a shortage of real stuff.
And you cannot manufacture real stuff by issuing more paper derivatives.
And this has been the real challenge and the reason why it's so hard to really
assess the supply demand dynamic in things like oil in things like copper
and things like some of these other precious resources to line up the ducks
is peloton. An example of a zombie company is Credit
Suisse zombie bank is Twitter zombie social.
Those debate that's the fourth quarter. Not for me to say but I can say that is
certainly a relationship between what is happening with with the likes of
Palatine and what's happening with the likes of OPEC plus and the oil market.
Joel Weber. To your point though it doesn't mean
it's a bad company or has a bad product.

Joe Weisenthal.
But perhaps it was structured in an era where money was free and where people
were more willing to finance a model that perhaps looks unsustainable in
another interest rate environment. The whole question of zombification
suddenly refinance refinance. Can they be sustainable.
At a 4 4 percent Fed funds rate revival is zero.
Are you at 4 5 percent. It's a very different proposition and I
would say zero argue maybe north of 5 percent for some of these companies.
Right from New York City Mountain wasn't coming up surely from BlackRock this
fiscal impact. Live from New York City this morning.
Good morning to you. Better come just a little bit of calm
relative to the big swings we've had in the last couple of days with an up and a
half of 1 percent on the S&P and the Nasdaq 100 we're down a half of 1
percent. Also on the S&P I think we're about six
percent off the lows of September 30 is still down about 20 percent on the year
so far. If we get to the bond market a week ago
yesterday the highs of the year on a 10 year yield north of 4 percent right now
370 752.

We've come back in over the last week
with just a little bit higher on a session by 2 basis points on a two year
two basis points as well to 417. Last week 435.
So we've come in there as well in the commodity market.
We've broken out big time in crude over the previous three days were up by about
11 per cent on the S&P 500. The energy names are up by about 12
percent over the same time period. Crude right now Tom on Brent ninety two.
Eighty nine. That 2 million barrel a day cut from
OPEC plus probably works out in real terms at about 800 K because they
weren't hitting that limit anyway. But certainly that's a snub to this
White House of what this president wants it from the crown prince.
I looked beyond where we are. Greg will you writing eloquently of
California up 62 cents a gallon.

Is that all this is about John for
America Operation Midterms. That's what it's all about for this
president somehow. What do we call it a little bit earlier.
Strategic nerves. The strategic midterm races are very
nicely done. CONVEXITY out on Twitter.
Fantastic night. That's a cross asset price action.
Got some single names. A lot to look at.
Let's get to Lisa. Hi Lisa.
Hey how's it going John. There's a question about how much some
of these stories are idiosyncratic versus thematic.
And we talk about job cuts.

We're seeing that around the periphery.
And this morning we heard from Palatine or Dow Jones reporting that they're
planning to cut 12 percent of their staff.
This seems like they're a last ditch effort to avoid some sort of broader
disassembly of the company. This is the fourth round of cuts so far
this year. Those shares year to date down more than
76 percent. They are not alone in terms of job cuts.
Last night late last night General Electric.
It was reported was laying off hundreds of workers in some of their renewable
energy units there. Wind offshore a wind unit.
How much does this really represent a situation where they're not seeing the
demand. And how much is this because of supply
chain constraints because they're inflation constrained.
They cited all of them as they talked about this.
We've heard from metro platforms or Facebook.
Basically those shares are down almost 60 percent year to date.
They are shrinking that company.

They expect to be a smaller company next
year than this year. Not saying layoffs are but basically
attrition pushing people out. Either way they are shrinking.
Palatine shares ahead of the open. David Westin moving all around.
Right. Is this a good thing or a bad thing.
Are job cuts what these companies need right now even after all the losses this
year. Tom you're still seeing those shares
lower by one point seven percent ahead of the op ed because there is a dire
feeling. Is this the last ditch effort.
What happens if this doesn't work to revive profitability.
It's going to be interesting to see. We'll continue to follow that as we can.
Joining us right now Marilyn Watson.

How did global fundamental fixed income
strategy at BlackRock long ago and far away she was head of global fundamental
strategy for the Bank of England was thrilled that she could join us this
morning. You have been in the halls of the Bank
of England. How do you distill the chaos in England
and also with their central bank. Well I think it's a combination of
obviously the high inflation the Bank of England raising rates then the new
government and the very poor communication around the mini budget
that they announced. And I think that really completely took
investors unawares. There was no sign of how they were going
to cut expenditure along with the cuts in taxation.
And I think it just added you know on top of Brexit on top of you know the
deep issues we're seeing in terms of economic activity in the UK.
I think it just created you know a lot of you know carnage essentially in the
gilt market for a time big time.

Tom Keene you learn to ride a bicycle in
the US that could stabilises the training wheels.
Training wheels. We could have stabilizers in the UK just
if one knows what I'm about to say. Is this bond market going to struggle
with our stabilizers like the bank having a gilt market operation when it
expires in the middle of October. So I think the Bank of England have
already signalled you know with the temporary measures that they announced I
think the Bank of England is keenly aware that they want to keep the market
stable.

So they may in fact need to do a little
bit more. I think at the moment the sort of
treading a very fine line the Bank of England you know have a very very
measured approach to monetary policy. Every step that they take you know is
very very finely nuanced. They assume essentially any tweaks that
they make to the monthly policy won't be seeing the full effects until at least
18 months out. So they're trying to adjust policy for a
longer term trajectory and yet they're dealing with a very volatile market
right now.

So I think the Bank of England is
obviously incredibly keenly watching what's happening.
And I think they will be prepared to do more if they do feel the need to keep
the market stable. But I think it's also a global
phenomenon. I mean we're seeing volatility across
all asset markets. We're seeing across you know all all
sovereign bond markets. So we're seeing you know volatility here
in the US. We're seeing it in Europe and elsewhere
as well.

So it's not just a UK phenomenon
but I do think in light of the fact that you know we have issues that are global
in terms of activity issues specific to the U.K.
and then the fact that many central banks are obviously draining liquidity
from the system at a time when inflation is high.
I think I think it's just a confluence of many things and it's being
exacerbated in the UK Dani Burger which raises this issue of stabilizers or
training wheels for other central banks. In terms of quantitative easing you're
not quantitative tightening. Are you expecting a lot of central banks
to fail at their attempts of quantitative tightening and end up
actually having to buy bonds selectively on the longer and try to control some of
the. Is that they're seeing.
Yeah. So that's a I think is a very good
question. And I think it it.
We've never been in this environment before where we have had so many central
banks that came away from positions of such loose monetary policy.
They've had these massive bank balance sheets that had these huge QE programs.
Rates have been incredibly loose and we've never had a starting position
where they're starting to tighten.

You know from these incredibly low
levels given how high inflation is as well.
And so I think it does remain to be seen.
I think here in the U.S. I think the path is pretty well laid out
in terms of Kutty is already in progress.
I think in the U.K. and also maybe in Europe as well it
remains to be seen. I think you know in Europe we do expect
in the ECB to continue to raise rates the next two meetings.
But in terms of reducing its overall you know bank balance and in terms of Kutty
there's still a little bit unknown when you have the asset purchase program.
On the one hand you have the pet program on the other hand and it's a fine
balance that they are trying to juggle. Yeah.
You know right now there's a lot of discussion with our star star.
I'm not going to get into the jargon.

I don't want to do that.
It's sort of I feel everyone just rolling their eyes as I say that I was I
was smiling. Some scary.
But I'm curious whether you have in your mind a level at which longer term yields
could rise before the financial stability risks become more pressing
than the inflation ones. I think it's not just the level to which
they rise.

It's also the speed with which they do
that. And so we don't have a certain level
that we're currently looking at where we think we'll be overly concerned.
And we don't think they're going to get to extreme levels.
But we do think if the volatility increases and you see a dramatic shift
either because you know the the economy is much worse than we expect or because
of other factors we don't know. But I think half of it is actually the
speed and also how the curve reacts. It's not just the end point.
Martin just final question. Just take a step back from all of this.
Can you tell us how much the world has changed for you Rick for Bob for the
whole of the team with rates where they are now.
And are you looking at this world as maybe something that we have to live
with for a while.

The Fed funds the risk free asset sticks
around 350 to 4 per cent and credit is hanging out at these levels.
That's right. I mean the world has changed completely
from a year ago three years ago five years ago 10 years ago.
But actually it gives us a lot more optimism now in terms of fixed income
actually giving you a decent yield. I mean we were relatively cautious in
this environment but fixed income now is really I think you know a very decent
good asset class. Once again you can get the decent return
with little risk at the moment if in the front end with legislation.
So I think for the long term and going into next year then I think there are a
huge number of opportunities in fixed income that we haven't seen for such a
long time. So I think in terms of the team and
fixed income investors in general I think this is a far better environment
going forward than we've seen for such a long time.
Do you think we can break out into this environment a new equilibrium a new
normal on a sustainable basis.

You get the feeling we can we get a ton
of pushback around a table that we just can't live with these levels of interest
rates. Do you think we can't.
Well I'll see it. In the past we've certainly seen
interest rates much higher than this in the past.
And I certainly think we can live with interest rates being much higher.
And I think to a certain extent to get back to a healthy financial environment
you know I think to have rates a little bit higher I think you know it's
beneficial for a lot of different businesses.
So I think it's certainly possible to get to a sustainable level.
It's beneficial for the economy. The world has changed that's for sure.
Marilyn thank you. Also to catch up Marilyn Watson of
BlackRock. Foreign exchange interests and against
him after being boring for a long time. Fixed income interests it again after
being boring for a long time. I think we've all seen those stock shows
over the last 10 years and they're talking about muni bonds.
Tom.

Yes yes.
Yes yes. Yes.
Have you noticed that many folks in all caps and all of a sudden this tell us
about fixed income. A Moody's said well it's there you know.
Did anyone you mentioned about the risk free rate which has been gone for years
and within the risk free rate is the idea.
As I said this 15 times however is a great quote.
Grab that is back. I love the.
On a Matthew basis. That's what it is.
It is a whole new math after all. Just like 20.
I will take Maryland's point. We've lived through this before.
I don't share the gloom about our inability to live in a high rate.
I will say I'm watching the real yield very carefully.
Not only saw the real yield but the television property.
You can see that Friday. Thank you for that.
Thanks for the primer after. Appreciate that.
Well I'll just add this and just to give a little gloom to offset that because
that was way too optimistic. And you know.
But in all honesty the real tension here is how much debt has been issued at.
Rates that are not sustainable at this point.
So what happens with all of those companies and you'll do.
Well exactly.

And does this end up with an
unsustainable number of corporate failures.
If this does persist for the decade to come and that I think has attention to
the sovereign debt profile has changed completely at a massive massive since
the last time that rates are coming up steam is sure the principal at the short
group. I imagine he's got some things to Santa.
Okay. Plus since this White House look forward
to that night from New York this is Bloomberg.

Keeping you up today with news from
around the world with the first word. I'm Lisa Mateo.
Well it looks like President Biden's fist pump with Saudi Arabia's Crown
Prince Mohammed bin Salman less than three months ago.
Did it pay off. Instead the Saudis snubbed the president
and aided Vladimir Putin with that OPEC plus oil production cut.
President Biden had hoped his visit to Saudi Arabia would encourage the Saudis
to pump more oil. In Sweden the government blames
detonations for damage to the Nord Stream pipeline delivering natural gas
from Russia.

The Swedish security service says the
investigation has increased the suspicions of sabotage and Danish and
German officials. They're also investigating.
Shares of Shell dropped after the energy giant pointed to a weaker third quarter
performance and that's likely to end a run of record earnings.
Shell's refining and chemical business showed signs of a slowdown and that
could be a worrying sign for Europe where major industries are buckling
under pressure of soaring natural gas prices.
In the U.K. at least 340 billion dollars was wiped
out from the nation's stock and bond markets in the first month of Liz Truss
his government. The September sell off on concerns about
tax cuts saw the pound hit a record low. A Bank of England intervention and
eventually a government U-turn. One strategist says investors selling
the UK market is on investable.

President Biden had super in New York
today for a jobs event at IBM which will announce plans for a 20 billion dollar
investment over the next decade. And the investments will focus on
semiconductors and artificial intelligence among other things.
IBM has said it will directly benefit from President Biden's Chips and Science
Act which is aimed at ensuring a secure supply of semiconductors.
Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than
twenty seven hundred journalists and analysts.
I'm Lisa Mateo. This is Bloomberg. I'd like to reach a point where our
policy is moderately restrictive. Somewhere between four and a four and a
half percent by the end of this year and then hold at that level and see how the
economy and prices react. Is that bullish.
Rafael Bostic. That Atlanta Fed president.
I guess you decide. Isn't that horse is a pause a pivot.
What you're looking for cuts.

Not that simple assessment.
That's not a simple. I should be just asking.
I think that anything was bullish. He's asking for friends.
OK. So if for you for Jonathan Ferro I think
if they're pausing and not cuts and get a recession that's problematic.
And I can't remember the last time we saw that.
I look you're not cutting interest rates in a recession.
Some look at the acclaimed academic Rafael Bostic and all this talk about
cutting interest rates and that in a guy like him is looking at our stars stirred
ISE going. Really.
That's driving me nuts this morning. Driving Rafael Bostic nuts is what I
would do to make it a little bit more simple and frame it as follows.
They're going to bump into financial stability concerns before they get to
where they want to be. That's the argument not my argument.
And that's the reality in places like the UK maybe even in Europe.
So you've seen Italian spreads.

Yes.
Couple yo yo act back to two fold. Two readings there.
Ambrose Evans-Pritchard in the Telegraph was brilliant and gloomy on Italy where
they're stuck here now. And Ben Emmons was definitive yesterday
unexplained into me. He went so far he had ah sure.
Asked a hard stock in our star search. It was an English.
The ECB said this moments ago. In their accounts growth concerns
shouldn't prevent forceful rate hikes. OK but that's where we're at right now
with central bank policy. That's what they got a second look.
That's the official line. Is that is that is it tradable to say
that they're not going to do this. If I tell you they're not.
That's just what they want to signal. They won't follow through.
That's tradable event and you can get your head around.
It has become a parlor game of trade ability around all of this stuff.
People who has been has been. Oh yeah.
Like the hedge fund you mentioned earlier.
That's up 100 gazillion percent below crest.
Yeah. Yeah.
Are they trading around this news.

I don't think so.
They're trading. What's fiction.
Well they they are traders. And I think there's a there's a famous
line from Michael Platt that an investment is a trade gone wrong.
You ever heard that line. Yes.
Is it really an investment. It's a trade gone wrong.
Yes. What's amazing about that company and
why I'd love to sit down with them and this is a pitch by the way is that they
seem to manage to avoid becoming married to a world view.
Yes. If you think about the gangs from 16
through 22 and I was going through it yesterday I was just thinking 2016.
China's slowdown Brexit 17. Tax cuts 18.
Trade War 19. After the cootie must rate cuts the
pandemic the massive stimulus the inflation this year huge rate hiking
cycle.

And to keep generating gains through
each and every one of those regimes without becoming married to a world
view. You think about the people who did
really one in the previous decade. A lot of those guys did that.
Some great years that some fat years but largely because they were pretty
consistent about the way they saw things.
They read the perma bulls or perma bears to make that move from regime to regime
from year to year. It's pretty phenomenal.
Speaks to a process and space to a nimbleness of thought and of really
execution. I don't think exists in many places.
Tom Mackenzie it does exist in the oil patch.
It exists in the research note of Stephen Schork whose principle to short
group we protect. The copyright of all our guests get his
magnificent statement on the American distillate an oil economy from the short
group.

Steven thank you so much for joining us
this morning. It's a simple question is what is OPEC's
plus mean to a gallon of gas. But far more than that is the nuance.
How does OPEC's pluses decision impinge on the many distillates that we take
from a barrel of oil. Yeah absolutely.
OPEC's only influence over the market Tom is the price of crude oil by
constricting the production or increasing the production thereof.
So obviously with the move they've made now or the announcement they made
yesterday of taking 2 million barrels off the market.
Clearly we're looking at fewer barrels on market as we go into the fourth
quarter.

Now I want to be clear here.
OPEC made the announcement of the 2 million barrel cut.
But OPEC was already its 13 members. And I want to add four which are in
sub-Saharan Africa are struggling to maintain their current quotas.
So by announcing a two million barrel cut given what OPEC is actually putting
on the market now the cut will amount to only 750 to 800000 barrels a day which
is still not an insignificant number. And therefore it has the potential for
an impact on oil prices. Now we don't consume oil right.
We consume the derivatives of oil gasoline jet fuel diesel fuel so forth.
What we've seen here now to answer your question Tom on the U.S.
East Coast is our refinery capacity has been slashed by more than half over the
past 10 years. We simply don't have the ability to turn
what crude oil there is out there into what we need into everything we need.
And Thomas Soule statement on economics is scarcity.
We cannot produce everything that everybody wants.
That is the current situation when it comes to oil derivatives.
We are producing what most people want the most.
That is gasoline.

And therefore what refining capacity we
do have left here in New York is geared towards Matt maximizing gasoline
production. The other derivatives i.e.
heating oil which is also diesel fuel jet fuel that suffers.
So as we look ahead to this heating season 70 percent of the homes in this
country that heat their homes with oil are located in the mid-Atlantic New
England states. We are going into this winter with a
thimble full of heating oil. We do not have it is a dire situation
we're going through this winter. We don't have enough supply.
It is going to be a very volatile and very expensive.
At so we can get the heating oil from Europe.
CAC. That's going to be tricky right.
Sorry. We try to provide them with gas natural
gas as well. But Stephen to your point about
refineries and capacities given that there has been talk about releasing even
more from the Strategic Petroleum Reserve to lower gasoline prices how
much are we bumping up against the limits of refineries where even a
release won't really make a difference in lowering prices further.
And really we're kind of out of bullets.

Exactly.
Well we never had the bullets we saw. I mean the doubling down on a policy
that has failed. Is stupidity on stilts.
We have been trying to manipulate the price.
We being the White House and trying to manipulate the price of oil now for the
past year with last 52 weeks we've dumped 200 million barrels of government
on crude oil onto the commercial market. And what do we have to show for that one
year later in New York. Heating oil prices are dollar 46 a
gallon higher 30 percent higher than they were a year ago.
So we could drain and we're just about there with the SPDR.
Over the last 52 weeks we've drained a third of our emergency supply of oil.
So what does that mean. A year ago we had 42 days worth of
supply of crude oil sitting in the SPDR. Today we have 26 days left of capacity.
That is the lowest level since 1983. Now keep in mind the Strategic Petroleum
Reserve is for emergencies.

Imagine last week of Hurricane Ian did
not go into Tampa but instead went into Euston or New Orleans.
The ICB oil epicenter of North America. We simply are the least prepared ever
for an emergency. And the only thing we have to show for
that lease one year on is a 30 percent increase in
distillate costs. So threatening OPEC with oh we're just
going to put more or we're just to do what hasn't worked the 52 weeks.
I'm going to do more of that. That is not a threat.
OPEC is laughing this off right now. Statement is a strategic mid-term
reserve to.

Okay.
Remember that stage show. The show.
Great. Thank you sir.
The SPDR C.K. that has been battered.
Well don't get me going on it. But the answer is to speak to experts
like Shaw because valuable. I know these guys go narrow and we take
advantage of it to get you go in life in New York City.
I just want you to just keep setting that right.
Exactly. This is Glenn Beck. We're gonna have to accept some pain in
the domestic economy to bring inflation down.
I think the most important thing to remember is that we're in this situation
because of overstimulation of the economy.
I think the market is too optimistic about the earnings.
Question of the day has been where we are in terms of capitulation.
As long as there's vigilance by central banks it's highly likely that the
inflation rate will decline.

There will be disinflation.
This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa
Abramowicz. Good morning everyone.
Jonathan Ferro. Lisa Abramowicz.
Tom Keene. A most interesting Thursday claims in 30
minutes as we looked at Jobs Day tomorrow.
And John we start October. I'm going to call it October.
That's what we are right now with whom we're very focused on the economic data
some very focused indeed. Job openings collapsed by more than a
million a little bit earlier this week. The hope is that we can get a soft
landing. Jobless claims coming a little bit later
this morning and then it's on to payrolls tomorrow.
Monarch. Well it's under perils to our morning
but what in payrolls matters. Is it about the job.
Someone told me it's NFP three month moving average.
Or is it about the elements of inflation that you see in there including wage and
they want some heat to come out of the tightness of this labor market.
That's for sure.

And that's what the move lower and job
openings spoke to last week. But I don't think we can forget when we
think about the totality of the data. This one data point that's much brighter
than the others a much much bigger. It's inflation with an eight and or
still we'll get CPI CAC next. When we see that.
I mean we're not gonna just moments ago the central bank left lots of e moving
here frankly getting out front of IMF in two weeks.
But but Lisa I look at the jobs report tomorrow on a grill John it is about
price change and what it signals for the Fed.
And then there is this issue with workers between a rock and a hard place.
There was recently a study done by the Federal Reserve one of the regional
banks that showed that people are losing money at the fast as well is going back
in history according to some measures in terms of real wages.
They are so deeply negative and growing more so at a time when inflation is
incredibly punitive particularly to the lower income Americans.
So how do you then deal with this at a time we want to see people keep pace
with inflation.

Is wage inflation such a bad thing.
Especially if offsets Joel Weber talked to Tracy Alloway on about this an asset
allocation reform. But let's stop the show.
For what. No one's talking about.
It's not front center. It will be fast 6 percent plus mortgage
rates housing in renting to year imploding.
Is that too strong a word. If you own a house right now if you
bought it like Matt Miller not that long ago this is a wakeup call.
The leg up is going to be a big one when you go to fix that mortgage against
home. But this is the goal is in England.
That's a big deal. And this the objective is in this the
goal. Yes.
I will say on housing it is the goal. It was out of control way above the
regression to the mean and all. It's definitely not a mature distinction
between what is problematic at the moment and what was the objective for
this for a reserve politically what does it mean.
We sort of see house prices decline like the RTS rentals even come in.
Dani Burger.

Watch when you're talking about house
formation and the fact that people cannot afford to go out and have their
own homes as young people. It does become a political issue but it
doesn't speak for lower rates. It speaks for to keep them where they
are for greater home affordability. My issue is at what point do they
actually develop more housing. Right.
Rather sort of side of an equation that has been unbalanced since the crisis.
And the fortunate things to talk about today we go to Bloomberg reporting and
Zurich and in London. And John it's a Credit Suisse update
from Bloomberg. And it wasn't pretty.
Tom with them trading at about four Swiss right now to do the restructuring
and raise the capital they might need for that would be very difficult.
So it's no surprise to many of us that we're reporting some outside investment.
Don't know. Perhaps we'll cut her before.
But ultimately the clock is ticking. And I think we get this new reorg this
new strategic plan at the end of great month.
So do they need someone to announce by then.
Quickly Lisa.

A serious matter.
I'm not a fan of CBS as a measurement of a company to credit default swaps.
Matter is a measure. You speak after a credit squeeze default
swaps a rose to the highest levels or became the most expensive to insure
against going back to 2009. It's an indication of the likelihood of
restructuring of some defaults. Credit default event.
Not necessarily some sort of liquidation wholesale like a Lehman moment.
Get the data started John Trust. The Yen Sterling semicolon is not so
good. A trustee and trustee in Sterling
Stanley Stanley's weekend has been the last couple of days.
Dollars stronger again against the euro. Euro dollar 98 66 with Nancy tenths of 1
per cent yields unchanged on a 10 year 375 51 equities a little bit negative
here somewhere down a half of 1 per cent on S&P.
Brent crude. Ninety three were watching that for a
breakout.

Not there.
Yeah but as John mentioned a big pop over the last number of days.
Tracy McQuillan holding court at Wells Fargo Investment and Global Asset
Allocation. How valuable is Care's Tracy right now
into the jobs report tomorrow. So we would say that holding some cash
in a portfolio holding some shorter term fixed income being more defensive on the
equity side is all important. Going into tomorrow's read on the jobs
market we do expect that the jobs numbers will be something for everyone
really in terms of job gains probably likely to slow relative to the August
numbers. So that will be a positive for the Fed.
We would also count as positive any increase in the participation rate any
decrease in average hourly earnings. If we were to see a decrease in the
workweek that would signal to us that the labor market is less stretched.
So the overall message probably from tomorrow is continued strength.
And we expect that the unemployment rate is going to stay stubbornly low at about
three point seven percent.

Tracey when you get into a mess
typically a white for some kind of countercyclical circuit breaker to come
in so you can get long this market again.
Tracy where does that come from. It's got to come from the fiscal policy
maker and a monetary policy maker is intending to slow this thing down.
What's it gonna come from. It's probably not going to come in the
near term and it's probably eventually going to come from the Fed.
We think that the Fed is likely to stick to its plan to raise the Fed funds rate
to four point to five to 4.5 percent by the end of the year.
So that means 75 basis point raise in just in November of fifty point raise in
December to get us to that level.

And then probably a couple more 25 basis
point increases in 2023 to get us to their terminal rate.
Then we expect them to take a pause and start cutting by late 2023.
So that's probably where we get that turn in the markets is in anticipation
of an eventual cut. But it's probably not coming for another
year or so. Tracy we've been talking about the death
of 60 40 for the past nine months. How much are we going to see the rebirth
reincarnation of 60 40 maybe starting at the early next year.
If you start looking at the potential for some sort of a real rebound or
revival once we get the downturn as well as a run of Fed cuts helping the fixed
income market.

Sure so it has been really ugly for
global bonds ever for global stocks. I was looking at the end of September
numbers for global stocks down twenty point three percent and global funds
down twenty point four percent. ISE So that 60 40 at level 60 40 has had
very abysmal returns over the past 12 months.
But the good news or the silver lining I guess for those fixed income investors
who have suffered through this worst bear probably on record is that rates
have reset higher. So that does mean that they are getting
these higher rates for a longer period of time.
And should we see cuts next year then that could also provide capital gains
this for for the fixed income component. And as we see things recover from the
expected recession a boost in equities by the end of the year last next year as
well.

And we would say broaden that
diversification for now have some commodities exposure and if appropriate
has some hedge fund exposure too. Because broadening diversification is
helping that very narrow 60 40 performance this year.
Tracy thank you. Tracy McMillan the owner of the Wells
Fargo Investment Institute. Tracy thank you.
60 40 had a tough write this year but we reset as we reset with bond yields and
these kind of levels. Lisa the pushback to that view at the
start of the year kicked in a bigger way.
Gonna see your rent. I mean what's going to get away from
these asset classes moving in tandem. They moved in tandem the wrong direction
this year. How much do we get them moving in tandem
again. In the right direction come next year
especially given how much room we've bought ourselves when it comes to fixed
income.

What's going to drive the correlation.
So that's the question. I don't think that I don't think there's
anything that's going to break in other data dependency and there'll be some
seismic change. The hope and prayers towards a soft
landing but frankly can go the other way.
You know I don't. If Covid continues in China and if we
continue with what we've got what are the what are the central banks do.
They've got to continue this trend.

We flirted with this idea of a soft
landing. Going to CPI is the right word.
And then we got CPI and all of a sudden again it was just elevated.
And we post that story once more. In the heart of the matter is whatever
you gauge inflation 6 percent 5 percent whatever the number is that's
unacceptable to any authoritative institution.
It's not just the Fed slowing down it's the ECB slowing down as well.
And we're still asking the question what does life look like.
Could it be okay after Governor Kuroda has gone.
Does he take yield curve control with him.
Well some people think that they're just buying time for six months or so until
his term is up and then they'll let it go because he wants to just cap his area
of yield curve control.

And other people are saying well perhaps
it will coincide with this perfect weakening in the dollar and we'll give
them plenty of room regardless. We are looking at an era where perhaps
we're going to see the end of quantitative easing but perhaps not.
Perhaps it'll come back and forth. And that's what we saw at the bank.
I can't get away from itself. Can't get away from it.
George Magnus yesterday when he saw a silly string note and we've forgotten
about productivity moments ago.

Thank you Alan Tanzi down in Washington.
Pablo Azhar at the New York Fed writes a definitive short paper on this on radio.
I'm holding up my cell phone and he says the productivity decline is from not
computing not from technology but small computing.
The miniaturization that all of us have lived is a huge part of this gloom over
it will relocate.

Another way of putting this is that we
waste a lot of time on our phones. I think that's what I think that that's
what you're saying. Which you're saying I haven't told you.
I don't disagree. Is that a message for the kids at home
or a message for their roles in why we're doomed.
Should I get a tip Tucker talk. I don't want I don't think I should do
things. A Chinese Communist Party gets your data
through that. So I think we need to salary a little.
Yeah something like that. Possibly.
The New York City complained to you. Claims
20 minutes away. This is pulling back.
Jeanne I will follow you on tape. Tuck keeping you up to date with news
from around the world with the first word.
I'm Lisa Matteo. The price of oil is holding steady.
A day after OPEC plus agreed to the biggest production cut since 2020 the
alliance plans to slash daily output by 2 million barrels.
That move drew a rebuke from the U.S.

Which has been seeking more oil from
producers. Meanwhile Russia repeated a warning that
it won't sell crude to any country that adopts a price cap.
North Korea is ratcheting up tensions in the region.
It fired two suspected short range ballistic missiles toward waters where
their aircraft carrier USS Ronald Reagan had been deployed earlier this week.
Kim Jong un's regime launched its first rocket over Japan in five years.
North Korea criticized the U.S. for redeploying the Reagan carrier group
to waters east of the peninsula in northern Thailand.
A mass shooting that began in a day care center has left at least 36 people dead.
Most of the victims were children.

Authorities say a former police officer
used an automatic weapon. They say he later killed his wife child
and himself. Amazon plans to hire 150000 seasonal
workers. That's about the same as last year
despite predictions of a lackluster holiday shopping season.
Amazon says the employees can earn more than nineteen dollars an hour on
average. This comes after Wal-Mart slashed the
number of holiday workers it's hiring from one hundred and fifty thousand and
twenty twenty one to forty thousand this year.
Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than
twenty seven hundred journalists and analysts in more than 120 countries.
I'm Lisa Mateo. This is Bloomberg. I think he needs to do one more 75 basis
point tightening but he needs the markets to follow through if he tightens
and raises the policy rate and you see equities go off to the races like half
of the last two days. I think that's going to be
counterproductive to what he's trying to accomplish.
And that's the problem for the bull was right now.
Craig Staples that had a North American fixed income at D.W.
s great.

Someone just wrote in some question for
me is 60 40 the way you and Kane split the check.
If so who pays the 60 congregates. We know the answer to that yet.
The roto keeper of the truth in charge of this.
I pick up the four teeth out of my own money.
Tom picks up the 60 out of somebody else's.
Well red sticks IBEX is the one that makes us go to the other day from that
same cafe. I walked out without paying and they
chase me. So so tired.
Forgive me for doing that if you watch it.
I went back and paid to this McDonald's. That was McDonald's.
And chase me at McDonald's for not paying a negative 50.
We're twelve minutes away.

11 minutes away here from claims.
That's an important statistic on tomorrow's jobs report.
This is a joy CIBC World Markets Capital Markets I should say out of Toronto is a
wonderful wonderful shop. I think of Benjamin Tall and his great
work Bib and Ride joins us right now head of foreign exchange strategy there
on Canada. But so much more on the time we live in
which is strong dollar. But I want to talk about the x axis of
the belief that the dollar is going to weaken.
Everyone's been wrong wrong wrong.

Is your dollar study short term or to go
to the British medium term or long term. We're on the x axis.
Are you studying when the dollar breaks. Or probably look at the medium to long
term. If you want a specific gauge for how
long. Or at least a way to calibrate that I
would say that potentially in the early to mid part of next year is that you
when we start looking towards the next U.S.
growth story potentially lead to a softening of the dollar and sustained
basis. Well sovereign in dollar the same
sustained basis. But the question is what is ESM do along
the way. Are you partitioning now developed
economies from ESM or are they holistically the same against strong
dollar. No you have to partition the.
If you look at the way he demonstrated this year has been relatively robust
compared to the dollar at least compared to other teams in most of these.
The stronger dollar story has really been concentrated amongst the inferences
predominantly bird the traditional funders like the euro the yen and also
now against the sterling.

May we think that will migrate more
towards a stronger dollar. Russia's commodity currency is that
backdrop as we move forward and that's probably due to the imbalances that have
been built up in some of these commodity currency economies including here in
Canada. Of course Australia New Zealand as well.
So over the past couple of months and I really mean couple month and a half
perhaps we've seen a little bit more stability under the market.
We haven't seen the same kind of runaway dollar strengthening and we've seen a
little bit more stress at much lower levels versus a dollar for the euro
pound as its own story. How long do you expect to get this kind
of stability as people game out what we already know which is rate hikes on both
sides of the Atlantic.

Yeah so lots of talk about stability of
the dollar. We really need to delineate against what
we expected stability come from it. If we're talking about the broad dollar
gauge it would be X Y. Which of course is more tilted towards
it. A greater weight weighting of the euro.
Yeah. Maybe this stability lasts a little bit
longer because I do think that a lot of the these sources of concern earlier
particularly with respect to energy security.
You know what. They've been pushed a little bit further
out. I don't want to say the complete result
of course because a lot of it now depends on how serious the rand
situation will be. And for that we need to really look at
the weather reports or at least see what the weather looks like and how cold it
is in the eurozone for this winter. So for migrating away from this sort of
you know concern that the dollar is going to continue to appreciate and the
euro eventually the end of course the intervention story there you know that
doesn't mean that the dollar still can't appreciate against some of the other
currencies.

And you know I very much agree with some
of the other rhetoric that's been espoused by some of the other guests
that we're going to look at a higher for longer story not necessarily a scenario
where central banks are entertaining cuts next year.
If that's the case then we've got to look at where the situations are fragile
and where know the higher for longer story could potentially break things.
That to me this is somewhat concerning especially for Canada and Australia.
John when do we just start to get a meteorologist on.
Ask that didn't I.

Yeah exactly.
We should. I mean at what point is this going to
determine the trajectory for the euro. I mean let's say it's a cold winter
pippin. And what are we looking at in terms of
what the euro dilution should be. If it's a colder than expected winter
really miss. Yes.
Much more serious Brian natural gas supplies.
We're looking at potentially maybe Satya Nadella ISE they could maybe even though
sustain momentum below there. That's when you start worrying about
whether or not to have security risks or at least natural gas security is is
enough and given what we have now. I mean one of the key things that have
really driven there is really getting the euro lower this year.
The fact that the largest economy in Europe and of course Italy as well.
Both of that the reoriented area of their energy story away from Russia.
And again that's that's a structural change.
That's not something that you can really hope to address in one of the euro even
two years before.

Right.
Thank you sir. Of CIBC Capital Markets.
It's not a one winter event. How many people have to come on and tell
us that it's not a one winter event in fact given how we've got storage up in
Europe this winter. I think that explains how much harder
it's going to be some next winter to do the same thing again.
While the extension of any war and you see this in every single war is sort of
the American civil war John it was gonna be over in six months.
That didn't work out.

And as many others is.
Well and you get to the war in Ukraine right now.
There's a ghost is Ukraine. Do they make a dash down south towards
Crimea. Guess what they're talking about mud.
It's no different than any other war. It's about the weather.
It's about the calendar. What are you set for next spring to
restart that war that gets you to next year.
Have we confronted the reality of what could be happening in Europe beyond this
winter. And this goes to the point that you made
earlier about how we haven't invested enough in the ground in physical goods.
Right. And this is what you were talking about
where this is the sort of comeback of the real world.
How much can nations like Germany borrow and especially at these rates to do
fiscal investment in some of these structures to get the natural gas needed
that will not be supplied. Probably by the Nord Stream pipelines.
You said yes you may want to talk. Well yeah.
I'm not really focused today.

I'm sorry.
I can make a difference. I can sell.
I got a hole in. Right.
Can I. Can I give away your secret.
Yeah. When Tommy went to speak next and he
misses his cue he goes quiet because he knows the rule in radio is the next
person who speaks owns the silence. Right.
And it sounds like it's drama state or whatever.
But when I've gone away for a long time a copyright on that I'm quite quitting
today. Are you.
Yeah. Is that what this is.
One foot out the door. I'm quite quitting.
Okay. You know this is a new theme with the
kids.

The kids are quite quitting.
I'm quitting. I could tell.
I'm actually you know I spent a strange year so I'm actually going to go away
for a couple days. Nice.
Do some research. Good to go on for five days.
I'm going to research the euro. Ryan you know see the effect IBEX.
I explored the effects channel. Yes.
Yes. And I'm like I'm boring.
Can I make this clear. And I've been to Paris now twice coming
up this week. My hotel room in Paris is 80 percent
more than it was in March 8. ISE crazy right.
The Hotel de Mille rose even with the confession with the euros in conversion
to hotel demand. They said Mr.
Keener October is like July.

I'm not gonna last.
That is if you can guess what accent that was.
That was my guess where time is going on vacation from New York.
Jobless claims. This is DAX. A lot from New York City this morning.
Good morning. Futures lower by about four tenths of
one per percent off session lows. The economic times just around the
corner looking for jobless claims. The estimate is to Internet forecast.
The previous number one hundred and 93000 with the economy tied to Mike
NIKKEI ran the table with us.

Mike waiting for that number to drop.
Well it's two hundred two hundred nineteen thousand is the number.
It just drops. That is a change from the one hundred
and ninety three thousand. That was a racially reported last week.
We'll get the updated numbers in just a second.
For for the change. That means that we are seeing a slight
increase in jobless claims but not a whole lot at this point.
One million three hundred sixty one thousand continuing claims.
That's just marginally up from the week before as well.
So it looks like people are still getting jobs.
Now I was interviewing Mary Dailey yesterday.
We talked about this claims.

She says are the last thing she looks at
because at this point the JOLTS data are telling you there's still a lot of
openings. So people who lose their job can get
jobs. And claims are going to be really slow
to go up because companies at this point aren't laying off people.
They're just not filling new jobs. I'm going to sound like a Fed official
then when she looks at the totality of the data the totality of what.
The totality of the data does she see the heat coming out in this labor market
yet.

So far we're seeing that in the job
creation numbers. And tomorrow we're going to according to
Bloomberg consensus see a reasonable decline not a drop off tremendously.
And that will suggest that companies are starting to cut back a little bit on
their hiring. And that's what they want to see.
They don't want to see the unemployment rate go shooting up but they don't think
that's going to happen because at this point companies need workers.
You also asked her and it was a really good interview by the way.
Congratulations.

You asked her about what it would take
for her to cut rates and she really put cold water on this theory that there are
going to be rate cuts next year. This is coming from someone who wants to
see workers succeed. Who wants to see a fully employed
America. Did she explain some of the tensions
that she feels in the face of higher unemployment and potentially still
restrictive Fed funds rates. Well she told a story about going out to
a Wal-Mart in the San Francisco area dressed in sort of sweat shirt and jeans
not telling people that she's the San Francisco Fed chair and asking people
what are you most concerned about these days.
And she said everybody complained about inflation.
Nobody said there was a problem getting a job.
And so their concern is that workers are worse off.
Even if they're getting raises because they're not keeping up with inflation
then they would be by a small number of people losing their jobs in totality if
the unemployment rate goes up a little bit.
Now is the unemployment rate going to go up a little bit.
Or is it going to go skyrocketing.

That's going to be the question.
In the past it's often skyrocketed. You get a much larger increase in
unemployment when you get a recession. But so far their argument is holding
water. So what President Bostick said even if
that happens we shouldn't prematurely step away.
Well they look back at 1970 as. It was actually in the 1980s when Paul
Volcker went back to cutting rates a little bit because unemployment was
coming down and then it started to go back up again.
Inflation started to go back up again and they had to start raising rates
again. And they don't want to repeat that
mistake.

You get the feeling some these guys are
really weighed down by the weight of history don't you.
ISE. Every morning I read literally every we
Mary Delia thinks she's just doing a great job.
Most of these people are making it up as they go and they don't admit it.
They think they're on a theory. Where's the theoretical structure for
all that we're seeing. I think they're looking back to history
the mistakes that were made some and they're worried about repeating them.
No one wants to be that name in the history book when it gets here.
That's fair. That includes the Bank of Japan is well
Michael McKee. Tomorrow is a press conference for Jobs
Day.

There should be.
Well there is. Because Marty Walsh will talk to.
That's the news conference. There you go.
I can only hold a news. That's it.
That's the news conference. Futures race in the morning's losses.
Tell me now. Positive on the Dow on the S&P.
There we go. And it's been a relatively resilient
market after those. If that's all it takes we'll get a few
more layoffs next week in the bear market is over pretty much.
Are we done yet. Dana Robertson let's go there right now.
Michael McKee thank you so much. Greatly appreciate that this morning.
Leila Richardson with us chief economist at ADP.
Neal I want to cut to the chase and just simply say in the new emphasis on
tomorrow's jobs report what do you and ADP focused on.
Well good morning.

I can't think of a better way to start
that conversation with wages. It's all about wages.
It's about how wages are driving or not driving inflation.
And that's what we're focused on. It has to be a micro economists in a
macro world. Because when you are you look at things
as a collective decision makings from small to large firms.
And what we're seeing is that timing has been a very important factor in the
entire diamond hammocks of the labor market.
We are now starting to see more people at least as according to the August
report entered the jobs market and we saw a deceleration in wage gains growth
for job changers.

And I think that deceleration is
notable. We saw it across all firms sizes because
it means that switching jobs is not paying off quite as much as in the
summer. And that might reduce some of the
pressure in terms of what's occurred. GDP is wonderful.
This what's the character of the job market differential out there right now.
Is it airline pilots. Is it bartenders.
Who is the jobs sector that matters to Neil Richardson right now.
Well it all matters Tom. But I think what where we are different
points of rebounding. Right.
So the service sector was hardest hit. And so when you look at leisure and
hospitality that's important. When you talk about inflation though
what's driving inflation is low pay low wage low skill jobs.
And are we still going to study that bartender or that waitress.
Bartenders actually can make pretty good money.
Let's do lowers.

Go.
Are we going to see low skilled low pay workers still see gains and acceleration
in pay. That didn't happen during the 10 years
of expansion leading up to the pandemic. Well we see it after we get over this
hump of getting really back to normal when it comes to jobs and getting
inflation down. That's the concern that low pay workers
won't see the pay gains in the future that they saw over the last year and a
half or so. Neela given that backdrop I'd love you
to comment on what Michael McKee is talking about that there is this
expectation that the unemployment rate will rise but just marginally.
Right. It might peak out at four and a half
percent. Still well below some of the peaks that
we've seen in recent downturns.

How quickly could that move away from
the Fed. Based on what you're seeing in the micro
data. Well let's start with the JOLTS because
I think that's important. That was a big number this week to see a
million fewer job postings. We had ADP actually think that postings
peaked this spring. So we weren't surprised to see that
decline. So that's the first indicator.
The second this timing issue is really prevalent.
If more people are coming back to the labor market because they want and need
to work and yet firms are slowing hiring that's what's going to have going to
cause the unemployment rate to increase.

That denominator is really important.
It's not the number of jobs created every month so much.
It's the number of people entering the labor market right at a time when firms
may be slowing hiring. So I'm really focused on the denominator
of the unemployment rate. We're looking at this hoping that we
still managed to get some sort of soft tissue landing.
But even Fed officials are really pulling back from that kind of language
and left from what you're looking at. What kind of downturn are we looking at
based on some of the rate increases that are expected and based on the pace of
weakening the pace of loosening of this labor market.
I think you're going to see different angles.
Maybe you could call it a downturn by a variety of cuts as opposed to one big
stab.

Sorry to be graphic in the morning but
you're seeing interest rate sensitive sectors starting to feel some weakness
in construction and manufacturing. If we see inflation really hit
pocketbooks in consumer spending you might see consumer services take a bit
of a head as well. And so all those gains in leisure and
hospitality that we've been touting might slow.
Professional business services are vulnerable for structural reasons as
fewer people go back into the office. That might change the complexion of like
office support jobs. So the economy structurally is also
changing. At the same time that we might see some
downturn dynamics driven by monetary policy and tracing that all out is very
difficult to do.

Nina I always loved listening to you.
Thanks for coming on the show with us. Neela Richardson of ADP.
I can tell you this market now unchanged on the S&P 500 erasing this morning's
losses. I can also tell you the yields were
higher. Now they're fractionally lower on a 10
year. And on the front end is one on a two
year. So your two year now just sub 415 on a
two year yield on a 10 year at an around 375.
As claims come in worse than expected. Now use that word worse loosely Lisa
because for the Federal Reserve maybe this is exactly what they want to see.
Right. And is it enough then to actually cause
them to pause. I mean the fact that markets are trading
as much as they are shows this sort of confusion and perhaps erratic or febrile
as you guys were talking about markets that we had seen because it's hard to
say that this is really going to cause the Fed to readjust.
However that clearly still is where the hope is in the markets that they will
actually present the circuit breaker to what we've seen in terms of a downturn.
The thermometer here John is a Bloomberg Financial Conditions Index.
This is really good math.

The IMF uses it all the time.
The fact is this has gone against Chairman Powell.
We've gone in a matter of days from a negative restrictive one point four six
standard deviations. We breached through negative 1 in
advance this morning to a less restrictive negative point 9 4.
That's all you got to look at. So they want to keep it restrictive.
I agree with you.

But if we're worried about further
downside in markets this is the kind of data set that alleviate some of those
worries because you have some economic data coming in that changes the
probability that the Fed has to go further and I say changes the
probability course that can change again tomorrow morning.
What you're learning about the way the market is responding to the incoming
information though and this will frustrate you all I know and Lisa's
bracing for is that at the moment bad news is there you go to the market
because hopefully if the data cooperates they don't have to be as punitive with
respect to rate hikes.

And the data was not cooperative in
September but now it's starting to get more so.
And this is why the bullish argument is change this one in the last couple of
weeks. They're not talking about lots of
upside. Now we're talking about limited downside
because they want to see the data come out this way all the bullish discussion.
Who are you talking about. I'm not talking about anywhere.
Yeah let's not make it personal. All right.
I'm never personally saw it. Coming up Laurie CAC seen it.
If RTS for NYSE Morgan Stanley Francisco Blanch at Bank of America and the guys
over the investment bank J.P. Morgan Stanley coming up.
I would love the conversation about the joy.
And I know you know as a person not just it's not personal.
Just love to catch up with a team theoretically from New York.
This is blamed for so many. Keeping you up to date with news from
around the world with the first word.

I'm Lisa Matteo.
President Biden's fist bump with Saudi Arabia's Crown Prince Mohammed bin
Salman less than three months ago didn't pay off.
Instead the Saudis snubbed the president and aided Vladimir Putin with that OPEC
plus oil production cut. President Biden had hoped his visit to
Saudi Arabia would encourage the Saudis to pump more oil.
Shares of Shell dropped after the energy giant pointed to a weaker third quarter
performance. That's likely to end a run of record
earnings.

Shell's refining and chemicals business
showed signs of a slowdown and that could be a worrying sign for Europe
where major industries are buckling under the pressure of soaring gas
natural gas prices. Over in Sweden the government blames
detonations for the damage to the Nord Stream pipeline delivering natural gas
from Russia. The Swedish security service says the
investigation has increased the suspicions of sabotage.
Danish and German officials are also investigating.
For the fourth time this year Peloton is laying off a significant number of
employees. CEO Barry McCarthy told staff today it's
part of the effort to save the struggling fitness company.
Roughly 500 peloton workers are being let go.
That's roughly 12 percent of the workforce.
AT&T CEO claims his company's satellite phone service has an 18 month lead over
T-Mobile and Elon Musk in an interview.

John thank.
Said that Space X is not going to have its satellite up for testing until the
middle of next year. AT&T has been working with HST Space
Mobile as its satellite partner. The companies still need further
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Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than
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I'm Lisa Matteo.

This is Bloomberg. We're gonna have to accept some pain in
the domestic economy to bring inflation down.
So yeah it's an odd situation but it's a Fed right now that's saying we need the
economy to slow to help us on the inflation side.
Michael gave in Bank of America really interesting there yesterday.
And Lisa Tom Keene Lisa Abramowicz fearless preparing for the next glorious
hour.

Francisco Blanch with John on OPEC plus.
And Lisa one of the tealeaves here VIX 30.
Twenty nine in the twenty eight point ninety three.
A more constructive tape than before claims.
And how much is this again. And I really I cringe too.
But bad news is good news. The idea that perhaps it gives a bit of
a hero using it more. Really.
You thought that I would not give you that.
ISE. There it is.
Our star starred in the rest of it as well.
Jobs Day to Morrow will be fascinating and important as we digress to earlier
where to go to what matters for those on radio and TV and particularly across
America. But with a global view on housing on the
Brink is a brilliant research essay from Oxford Economics.
And there Adam Slater.

Adam joins us this morning.
Adam congratulations on a really thorough look at housing.
If you go deeper on housing in America what do you see.
Well thanks very much. If we look at the states compared to a
variety of other economies which is what we did in the in the piece you mentioned
we find that the US is towards the top of the risk scale but not at the very
top. There are some factors for the US that
make us a little bit concerned.

The rapid run up in recent prices.
The scale of rate hikes and increasing mortgage rates.
Valuations. Perhaps the canary in the coal mine if
you like this sudden turnaround in actual price trends in the last couple
of months. Well then we'll see.
Sorry. No no.
I want you to to illuminate each CEO's more concern in places like Canada and
New Zealand and Australia that there actually is a risk there for a more
protracted downturn.

What's the distinction between declines
in prices and a housing crisis. Yeah that's a good question.
The scale of. Declines is obviously important.
What we think at the moment is that markets are poised between something
like a modest sort of decline maybe five or seven per cent
and something much steeper 15 to 20 per cent.
Now how much you need to constitute a crash.
Depends what you mean by crash. Exactly.
Normally when we think of a crash we think of not just the scale of the price
decline. We think about things like mortgage
delinquencies and maybe a feedback into financial instability through that
channel.

Now when.
We think it's quite plausible that some of these markets are going to see
ultimately principles of 15 20 percent even more.
We have a bigger forecast downturn in Canada for example.
Yeah but perhaps we're less concerned about financial instability than we
would have been 15 years ago. What is the character here.
And I want to go back to America.

Here's where Morning in America a A.M..
What is the character of America with the housing worries in a relatively
conservative fixed rate fixed mortgage market versus a floating rate regime as
you see in the United Kingdom. Well UK isn't really a floating rate
regime anymore. It's partly a floating rate regime and
more like a short term fix regime really.
But you're right that the US has got a very different structure in mortgages to
most of the economists we looked at with a longer term fix.
But of course that didn't preserve the US from having quite a nasty housing
crash after the global financial crisis. So it's not a panacea to have long term
fixed mortgages because you can get problems in other areas.
So for example if people go into negative equity in
parts of the states we've seen in the past durations where people will hand
back their keys and you get foreclosure sales which which which hit prices
in various parts of the country too.

That's just one channel by which this
can happen. So it's one of the christening factors
having long fixed rate mortgages but it isn't on its own enough to prevent a
downturn. Adam how much is what we're seeing with
mortgage rates could accelerate the trend of the emptying of big cities that
have gotten more expensive although they haven't necessarily seen the price gains
that other nine cities have vs. perhaps making them more relatively
affordable and seeing more stability. Yes well obviously cities tend to have
higher property values and in many many cases which means that you need bigger
mortgages therefore other things being equal higher mortgage rates will put you
off from city property to some extent. How that balances with affordability.
It depends. You have to model that quite carefully.
Prices probably have to come down quite a long way.
For it to be a net net win for affordability I suspect but you'd have
to model that carefully to give a definitive answer.
Adam thank you for the note.

Greatly appreciate it.
Slater of Oxford Economics here with a global view on housing with a mixed
story. Country to country.
We've got to go listen to what you talked about in the brief this morning
which is there's no one not talking at the Fed today.
We begin with Loretta M. Now beginning at the Cleveland Fed we
don't have headlines on that yet. The mathematician in Cleveland is gonna
give us a mathematical view I'm sure of what they need to do which is to move
forward. Yeah and we haven't heard which I find
really interesting is no talk about shifting that target of 2 percent.
That has remained very sticky in the conversation.
They want to see us get back down to that.
There is no discussion of the Adam Posen 3 percent.
There is only this idea that you want to stay high in terms of where the Fed
funds rates remains for longer. Even as you see a deterioration in the
economy you know what's interesting there is is not even to point to two
point four.

There's just this religion and
institutional responsibility to say 2 percent.
And I really think I can add whatever that means.
So when we were talking about Mayor Mary Daley and the conversation that Michael
McKee had had with her he talked a lot about how her sort of walking about the
streets really colored her view on how to move forward and how punitive it is
to see inflation where it is. And that is such a massive concern and
charge on people's incomes in a way that even puts that as part of their broader
mandate. You know beyond just simply targeting a
number you mentioned this earlier. And what you do folks as you look at the
chart we don't have a chart right now and radio doesn't look that good
anyways. And there's the integration or the area
above the line of the wage boom of the pandemic.
And now there's a new Instagram below the line of real wages not being good.
And it's getting old.

It's getting you know the phrase it's a
fancy phrase long in the tooth but it's getting old here.
This negative wage growth after adjusting for inflation when you start
seeing higher income households shopping more at Wal-Mart shopping.
Right. I believe that we we're hurt in the
numbers. We heard it from them that they're
seeing more people start to shift to areas where they can get better deals.
When you go to Whole Foods and you get the paycheck at the end and you get the
feeling you get the paycheck. I can't give it over to the check for
the grocery store. But how much do you end up shifting
gears just to save money. Because it is a shocking difference.
It is an across the board. And I can do I've done research your
whole paycheck. And the answer is yes it is.
It's in on a given run round. There was six seven eight bags is 20
bucks more than it used to be.

And so people are starting to downshift.
That's reason why people see this negative data and they think maybe the
Fed moves away a little. Will there be negative data tomorrow for
jobs. We'll see that at 830 tomorrow.
Yes. We'll go beneath the headline data and
look at that on radio and on television. Futures improved negative 8 right now.
Resilient. Take the VIX twenty eight point nine
five. Stay with us.
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