Live From London: Bloomberg Surveillance 09/12/2022

Central banks have doubled down on what
they've said. We've seen such a surge in inflation
that the European Central Bank like the US Fed has decided it needs to be seen
as fighting inflation. The Fed follows monetary policy based on
what's best for the United States and the consequences the rest of the world
or the consequences for the rest of the world.
The elephant in the room is global growth and that's the elephant in the
room of the euro Dani Burger.

It's hard to say that we're done with
the high prices and how that's going to affect people.
This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa
Abramowicz. Live from London for our audience
worldwide. Good morning.
This is Bloomberg Surveillance alongside Tom Keene and Lisa Abramowicz Som
Jonathan Ferro a momentous week in the history of the United Kingdom a seamless
transition from Queen Su Keenan Tom Keene from mother to son.
It is that John but far more is King Charles at Westminster Hall.
In the last hour an example of selfless duty as we talked about here he has to
make the ship shift from Prince Charles to King Charles a third.
Some of that happening over the week as well.
It's early this morning.

Lisa I cannot help but feel the weight
of history and I think we all feel that in this very moment.
So this week especially because this queen really saw a massive transition
for the United Kingdom for the world on several scales.
And King Charles the second is entering a very new regime both on an economic as
well as a social level. That is a very different view toward the
monitor. One question I have to you the stunning
television footage on Saturday.

I was honored to witness at Mansion
House and the royal exchange the announcement of the king to see it on
TV. The obsession on TV must have been a
shock for the nation. A series of proclamations across the
country and some. I think that one thing many people have
said repeatedly over the last week is that we all knew this moment would
eventually come and it comes and you feel utterly unprepared for the emotion
that comes with it. And I think that emotion resonates with
a lot of people across the United Kingdom today and this morning again.
It will take through the rest of this week is an American in the United
Kingdom I thought troops roughly 0 4. Bloomberg opinion was stunning.
And she said you're never prepared. And that's what the weekend felt.
We'll catch up with a Bloomberg team a little bit later this afternoon in
London this morning for you over the United States.
Wait for the price action as well. A decent couple of days back.
Best week of gains on the S&P 500 gone all the way back to the end of July.
Up about three point sixty five percent on the S&P last week.
Futures right now positive 20 points on the S&P 500 up a half of 1 percent.
Yields coming in Lisa about a basis point to 329 45 on a 10 year 10 year.
Yields have been climbing for six straight weeks.
It's sort of stunning especially considering the fact that so many people
were saying yields were has already seen their highs at least in the long end.
And Deutsche Bank put out a survey this morning saying that more people thought
that yields could go on 10 year treasuries to 5 percent than 1 percent.
We haven't heard that.

So that basically was the latest in this case today.
We are tracking the movement of the queen's confidence travelling St Giles
Cathedral in Edinburgh where she will be in repose for everyone to come and more
and really deal with the emotion not only of her passing as her symbol but
also the rain that really simplified and amplified an entire era for the United
Kingdom many areas as well as the rest of the world.
Then you have King Charles the second flying to Scotland.
That's where he is on his way. And he is going to be meeting there with
Nicola Sturgeon first minister of Scotland as well as being there with the
coffin at 8:00 a.m. Eastern Time.
ECB is about survival is going to be welcome giving welcoming remarks the
seventh annual ECB research conference in Frankfurt.
What are the biggest moves of the morning as the euro strengthening the
most in six months versus the dollar.

As people take a look at some hawkish
rhetoric over the weekend by a number of ECB officials.
And talk about how to counter some of the weakness that really has been driven
by higher electricity prices. And then at 12:00 p.m.
Eastern we're watching the food backdrop.
The World Agricultural Supply Demand September report is due out.
John this comes as I don't know if you've experienced this but I've been
going to the grocery stores looking for fruits and vegetables and there's less
and less available. And I know that this is just anecdotal
but if you look at the actual data it is also bearing out whether it's the United
Kingdom or whether it's the U.S. because of weather because of lack of
planting and a whole host of other issues that are really creating
submission as someone funds it in dollars this week.
Are you feeling wealthier at the United Kingdom.
About wants 50 60 on sterling you get at the truth.
I would love to know the truth.

100 percent. Yeah you could actually feel the
difference because you can kind of transfer it into almost one to one
rather than you know one and one who is fit.
And the difference is T.K.. Had a good weekend some.
You know it was in June weekend if I can mention that.
We've got so much to do and go to Lizzie BURDEN.
But I attended the Requiem Mass for the queen at the Westminster Cathedral which
the symbolism of this was really extraordinary.
The Duchess of Kent there who converted to Catholic faith in 1994 but that was
one of the moments of the weekend at least when I saw some walking.
So did the way down to how many parties to you go.
I gave her a history of the city of London.
This is the RTS outsourced temple dance at Westminster.
Then we went. Did you get out to West Ham.
Did you go the other way. Made it to Mayfair and it was

It was an incredible walk through
history. I made it down.
I made it to the garden room in Mayfair. IBEX.
Let's start a team coverage. Plain facts.
Lizzie Borden outside Buckingham Palace. Maria Tadeo is in Brussels.
Lizzie Alisa went through briefly the day ahead for this country.
Can you walk us through again in detail what we can expect today and through the
rest of this week. Well John I have to say I arrived here
before the sun came up but it was quiet. It was somber.
People were paying their respects. But now the mood is really lifting here
at Buckingham Palace. They've got the Beefeaters the bagpipes
the horses.

They're really just trying to lift our
spirits with the thinking that Brits do best.
Pomp and circumstance is going to continue later today.
King Charles is going to go up to Edinburgh for a ceremony of reflection.
And then tomorrow the coffin will be brought back here to Buckingham Palace.
And then until the funeral which is confirmed for September 19th the queen
will lie in state at Westminster Hall. And the NIKKEI newspapers today are
different estimates. But some reporting that up to three
quarters of a million people are expected to file past and pay their
respects. Could be hours long queues.
So think Princess Diana think Queen Mother and times it by ten because this
really is a huge moment Lizzie for the American audience for the
international audience explain the symbolism of this day of Scotland and
the linkage to England and the rest of Great Britain.
Well it's a real difficult moment for Charles to become king because of course
the calls for independence have been growing but it's not just the union that
he's got to hold together.

It's also the Commonwealth which really
is a foot post empire. The family of nations.
And so there are also calls for Northern Ireland to break away.
So really this is why you're hearing in Charles's accession speech over the
weekend in his speech to parliament today his commitment to rule with
loyalty and serve to the four nations of the UK on this family of nations that
make up the Commonwealth because of course you're having increasing
Republican sentiment in different corners of the globe.
And we do see the United Kingdom very much facing regime change with respect
to the question about the monarchy as well as the new political regime as well
as the new energy regime in Riyadh today.
I wanted to touch base with you about what happened over the weekend on the
energy front with European leaders as they tried to deal with these price caps
that are being put out there in order to counter Russian Russia profiting from

Has anyone talked about what it would
mean if Russia lost the war with Ukraine if they did retreat how that would
affect the oil and the energy and the gas situation.
To that question is no just purely because everyone here in Brussels but
across the European Union were just stunned on Saturday when the Ukrainian
army made those gains in heart Kiev they're able now to push the Russian
army back. This was something unexpected as nothing
short of a logistics catastrophe for Russia.
And I think today really the question here is not so much about the energy.
This is on everyone's minds.

And Wednesday it would be a very
important day when our sort of underlying speaks before members of the
European Parliament. But the real question are for many
Europeans as what happens next. Can Ukraine actually win the war.
Has the assessment on this country been wrong from day one.
But also what does Vladimir Putin do next.
This is an embarrassment for the Russian army.
And then the obvious question now is will he go now.
From a special operation to full war in Ukraine.
And what does that mean. Does it mean conscription.
And that could unleash a lot of forces that we haven't seen until now.
Maria does any of this change the fact that we still have a policy response to
this war that will endure regardless of the outcome of it.
It is very unlikely even if this war ended tomorrow that the Europeans would
go back to consuming Russian gas and quite the same way even if it was

Maria the question I want to ask and I
think is perhaps been collected by a lot of us but is being acknowledged much
more so by the Germans is the persistence of this.
The duration of it the fact that it might not be one winter it could well be
two perhaps even more. Is that dominating the conversation a
little bit more across Europe. Yeah and Jonathan we heard it too from a
number of other European leaders the Belgian prime minister he said in my
view this is going to be five very difficult years for the European Union.
You're talking a complete change of systems.
But I do want to say because we have new data that came out from the commission
today at the start of the war the European Union was importing about 40
percent of gas from the Russian Federation.
That number has now gone down to 9 percent.
It is a significant change.

It is costing a lot of money sweat and
tears for the Europeans. But what I hear every time behind the
scenes on the record is that the relationship the energy relationship
between Russia and the European Union is over.
This is the end of it until Latimer Putin decides to change course or
perhaps in some way the end of the Russian Federation as we know it.
But for the time being every European official tells me there is no business
as usual with Russia. This is done.
Maria thank you. We appreciate your time alongside Lizzie
Burton there from Buckingham Palace and from Brussels as well.
Germany according to Chancellor Schulz quote has prepared for Russia to largely
cut off gas supplies because of the war against Ukraine.
The worst case outcome the start of this war least on the energy front has become
the base case for a lot of people.

And now I think more and more
politicians across the Europe across the European continent speaking more openly
about the fact that this could go on. Why be on this winter.
So if the base case has become the worst case or vice versa the worst case become
the base case why are natural gas prices in the United Kingdom in the European
Union falling. This is really an interesting aspect.
Natural gas has fallen pretty steadily over the past month.
How much are people responding to the worst case.
How much are people responding perhaps not seeing the whites of the winter as
ISE. You know we should start interviewing a
meteorologist. I think that probably that person would
be a great market. Wouldn't a meteorologist be the best I
could rule out. The best forecast euro dollar pocket
than anyone I know are not. But in the United Kingdom being a
meteorologist is like heavy lifting versus say.
Have you noticed in the UK there's a phrase that they use here that that's
not used anywhere else in the world in a weather report.
Sunny spouse.

Oh sorry.
Sorry about the weather. That will be sunny.
Spell out the spouse of some. And for me it means that there's more to
that somber moment. Boy did King Charles get the weather he
was praying for. Absolutely extraordinary.
Coming up Eric Freedman U.S. Bank Asset Management chief investment
officer live from London. This is Bloomberg.
Keeping you up to date with news from around the world with the first word.
I'm Lisa Mateo. King Charles the third addressed
parliament for the first time today. He told lawmakers he feels quote the
weight of history which surrounds us following the death of his mother Queen

The second trials is due to travel from
parliament to Edinburgh and accompany the queen's coffin to St.
Gale's cathedral for service of remembrance.
Meanwhile the U.K. continues its period of national
mourning following the monarch's death. The U.K.
economy recovered more slowly than expected from a slump triggered by an
extra public holiday in June. The zero point two percent expansion it
followed a point six percent decline in June when gross domestic product was
curtailed by an extra day off to mark Queen Elizabeth's jubilee.
Economists had expected growth of point 3 percent.
Tens of thousands of U.S. railroad workers could be on strike by
the end of this week. Negotiators met through the weekend
trying to reach a deal with two unions covering some 57000 engineers and

They are demanding better working
conditions. Work stoppages that clog major arteries
of the nation's food and energy supplies could pose a potential risk to President
Biden and other Democrats. 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. I support continued increases in the
FOMC as policy rate and based on what I know as of today I support a significant
increase at our next meeting on September 20th and 21st to get the
policy rate to a setting that is clearly restricting demand.
So what are that.

They said it was f government speaking
at the Institute for Advanced Studies. Not alone.
His old colleague and good friend President pull out saying the same
thing. I'm leaning most strongly towards
seventy five at this point. Those comments going into the weekend.
Live from London this morning. Good morning.
Is the price action for you a lift in this equity market.
The first thing I looked at this morning on the Bloomberg terminal a snapshot of
foreign exchange the dollar getting absolutely hammered euro dollar
reclaiming a one to one handle one to one steady five.
Europe is not alone. It's basically the whole G10.
We're positive on that currency Pat. Some nine tenths of one percent.
So that's a snap back for you.

That's a little bounce back is the right
phrase. Snapback is the right phrase.
We have you with us in London today. We're thrilled to be here through the
week. We are going to continue to look at
economics finance and investment very quickly now.
King Charles is he travels to Enbrel is at his airplane and we'll continue to
cover his travels. And his sister and brothers travels up
to Scotland for a walk of the Royal Mail an emotional walk of the Royal Mile the
queen consort seen there on Bloomberg Radio.
We say good morning and perfect weather for the king in his Great Britain right
now on what we do cover Eric Freedman with an exceptionally important note
with U.S. bank asset management.
He is of course our chief investment officer.
Eric we sidle up to I believe a survey of 8 percent headline inflation six
point one percent core inflation.

In your research you know you say the
tip point the pivot in the fourth quarter ahead is the 10 year yield at
three point five percent. Which way will the 10 year yield cut.
And what does it mean for equity investors.
Well some good morning and we think that three and a half is a level that really
has to hold for the equity market to do better.
And the reason for that is because the Fed and I'm reading you're obviously
more from the Fed next week and we'll hear more about CPI the US tomorrow.
But the Fed has really shifted its viewpoint from inflation can't just be
better than expected. Inflation has to be on an absolute basis
lower. And we think that share power and others
have had a chance to reset expectations away from 2 percent.
But they really held firm to say look 2 percent is where CPI and PVI has to kind
of come out on a more sustained basis.

Some time we think that there's a
trapdoor above three and a half percent that would challenge both the bond
market and the equity markets. So we're still a little cautious.
We'd be a little bit let's call it on the sideline as we wait for that 3 1/2
percent retest. But again short term proxies for us.
We will reset at 2 p.m. on September 21st an important Fed
meeting and then the focus will be on Q3 earnings reported in this fourth
quarter. You're in an interesting position on
this without being part of a securities research operation at a major Wall
Street bank. What do you see for earnings as you
distill all of Wall Street's research. It's that we're starting to see a
moderation lower both in this year even though we only have a couple of months
left in the period here to next year's earnings estimates are starting to
really have a sign curve effect lower.

And it's not going to massive revision
but we still think that there is downside pressure real.
The reason for that and at least is a good job.
A document listing tweets from the week. And if you look at semi's in particular
you look at what's happening with both supply chains as well as with enterprise
spending is showing some signs of moderation.
Of course the big driver of this is what's going to happen with consumers.
We're seeing consumers really reach from a credit perspective.
They've been upping demand for credit. We've seen a lot more activity in credit
card demand as well. So we think that both the consumer as
well as businesses are starting to at the margin rollover.
So we do think there's some downward pressure.
We do think that multiple people willing to pay will probably come down a bit as

So Eric just to sort of build out what
people are concerned about with the semiconductor industry we've gotten one
semiconductor manufacturer after another come out with some pretty stark warnings
about the demand picture the deterioration.
Citigroup analysts came out a couple of weeks ago saying we continue to believe
we are entering the worst semiconductor downturn in a decade.
Given the inventory build given the potential recession why has that not
been priced into some of the biggest producers of goods that used
semiconductors. If that lack of demand comes from their
products. I think two things lead to number one is
because of the supply chain.

There is a there is I think just the
guessing game happening right now not just across semi's but across retail as
well. In terms of just what you know what that
dislodging timetable may look like. And the second thing is people still I
think have hope that enterprise spending will hang in there.
Again there's been so much focused right now on the labor force but we really
need to think about where we're tacking back to as a global economy.
We're tacking back to an economy where CFO is are still gonna spend marginally
we think on information technology.

Productivity is very important.
They're not going to get that from workers per say.
So really emphasizing what they're going to spend time on we think is going to be
a tech spending specifically know broader technology infrastructure that
is manifested in way. So I think there's hope still that there
is going to be some follow through next year with with respect to enterprise
spending. That's really the reason there's been
some degree of hold up in prices right here.
Eric thank you for being with us. Eric Freedman U.S.
Bank Asset Management Kit Jake's publishing moments ago picking up on
what many of you have picked up on the progress being made by Ukraine in the
war against Russia and how the affects market in the gas markets are picking up
on it as well. The bounce in the euro and the fall away
and gas prices Lisa which you mentioned a little bit earlier this morning.
Well is it fair to attribute it though to the progress that Ukraine is making
versus Russia.

I just wonder because we've seen the
decline in natural gas prices pretty steadily over the past few weeks.
So there is a question of whether this is all the bad news being priced in
versus optimism about some sort of conclusion.
Nevertheless it is interesting to raise the question what is the consequence if
there is some sort of Russia for withdrawal.
I give The Washington Post major credit a stunning article in the last 12 hours
paragraph by paragraph Jonathan out of World War 2 just vignette after vignette
village to village in the FTSE with their interview of the defense minister
of Ukraine making clear. There is a point John where you take too
much territory where you've almost gone too far.
Yep. And there there this morning in London.
This was the line from Kit Jakes of Self.
Jan the effects market has cramped hold of the news of Ukrainian progress in its
war with Russia with gusto that crossed the effects mark at least.
I think you're right to question the durability of this move.
One thing that's frustrated me over the last couple of months is the way that we
say the war the war.

It's the response to the war that has
driven gas prices to where they are. And it's not clear to me that even if we
resolve some of these issues on the ground militarily whether we'll actually
address and readjust some of the policies that we've actually implemented
in response to it. That's the right response because what
we've seen is Germany basically saying we're not going to go back to Russian
natural gas. You think they're going to say let's
restart the Nord Stream line and let's rebuild Nord Stream too and let's go.
No way. You're a dollar right now.
One of 138 positive about one full percentage point.
Coming up Geo Malik the chief economist at AXA Investment Managers Life in
London with Tom Keene Lisa Abramowicz some Jonathan Ferro.
This is Bloomberg Surveillance. Live from London this morning.
Good morning to all of which Tom Keene and Lisa Abramowicz Jonathan Ferro this
is Bloomberg Surveillance.

If you're just waking up it's a bounce
back in its equity market and that bounce continues after delivering the
biggest week of gains on the S&P 500. Come back to late July.
We add to them on equity futures by about a half of 1 percent on the S&P on
the Nasdaq and the Russell 2000. It's wow look at the bond market closed
at year today. Highs multi-year highs on a two year
yield on Friday. Yields this morning come back a couple
of basis points but you'll notice three fifty four on its two year and you'll
also notice 330 on tenants. And as I said a little bit earlier this
morning that is six straight weeks of 10 year yields climbing after what I did
every weekend under the sun came on this program some big exception of a couple
of people and said that maybe we've already seen the highs for the year.
Well maybe I'll challenge them again in a few weeks.
I got very little value from that. What I want to see is the data John and
I know we've been talking about it across Bloomberg Radio and TV.
I believe there is an inflation report this small tomorrow which is the most
important energy I should say I take.

And I think CPI Tuesday is an important benchmark here on the way to the 21st.
Could we get a snapshot of the affects market as well.
Just to check in on your dollar because the real bass this morning is in real
weakness in the U.S. dollar say that captured by the euro.
Euro dollar Shanghai one to 1 handle. It's been a while since we can talk
about it. One one had a one to one thirty three on
your right dollar positive. Nine tenths of one percent.
So some real dollar wait to start that euro strength.

Getting a little bit better for Europe
relatively speaking. Caught up in sterling from the loose
trust 114 out to a stronger pound. Sterling 116.
Sixty seven. We'll continue to monitor the travels of
King Charles the third from London by Jet to Edinburgh.
An emotional day with his two brothers and sister and the walk on the Royal
Mile. Schumer right now joins us for an
important briefing. Why is this important.
He is one of the great students of continental economics.
It matters for America right now where the trading relationships that we have.
What is the distinctive uncertainty you have in the fourth quarter.
You are covering on a global basis but you are covering for Europe a continent
in war. What is the distinctive uncertainty you
face in the fourth quarter. Well know Q3 we still had some support
from the fact that we reopened our economy a bit later than the US.
So for instance we had really nice spending on tourism recreational
activities and so and so forth that goes away in Q4.
And we have this major uncertainty on the price of gas beyond the price of

The availability of gas.
So at this juncture we're still waiting for the details of the EU policy on the
possibility of gas rationing and how electricity gas can be can be reformed.
And we need to know whether or not there will need to be some actual rationing of
gas of energy in general this winter because dealing with this could have a
drastic impact on GDP if you forced to stop production in a writer of energy
spending companies. You will have a direct impact on GDP.
The backdrop here is well over the weekend is electoral tumult in Canada.
Certainly the election in Sweden and a coming election of some form in Italy as
well. Give us the political backdrop is it
folds into 2023 and a Europe in recession.
Well Italy is important obviously because
all the polls are saying dance the Frattini d'Italia is probably going
to win in coalition with with Liga and Forte Italia.
And there are questions obviously as to their approach to the commitments of
Italy towards towards Europe.

To be fair Giorgio Moroder is the leader
of France Italia as mellowed the law's father.
And the European rhetorics to the market is probably ready to give some some
leeway to a new government in Italy in September.
But more generally if you look beyond the elections per say what we've had so
far is a willingness by governments across Europe to accommodate the shock
from a rising energy prices with rising interest rates.
It's going to be increasingly problematic for these governments to
maintain this kind of fiscal policy. And obviously this could lead to some
political trouble down the road. So we are in sort of a tipping point for
now. Governments in general have been able to
mitigate a lot of the role impact of the rise in gas prices that may become more
complicated as we get into 2013 to 2023.

I want to double down on this a little bit because we are here in London as
this sort of sea change happens on multiple prongs whether it's the loss of
the queen whose reign for 70 years or whether it's the loss of negative yields
which had been the base case for for more than a decade or whether it's this
energy crisis. And the point that you just made is
incredibly important that governments have not realised that the more the ECB
hikes rates the more unable they will be to plug the pain for a lot of the

What are you looking at in terms of
translating into GDP growth in the euro region as a response to exactly that
dynamic that something has to give here. Yes.
I mean basically what's happening is starts.
We are mitigating the current shock. And then you can see that everywhere in
Europe including now in the UK which was hesitant actually as to whether there
would mitigate the shock. They are they are going to cap energy

So the depth of the recession which is
looming right now is probably going to end up shallower than the one we could
have feared just a few months ago. But at the same time what we're doing is
dance. We are obviously increasing public
deficits increasing public debt. So at some point and we don't know
exactly when but probably in 2023 your and Shery Ahn 24 at the latest there
will need to be some efforts on on fiscal policy.
This will probably have a dampening impact on domestic demand.
So in a way we all just changing the timing of the pain and
it makes sense. I mean we need to deal with the current
energy crisis right now but this will come at a price and the price is likely
to be some measure of austerity in 2020 in 2023 or again at the latest in 24.
There were reports over the weekend villa of manufacturers in Germany.
Industrial companies closing down their plants at different times or early
curtailing some of the activity in response to the energy concerns the
energy cost.

How much is that going to really affect
the reassuring the desire to try to avoid the interest rate hit and the
currency hit that a lot of nations have been feeling.
No I mean it's it's it's it's a big issue fought for Germany because the
industrial specialization of Germany makes them very sensitive to the price
of energy. Beyond the fact that they've made
themselves reliant on Russian gas the very fabric of German industry is quite
energy energy intensive. So there are questions actually as to
how this model could continue of maintaining on German territory those
energy intensive intensive companies. It's not the first time that we have
questions as to the German industrial model their reliance on exports.
This question is becoming even more crucial today.
So what's what's helping Germany obviously is that they have massive
policy space. They don't have much of a protected
product that they can't actually take time to
rejig the way their economy is specialized at the moment.
But yeah the question is specifically to Germany at the moment.
You will ask to borrow from Ian Bremmer.

What is the power of Brussels now.
The force of Brussels right now. Or is it every nation for itself.
Actually full something I would say that the level of solidarity that has been
achieved in Europe in the face of these crises is quite high.
I mean you have for instance this principle of European solidarity on gas.
It was not obvious and it has been actually confirmed the French
president's side publicly in a TV address that France or the winter would
actually help Germany with a gas supply this winter.
So actually there's quite a bit of solidarity.
One of the issues we have however is that there's an issue in terms of
leadership. Mario Draghi is no longer going to be
prime minister of Italy. He was playing a big role in shaking
things up. If you want at the European level the
chancellor of Germany is under massive domestic pressure.
Faleh doesn't have that much time and energy to devote to European matters.
And obviously that not is not in the same leading position in which he was
before the opponents reelection.

So there is a little bit of of of of of
a hesitancy if you want in terms of leadership.
But at least for the time being solidarity is continuing.
It's there's not a lot of signs actually that it's it's every country for itself.
We have a few issues with some eastern countries Hungary as usual.
But by a large this system hold. As you mark of AXA investment managers
you get a CAC shabby sir. A good moment to catch up as well on the
European economy. Can I just say how much of a good sign
this is for Governor Bailey next week. So they've had the Bank of England rate
decision delayed from Thursday to next week postponed because the events here
in the United Kingdom to see Sterling almost break 114 last week and then
print 117 a little bit earlier in the session.
I have to admit at one point last week Lisa it felt kind of touch and go for
Sterling that we might be kind of running into what could be a bit of an
issue here with the currency that bounced back.
I don't think it's over.

I'm not sure anyone's saying that this
morning. But that bounce back is going to be
music to the ears of this governor as he sets out for a decision next week.
I couldn't agree more. Just because you're not seeing unmoored
declines unmoored weakness and people saying it could go to parity and below
because there is concern about whether in foreign investors are willing to fund
less Truss's plan. Now people are talking about how
interest rate hikes are actually going to be meaningful the end of the
potential end of the war. And some of the optimism that we're
hearing throughout the European region haven't heard enough about that plan.
Still have we haven't heard a lot about any of this.
Obviously for very good reason. It's not on the front pages in this
country. But for the Bank of England governor
next week it's going to be the big issue for him.

We've got to work out what this means
for inflation what this means for growth ultimately what it means for policy
trying to understand what it means for the bond market for gilts at a time that
we don't have QE. We have to take what it means for this
weaker pound over the last several months.
How do they deal with hiking rates at a time when this government's going to be
spending more with no limit and with no real input to the GDP from that
expenditure starting right now.

Someone 60 70 well it's a better
statistic. But when the service is over and a new
king is annoyed guess what John. All the problems are still there.
Is will go away with a vengeance. They don't go away.
Tom Keene. Lisa Abramowicz.
Jonathan Ferro. This is Bloomberg Surveillance.
Keeping you up to date with news from around the world with the first word.
I'm Lisa Mateo. King Charles the third address
parliament for the first time today. He told lawmakers he feels quote the
weight of history which surrounds us following the death of his mother Queen
Elizabeth the second. Charles is now on his way to Edinburgh
to accompany the queen's coffin to St Giles Cathedral for a service of
remembrance. Meanwhile the UK continues its period of
national mourning following the monarch's death.
Russia had power plants deep behind Ukrainian lines today causing blackouts
across the northeast of the country. Ukraine says more than 30 settlements
have suffered Russian missile and airstrikes over the past day.
At least two power plants were reportedly hit with precision rockets.
Meanwhile Ukrainian troops are continuing to advance in an offensive
that has reversed months of Moscow's advances.
Chinese President Xi Jinping will make state visits to Kazakhstan.
And it was Pakistan this week his first trip abroad since the start.
The Covid-19 pandemic.

Beijing says he will attend a leaders
summit of the Shanghai Cooperation Organization.
Russia announced last week that JI will meet with Russian President Vladimir
Putin at the summit as Moscow seeks to bolster ties with Beijing.
The US health care system has received failing marks.
A new poll from the Associated Press and RTS Center for Public Affairs Research
shows that fewer than half of Americans surveyed say health care is generally
handled well. Only 12 percent say it's handled
extremely or very well. Even lower marks were given for the
costs of prescription drugs drugs the quality of care in nursing homes and how
mental health care is handled.

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. The constraints revealed by the pandemic
are likely to be with us for some time perpetuating imbalances contributing to
inflation and likely requiring a sustained policy response.
I'll also argue that constraints continued to bind policy.
Can we thank us to George the Kansas City said president for his service to
the Kansas City Fed some and also her immense hospitality in Jackson Hole
Wyoming. Wasn't she pretty.
And she was brilliant. I will stick then.
And we were making light humor about it about our new puppy which was the next
puppy for her for the Kansas City Fed the pivot.
But John I'm going to state this as clearly as I can.
Jackson Hole was the greatest most unaffected reality of diversity of
guests I've ever seen in economics. She and the Kansas City Fed absolutely
nailed an eclectic informative set of guests.
It was only a number of files ago on a number of days ago.
And least already some people are questioning the communication.
We got a number of Fridays ago.

What you don't think all of the Credit
Suisse cites us on Friday. I reviewed that interview with John.
Me too. You said okay they're not going to tell
you what they're actually going to get you rather than telling you one thing.
But I'm telling you they're going to do something else.
He said that it was game theory. Right.
You need the markets to move in a certain way to work for them.
So basically you just basically you know you can ignore them because you can
figure that they just want to move the markets enough and then they will
continue to reverse course and lower rates.
And this is actually the bull case for a lot of equities.
He's not alone with this.

Maybe he's right.
So we got equity futures up another half of 1 percent this Monday morning awake
at dollar and yields. Have they stabilized just a little bit.
So it's not a smart bet on what we're going to see on inflation tomorrow.
And that's what we're focused on with the markets today.
With the weaker dollar sterling out through a 116 round that up a 117 level
is while we continue to monitor the travels of King Charles his two brothers
and sister this morning to Edinburgh rule right now.
And this is exquisitely time we had the Booker months in advance.
So difficult to get Professor Norman. Julie Norman is co-director of UCLA
Center on U.S. Politics.
But far more is a claim for study of terrorism and war unraveling.
And that's certainly what we have seen here over the weekend.
I commend you.

The Post The Washington Post article
which paragraph by paragraph shows the brutality of the present war.
Dr Norman how bad is it. Well Tom we know that the war has just
been grueling throughout the whole summer.
So I think it's really notable today that headlines are actually back focused
on it. And of course that's because of the just
extremely impressive Ukraine offensive that managed to retake.
It's looking like about fifteen hundred square miles in just a matter of a
number of days. Huge boost of morale for Ukrainians even
despite the devastation that we've seen left behind in the villages as you
mentioned to take the Middle East experience which you're expert on I
believe when the allies went across North Africa.
A guy named Rommel pushed back from time to time to the Russians had the
capability to push back as we saw from the defense secretary of Ukraine in the
FTSE Sweden.

It's an important point Tom because as
much excitement and I think a war into that there is for Ukraine this weekend
it's we should be cautious with it as well.
You know Russia still controls about 20 percent of the country.
They start very strong in the south. They control the main cities in the
south and Landbridge to right to Crimea. And most importantly they still have a
lot of wild cards up their sleeve in terms of both conventional
unconventional and unconventional warfare that we know Putin is still a
possibility that he could still use here.
Can you think of a resolution of this war that leads to a recalculation of
what's going to happen with energy supplies this winter.
I asked that question Judy because there's a clear market reaction today
where gas prices are lower.

The euro is stronger.
Does it change anything for the energy crisis that we've got to work through
this winter. Yeah it's a great question because it
changes the narrative right now in the moment even though again the course of
the war is still likely to be very long and very prolonged and very difficult
for Ukraine. So obviously this week we're still
seeing EU leaders trying to decide on what they're going to do about this
energy crisis. I don't see what happened over the
weekend ameliorating all these concerns anytime soon even though the markets are
responding. So it was good news for Ukraine in the
sense that I think they'll get a bit more sympathy and support from some
European allies who may have been questioning policies moving forward.
But in reality in the long run these are studying the issues we're dealing with
for quite a long time.

This is humiliating for Vladimir Putin.
This is not what he wants to have happened.
How does he try to save face and how potentially dangerous is that response
yet. Well this is obviously the concern that
we never know what Putin is going to do next.
We do know that when Putin feels backed into a corner or feels humiliated that's
often when things are the most risky and the most tense.
So I think there's a lot of question marks as to what Putin may do.
We've already seen him respond in terms of targeting civilian infrastructure.
So cutting off power and water supplies to civilian areas in the province where
I gains were made. So we can expect more of that.
But even perhaps even more more grim kinds of interventions as well.
And so I would say nothing's off the table when it comes to Putin.
Jenny whether it's president in the United States has had success.
A lot of success is keeping all the European nations onside.
One voice to address was.

In Ukraine are you seeing any signs of
cracks around that story within respective electorates across the
continent at the moment. Yeah.
Biden and the Biden administration has been so focused on that from the start
and even before the start of this conflict.
And I think that will continue to be their priority.
In reality though I think Biden has a little bit less leverage with EU
countries now going into this energy crisis going into very likely recessions
that are just simply going to affect Europe a bit differently than the United
States. I don't think we're seeing cracks just
yet but I think we're hearing what are very realistic pragmatic conversations
about what kinds of policies can actually address this energy crisis.
What that means for the Ukraine conflict at the same time is that one country
you're more worried about than the others is the one that jumps out to you
at the moment. Oh I would say there's different
countries when concerned.

I think about 10 countries are pushing
back it the oil cap and the gas cap for example.
I think we heard from earlier commentator Italy's leadership is in
flux right now. And Draghi had been very firm and a very
important voice in the Ukraine conflict up till now.
So I'm I'm watching Italy to see how they play things moving forward.
He's not alone. Juliette great to see you in person.
Thanks. Thank you gentlemen.
Of U.S. out central on U.S.
politics later tonight what's your number one focus as well.
Over the last few months or so. Are we starting to see some cracks
emerge. Judy mentioned Italy.
Thank you. On the same page.
Italy is showing there was a poll that came out showing more than half of the
respondents were against some of the caps or against some of the sanctions on
Russia saying it's hurting the EU and the US more than it is hurting Russia.
And this has been a big concern right.

You see Russia making money and you see
the E.U. struggling in the face of potentially an
energy crisis as reality by some later this winter.
We joked in the last hour about the need to speak to a meteorologist about the
future in Europe. But in all seriousness that's what it
comes down to. How cold is this winter.
They haven't really said. Will it be and how much support will
these politicians have to maintain the current energy policy they have.
When you see the political pressures over the weekend ongoing in Sweden what
may come in Italy is it about a cold winter or is it even about one week

What's the difference between a one week
cold in Poland and a cold winter. I don't jobs but some a cold winter or
two or three or four. That's another issue.
And the Belgians the Belcher come back to this.
The Belgian prime minister seems to be the only one talking about that.
The prospect that this could go way beyond one winter maybe even many many
more. I would suggest in the Monday of next
week there's a distraction as European leaders travel to London for the funeral
of the John F.. Through that with a vengeance.
We may catch up with this to be set at some this hour.
The problems do not go away. Don't go away.
They're going to be here with a vengeance Tuesday next week.
Bob Miller is going to join us from BlackRock very shortly.
Looking forward to that conversation with Tom Keene and Lisa Abramowicz.
Some Jonathan Ferro features bouncing back slightly positive from London.
This is Bloomberg Surveillance.

Central banks have double down on what
they've said. We've seen such a surge in inflation
that the European Central Bank like the US Fed has decided it needs to be seen
as fighting inflation. The Fed follows monetary policy based on
what's best for the United States and the consequences to the rest of the
world are the consequences for the rest of the world.
The elephant in the roof is global growth and that's the elephant in the
room of the euro. It's hard to say that we're done with
the high prices and how that's going to affect people.
This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa

Global leaders will descend on this
country a week from today that will pay tribute to Queen Elizabeth.
Their problems will not go away. Live from London for our audience
worldwide. Good morning.
This is Bloomberg Surveillance on TV and radio alongside some keen and Lisa
Abramowicz some Jonathan Ferro. Tell me you've said it all morning that
problems will not go away. They will not go away.
The pageantry continues today for Queen Elizabeth.
We can get to that in a moment John. But the problems here center around the
inflation picture which we'll see in the United States tomorrow.
But so much more in complexity. And I'll say to you John going down the
embankment in the Thames and looking over to St.
Thomas where the prime minister Johnson was fighting for his life of Covid that
is just one issue for the United Kingdom.
Their health system is in crisis. And then later on to Ukraine.
Ukrainians are fighting for their lives and real signs of progress over the
weekend with accounts of Russian soldiers fleeing Ukrainian areas that
they had previously captured getting pushed out as Ukraine reportedly is
reclaiming that land with the help of some of the U.S.
weapons systems and the weapons systems of allies.
How much does this really change the backdrop of the energy crisis that's
facing Europe this winter.

John for an America waking up this
morning of course on London time five hours difference this morning an
extraordinary moment. I can't say enough about the importance
of Westminster Hall where the queen's coffin will rest briefly.
The word is gathering today including former Prime Minister John Howard and
others to hear a sombre speech from King Charles as he speaks to the government
of this nation. The symbolism they're extraordinary.
They're going to run through the play by play the day ahead the week ahead.
The words of the king early this morning I cannot help but feel the weight of
history. And as I mentioned a little bit earlier
this morning I think we all feel that over the weekend and we will do through
the next week as well. I going to run through the markets for
you at least it's going to go through the day ahead.
I want to start with equity futures because we just delivered a really
decent weekly gain on the S&P 500. The best weekly gain come back to late
July. Equity features right now are positive
four tenths of 1 percent on the S&P.

So it's not just a little bit lower by 2
basis points at 328 88. But the one thing you will notice is
front and center drama. It's that dollar weakness out there
right now. Euro dollar one of 140 that currency
pair. Positive one full percentage point.
And you're pointing out it's not just the dollar versus the euro it's also the
dollar versus everything else because there is this feeling that perhaps the
world is going to recover perhaps insert your narrative here.
The euro though definitely catching people's eyes at a time of great change.
And you said that we'd walk through the play by play.
Here is the latest that we're hearing as King Charles the third has to Edinburgh.
He's going to arrive evidently at 12.

Forty five a.m.
local time seven forty five Eastern. And then he is going to join in the
procession behind the coffin of his late mother starting around 9:00 at thirty
five Eastern. That is two thirty five p.m.
local time heading to St. Charles Cathedral but really catching up
with you throughout the day about the proceedings.
Then of course at 8:00 a.m. Eastern.
We are going to be hearing from Isabel Novel of the ECB.
She's giving welcoming remarks at the 7th annual ECB research conference in
Frankfurt. And this does follow some hawkish
comments over the weekend for a number of ECB officials including Bundesbank
President Rocky Nagar. Some people saying this is part of the
reason why you are seeing euro strength is because there is a reiteration of the
willingness to hike rates again after the biggest ever rate hike by the ECB.
Then at 12:00 p.m.

A focus on the U.S.
and some of the food supplies not only the United States but throughout the
world for the world. Agricultural Supply Demand September
report. How much is there the support of the
weather growing things at a time when food prices very much catching people's
attentions when they go to grocery stores.
Two headlines that stick out this morning after reports over the weekend
that we've seen progress in Ukraine Lisa.
Here's one from Chancellor Schulz reiterating support for Ukraine.
Quote for as long as it takes. And this from the Russians a little bit
earlier this morning. This from the Kremlin spokesman Dmitri
Peskov. He said he sees no prospects for talks
with Ukraine. Now at least I think we all need an
update on what's happening here because certainly for some people they're
attributing the move in the euro stronger euro this morning the move in
gas prices in Europe lower to the events over the weekend.
If there is progress what does it look like if you do not see a Russia that is
willing to retreat that is willing to talk and come to some sort of agreement
especially when we're just talking to Julie Norman.
And she said the big fear is that we have a Vladimir Putin who is
unpredictable and does not want to lose face.
So what is his response going to be and how does that really shake the status

I think coverage starts right now with
Bloomberg's Anne Marie down in D.C.. Maria Tadeo over in Brussels.
Maria can we stop there. What if you heard about developments
over the weekend in Ukraine and what does it mean for policymakers in your
world in Brussels. Look I think there's two things.
One is European leaders were stunned by just how quick but also effective this
operation from the Ukrainian army was on Saturday.
And when you look at just how big this country is the amount of land that
they've been able now to win back is enormous.
You always have to look at the map to figure out just how significant this is.
These are just tiny villages. This is a significant amount of land for
the Ukrainians.

It also validates their theory that
their army is competitive. It is well trained.
It has been since Crimea and that heavy weapons make all the difference on the
battleground. So I will expect that from now on they
will push the Europeans not so much the United States because they have provided
a lot of the weapons but the Europeans to put more weapons in their hands.
Now when it comes to the Russians the big question today in Europe is what
will Vladimir Putin do.

And I think the key here is does it get
to a point where he goes from special operation to war and war means
conscription. And I think we all can agree there's a
huge difference between if you're a Russian to watch a war like it's reality
TV to being called to go on the battlefield against an army that has
proven very effective. Maria I look at the news over the
weekend in the pregnant question I'm sure for the Defense Department in the
United States is how do you link the Ukrainian effort in the north to a
Ukrainian effort down south towards the Black Sea.
Is that even feasible now. Well Tom at this point I think if you
look at just how quick and just how efficient this was.
There is this thinking that they can move down of course.
The problem is is that Russia has retreated and has also pulled down some
of their troops to regroup. And what they say is not a defeat but
it's just regrouping to protect some of the areas that they had already

Can you imagine the embarrassment for
Vladimir Putin if the Russians excuse me if the Ukrainians do manage to get back
to areas like Mariupol at that point the options for Vladimir Putin would get
very narrow. He needs to save face some way.
But the Ukrainian army I think that post yesterday by other means and Lansky and
telegrams saying we will liberate everything.
Our army is not going to stop. We rather staff not have heat and not
have electricity but have our country back.
This is everything that we're aiming off also shows that the Ukrainians at this
point have no incentive to stop.

They will continue.
They have the weapons. And Marie this really brings us to the
United States which has been supplying a lot of those weapons and has been
expressing support for Ukraine. How much and how far does that support
go of the European nations that are struggling with a natural gas crisis.
They did talk to the United States about possibly capping the price that people
pay Russia in order to get their gas or their goods their oil I should say.
But what else are they doing. What else is in the works to provide
natural gas to Europe. So two things.
First on the natural gas front this summer.
No one's really talked about it. But the fact is US Latin liquefied
natural gas supplies to Europe have been bigger than the Russian supplies via
pipeline. This is something that has never
happened in the world. This the first time on record.
So you ready. You have seen the United States sending
more LNG over to Europe which of course is gonna be more expensive for Europe.
And logistically it's not how Europe is placed.
But this is the situation they're in.

And what we've seen for months in my
reporting on this goes back to early this year.
You have U.S. officials traveling around the world
well before the war started well before Ukraine thought this was even possible
making sure they were talking to huge LNG producers like Cutter to if there
was an event that Russia was going to ratchet back this natural gas that they
could get to Europe. And what you're going to see is a
continuation of that. I would also say on the defense front we
heard from Senator Mark Warner over the weekend talking to CNN STATE OF THE
UNION on the Sunday shows saying that it's not just the military equipment but
it's the U.S. and the UK intelligence that is also
helping Ukraine. That of course is going to continue.
And then the White House is asking Congress to add a nearly 12 billion
dollars more in terms of help for Ukraine when they work out this stopgap
funding measure. MH Thank you.
Over in Washington D.C.

Alongside Maria Tadeo in Brussels a team
back together on the big events taking place in Ukraine.
The war continues. Progress real progress we're told over
the weekend. Some headlines for you from the prime
minister's spokesperson. This is less trust.
His spokesman Max blamed briefing reporters at the moment.
They're still planning to hold a fiscal event later this month.
Then we're all ears on how big that fiscal package will actually be.
And of course we don't know because you need to basically guess where gas prices
are going to be to work that out. The plan for households will take effect
at least on October 1st. The energy plan for businesses is still
being worked on. And this is the reality the moment in
the UK. This is how we started this program.
We will pause in this country for a week.
Global leaders will descend on the capital.
They will all pause and pay tribute to this queen.
These problems they will need to be addressed.
And the number one issue in this country particularly over the last week has been
the unveiling of massive fiscal intervention.
The details of which still need to be on doubt still need to understand how it's

How do you cost something that is
ultimately uncapped incredibly difficult almost impossible.
And it's incredibly difficult when you're not having meetings to hash it
out in public. You imagine that behind closed doors
they are trying to figure this out if it's going into effect October 1st.
But then what's the response in the bond market.
They believe there is a market holiday in the United Kingdom when it reopens.
What kind of response to get gilt yields as you look at passport plans that are
going to be relatively unvetted if they get brought October 1st.
Some details we understand some for next Monday that markets will be shut.
It will be a bank holiday for the funeral.
And we've finally got a date for that.

It's a week from today.
It is a week from today with world leaders attending.
Mr. Biden I believe last evening confirming
that he will return with Dr. Jill Biden.
Sterling just a bit stronger here but three quarters of one percent against
the dollar cable 116 to 74. Very briefly earlier on today 117 after
threatening to break 114 at one point last week.
Coming up Bob Miller of BlackRock. Looking forward to that.
We Lisa Abramowicz and Tom Keene ISE. Jonathan Ferro.
This is Bloomberg. Keeping you up to date with news from
around the world with the first word. I'm Lisa Matteo.
King Charles the third is vowing to uphold parliamentary democracy and
follow what he called the selfless duty of his mother Queen Elizabeth the second
addressing parliament today.

The king said he felt quote the weight
of history surround him. Charles now heads to Scotland will lead
a procession carrying the queen's coffin through Edinburgh.
Tens of thousands of U.S. railroad workers could be on strike by
the end of this week. Negotiators met through the weekend
trying to reach a deal with two unions covering some fifty seven thousand
engineers and conductors. They're demanding better working
conditions. Work stoppages that clog major arteries
of the nation's food and energy supplies could pose a potential risk to President
Biden and other Democrats.

Japan is reportedly easing some Covid
era restrictions. FNM says the country is planning to end
its daily limit on arrivals from overseas visitors.
Japan is also said to be considering allowing foreign visitors to book trips
directly and travel freely within the country.
The rules are expected to apply to travelers who've had three vaccine shots
or can provide negative test results. Twitter is saying no to Elon Musk's
latest effort to cancel his agreement to buy the social media network.
Twitter says Musk's latest move is quote invalid and wrongful.
That's according to a filing today.

The billionaire says the company's
treatment of a whistleblower gave him another reason to walk away from that 44
billion dollar deal. It's his third attempt to withdraw his
offer. 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. It's remarkable that people were saying
that the dollars day was passed not very long ago.
Given its current strength and my guess is that there's room for this to
continue. Do you think that might have been aimed
at someone over at Yale. I'm just asking just right.
That was Larry Summers the former U.S. treasury secretary.
It had that kind of failed some that it might have been someone over at Yale.
We spoke to Dr.

Laura and the other day of the huge
emotion of his representation of the queen of England to University of
Cambridge. And we stayed on that theme.
I'm sorry. Summers El-Erian and the rest of them
going to got a massive victory lap here without a doubt.
Relation on to what we've seen as strong dollar people like Mark McCormack people
like HSBC IBEX the late David Bloom was no longer with them.
You know I'm sorry. These people nailed it.
Wells Fargo as well. Yeah I was talking about another
scolding. I know we all know exactly how America
hope. Stephen Roach.
Really. Yeah there's another one.
Yeah. Oh yeah.
It's kind to buy him just the other people yelling.
I've got it wrong. The US dollar anyway features that
positive on S&P 500 rough a little bit.

So and the equity market is the best
company. I forgot about stadium point.
What. What was his call on the dollar a week
we call it. We're like we don't have to wake it
today. Alix Steel dollar.
When I once said he take Tom Mackenzie parent nine tenths of one percent.
I think bounce. It's a big bounce and there's an
adjustment here. But it goes into what we have here which
is the data dependency of the various central banks including the Bank of
England meeting the day after the Fed and also the data dependencies of fixed
income professionals. One is Bob Miller head of America's
fundamental fixed income truly with decades of experience.
Bob Miller what is the symbolism. If the Lehman Barclays Bloomberg total
return aggregate index breaks down to a new lower price and a higher yield.
How do you redefine the bear market. If we get that technical breakdown.
Well good morning Tom.

Hope all of you are well.
It's good to be with you. Look I think we think that yields are
now reasonable. So yes they can.
You know prices can go down and yields can go higher from here.
But but we're in the range of reasonable fixed income offers you know.
So some reasonably attractive opportunities today after for the first
time since 2018 and certainly after a period of no opportunity two years ago
and a year ago.

So you can build a high quality
portfolio that has a 4 to 5 percent yield including treasuries you know high
quality credit even high quality. Add some high quality high yield an
eight and a half to 9 percent range. You can build a pretty attractive
portfolio for the first time in years. And specifically in U.S.
fixed income. And we think that that's that's
something that investors ought to be thinking about for the next year.
No doubt things have been ugly this year and there's no near-term relief in
sight. But valuations matter and these
valuations look look reasonable to us. They look reasonable compared perhaps to
a year ago. They won't necessarily look as
reasonable in a year if 10 year Treasury yields are 5 percent where some people
are suggesting they could be.

Are you in the camp that says that we
have seen peak yields on 10 year that we're close to it even as we do see them
start to climb and push up against and test some of the highs that we've seen
of the cycle. Yeah.
I don't know if we've seen the peak but but I think we're close.
Me because we're in the camp that inflation is going to decelerate growth
is going to decelerate. I think it's a it's it's it's really
important to keep in mind the magnitude of the financial conditions tightening
that the Fed has engineered in just six months time.
They're going to raise rates by another seventy five.
Most likely in less than two weeks time pushing the funds rate to three.
That's in a six month period of time 300 basis points off zero six hundred basis
points annualized rate.

This is not an insignificant move.
It's a it's a meaningful move and it takes time.
Write the famous long and variable lags. It takes time for policy adjustments
easing and tightening to work their way through all of the cracks in the
economy. It's coming.
I think it will be it will be very unlikely that we we look up in three to
six months time in growth and inflation haven't slowed by a sufficient amount
that the Fed is probably able to pause with rates around 4 percent and just sit
there for a while. So in order to get a 5 percent 10 year
on a one year horizon a lot of things have to go wrong.
Right. I just.
Just maybe it could be. But but a lot of things already have
gone wrong. And I think it's it's a little dangerous
to extrapolate the last nine months into the next nine months without considering
what's happening.

To financial conditions in the US
economy. They are tighter.
Yeah but you do still see the consumer having some strength particularly with
oil prices or at least gasoline prices coming down a bit.
Have we fully taken into account the fact that Europe has also moved away
from negative yield machine with the biggest ever rate hike at the IMF the
ECB meeting last week and is poised to do more that there is a cohesive and
global synchronized rate hiking cycle that we really haven't seen in modern

Yeah it's a great point and it would.
I would argue that that adds to the the reality of financial conditions
tightening in a lot of different places not just the United States.
And that will ultimately have a delayed but but likely a real impact on growth
and inflation over the next year or two. Keep in mind there's one central bank
that isn't participating that we think will will likely be forced to buy their
own inflation dynamics in Japan sometime over the next six to nine months.
We wouldn't be at all surprised to see the yield curve control program that's
been in place for some time.

At a minimum.
Adjusted slightly if not adjusted by a reasonable amount.
But we got to pick up on that final question.
What does that mean. And how would the rest of the global
bond market respond to a move like that. Yeah.
So Jonathan great. That's where.
Like if you asked me what's the scenario or the question Lisa mentioned about a 5
percent Treasury yield. What's this.
What's the scenario where that's a reality.
It's either it's either just unbelievably persistently high inflation
that the Fed cannot get under control.

So the front end is likely at 5 if not
higher or it's some resumption of global term premium by the ECB not only not
only turning off QE but perhaps even pursuing some balance sheet runoff and
importantly the Bank of Japan abandoning yield curve control.
I think all of that each one of those is individually pretty pretty low odds.
But but that is the scenario where if you want to get really bearish on bonds
I think you've got to have something like that in mind.
Bob thank you. Bob Miller that broke rock.
Great place to leave it and pick up on that and continue the conversation.
If you think about the global bond market over the last decade or so Tom
it's been two very heavy anchors just weighing down you right.
What must Europe. It was Japan.
Cut the cord. We've cut the line on Europe.
Is Japan next. Well that's a shock.
And it's the old phrase. Expect the unexpected.
And certainly that's not priced in right now.
And that would take ISE talk about a snap back in yen if we only imagined
that 10 billion figures.

I'm not going to predict but maybe it's
that kind of ginormous move. 330 right now on a US 10 year.
Kelly Kaminsky is now for simple acts. Joining us up next from London this is
Bloomberg. Touchdown.
Adam Baron for King Charles the third a little bit later this morning after that
you'll have an audience with a Scottish first minister Nicola Sturgeon.
So before he gets there I understand there will be an arrival an inspection
of the guard of honour at the Palace of Hollywood House Scotland.
So that's the next phase of all of this Thomas.
We work our way through to the funeral this time next week.
Many including in America will say what's the why.
Here is a focus on Scotland.

Besides the queen's immense affection
for her mother the Queen Mother's heritage of Scotland and the answer is
all of this is the imagery is King Charles will visit the different parts
of the United Kingdom John that are separate from England.
Britain is not England is it. It's another part of this as well.
So we have to remember this as a member of the media we've been thinking of what
was called Operation London Bridge and that was for if the late queen died here
in England in London at Buckingham Palace or perhaps even at Windsor.
She of course stayed through the summer in Balmoral the royal family's Scottish
holiday home. And that was Operation Unicorn.
This was an unexpected development. So all these things you'll see centred
around Scotland as we go through the next phase of bringing the queen back
towards London. Some this is why this was part of this
sequence that was unexpected when all this planning has been done and this
plan has been in place for a long long time.
The unexpected will be the emotion this morning.
Everyone of course is covering this worldwide focus and on radio and

Lisa John and I are going to try to give
you perspective within the market coverage that we we do.
John I can't emphasize enough the symbolism that we will see in the next
two hours from King Charles the third moving from the palace up the royal
mile. I can agree with you more.
We're going to pick up on some of the price action as well.
So allow me to go through some of the equity market movements this morning.
And good morning to you all in New York is now.
Good afternoon from London. Equity futures up a half of 1 percent on
the S&P 500 as we wait for the opening bell in New York City a couple of hours
away. Equities elevated yields lower by a
couple of basis points to three twenty nine.
Forty five dollar weakness is a real story today.
Euro strength euro dollar one of 133. That currency part positive.
Nine tenths of one per cent with some single names.
We can head over to New York now and catch up with critic to high critic.
Good morning John.

Well as your time out in the kind of
sphere of the broader market with that background here you do have Twitter
shares actually lower one of your underperformers this morning down to the
tune of 1 percent and really do have that shareholder vote tomorrow as the
legal battle with Elian must continue as he has for a third time tried to say
what he needs to withdraw out of the deal.
Twitter saying that his claims while they are invalid.
Nevertheless those shares down to the tune of 1 percent following
cryptocurrency they'll write block chain sharing and some of that glory up about
3 percent on the day. But to me I think the real macro story
here is going to be railroad strikes.

One they're supposed supposed to start
as soon as Friday and could actually increase oil supply chain woes across
the country. Think Chicago Kansas City Fort Worth
Texas. Right now the assumption here is that
Joe Biden the labor transport secretary Marty Walsh as well is going to happen
and somehow push them back as they have earlier in his term.
Nevertheless Union Pacific shares and the other railroads I should say to
trading a little bit higher to tune of almost 2 percent.
Let's get to the other major macro story now of course is going to be the chip
sector in expectation here in the market that President Biden is actually going
to broaden some of the restrictions when it comes to exporting chips to China.
He's already tried to do this a little bit when it comes to specific
technology. Now he's going to broaden it to other
artificial intelligence as well. So on the expectation of that move you
have the likes of Video Advanced Micro Devices and even Intel all up on the
day. Gupta thank you so much.
Greatly appreciate that. We say good morning to you from London
as we look as John mentioned of equity markets doing better than good.
And maybe it is the second rally off of what we saw in the horror of middle of

Katie Kaminski joins now.
It's been a joy to speak to her chief research strategist and Alpha Simplex
about trend because she offered Andrew lowered my too is a slave to trend is
full disclosure. I am too.
Katie what is the trend now and is the trend different than what we saw in the
last two weeks of June. Yes I mean I think we've seen the short
bond signals as well as long long positioning and dollar be very dominant
recently. But in the last two weeks we've really
seen an influx of risk on behavior a lot of buying pressure particularly in the
equity sector. And this is somewhat of an indication
that people are getting optimistic they're ready to put money back in the
market. But the question is going to be is it
too early.

That's the question a city's asking.
This is what Andrew Holland host of the team had to say this morning that
published just moments ago right through it.
Despite the pricing enough hikes risk on prevails.
The message at Jackson Hole was clear The Fed will lean against looser
financial conditions until inflation has convincingly slowed.
The team over city I want to say maybe the Fed will be incentivized to push
against the nice and risk rally.

Do you agree with that Katie.
I do agree with it but I also think it could take longer than people expect.
And the fact that the Fed is remaining steady is they're sending a signal that
they're thinking a little differently than the market.
And I think we've been the most surprised to see that the market is more
optimistic than Fed commentary. And that suggests that there's perhaps
maybe a little bit more that we need to think about going forward and that we
might see a little bit of reversion.

We'll see what the CPI looks like today.
But you know you're going to have to see how winter unfolds and how he handles
these energy issues and other problems. We haven't even really seen Kuti yet.
So I think it's going to take time to know but I'm a little bit less
optimistic than the market's. And Katie John was talking earlier about
how it should just interfere with me ought to be ideologists all day and that
might be as good as interviewing prognosticators on the market because
that might be what determines the market.
So what is the bond response.

What is the stock response to a really
cold winter one in which the energy shortfall becomes more acute.
I mean this is a serious issue because if you see people dealing with higher
interest rates in terms of their payments you're also seeing people
dealing with higher costs. It could really be a difficult situation
particularly for Europe. And so I think people really need to
think about looking at those prices as we roll into the winter season.
We're just now starting to move towards December contract some further out in
the curve.

So I do agree with John that you know
it's really going to depend on how we weather the winter
as as the price pressure is real. Katie we're speaking with you after you
got a thirty eight percent gain in Alpha Simplex his main find as a result of
selling short bonds something that hasn't worked for years.
At what point do you double down on that short position at a time where you think
the market's getting it wrong and underestimating the Fed's resolve.
So I think one thing to know about trend falling is what we do is follow trends.
And the truth is that the market particularly in really difficult
environments is often a better bastion of information than one individual or
any one particular view. And so what we see now which is kind of
why I'm saying it's surprising is that short bond trends are still there.
That positioning is still very strong in the data.
And we could definitely see even though rates are reasonable then becoming more
unreasonable in the short term.

Can you correlate short bond bond price
down yield up into an equity bet on trend.
Yes I mean as once we see that things have leveled out.
I think I've always said that this isn't an equity story it's a bomb story.
So once we see that bonds have stabilized and we have a much more
healthy curve and more of a risk premium out in the curve.
So we see much more of a steeper curve. I would think that that's really sort of
the risk on signal that we can all start to think about those premiums as opposed
the potential destruction of rate rises because we all forget even though it's
better going forward. The bonds right now really take a hit.
They all felt that this year. OK let's go.
Matthew your we're doing this on a Monday.
We can go math Monday here as well.

Is a decent version of the curve
important or is it the first derivative rate of change of this inversion.
For me it's much more the inversion of the curve that's going to matter.
I mean that tells us something about the disparity between what we're thinking
about short term rates and long term rates.
And if you look empirically at signals in terms of trend and direction of bonds
you see that bonds have tended to fall when the curve is more inverted.
And thus if we continue to see that inversion signal we're going to see that
there's some sort of bearish view on bonds until we can kind of see that
longer term risk premium and that steepness really be an issue.
So I'd say first derivative. Katie Kaminsky thank you.
Over Alpha Simplex on the latest in the bond market built on a conversation we
had with Bob Miller at BlackRock about 10 15 minutes or so ago.
Matt Miller so very keen to point out that Bank of Japan and I brought out the
fact and a lot of people would go along with this.
I'm sure that the two anchors around the global bond market for the last at least
10 years it's been the ECB and the P O J.
Both with QE and negative rates deeply negative interest rates so far in Japan
weighing down yields we're unwinding that process of the ECB first with a
rather large rate hike in the last week or so.
Q2 could be the next step.

But we're all waiting to see happen is
whether the be chase the next to capitulate here because they're running
not just very very low interest rates but also keeping a lid a cap on yields
and the JCP market. Over the weekend a number of Japanese
officials came out and raised concerns once again on the yen and the
devaluation. They have seen and the concern about
importing the wrong kind of inflation. And at what point do some of the voices
get together and kind of pressure to become a scenario just like you say
where they have to abandon that CAC Johnny outcome and you can do it off the
Bloomberg very quickly on a weekly chart.
Dollar yen if you get a push to negative 2 standard deviation strong yen is 16.
Big figure as you find it interesting on a day where everything counts is really
running cut against the US dollar the euro sterling that the NSA and some
change to what 40 to 50 fire.

I mean it is what it is just that it is euro stronger yen helping out a euro yen
or 144. Forty six shows that.
But I to me it's a little bit of noise waiting for Tuesdays US inflation CPI
change. I didn't see very Tuesday's CPI chase
tightly it just around London. Well look right now the Japanese yen is
not correlated in the same way because they are not playing by the same
playbook that everybody else is. So at what point to this.
I just play along at a time when they are basically facing off the same
inflationary pressures that everybody else says and frankly an energy
shortage. Some people say as pretty significant as
well. The city set up a takeoff of UBS is
going to weigh in on some of this stuff in about five minutes or so.
What's going to keep following. King Charles the third who we understand
has touched down in Edinburgh. He will disinvite the plane very very
shortly and make his way home to an audience with the first minister to walk
off the story.

Smile a little bit later.
Yes. Lisa I was just going to do a mea culpa.
I said even before it's Edinburgh. I just keep thinking about it.
These things happen. And that's the king right now.
King Charles the third touching down in Edinburgh Scotland from London.
This is pulling back. Keeping you up to date with news from
around the world with the first word. I'm Lisa Matteo.
Russia hit power plants deep behind Ukrainian lines today causing blackouts
across the northeast of the country. Ukraine says more than 30 settlements
have suffered Russian missile and airstrikes over the past day.
At least two power plants were reportedly hit with precision rockets.
Meanwhile Ukrainian troops are continuing to advance in an offensive
that has reversed months of Moscow's advances.
The U.K. economy recovered more slowly than
expected from a slump triggered by an extra public holiday in June.
The zero point two percent expansion followed a point six percent decline in
June when gross domestic product was curtailed by an extra day.
Off to mark Queen Elizabeth the second to leave.
Economists had expected growth of point 3 percent.
Authorities are stepping up efforts to deliver food tents and other supplies to

The country is grappling with food
shortages after deadly floods devastated the impoverished country.
Nearly 14 hundred people have died in the flooding.
More than 30 million people have been displaced and 90 percent of the nation's
crops have been destroyed. Dear is investing billions of dollars to
expand into software to make its farming machinery more productive.
The Wall Street Journal reports the company will introduce self-driving
tractors and sprayers that distinguish weeds from crops.
This year projects at 10 percent of its annual revenue will come from fees for
using software. 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. The Fed actually wants the dollar to be
relatively firm because the stronger dollar restrains economic activity and
it reduces inflation because it reduces the cost of import imports into the
United States.

So the Fed is not unhappy with the
dollar's strength. This is just part and parcel one aspect
of how you tighten financial conditions. Well the dollar is weaker today not
stronger. That was Bill totally the Bloomberg
opinion and former New York Fed president from London.
Good afternoon Tom Keene and Lisa Abramowicz.
Some Jonathan Ferro. The price action for you in the equity
market. The bounce continues.
Up twenty one point twenty two points higher on the S&P 500 up a half of 1
percent. Yields lower by 3 basis points to 327 70
for the dollar. A whole lot weaker against the euro and
against sterling. Euro stronger by one full percentage
point. Euro dollar one to one 38.
The King Charles the third just touching down at Edinburgh Airport now making his
way for an inspection of the guard of honour at the Palace of Hollywood House
in Scotland Tom. He should arrive there in the next 30
minutes or so.

And then an hour later something deeply
deeply emotional for a soul to witness. Time and hour later if he king will walk
behind the queen's coffin. From Hollywood house to St.
John's Cathedral with his two brothers and sisters scheduled in of course we
saw the Princess Royal over the weekend with the queen's coffin into Edinburgh.
But I would suggest John that all the symbolism here of the moment begins with
I believe a meeting with Ms. Sturgeon near the Scottish Parliament
which is just across from the palace. And we hope to bring that to you as we
see it a little bit later this afternoon.
As I say them to kick off the trading week equities firmer some yields pretty
stable and a dollar a whole lot weaker vessels is.
Rebecca joins us right now with UBS in affects in macro strategy as we try to
frame a picture of where we are.

And because of the moment that's where I
think I need to start with the symbolism and the signals that we see and pound
sterling. If we move beyond this period of
mourning if we move beyond a new King Charles the third touring his domain
what will be the challenges to Sterling. What are the domestic political
challenges that can move pound sterling. Yeah I think the domestic political
challenges are pretty clear. And I think they've been largely
outlined by the Bank of England and some of their recent communications.
I mean it really is their risk of a deeper downturn.
I think from the currency perspective that could mean that you know
inflation remains relatively high but girls falters.
That's a fairly negative combination for a currency obviously.
But to some extent you know as important as domestic issues clearly are for the
UK I think it's in the same boat as the euro in the sense that energy prices and
energy crisis have really been you know in our mind and in our models kind of
the dominant driver here.

So the reason I think you're seeing some
reprieve for sterling and also the euro today also has a lot to do with natural
gas prices coming off some of the pretty extreme levels that we've seen over
several weeks. I certainly know it's nowhere near
normal but it's been a little bit of a
correction there. And I think I think that's helping
Sterling that frankly I think that's where we're going to continue to focus
going forward.

Where is the opportunity right now.
I mean we have the confusion of a Fed meeting.
We've got a Bank of England meeting right beyond it but on a global basis
for UBS whereas the foreign exchange opportunity end of September.
Look I think that in terms of some of the more recessionary trades if you
want. Right because I think it's still very
clear that the global economy is in a very weak phase.
We think the dollar yen starting to look fairly misaligned.
And I know there's been sort of a lot of talk around over the past week.
I think it's becoming increasingly difficult to justify current levels of
dollar yen even with U.S. rates.
So that means we're in this kind of overshoot zone that to some extent is
testing the resolve of Japanese policymakers.
That being said you know I think it really depends on US inflation as well.
Right. So we expect a fairly soft by recent
standards at least CPI print tomorrow. And I think that that could be kind of
the initial impulse for some some further correction in dollar yet.
But I think as you pointed out earlier it's interesting that the dollar is the
US dollar is weaker but not against the yen today.
And that seems to be kind of at odds a little bit I think with the current
economic backdrop.

So I think that's maybe one where we
think things that are fairly misaligned in the near.
So are you saying that you are long that began that you think that it is going to
strengthen versus the dollar here regardless of whether the.
Japan abandons its peg abandon its heels abandons its yield curve control that
could be sort of several thousand to the same same outcome.

I mean I think that there's if you're
thinking about the broad range of scenarios it's it's possible that global
inflation continues to push higher and B OJ does nothing.
I think that's a possibility and that's kind of the world we've been in.
But the two other scenarios I think lead you to a stronger yen.
That is either global inflation continues to push higher.
And finally OJ caves in. Right.
And we're starting to see a little bit of noise in that direction or we're
going to see finally us inflation moderating kind of more prominently.
And there are kind of some of the some of the impulse for dollar yen higher is
being removed naturally rates from from the US side of the equation.
So it seems to us that you know it's affects markets overshoot.
That's what they that's what they tend to do.
But the argument for for dollar much higher by Angola and of one 143 or 144
seems to be relying purely we would say on momentum at this point rather than
any kind of plausible evolution you know easing US rates or sort of Japanese

This city of course 60 seconds and I
want to squeeze the sand and just return to the euro story the sequence.
The logic behind the move today it's essentially progress from Ukraine in
Ukraine against Russia means gas prices lower euro stronger.
You question the logic behind that that sequence from one to the other.
I'm not sure this was just the situation in Ukraine right.
I mean I think to some extent if you look at gas storage levels and things
like that they have been above sort of a bit ahead of schedule for some time.

I think Marcus just simply took took
note of that. No I think the euro actually has been
very efficient in capturing some of those developments.
So it more or less trades where it should be based on those natural gas
prices where they're at today. I would agree with you in the sense that
we're not out of the woods. Right.
This is this crisis is by no means over which means it's probably not the time
to buy the euro quite yet. 1 1 45 percent.
Thank you. The city said every cough there of UBS
talks a lot about the weakness in the dollar.
Also the random risk assets city expecting chairman power to lean against
that. Here's some feedback for you.
Bravo. That's the problem.
Lean Jerome needs to show up at the next FOMC with a hawk on his shoulder a full
body hawk tattoo and a mohawk. And instead of taking questions screech
like a hawk for an hour and a half.

Especially after that.
Honestly that's that's kind of genius. I think maybe he'll take that under
consideration. Not sure Chairman Power is going to
arrive in quite that fashion but it's amazing that only a few weeks after we
had that address in Jackson Hole that already people are questioning their
resolve. My favorite part about it is he could
not have been clearer. And then other speakers including Lael
Brainard came out could not have been clearer.
We are hawkish.

We are hawkish.
We are hawkish. We are hawkish.
People are saying are you hawkish. Well look at the data tomorrow.
CPI the main event for my is just around the corner.
You're on board with that now. You know it.
You Brandon it CPI Tuesday a week from London.
David Wright is coming up from Blue Bay Asset Management.
This is Bloomberg Surveillance. ACP Monday Basically Americans buy here
and that is about inflation. Fiscal stimulus from the UK.
More fiscal stimulus coming across Europe is going to make their job
harder. Right.
They need to continue to be diligent unread staying high in order to stave
off inflation. Those bonds are going to play into
inflation. Great point.
The Fed is not unhappy with the dollar's strength.
This is just part and parcel. One aspect of how you tighten financial
conditions for the new economy. It's a new normal and it needs a
different type of analysis in order to adjust.
This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa
Abramowicz. Witnessing history a seamless transition
of power from queen to king from mother to son from London.
Good afternoon to you all.

pexels photo 3768911

This is Bloomberg Surveillance on TV and
radio alongside Tom Keene and Lisa Abramowicz.
Some Jonathan Ferro take a moment ago King Charles the third touching down in
Edinburgh Scotland and on his way to Hollywood house.
One of the things to do John here is to look back in history as this is at the
bottom of the royal mile in the Scottish Parliament and of course the acclaimed
palace going well. Back to Charles first as coronation
there at the demolished the abbey. Now that's just adjacent to the palace
is a symbolism in the place of Scottish independence.
And if you go back John to August of this year there was a different dialogue
between sturgeon of Scotland and the London politics.
And he will have an audience with the Scotland's first minister Nicola
Sturgeon a little bit later on at least from there.
The arrival I understand the Hollywood house taking place in the next 20
minutes or so there'll be an inspection of the guard of honour.
And then this very emotional walk that's set to take place behind the queen's
coffin on its way to St.

John's Cathedral.
Yeah it's going to be incredibly somber and needs to strike the right tone at a
time when there still is trying to be this unity.
And I think that that's the important thing.
A unity of the United Kingdom at a time when there is so much change in so many
different places they think for us today and I believe over the next week.
We are a witness to history a momentous occasion for the history of this nation
and I would argue for the rest of the world looking gone as well.
But Thomas you've mentioned several times today the problems that these
global leaders have to deal with. They may well pause and reflect this
Monday as they descend on the capital a week from today.
But after that they've got to grapple with the same problems.
There has been one good piece of news. I think one really important development
over the weekend Ukraine's progress in its war against Russia in the war.
Experts saying it was accused of the most significant weekend since April if
not back to the February 24th invasion by Russia.
We've had some good follow up on that good conversation this morning here.
But John I would suggest it dovetails into is Lisa mentioned earlier natural
gas prices ebb away.

Oil ebbs away.
Dollar weaker possibly. Good news into October.
The euro stronger. Sterling stronger.
Some big moves in effects today Lisa. Yeah.
Really driven from this feeling of relief.
And perhaps this has to do with Ukrainian developments over the weekend.
But perhaps it also has to do with the fact that natural gas has been declining
pretty steadily over the past few weeks. At what point though is this just noise
as we head into the winter and we keep having to double down on this idea that
what will determine a softer landing or a very hard one will be the weather and
whether we get a cold well for ACP.

Never mind the staff forecasts.
We're still talking about our staff forecasts of a week ago.
Recession no recession in the baseline for the ECB when I think the baseline
for many people is not whether we get a recession.
That's how deep it would ultimately be. But the severity of what's about to take
place on the continent Tom will come down to how cold this winter will be.
Yeah the weather. Yes I agree with that.
But I think just as important off of September 21 as September 22.
And let me ask a question John. Frankly I've been asked in the blur of
the moment is the United Kingdom in recession at the moment.
Most people would say no in the future possibly.
I mean one thing that's changed the calculation in the last week is just
massive massive fiscal intervention from this prime minister which can change the
away from recession. You would hope so.
But Lisa regardless of the new cap from this prime minister and the willingness
to take on unlimited liability to cover the cost of these bills bills now are
much much higher than they were a year ago.
And people are still got to grapple with that reality.
And you're seeing that borne out in the data earlier this morning in the United

We did get GDP figures in the U.K.
stagnating. And so at what point is a tipping point.
Not that difficult to see given the pressure that people feel with a
potential double digit inflation rate for a longer period of time.
Tuna ruptured quickly a distant shot John as the king enters Edinburgh of the
castle and then he will descend down to Hollywood house.
But just you know again the history here is just stunning.
We don't need to do a history lesson of the moment but this is an original
moment. I would suggest for the United Kingdom
as something many of us have never seen before time and something some of us
will possibly never see again. You think of the economics that we cover
every single day. The sterling at the coronation of the
queen was I believe two dollars 80 cents.
And we come down with the cost of that of course.
I checked it as well and I was sort of surprised the thought was there actually
a higher statistic.

to see the challenges that are to be faced which we will cover with our great
team and I really commend you folks. Bloomberg UK has an extraordinary effort
here to be up to date on these set of crises.
And that's the issue. It's not one crisis.
It's not I it's starkly different from the United States.
It's a set of crises. All these.
Images of which there are many. There was one crisis Tom that was on the
horizon that we all hope to avoid. And that was in the affects market.
And I reflected on this a little bit earlier this morning and I think we
should do it again. The very fact that we were having a
little look at 113 and didn't break 114. And now this morning this afternoon here
in London we're back to 117 levels. The meeting for the Bank of England
governor which was set to be this week right now next week was always going to
be difficult hard and complex.

The very fact though Sterling has
rallied back I think for the governor of this Bank of England.
That is a positive development relatively speaking to what we were
looking at just a week or so ago. It's a bounce.
And I'm not going to play technical analysis here.
But certainly it's cutting the right way for a new prime minister.
We have to remember she's been out of the picture here for a few days.
We have a new prime minister of the United Kingdom.
We do.

That's been underplayed I think here in
London at least has been on top of that as well.
The problems of this prime minister lace up front and center for the British
public. Of course we're all following this at
the moment. But to Tom's point we've still got an
energy crisis. We've still got a lot of problems to
work through. They don't go away.
And we got news earlier this morning that October 1st was when some of that
aid was going to get starting to get distributed for consumers for consumers.
So what does that mean. We don't know necessarily for businesses
but to get that through during a period now we're out of respect for the queen's

They are not doing deliberations is
going to be quite a feat. We'll continue to follow.
King Charles the third as he makes his way to Hollywood House Scotland the
palace of Hollywood House from there. Tom of course he'll move us on to St.
John's Cathedral a deeply emotional wall which is set to take place in the next
hour or so. Walking behind the queen's coffin from
the Palace of Hollywood House to St. John's Cathedral Tom just the next phase
in a long sequence of events that set to take place as we work our way towards
this time next week where we have the funeral for the queen.
It's a path forward. But for the family this is different.
Balmoral is owned by the royal family. It is different than the other castles.
And I would suggest there is Scotland is different.
And again what we'll see here and I will save the history here for when we
actually observe these events but they're stealing themselves for
significant symbolism which goes back beyond Charles the first and roughly 16
20. Time out for the show.
And I said that what we're witnessing care is a seamless transition of power
from queen to king from mother to son from mother.
Forget that.

And William's.
Same thing in the last 12 hours. We'll continue to follow these pictures
as they come in from Scotland for you to follow the developments in this market.
With equity futures bouncing back sterling a whole lot stronger the dollar
a whole lot weaker. I reflected on this a little bit earlier
this morning. The very fact that we've got all this
dollar weakness and still the yen is struggling to find some strength.
I think a concern to David Riley the chief investment strategist at Blue Bay
Asset Management. David can we start with foreign exchange
and work our way to your world. What do you make of the dollar weakness
this morning. Yeah I think some of the weakness that
we're seeing in the dollar is reflecting both the repricing of the rates outlook
for the euro after last week's ECB meeting and I think those are some sort
of you know a little bit of a sliver of optimism in terms of recession risk
including 44 for Europe because I think you have been discussing the UK.
But one aspect about the UK is this huge fiscal package.
We know this discussions going on in Brussels about an energy price measures
as well.

So I think kind of a little bit sort of
thinking well you know somewhat higher rates may be the worst case scenario in
terms of a severe downturn in Europe is less likely and other things being
equal. I think that's kind of broadly
supportive for the euro to some extent for full force for sterling as you say
know yen is the standout in that respect.
David I've been dying to talk to you with your holistic knowledge of the
guilt market. We see a new king shaking hands in
Scotland and all the news to come on. The fiscal solution at least are brand
words talks about can the United Kingdom withstand this fiscal impulse.
The United Kingdom can certainly I think finance that without having a sort of
outright if you like sort of funding crisis.
But I do think that it does imply the longer and gilt yields will be higher.
I do think actually something which won't be welcomed by the new prime
minister. I do think if you're the old lady of
Threadneedle Street then you are also looking at this package and saying other
things being equal implies higher Bank of England base rates.
So you know U.K.

And the U.K.
government better financed this package. But I think he's going to have to pay a
price for it. And I think ultimately that's going to
be higher yields. And I think you know I'd still be
relatively bearish on sterling. David what do you need to see from the
plan that evidently is going to leave consumers with some aid from the UK
government as soon as October 1st. What do you need to see to assess the
path forward for how hide gilt yields could really go.
Was that the first thing is we actually still don't have an official costing for
the plan that was announced on the day that we got the very sad news about the
passing of Queen Elizabeth.

We actually don't have the numbers.
I mean there's estimates floating around ranging from one hundred billions
British pounds up to 150 billion plus. But we still don't know really the
details of the plan and ultimately in terms of the cost.
So I think that's going to be important in terms of working out what the path
for for for for guilds will be. And also then of the Bank of England and
the Bank of England reaction function. I think one of the themes that's
starting to come through not from the UK but also transferred to Europe is that
we are starting to now see the emergence of a kind of fiscal purse if you like in
terms of growth. But I think that's clearly I think
broadly positive.

But it does mean I think that implies
that we're kind of deferring high inflation or keeping high inflation for
for longer. And I think that then fits into the
thing that actually rates stay higher for longer as well.
David Roddy thank you. Philippe Asset Management.
David thank you very much. I'm continuing to follow King Charles
the third as he makes his way to Hollywood house in practice here for
what is presumed to be after the funeral on Monday which is a tour of his Great
Britain. It'll be fascinating to see how we've
talked about this on Friday. The shift from prince to king but also
the shift in moving to the grind the royal grind of duties.
And part of that is to visit Wales visit Scotland maybe visit Northern Ireland.
I'm not I'm not sure on the full nations of this United Kingdom and least it
ultimately works unite a country for many grieving the loss of their queen.
That will be a deeply emotional scene taking place in an hour expected to take
place in an hour.

Lisa when we see the king walk behind
the queen's coffin from Hollywood house to St.
George's Cathedral she wasn't just the queen of the United Kingdom.
She was a queen for a commonwealth that may not ever have a monarchy again.
If you look at some of the discussion it just positive this afternoon from London
this is pulling back. I think it's very difficult to be the
head of the central bank right now because you're fighting an inflation
that is. That is probably from energy and
probably from psychology.

And you're fighting growth.
It's falling because of it. So to be raising rates aggressively into
falling growth and energy you can't control means credit spreads should have
a premium. And as you said more debt on the heels
of it doesn't have the premium that from what state and local standard would like
to say. That's for sure.
From London this afternoon. Good afternoon to you.
Here's the state of things right now and markets particularly looking at
stateside where equity futures are positive by around about four tenths of
one percent on the S&P 500 one hour and twelve minutes away from the opening
bell with equities up yet which allow up by 4 basis points to three 326.
Fifty nine at dollar this week a euro stronger one to one.
Forty eight on euro dollar positive. One full percentage point all ahead.
Some of this time tomorrow we'll be counting down.
I was going to say P.I.

24 hours and eleven minutes already
about what life is all about and fly which is more important to join a
headliner quite quickly. A core month on month.
Yeah I think my son month call. What happened Sarah.
It's gonna take time. Even some people modeling a decline.
They want to see a convincing sustained decline in inflation over time which
gives them confidence that we're heading back to what's 2 percent inflation.
And you heard from Governor Wallace last week.
He's not convinced of that right now. We welcome all of you on Bloomberg Radio
on Bloomberg Television.

Extraordinary Monday of history in
Scotland of war in Ukraine. And of course what we're seeing in the
markets right now we turn to Ukraine has been a absolutely unique weekend of
infantry movement which means only we can speak with General Hodges.
Ben Hodges is a former commanding general for U.S.
Army Europe. He is the Pershing chair in strategic
studies. A super.
But so importantly Ben Hodges I'm going to go back to you doing what you do
best. You were an instructor at the Unite
United States Army Infantry School. When you instruct infantry and
particularly if they're Ukraine's going after rapidly retreating Russians what
should they do. Three things.
Number one do not let up the pressure do not give the Russians a chance to stop
and turn around and fight. So that's number one.
Number two keep using your combined arms.
In other words infantry tanks artillery engineers all of these things working
together. That's what Ukraine is doing so well and
that the Russians have not done well.

And then finally unleash Ukrainian
airpower. Even though the Russians had all the
advantages they they've never been able to dominate the airspace over Ukraine
and nothing. The Ukrainians are a tragic event that
this conversation reminds me of. One U.S.
grant an unknown going down the Mississippi River and teaching the north
how to prosecute a full force invasion. What do we need from the Ukraine's
Ukrainians now to be like grant in our civil war.
Is it simply they need more material. Well for sure.
They have the same sort of strategic eye as General Grant did.
This is about.

You have to crush your enemy.
And that's that's from President Zelinsky on down.
He said this thing started with Crimea and it's going to end with Crimea.
And so what they do need from us of course two things.
One they need continued delivery of the type of weapons and ammunition that are
helping them make the difference to destroy Russian logistics destroy
Russian command and control. But also the sanctions.
So the sanctions really are having an effect on Russia's ability both in terms
of their own defense industry but also domestically.
I think more and more Russian people are beginning to feel this war that Putin
was trying to shield from them. Well Lieutenant General that's why I
wanted to go because there is some discussion about the possibility of
conscription if Vladimir Putin does not want to come to the table does not want
to come to some sort of resolution if he is running out of troops as the reports
have suggested.

What is Vladimir's Vladimir Putin's
response to this. How concerned are you about some
retaliatory measure that we're perhaps not expecting.
Well you're right that they have a very serious manpower problem in the Russian
military which is not doesn't sound like what I would have said a year ago.
Most of their recruits now many of them are conscripts come from the way outside
of Moscow and St. Petersburg.
The Kremlin has tried to avoid drafting anybody from the two major metropolitan
areas because again they want to shield the public from what's happening in
Ukraine that nobody wants to fight. Nobody wants to get involved in this
war. They know what's going to happen if they
do get sent into Ukraine. So I think part of the reason President
Putin has avoided doing this general mobilization is because he wants to
preserve the fairytale.

But also they'll be humiliated.
People will not show up. They don't have the equipment to to
equip their uniforms and weapons to equip another hundred thousand troops.
And it would still be months before they would be effective in any way.
So Lieutenant General how does this end. And does it reassert Russia as a member
of the global economy or does it leave it incredibly isolated.
I think it's can be a long time before we can look at Russia and work with them
as if things are quite normal.

Does this war end.
I believe early next year that the Ukrainians are going to push the
Russians back to the 23 February alone before the end of this year I believe.
Of course I could be proven wrong here in another month or two.
But that's how I think that's going to happen.
And then Crimea probably early sometime next year a combination of fighting and
perhaps some negotiated conclusion. But the Ukrainians are not going to stop
nor should they stop.

What does Russia look like when this is
over. Of course I cannot for sure what kind of
friction and things are happening inside the Kremlin.
We are all seeing various reports of things that are happening there.
A lot of finger pointing. And people they start falling out of
windows again. I mean there's gonna be a pretty rough
scene around Moscow I think for the next few months.
General thank you. We appreciate your time today sir.
Penhaul insists that a former commanding general for the U.S.
Army laser even if it does conclude next year and another general would agree
with the sentiment that forecasting geopolitics as difficult as forecasting
anything right now. I think I think the only thing that
makes you look more foolish is trying to call the old price any time soon.
Gas prices for that matter. Gas is down today.
The euro is stronger. There's plenty of reasons for that.
But when you think about the durability of a move like this one even if you've
got a conclusion to this war I keep going back to these sanctions and the
policy response to it.

That's not going to get unwound
immediately immediately or at all which is the reason why I asked Ben Hodges
former lieutenant governor commander whether we would see some sort of return
of Russia back onto the international stage because if you don't does anything
change with the energy backdrop even if the war technically ends gas prices the
change in today that's down almost 9 percent.
The euro change too. It's a whole lot stronger.
Futures just about positive.

We're fighting now as we get closer
towards the often empowered equity futures are positive.
A third if 1 percent after paying a fair bit higher than that.
A little bit earlier in the session. Euro dollar positive.
One full percentage point. One to one.
Forty eight. Joining us shortly.
Stephanie Aronson of Brookings from London.
This is pulling back. This afternoon from London.
Good afternoon to you all as we count down to the opening ban in New York
City. Good morning to those of you waiting for
that. About an hour away with equity futures
positive on the S&P 500. Yields are stable to low through much of
this morning.

And the bond market on a 10 year yields
have been climbing for six consecutive weeks.
That lower today by three or four basis points to three thirty three twenty
seven thirty six. The euro is stronger to tell us weaker
one to one forty seven. The reason for that least when you and I
have been going over that for much of this morning and into the afternoon here
in London is just the connection from these stories the news we hear over the
weekend about progress being made by Ukrainian forces against Russian forces
the pullback that we've seen in gas. And one thing you and I have both on the
same page on that it's not the war per say alone exclusively that has caused
this move in gas and energy. It's the response to the war.
It's the policy. So it's the potential for a change in
policy that we need to focus on more than anything.
And Dan Tannenbaum a good friend of this program over the years and a sanctions
expert said this Lisa just moments ago think a message.
These sanctions won't go away for years and it's going to take years to come up
with the alternative.

The European Union is still discussing
what their energy plan is going to be an emergency energy plan.
Earlier this morning we were hearing from EU officials that they are going to
have a mandatory power demand cut. So they're going to be trying to target
this from both sides. But this is not going to be clear cut
and it's not clear to see an easy read through to a currency response at this
time regardless of the developments on the ground.
Some gas prices down about 9 percent. It does afternoon.
I did a technical study of the Netherlands and I'm going to say they're
down but they don't signify any sense of a downward trend.
Have we've broken some form of technical level.
I don't see it but I just defer to Harvey Blossom.
Stuart Wells and all of our hydrocarbons said we were down about 7 percent this

We're down now down about nine last week
down three and a half the week before that down about 36 percent.
So we've had a steady drop off over just two in a big way.
But boy what a moonshot. It was a chance.
And we can pull up and go get it. But I would suggest that the pricing
that we've seen is this faith in the Ukrainian advance against Russia.
It's that simple.

But to dance Hannah Pound's point it's the sanctions and the policy response to
the war that matter here. And even if we have a conclusion to this
war and I think we all hope we have a conclusion to this war in the minds of
many times the sanctions aren't going to go away for a long long time.
So can we actually resolve some of these issues in the energy market.
General Hodges just telling us the sanctions work.
Others disagree. Jeff FTSE it's that simple.
Futures up 13. Dow futures up 42.
This morning we welcome all of you. Stephanie Aronson with us economist at
the Brookings Institution. As we look at the state of the American
economy as we look towards this inflation report but also just the
general mix of the American economy stuff really how complex is the American
economy now versus what we see in Europe.
It seems to be more successful quieter maybe with a better plan for it than
what we see in the tumult of Europe.

I think it's true that the situation in
Europe is much more complicated although there are certainly spillovers from the
war in Ukraine to the U.S. economy.
We are energy markets are just less affected than they are.
And also there are a lot of direct spillovers of the war too in Europe in
the form of the refugee crisis. So I think there is just much more
tumult now in Europe. And while it's certainly spilling over
to the U.S. economy it's just a less complicated
situation. I would suggest Stephanie that Brookings
owns the high ground on the research of the effect of inflation and the effect
of slowdown across deciles and quintiles of America.
It's unevenly distributed.

Everyone tells us that.
But how bad is it unevenly distributed. How much is the middle class of America
getting crushed right now. I mean lower income and middle income
Americans spend a lot more of their budget on things like food and gas.
And one thing that's really been striking in the past year is how much
these prices have risen. So the effects are much larger for them.
Stephanie can you tell us about Jackson Hole and your take away from Jackson
Hole. And how surprised you were by how
hawkish some of these central bank participants actually are because it's
only a few weeks later that market participants are coming on this program
and questioning the credibility of those institutions and their resolve to do
what they have told us they're going to do.
Yes I think that the Fed and other central banks were clearly trying to
send a signal to their publics that they were on the case of inflation and that
this was their main priority now even potentially at the expense of their
being significant slowdowns or recessions in the economy.
And I think part of it was a response to the movements we had seen in the markets
leading up to Jackson Hole where there seemed to be some sense that perhaps the
Fed and other central banks wouldn't act as aggressively.
And I think clearly now you know they have sent the signal that they are going
after inflation first and foremost.

Which raises an interesting question
Stephanie at a time when we're expecting a CPI print that will potentially be
soft or maybe even negative at least in the headline number.
I'll be at the core is expected to continue continued to rise.
But you're seeing gasoline prices come off.
You're seeing even certain retail companies put their clothing on staples.
You're seeing a lot of movement toward lower prices ahead.
How does the Fed respond. Do they remain hawkish in the face of
progress even though a lot of people are seeing it continue to accelerate in
certain sectors. Yeah I think so.
Clearly the step down in oil and gas prices is very welcome and that is
probably going to depress the headline number or as you said it could even
decline. But I think there is a lot of momentum
still in the core.

We're expecting you know for instance
housing prices to be very persistently high and other sectors as well.
And so I think that this one reading is not going to be enough to dissuade the
Fed from a large movement at its next meeting even if it is a bit softer than
the numbers had been coming in recently. What are you watching Stephanie to
really gauge how quickly inflation is coming down.
We know that used car prices have declined.
We know that gasoline prices have declined although that's questionable
whether it will stick.

Once the Strategic Petroleum Reserve is
no longer being deployed. At what point are you looking at other
stickier measures like rent and some of the other areas to really get the your
guide. I mean I think clearly looking at some
of the other sectors what's happening in rents as I mentioned also what's
happening in good prices is going to be key for monitoring inflation going
forward. And I'm also looking at the labor market
because the Fed is going to need to see a real slowdown in the labor market.
We've made a little progress on that front.
But the three month moving average of payroll employment growth is still above
three hundred thousand.

That's a big number.
And so I think we really are going to need to see that slowing down further
before the Fed can feel comfortable that they're going to be able to achieve
their target. Stephanie your wheelhouse here is a
study of labor participation. We see cultural institutional.
We see it by male female over 30 40 50 years.
The dynamic of labor participation now. What does that signal about to Americans
out there in employable America in a less employable America.
And I think you've hit on a very important factor going forward that you
know obviously some of the decline in labor force participation we've seen in
you know over the past decade really is just sort of the natural result of the
aging population. But there actually has also been a
decline in the labor force participation of sort of prime age men men 25 to 54
who we would really expect to be working right now.
And a lot of that to have this decline has taken place among lower skilled men.
And I think it does speak to the very difficult labor market that these men

And that's going to be a long term
structural problem that the U.S. is going to have to deal with.
Stephanie great to catch up and again fantastic to see over in Jackson Hole
Wyoming. Thanks for being with us Stephanie Anson
of the Brookings Institution. Lisa we went back and forth on this
after we caught up with those Fed officials in Jackson Hole.
They're forecasting common employment. They're forecasting some pain in this
labor market. And they can talk about higher rates and
lower inflation or they like once you start to see materially higher
unemployment a deceleration of growth accompanied with that it's gonna be a
lot of questions about this policy a lot more than the questions they've already
had. There's a political question too because
right now a lot of politicians are saying inflation's a private risk for
most concern. And so they're fine with the Federal
Reserve. That's hawkish.
But what happens when you students do start to see that deceleration to your
point how much resolved and they have especially considering that this is
unknown chartered territory.

The language at the White House Tom so
far as that it's been that we will give space to the Federal Reserve to do what
they need to do to bring down inflation now when unemployment starts to shift in
the other direction. I wonder if that's going to be in the
state for some months. I think the message is change from four
five six months ago in that the space is occurring right now.
Shock because of the data which shows how important tomorrow's data is into
September 20. I guess the good news for this fed of
reserve stress the good news for the Federal Reserve and not good news per
say is that unemployment was climbing least in the last jobs report off the
back of higher participation which led to softer wages.
I'm not sure anyone's jumping on that particular data point with conviction
and saying that's going to be the trend for the next several months.
But maybe that's the opening for this Federal Reserve to start talking up a
so-called can I say a soft soft landing.

You could say it whatever that means.
I mean honestly whether it be transitory.
I'm not sure. I it's certainly you know recession.
Does that just mean that the unemployment rate doesn't rise.
The theory is in a perfect scenario there
all these people on the sidelines for the labor market that are going to come
back. That participation rate will go up and
suddenly wages will get a little bit softer in terms of how high they climb.
And everyone will be happy because the unemployment rate of people won't being
laid off. Covid kind of thought about this this

This is important.
X number of months ago what percentage of the punditry was calling for a
recession. It was a lot.
It's something that occurred at the end of the year.
And I think go back to the summary of economic projections in December of 2021
and we'll get another set of forecasts of this Fed meeting in a couple of weeks
time. They were looking for zero point nine
percent on Fed funds by year end this year.
That was the forecast of the end of December for the year ahead.
And we're talking about a 75 basis point hike in a single meeting again.
Lisa now that's a change. I love the way I see that.
You're basically just showing that their forecasts can be treated with that might
really just get out there. And so I do want to listen to Bloomberg
Surveillance futures up 40 cents from London is pulling back. Keeping you up to date with news from
around the world with the first word. I'm Lisa Matteo.
King Charles the third is vowing to uphold parliamentary democracy and
follow what he called the selfless duty of his mother Queen Elizabeth.
The second addressing parliament today.

The king said he felt quote the weight
of history surround him. Charles is now in Scotland.
Will he'll lead a procession carrying the queen's coffin through Edinburgh.
The queen will be laid to rest one week from today.
The euro surged the most in six months after a European Central Bank
policymaker said further interest rate hikes may be needed.
Traders are betting U.S. inflation data later this week could
undermine the need for aggressive tightening in the U.S.
The ECB raise its key rate by an unprecedented 75 basis points last week
to curb the fastest pace of consumer price growth on record.
Our Investment Management's Kathy Wood is warning about the risks of U.S.
auto debt if there is a drop in prices. In a Twitter post she said the
prevalence of ride hailing services means that people won't prioritize
paying car loans as they did during the 2008 2009 financial crisis.
The used car market is showing signs of softening after prices skyrocketed
during the pandemic.

Twitter is saying no to Elon Musk's
latest effort to cancel his agreement to buy the social network.
Twitter says Musk's latest move is quote invalid and wrongful.
That's according to a filing today. The billionaire says the company's
treatment of a whistleblower gave him another reason to walk away from his 44
billion dollar deal. It's his third attempt to withdraw his
offer global lose 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. What we've had so far is a willingness
by governments across Europe to accommodate the shock from rising energy
prices. With rising interest rates.
It's going to be increasingly problematic for these governments to
maintain this kind of fiscal policy.

As you look at that the chief economist
at AXA Investment Managers we are about 43 minutes away 42 minutes away from the
opening bell in New York City. Equity futures.
Positive on the S&P 500 just above forty one hundred on my screen right now
looking at S&P 500 futures up 16 points up four tenths of 1 percent.
You go to LA by two or three basis points 328 thirty one some euro dollar.
Look at that positive percent one of 141.
Stronger Europe weaker dollar. Most leg up here you see it much more in
stronger euro versus yen dynamics with stronger euro today.
We have a chart in New York on a Monday.

Here is Kitty Gupta.
Well Tom we have to talk about the power crisis.
I want to put in some perspective for our TV and radio audience here which
brings me to my chart of the day. We're looking at German and French power
prices going back about two years. So you see this kind of big move in
2021. It abates ISE any more parabolic move in
2022 which once again is coming back down from its peak that you saw in the
late end of August. Still at record highs though.
And I really want to put this in a perspective once again.
Electricity prices largely linked to gas prices because all the sources of

Well they bit into the same grid.
And of course gas prices are the more expensive source.
So they tend to drive the market for the American tourists.
I'll put it into some perspective. Here's what it means for you.
The Eiffel Tower their lights are going to turn off earlier.
The London Tube for example they're experiencing severe delays because of
these power supply issues Tom. This is going to be a key story about
whether or not these power prices ever come down simply as they deal with the
issues that come with gas prices and of course renewable energy.
Gupta thank you so much greatly appreciate it.
There a terrific journalism today at Bloomberg News on oil and hydrocarbons
and all that it means for us.

And of course leading our coverage is
Will Kennedy our managing editor for Energy and Commodities who were thrilled
to join him today. Thank you to all of our London team for
what you've done the last number of weeks and months.
It's just been huge value in New York for us today.
I got a double barrel no surprise at how big a blast is out guns blaring.
But also David Filling writes is well on the unintended consequences Mr.
Putin may have unleashed. Let's cover that concept right now is
you sum away all of our coverage. What are the unintended consequences
right now in oil. Well clearly Putin has made energy part
of his campaign in Ukraine. And part of putting pressure on the West
and not supporting Ukraine hasn't worked so far.
But in the short term in energy terms it has been working.
Its critics blame there. It's causing huge economic pain for
European countries as they pay unprecedented prices for that power and
gas. The point that David is making is how
long will that work for and what comes next and what comes next is a continent
that says right.

We have to find a way to live without
your gas Mr. Putin.
We have to try something new. So the point he's making and he's
drawing a comparison with the Arab embargo in the early 70s is ultimately
the winners in this and not likely to be Moscow even if it works in the short
term. Longer term it's the other suppliers of
both tasks from elsewhere in the world and new forms of energy who are going to
win from this crisis. It's such a hard issue to get your arms
around. Well not only because of all the
forecasting error that's inherent in this process but just gauging what's
going on on the ground whether there is sufficient stockpiles in Germany to
manage through a cold winter.

We've heard a lot of varying reports on
how well-prepared Europe really is. What's your sense of that.
Just heading in based on where we are right now in terms of stockpiles.
Germany is ahead of where it wanted to be.
I think that the current number is 88 percent full.
It's only mid-September. That looks pretty good.
But as we discussed last week it's going to be the second half of the winter
which is problematic. Once those stockpiles are run down it's
gonna be hard to secure that gas supply they need.
We say it again and again but I'd reiterate it.
Weather will matter here. But it's interesting what's happened to
the price. It's come down.
It's still fairly elevated but it's come down from the extreme levels we saw at
August. And I think that's a sign that
policymakers are starting to get serious in addressing this question.
And that's taken some of the extreme heat out of the market.
It's all going to depend on the weather in the UK.
I wonder how you'd respond to this.

Well it seems like they're almost
incentivizing demand with the plan than found last week.
How's this going to work out. I think that's a really interesting
point John. You've got a big contrast between the
European plan where we've been reporting more tales details like now which has a
face specific targets for demand reduction.
There is no target. Apart from a few warm words for demand
reduction in the UK. So you're saying this is a fixed price
and it is high. People will respond at the margin.
It's not cheap energy but there's no strategy to bring demand down in a
serious way. It's an interesting contrast between
Britain and Europe. Completely unfair question but it's
unfair. Monday what percentage of the United
Kingdom public is oblivious to the high price of hydrocarbons.
Is it a razor thin rich rich rich margin or is it a good percentage of the
people. I think it's something that everyone
knows about to be honest Tom it's been a matter of huge interest the last few

In the past there wasn't something that
people thought about. Much energy was relatively cheap.
We are probably paying on average about a thousand pounds a year.
Even at the levels that trust is proposing you're talking about a two and
a half times increase. That's something that gets almost
everyone's attention to be honest. Well Kennedy thank you.
And I think we all know it's just a little bit early this morning LEIGH.
So plan for the consumer. We've got a date for that.
We're still on it. Got the details for businesses.
And that's going to be a huge concern when you hear the reports you're hearing
out of Germany over the last few weeks that some parts of industries are just
shutting down. They're just shutting down.
Yes. And what does this mean for industries
and companies that are trying to reassure a lot of the production at a
time when their currency is losing power on the global stage.
In other words how do you deal with the inflationary inputs at having to import
more if your industry gets shut down because they don't have enough energy to
keep going at the same kind of tilt.

That's the better news today.
Commodity self and seeing the likes of sterling stronger.
117 take a little bit earlier on cable. That's a turnaround from where we were a
week ago. I think turnarounds are right phrase.
I'm not willing to say you know technical bottoms that only that other
people. But John what I would notice besides the
real yield hitting a point nine zero which is stunning.
Now a positive point eighty six eighty six basis points is also the Bloomberg
Financial Index has not given way to more restriction.
It's not gone to where Jerome Powell. Like it to be market based inflation
expectations have just done this. Rameau rolled over.
Yeah. Which really raises this issue right.
People feel like the Fed the ECB can get inflation under control or at least they
will get the cooperation of oil and gas. But they might not have to inflict the
same kind of pain that they're saying that they will probably inflict economy.
I mean this is just an interesting dynamic with the market not fully buying
good credit quality. So I may be wrong in this but someone
was writing about the Ankur frayed the rope of the anchor of the inflation
anchor fruit.

I'm not sure.
I'm afraid it is. I can't I don't have a handle on.
Chairman Powell when he interrupted ECB President Christine NIKKEI news
conference last week he went on and on about that repeatedly that the day
following maybe the governor of England will speak today which he loves to
compete with the Covid the Bank of England the gap earlier.
Do you still to understand what that was last week.
Well how much is this really.

I mean in fairness how much is it his
fault and how much is it the Cato Institute for not necessarily Chairman
Pat on line one he'd like to move his his panel to an hour later.
Well it was the Cato Institute going to say I unfortunately can't accommodate
this year. Perhaps we'll do something in 12 months.
They'll say that my son in law was the one who interrupted that tape flying
within six sec. So that's what happened.
So equity futures are positive on the S&P.
The opening bell is about 35 minutes away from London.
This is pulling back. This is an extended edition of Bloomberg
Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz
equity market rally going into the open impact equity features positive.
Live from London from audience worldwide.
This is Bloomberg alongside some keen and Lisa Abramowicz some Jonathan Ferro

Positive to say T.K.
got into this open and found we wake up Monday with a better tone to this market
better return to the market. And it's coming off of certainly good
news out of Ukraine and Russia. Ukraine doing much better but far more.
Joan it's about a quiescent inflation guesstimate for and I put guesstimate on
it because as we go to tomorrow's inflation report there's a real mystery
to it. Alisa a better time in this equity
market at a time in Europe say wow. Gas prices down steadily stronger euro
much stronger and a sense that there is some sort of plan formulating in Europe
with respect to how to diminish some of the demand to bring gas and oil prices
down ahead of a winter that really relies as much on the weather as it does
anything else. Our team coverage here at Bloomberg
starts right now with Amari Hilton in Washington D.C.
and Maria today at over in Brussels. Mary I want to come first to you the
progress that we're told that Ukraine is making over the weekend.
Your thoughts.

Well it is significant.
It does show that this is an army that can be competitive if they have the
weapons. Those who said that Ukraine could not
keep up a fighter could not put up a fight have been proven wrong.
I think the real question now is can it be sustained.
And yesterday the president of Ukraine Moments Lansky put out a post on
telegram which to me was so telling. He said at this stage we'd rather not
have electricity. We're rather not have food and not have
heat didn't get rid of the Russians that are in our land.
And he continued to say there will be a liberation of all of our territories.
So really a lot of this does show the spirit that this nation has.
And I have to tell you Jonathan a lot of the Ukrainian officials too that I speak
with on the record but also behind the scenes they also tell me you have to
understand this is the fight for our lives.
This is an existential question for us or for them.
There is no question that the fight will continue as long as we get the weapons
we need.

I think now for the Europeans and this
is the real question is whether or not they'll supply those weapons because as
you know very well moving concerns particularly
putting weapons in the country with weapons could lead to an.
And Mary this brings a question about what the U.S.
is doing about and we've been talking about this for a number of weeks now.
How much are you looking to the US when it comes to price caps for Russia as was
proposed on Friday at a time when the EU is also taking the lead on how to direct
some of the energy policy.

Yeah I think when you look at what's
going on between United States and Europe and as well as what is still
coming out of Russia in terms of energy exports you really need to differentiate
between natural gas which is one story which Europe it was tremendously relying
on in terms of pipeline natural gas from Russia which over the summer we did have
the US or pass that pipeline natural gas in terms of liquefied natural gas going
to Europe. And then the other when it comes to a
price cap globally is really the oil situation.
And this is the one that the US is keenly focused on because of course the
oil price around the world will infiltrate down to what everyday
consumers are playing paying at the gasoline pump.
So that is why they want to get and they have the G-7 onboard.
They're going to implement this plan. But it's also making sure others fall
into line even if they are not signing on the dotted line that they are going
to sign up for a price cap. What you are hearing from the
administration we heard from the deputy treasury secretary over the weekend
talking about the fact that this is still one part of the Russian economy
that has been able to actually grow and that is the oil industry.
So they want to make sure Russian oil stays on the market but it's capped at a

And in order to get access to this
European insurance and shipping you're going to have to get in line.
That's the message. I mean how does the news over the
weekend of a much better Ukraine military effort Anne-Marie how does it
change the debate the urgency at the Pentagon and on the Hill.
I think the debate maintained that they need to continue supplying and helping
Ukraine because what does that say. The fact that Ukraine is able to push
back you have this statement over the weekend when I saw the Russian defense
ministry pop up with this statement on my telegram channel saying that they are
quote regrouping. Maria was correct before saying this is
a rare admission from Russia from the Kremlin from the military saying that
they do need to regroup. But the concern now is what does this

What we see Putin has when he starts to
lose some strength is that he digs in. And the worry of course and the concern
is that he will come back harder. So that would almost extend the debate
in the United States to actually potentially more support is going to be
needed. That's what the White House is asking
for in terms of Congress in terms of funds so that the Pentagon could draw
down some of these stockpiles and send them over to Ukraine.
Thank you Emery DC Maria Tadeo over in Brussels.
Thanks America. Just published moments ago on retail
sales here in America off the back of what's happening with gasoline prices.
They say the following.

Total comp spending was up 5 percent
year after year in August. We forecast a solid zero point eight
percent increase in cocoa control group retail sales.
The plunge in gas prices supported spending Tom in other categories.
Some good news out there at least. This is just generally what I'm talking
about 70 percent of the economy. We've got all sorts of people.
Jim Glassman of J.P. Morgan is heated in his 50 years of
coverage of the street that we are underestimating the consumption surge in

Jim Bianco joins us right now.
Jim Bianco of Bianco Research. Jim fantastic catch up with you sir.
What do you make of this pullback in commodities gasoline in America that gas
here in Europe. Yeah I think it's part of the cycle that
these markets go through. I mean if you take nat gas in Europe it
got a little overdone. A couple of weeks ago.
Oh it's definitely pulled back a lot. This is the old Wall Street thing.
Are we more impressed that it's 40 or 50 percent off the high or are we worried
that it's still 400 or 500 percent off of the low from two years ago.
I'm more worried that it's four or five hundred percent off of the law regarding
gasoline in the gasoline or crude oil in the United States.
Count me in the camp that thinks that that market is deeply oversold right

The pessimism is running high.
Everybody seems to want to talk about 70 dollar crude oil as opposed to a rebound
to one hundred dollar crude oil. At least that's the way that I see it.
And I think we're setting up a low. I think that we're setting up a low to a
new high. Is that what you're suggesting.
I mean there's sort of just based on what John was reading earlier about the
Bank of America card data.

It's almost this unfortunate cycle that
if you get lower gasoline prices you get more spending and then you get a faster
economy and then you get an economy that needs a Fed to really help the break.
So at what point are you looking for that surge in demand to take back over
in the crude market. Oh I think that this surge in demand is
going to take over immediately I agree with that survey.
You know we've already had a dollar 20 decline in the price of gasoline.
And it's also worthy of note that tomorrow is the CPI report.
The Bloomberg estimate is minus one tenth of a percent because of the fall
in gasoline prices. But that has not stopped the market from
putting a 90 percent chance that the Fed is going to raise rates 75 basis points.
So if we print minus a tenth tomorrow still expects 75 basis points we need to
have something more than that.

Actually I think we're probably going to
turn our attention now to the core CPI measures because those are we're going
to matter and that spending surge will probably show up in core.
And that's really where the Fed and everybody will pivot to as far as where
they're going to go next with Fed policy and what's next for inflation.
Jim we're in London and we've been hearing a lot about an energy situation
that's quickly moving and looks marginally better.
Perhaps not when you look at the the the rate the pace off the base.
But when you look at for example just the trend of natural gas prices coming
down. How concerned are you about the fiscal
landscape with countries looking to borrow to plug the gap but not
necessarily reduce the demand. I'm talking about the United Kingdom.
No I'm very concerned about that. There's two things here.
First of all while the price of natural gas is coming down the storage for
natural gas is about where you would have expected it to be in the middle of

So there's no lack of storage but the
price that they've paid to get that storage is about 600 percent more than
they did last year or two years ago. Somebody has got a huge bill they've got
to pay. So that's either going to show up in
higher energy bills or it's going to show up in higher taxes.
And if they think that they're going to bridge that gap with more borrowing well
you're going to do it at a time. Let's take the UK.
U.K. when the Bank of England is aggressive
on raising rates is not going to be there to support the market.
If there's going to be a big jump in fiscal borrowing and it's going to be
very very difficult for that.

So it looks like they've either got
higher taxes or higher energy bills or a combination of the two.
The GMB aren't going to steal from the great John writing with his Bank of
England and Federal Reserve experience. Why are we afraid of higher interest
rates higher interest rates a sign of a resilient economic America.
Interest rates can go up for one of two reasons.
If they are going up because of strong economic growth real growth that's a
good thing. And you want to encourage higher
interest rates. If they're going up because of inflation
and to ward off higher inflation that is a worrisome thing.
And it's been the latter. It's been inflation that's been driving
there. Now if we ever pivoted to the point if
we ever pivoted to the point where we're talking about booming economic growth
which we are not we've just had two negative GDP orders then we could talk
about higher interest rates being good. But that's not the case now.

But that's beautifully explained Jim.
It's a clinic. But the bottom line Jim Bianco is
somewhere on the inflation continuum. We flip over to that.
Good news is that at a 5 ish 4 percent inflation rate and we got to get down to
Chairman Powells two point six percent. Well if you believe the chairman it's
going to be probably closer to two point six.
And we're probably going to have to see a lot more evidence that inflation has
peaked other than gasoline prices have fallen for the last two months.
Don't get me wrong that's great that they have.
But that's just not going to be enough to move the needle when it comes to the
Fed. In my opinion.
Jim you gonna stick with us. We're lucky to have you with us going
into the open and found that champion Covid.
Thanks. Research.
What are some is gonna say open and about us.
Well I believe we've got those movies with a happy.
No Abigail Doolittle I'm afraid although I was given direction.
Might be that some say that's unfortunate.
Coming up around you up in about say mission chief strategist just friends a
place to investors.

I'm not sure.
She e-mailed me. It's ready to go.
Abby emailed me like an hour and a half ago and she said are you coming out of
triple leverage or cash. And I said no I just can't do it today.
So maybe you say Abby's doing some work and she's popping a margin there right
now. I want to say Michelle's done some work
on this equity market as well in about 20 minutes.
You have some stunning pictures coming out of Scotland.
Tom as the king King Charles the third makes his way from Hollywood house over
to St.

John's Cathedral walking behind the
queen's coffin. I'm deeply emotional scenes that are set
to take place in Scotland. And that's what the minimum John.
This is back to the stewards of Charles first and Charles of second and the
uproar of the 17th century. But quite frankly I'm no expert in it.
But it goes back John much much further in the royal history.
This from Hollywood Roadhouse up the Royal Mile.
We can talk about that as we see those images and we'll bring them to you on
Bloomberg Radio as well.

But I just really can't say enough about
the choreography. Here is the coffin.
The queen moves to London Lisa. Yeah.
Honestly this has been a regime change and it comes at the precipice of a
massive shift in a lot of different aspects throughout Europe.
And so we're watching sort of a historical representation of a changing
of the guards on multiple fronts. And it is incredibly emotional for a lot
of people. I've got a lift in this equity market as

We've got to carry two things at once
and cover two things at once. So let's pick up on the price action for
you and look at the equity market stateside and the S&P 500.
Futures pushing higher on the S&P. Let's push in lower on a 10 year year.
It talks a lot about the 10 year in America yields higher for the last six
weeks or so. Equity features taking shape as follows
up for 10 Sunday NASDAQ on the S&P up a half of 1 percent of what mark on two
stents and thirties looks a little something like this.
After climbing for six consecutive weeks on a 10 year year it's a bit low itself
by three or four basis points. Dow futures up 76.
Nowhere near 33000. You just have to wonder about that.
Well yeah I think the Dow futures are germane this morning.
I would note the VIX is not pop down to a 22 level.
Thanks for that sound. Thank you.
Can I have a look at foreign exchange as well.
Quick look at the euro with a dollar that's a whole lot weaker today.
A euro that's a whole lot stronger.

Euro dollar pushing up from London.
This is pulling back. My lords and members of the House of
Commons. We gather today in remembrance
of the remarkable span of the Queen's dedicated service to her nations and
people. She sets an example of Sophia's duty
which with God's help and your concern I am resolved faithfully to follow
Guy Johnson. Joining us from London now on the latest
guy some deeply emotional pictures seems set to take place in Scotland just
moments away. Yes.
At 25 past John. You will see the queen's body moving up
the royal mildness. Giles.
It will have a royal escort. As you say this is a deeply emotional
moment. The royal mine is effectively lined with
crowds. You can start to see the start of that
process now and it will ultimately lead towards a service of remembrance that
will take place at around 3 o'clock this afternoon.
And that that's taking place as we heard just a few moments ago the king has
already spoken to the both houses of parliament.
Just reiterating what we've already heard in terms of his commitment to
uphold the constitution and continue what his mother started.
Much of this John televised for the first time when we saw the coronation of
the queen.

That was the first time that had been
televised much of this process. We've never seen this before as the as
the general population. But now most of this is being televised.
We get it. We get an insight into how the process
unfolds and what goes on behind the scenes.
Guy Johnson we have four children the oldest and the youngest 16 years apart.
It sounds like any family out there as well.
Tell us how these four children behind their mother's coffin how they're
perceived separately in England. What is the king.
That is how he is perceived.

That is a very clear line.
And the rest I think. I think now will play a very different
role. There is going to be a slimmed down
royal family. Tom that is the direction of travel.
Certainly the king has spoken about this in the past.
You are going to see a much bigger focus for instance on the new prince of Wales
and his family. That is where the focus is going to be.
Everybody else will become increasingly peripheral I think.
Guy Johnson thank you.

At a London game many people have echoed
those comments over the last week or so. When we get more on these pitches in
just a moment we'll continue to follow some of that for you as we work our way
towards next week next Monday when we have that funeral service for the late
queen. Jim Bianco up Bianco Research is back
with us. Jim we talked a lot this morning about
how the problems for many of these leaders many of these political leaders
aren't going to go away.

They may well pause this time next week
for a moment but the problems will still be there.
What we witnessed last week was an unprecedented fiscal plan come out of
this government uncapped uncapped liability.
Sterling was weaker. Yields were higher.
Sterling stronger today. Now Jim do you view that as just a
break. Just a sigh of relief for a moment or a
change. No I'm putting it in the sigh of relief

The dollar if you will.
The opposite of the currencies is you don't risk off asset when things are
weak and the world is uncertain. The dollar rallies and when equities
rally and people have breathed a sigh of relief.
The dollar goes down. I'm only put a put that into that camp
right now because I don't think what we've seen with it is anything more than
that. Net especially applies for the dollar.
Pound cross. That's the currency story.
There is a credit story for this as well Jim and we're talking a little bit about
this earlier. What is going to be the consequence and
sovereign yields in the U.K. and even to some degree in Europe as
they try to shore up their consumer balance sheets by borrowing money.
How much more do we have to go with that kind of credit premium risk premium put
into sovereign bond yields in the U.K. and in Europe.
Well we've got I believe we've got a lot more to go.
They're going to have four on one side. They're going to have vastly higher

That is going to be driven largely by
energy. On the other side.
They're going to have central banks especially the ECB finally catching up.
Madame Lagarde or laggard as I like to call her is becoming a little less
laggard in trying to cut rates. OK I'll be nice.
She's trying to raise rates a little bit more aggressively.
So we're going to see that.

And you're right on the on the other
side of the equation you're either going to get massive fiscal borrowing or
you're going to get higher taxes. All of this is a big cocktail for higher
inflation more supply higher interest rates.
It's also a prescription possibly for a recession.
The Bank of England is taking the unprecedented step last month of
predicting a recession would start in the fourth quarter.
I don't believe any G7 central bank has ever predicted a recession.
They always tell us we're going to a soft landing and then we have a
recession. They announce it's over but this is one
where they said recession is coming. Well but that's not even stopping them
from raising rates. So it looks like higher interest rates
across the board.

They've suggested it a recession.
It's nice out there. Bank of England.
Yes. Your European Central Bank has not taken
that step. The Federal Reserve.
It hasn't. This is not taking this up.
The Bank of England has been sort of the outlier with respect to a good degree of
perhaps somewhat say honesty. I am wondering though Jim what this read
through is if you get higher yields in the euro area and in the United Kingdom
on the heels of this two pronged whammy what does that mean for the U.S.
Treasury market. Does that bring up some of the yield to
the long end. I think it does.
I think it does be as Gordon rates go up there'll be enormous pressure on
interest rates to move higher in the U.S.
And I think it's the Federal Reserve continues to raise rates that will even
put higher rate pressure on the long end of the curve.
The terminal funds rate according to the Fed Fund futures contract is 4 percent.
That seems to be the number everybody's focused on.
All the rate hike cycles back to 1987.

The two year note ends its peaks above
the terminal rate. So if that history holds you're going to
get at least a 4 percent to your note if not much higher.
And that would mean that we're either looking at or a record inverted yield
curve of minus 75 basis points or 50 basis points or what I think will happen
is that the long end will be dragged higher too.
And I don't think that June May or June might have been the high of the year but
will come at a minimum will come very close to matching that yield or maybe
slightly taking that out before the end of the year.
It's an interesting call to the end that I can't it's good to hear from Jim
Bianco that if you VIX research on the bond market and precedent like it.
John if you and I said that we would be so time.
I just just think what Jim said. This wasn't us.
I've heard him say that before.

Well I think it raises the question
also. They said they talk about front loading.
Other people would just say this is late.
Right. Exactly.
The scramble. I like that.
I like to I haven't heard that late loading whether they're loading it at a
time when you're already heading into a recession.
That doesn't give me a lot of leeway. We've heard a similar scenario just
moments ago reiterating this idea that they're going to hike rates more sense
very hawkish to some shape else have hawkish.
The market still doesn't want it doesn't want to see Hawks features a half of 1
percent. Certainly I think philosophically they
are still thinking if your image of 21 what not our older selves with a tattoo
of a hawk is left to look for an impact. Up next.
This is pulling Beck. You have an impact just around the
corner seconds away. Equity futures positive a half of 1
percent on the S&P on the NASDAQ 100 up a half of 1 percent.
Also if all markets wish shut the was to look like their six consecutive weeks of
yields higher today lower by 2 or 3 basis points 328 31.
And as you can see right now dollar weakness.
The big story euro strength euro dollar max of 1 1 1 2 1 24 positive eight
tenths of 1 percent.

With your move as around the opening
bell I'm very pleased to say that joining us now is a..
Yeah. Hey John.
Well we do of course have that S&P 500 higher.
As you were mentioning. We're seeing something we haven't seen
since early July four up days in a row. So you Tom and Lisa have all been
talking about this rebound that we're having.
It is sustained a big piece of it. Apple up one point three percent over
the last two days up more than 3 percent.
That's on positive preorder data for that iPhone 14.
Not only that but it's really showing a shift toward the higher price pro.
Plus they may not have raised prices but they're holding pricing high pricing
even given inflation.

Occidental Petroleum up with oil higher
sharply higher up about one point three percent.
But of course also on the news or the know news that Warren Buffett's
Berkshire Hathaway has a twenty point two percent stake and also has the
ability to take that as high as 50 percent.
Bristol-Myers Squibb up seven point four percent.
Their oral psoriasis drug was approved by the FDA.
So a binary event producing a binary jump.
And then finally Disney well higher than its pre market highs up one point three
percent. Activist investor Dan Loeb as you know
yesterday on Twitter saying that he's giving up the push to remove ESPN from
Disney. It's of course one of their crown jewels
a big piece of the numbers. So Disney today of one point three
percent John. Abbi thank you.
Three days of gains. So the S&P becomes for the S&P 500 of
six tenths of one percent.

The NASDAQ up by around about six tenths
of 1 percent as well. Joining us now seems shot chief
strategist at principal global investors.
Saima you haven't been constructive on this equity market.
It's bounced back. What do you make of this move.
Is it one you can get behind this time around.
It's not John. We are still quite negative about the
outlook. We think this is it.
You know that you're going to get these kind of moments where there is some
positivity in the market. You're going to get these hopes that
actually the Fed Reserve the ECB the Bank of England kind of each central
bank that they may not have to go so far that inflation in fall.
And we expect. But the truth is is that like inflation.
Yes it's on the way down. But it's going to move very very slowly.
And we have heard time and time again from central banks around the world from
people on the council of each central bank that they need to raise rates
pretty aggressively and they've got further to go even if there is an
economic slowdown.

So we're listening to that message and
we're saying the market has got challenges ahead of them.
What's the linkage here of bonds to equities environment equities or need to
reallocate the need to rebalance or maybe just occurs to buy the marginal
share. What can I take away from bonds.
So at the moment we have moved to the overweight duration position and we
don't see them being particularly a lot of move.
U.S. Treasuries for the time being we think
they can be quite range bound because at least in the US certainly the recession
risk is a little bit further out. Are we still seeing a pretty strong
economy. But I think at this point you can see
Treasury with yields probably remaining pretty range bound between 315 330 but
then as you get into Q2 to then start moving down.
So this is a decent time. I think a different level to increase
exposure to U.S. treasuries especially as we start to
prepare for that time or risk assets really start to struggle again.
I look the same up it is linkage of bonds and all the economic data and
we're hinged on CPI.

Tuesday is Sima Shah hinged on CPI
Tuesday. Is it really that big a deal.
So I don't know if I'm hinged on it but certainly the CPI Tuesday is an
incredibly important number. If we see as we are anticipating that
core inflation stays pretty high are the 6 percent level is what we're
anticipating and that to us it is a green light for the Fed to continue
raising 75 basis points at the next meeting and then not not necessarily
moving it continuous 25 basis points but at least to suggest that there is
further to go.

If we are wrong and actually you do see
core inflation coming down further then of course it's a pretty different story.
And you could see this market rally that we've seen over the last couple of days
be a little bit more sustained. See Michelle.
Thank you Sima. We've got to leave it there.
Thank you very much. We're just starting to see some movement
had some. Queen Elizabeth's coffin standing to
begin the journey from Hollywood House down the wrote down the Royal Mile
towards St. John's Cathedral.
Those pictures just coming through from Edinburgh now.
So this is maybe for our viewers and listeners the house the castle the
mansion whatever you want to call it. That's a little less known John.
And it is a house. It is low slung across the fields.
The fields behind it are absolutely beautiful.
Major change there in the time of Victoria and Edward.
But it is there's a there's an interior in this to this John Windsors out there
bowels out there.

This is within Edinburgh.
And of course to to move up the hill the royal mile to St Giles is old.
Edinburgh awaits out. Lay said that following the coffin
moving in a hearse will be the king the Princess Royal the Duke of York and the
Elephant Wessex following on foot. Other members of the royal family will
follow in cars. This is the next stage the next phase of
a sequence of events through this way concert a ceremony next Monday.
So they service a funeral service for Queen Elizabeth.
The final march to say goodbye to a matriarch not only of a family not only
to a nation but honestly to the world. Having met with more foreign leaders
than anybody else.

And we are hearing about anecdotes of
people in this community who knew her because she was there and she would say
hi. And so the emotion is palpable in the
crowds of people who have assembled. It's this is something we'll continue to
follow through this morning on to the service next week.
The mile is now hugely touristy. I'll be honest John.
The first time I visited I think I've been twice.
I was thunderstruck of how touristy it's become.
But the history that is hidden by the tourism of it is substantial.
One of the great moments I had with Bloomberg is up the Royal Mile toward
St. Giles an interview that I did for
Bloomberg on the porch of Adam Smith's house.
That is the level of history that's involved here.
It is the only remaining existing residents of Adam Smith.
And it's now it's it's obscure John. It's not there's so much history
involved here that Adam Smith's only house of seventeen ninety is just an
item about six or seven minutes into the session telling that something else will
have to cover as well as equity market is positive six tenths of one percent
the NASDAQ of six tenths of one percent.

Guy Johnson standing by. Guy got a sore throat.
The next sequence of events as we work our way through to next Monday.
What you're going to see John today is obviously a lot of ceremony.
This whole process that is now unfolding in Scotland leading towards the
remembrance service that is ultimate at the other end of the royal mile from
where those pictures are now. A royal escort is going to take place.
Then you're going to see effectively the king spreading out.
So he is going to visit the four corners of the United Kingdom.
This is about in some ways establishing him as king.
But it's also going to be a message that he has already conveyed and will
continue to convey about continuity that he will continue to build on what his
mother has done. Now it starts to get a little bit more
complicated as we work our way around the United Kingdom.
Clearly Northern Ireland has a difficult and historic relationship that has
always been fraught with the royal family.
You need to think about what is happening in Scotland right now.
Now the Scots have made it clear those that would prefer independence that even
if independence were to occur the royal family would continue as the royal

But politics starts to kind of intercede
into this process. And it's going to be interesting as well
because the new prime minister is also going to be part of that process.
There is a concern that already there may have been a blunder by starting to
mix the process of politics and royalty and that could be a very difficult
combination. There will be an audience in attendance
at St Giles in Edinburgh. And then there is an audience at
Westminster Hall.

How will London.
And how will the royal family take on the hundreds of thousands of people
estimated to walk by the Queen's coffin. It'll be a balancing act Tom.
This is a royal family that has evolved significantly over the last few years.
It's become more open. The king himself has become more
familiar with dealing with these kinds of situations with dealing with the
general public. I I met him in a small Devon town once
with his with his wife. Now the king and the queen.
They were affable and friendly and chatty and interesting.
So they become they become used to this process.
But ultimately this is still about burying the queen burying their mother.
So it's really a balancing act between those two processes.
And there is historical precedent that must be continued.
But all of this will happen in a way that has never happened in the past.
In the glare of the television lights.

And that is that is how the situation
has evolved. We're getting an insight into so much
more than we've never seen before. Guy this is an unprecedented moment in
so many different ways from your vantage point.
There is unity that a lot of people can see of the affection and the feelings of
sorrow having to do with Queen Elizabeth the second.
How is the union and unanimity or how united are people about support of the
monarchy as a theory. I think there is not a strong Republican
movement in this country. If you were to have a if you would have
a vote tomorrow the monarchy would win every day.
Everyday everyday everyday. There is no there is no risk there.
There is a slightly.

Stronger Republican movement in Scotland
but even there it's not particularly strong.
So I don't think that there's no kind of risk to the royalty here.
But I think what there is is and we spoke about this a few minutes ago.
I think there is a need to evolve the monarchy evolve who is at the core of
that and where the focus is. And that I think is going to happen.
So Thomas me in a few minutes ago about about the four children three of them
will become increasingly peripheral. And many royals will become increasingly
peripheral. The focus will be on the line of
succession. Charles William George.
That's how the process is going to evolve from here.
So that I think it's going to be a different royal family for a different
country. Again there may not be a risk to the
monarchy at immediate risk. Is there a risk to the union anymore.
Much is made about Scotland's push for independence.
It seems to manage that.

Perhaps that push doesn't have the
strength it wants. Did many years ago.
I think it's very hard to say. John I think this is a situation that is
very much in flux. We gonna have election got elections
coming up. I think it's too early to judge how
those elections are likely to go. The new prime minister has dismissed a
call for another referendum but that may become.
Very difficult to refuse. I think there is a lot of that there
there's a lot in flux here and clearly Brexit has made that more difficult.
We also have a general election coming up in the United Kingdom in 2024 maybe
potentially even sooner. That could also be part of this process
as well.

And a potential catalyst Benchley to see
ultimately how Labor governments would deal with this question particularly if
a coalition was required. So I think there are a lot of moving
parts here John. I think the issue of the solidity of
this union has become increasingly fluid.
Guy thank you. Looking forward to your coverage in
around about 18 minutes time. Guy's going to pick up on the coverage
and also going to lead you through the first few hours of the open stateside
with equities up for a fourth straight session.
And I have to say four straight days of gains on the S&P 500 the longest 20
straight some out of July.

There is a bit on it is a wager on the
futures of added on through the morning for the most part as a generalization.
I'm waiting for a VIX of 22. I don't have it yet.
Dow 155 signals. To me it's a blue chip morning and
certainly we saw that. And Abby's equity report.
You're going to run away now. I'm going to run a winning catch up by

We've got a lot going on.
Really. For those on radio the imagery is
extraordinary here and would Guy Johnson.
We're very fortunate. The next hour with some real perspective
at least you're not going to catch up with Sreesanth Karen of Morgan Stanley
looking forward to that with their equity market.
Positive for a fourth straight session up seven tenths of 1 percent on the S&P
500 with Tom Keene and Lisa Abramowicz some Jonathan Ferro for our audience
worldwide. This is Belinda. I support continued increases in the
FOMC policy rate and based on what I know as of today I support a significant
increase at our next meeting on September 20th and 21st to get the
policy rate to a setting that is clearly restricting demand.
Governor Weller is ready to go once again on September 20.
Wellman The Federal Reserve meets convenes to raise interest rates and
perhaps by 75 basis points again once more.
Mark McKay joins us on the latest.

Might tomorrow's CPI day.
It is all about inflation in America. Absolutely John.
I feel a little bit like Bob Barker somebody nobody in England would know
anything about. And most Americans under the age of
maybe 30 would not know either. But he was the host of an American game
show in which contestants had to guess the price of goods.
Well that's what economists in the U.S. are doing right now.
They are guessing the price of the CPI where we come in.
And it looks like we're going to come in down a little bit on the headline and on
a year over year basis which would be seen as good news in the markets the
core unchanged.

And the forecast is it rises on a year
over year basis because of base effects. That's something people are going to be
watching closely. But some of the big indicators that go
into this have performed well for the month of August.
Gasoline prices of course down significantly for three months in a row
and used car prices. One of the big reasons that inflation
went up early on have tumbled. And so that should help the core a
little bit. That leaves us with the Fed probably
going 75 any way because there are warnings about what will happen if oil
prices go back up again. Janet Yellen warning this weekend
Goldman Morgan Stanley say the price could go into the hundreds.
But for right now it is good news. And so the rest this week all about the
Benjamins which is another American expression.
But hundred dollar bills with Ben Franklin's face on it CPI and real
earnings tomorrow.

We get mortgage applications on
Wednesday and PPA retail sales on Thursday.
Are people still spending in the face of inflation.
And of course import prices will tell us something about oil and over all prices
and then Michigan sentiment. That's been a big deal of course the
last couple of months because what people think is happening to inflation
matters a lot to the Fed. John Lamont NIKKEI thank you sir.
It all translates. It translates.
You will understand. Sreesanth Current joins us now.
Head of U.S. and European credit at Morgan Stanley
stressed out with a Lisa Abramowicz question Shanghai and then later will no
doubt follow up all these things that the Fed is trying to lean against.
And credit spreads. Time and again.
Then why y why. It's a bit of a head scratcher.
I think part of the equation here is that credit fundamentals still look OK.
So the credit market kind of can't withstand a mild recession if it's a
technical one and a first kind of still solving for earnings growth to be
holding up.

But where the bottom up consensus is
which we disagree. But I mean it does feel like credit
markets are pricing in some degree of duration but not really a default rates.
OK but three. I understand that perhaps there's a more
constructive backdrop. But the rally and credit's been somewhat
significant. It's been pretty impressive considering
that people still see recession risk looming large and that people still see
the concern with the lockdowns in China and it's even come with more borrowing
even in the high yield debt market. Do you think that perhaps people are a
little over their skis and their enthusiasm for the instruments.
CILLIZZA I think yes.

Short answer is that our view is that
directly spreads are headed wider into year end and we do worry more about
downgrades and part of the leverage credit complex and so on.
But I think coming out of the summer there's still this bias that investors
where position defensively. So in some way it's like the technical
to the market are creating this sharp counter trend move tighter with respect
to credit spreads. But I agree with your earlier point that
yeah I mean it does feel like the market is now underpricing recession risk.
And that's kind of why we still have a clear up and quality bias.
And we do worry more about fundamentals declaration as we get into the back half
of the year and into early next year.

So we're in London right now.
We've been talking all morning about the possibility of nations in the euro
region raising cash through debt markets in order to plug fiscal gaps while they
try to support households that are coping with high energy bills.
How is that going to play out in the credit world.
Hey sorry at least have some kind of interruption with the audio but to your
point I mean it does feel like it's a somewhat of an unstable equilibrium
where you are getting this fiscal impulse which is supportive for parts of
the consumer complex. And that's kind of why we have seen
portions of the UK consumer complex be at the retailers.
A PUP named rally pretty sharply on the back of the announcements last week.
But I think the end of the day it is still a kind of complicating be the
central banks reaction function because it does add a bit of the inflationary

And I mean by and large these fiscal
transfers are not a free lunch and therefore you should see that reflected
partly in the peripheral spread widening.
And that again I would put the central banks again at a bit of a tough spot.
The thought process here is that yes it does temporarily create this relief
rally but it doesn't really structurally solve the problem of elevated energy
prices. A tree.
Sorry for the technical problem there going to let you go and hopefully we can
catch up again soon. Sreesanth around of Morgan Stanley on
credit. A head scratcher for him as a head
scratcher for others. But risk is rallying again going into
the Federal Reserve decision next week and going into a CPI print tomorrow
morning. Here's a headline for you.
Rameau from The New York Times. Goldman Preparing for layoffs as
dealmaking slows. And perhaps that's not a surprise to
some people. These are some divisions that were
really beefed up coming up at the pandemic because we had so much

That activity in some places screeched
to a halt and you're going to see the threat to profitability for some of the
banks as a result particularly in those areas.
A lot of people were expecting this. The question is how.
What's the scope going to be right. How much you're going to see cuts wall
NYSE or the normal culling of units that aren't as active as usual.
Or will it be something more in the face of a recession.
And how much will that be sort of a bellwether in some ways of what's to
come. Goldman excluded from this part of the
conversation but banks have wanted at higher interest rates for for how long.
Particularly Europe to keep match Lisa.

You've got European banks that wanted
higher interest rates get away from negative interest rates.
They've been asking for that for about 10 years since it started back in 2014.
They get them and we've got to go from one crisis to another.
Are you basically implying that they get what they wanted and they're still
complaining. Is that what you're saying.
No I'm saying they've got what they wanted at a very very unfortunate

Well it's very reasonable.
It shows how it's not necessarily the boon that they thought it was going to
be. Right.
And that's the that's the concern for a lot of people and why those shares have
been so unloved why people have not been going into bank stocks because they're
not going to do well in an environment where you're not getting the same kind
of commercial activity and the same kind of deal making.
And that's really the conundrum is facing the whole financial sector.
They're getting it because inflation is burning.
Ready. Ready.
Stagflation. That's the problem.
Fundamental to CPI tomorrow. The core is going to be the key
stripping out the energy costs. We all know gasoline prices are doing.
We could see it on a big billboard when you go past the pump every single day in
the United States.

The other issue is rents.
The other issue is grocery bills. We haven't talked a lot about that but
that's been huge. And that's really been driving prices up
quite significantly. Guy Johnson is gonna pick things up from
here in about five minutes time. As we've said repeatedly through today
just a momentous week in the history of the United Kingdom and stunning scenes
coming from Edinburgh. Right now a seamless transition of power
from queen to king from mother to son and a scene showing King Charles the
third walking behind the hearse carrying his mother's coffin heading from
Hollywood house to St John's Cathedral from London.
This is blowing back..

As found on YouTube

You May Also Like