tv Bloomberg Surveillance Bloomberg October 5, 2022 6:00am-9:00am EDT
>> i'm told inflation is under control. monetary policy will still have to change to account for this. >> inflation will still be stronger than they want. >> markets in general are looking for a sign that we are reaching the highest levels. >> don't count volatility out now, even though we are kind of dropping back. >> there is a global shift toward a higher return environment. you can't get there all in one go. >> this is bloomberg surveillance with tom, jonathan ferro and lisa abramowicz. jonathan: live worldwide, good
morning. this is bloomberg surveillance on tv and radio. i am jonathan ferro. futures down by about four percentage points below going the biggest to day pop of the s&p since april 2020. tom: i can't find a soul who believes in it. i don't know who to give the citation to. it is decidedly wednesday. it is decidedly defensive. jonathan: the u.n. has complained about federal reserve policy. equity markets have complained about federal reserve policy. now the wto is complaining about central bank policy. lisa: basically saying they will cause a recession with risk overshoot. they are also talking about food insecurity and debt distress and how much of this is the world's problem and not the united states. we've heard a lot of pushback and we will continue to hear
pushback. if we continue to get the data that we have. jonathan: has anybody told the fed? the fed does not know that yet. job openings yesterday. a soft landing without a doubt. lisa: it was the biggest move lower, the biggest drop going back to 2020. if you start to see this, perhaps this is a perfect scenario for the fed where you start to see companies not necessarily laying people off but reducing the openings they have. to your point, jon, fed officials coming out and saying we are not going to blink, just quit it. we are going to raise rates and you have to believe in us. tom: the wto nailed it last time. there are a number of headlines. the rule of thumb on global growth is 3%. 2.3% is a recession. it is not this or that.
that statistic is ugly. i tweeted this morning. jonathan: ok. is that the extent of the conversation this morning? tom: what are we going to do with elon? jonathan: trading just beneath the offer at premarket. lisa: he comes out and says 54.20 is back on. this make me think about those banks who committed to financing in april when the financing costs were incredibly cheaper relative to where they are now. are they going to be on those marked to market losses -- on the hook for those marked to mark losses? jonathan: on the equity side and the debt side. tom: it is going to be funny going into the jobs report on friday. elon musk, how much is he paying up? twitter is over double the valuation and price sales of
facebook and snap but i've never used snap. jonathan: snap is down from the april highs. that gives you an idea of how many of the -- of how much these companies corrected. lisa: and it was still thought to be overpriced at that time and now how much the valuation has changed and i keep going back to debt financing because that has a more systemic reach than just the valuation of one tech company. jonathan: the engine on the debt coming through. we will catch up with ed ludlow later on. twitter down just a little bit in the premarket. the biggest today pop going all the way back to april 2020. down 9/10 of 1%. recently you see -- coming to the market, yields up a little bit this morning. we saw some dollar weakness and dollar strength.
1% and there is a big conversation about some big output cuts at opec plus. crude, 86.30. lisa: opec-plus meeting in person for the first time since the pandemic. possibly cutting adduction by 2 million barrels at a time when a lot of western nations want to see lower prices. this goes against that and we are already hearing about potential push -- pushback from president biden and what they could do to potentially offset the production. do we see a pop back to the high 90's like a lot of people are expecting? a lot of central bank speak, perhaps some of that will come out and say you were right and we were wrong.
mary daly was adamant yesterday about the effect of inflation on lower income households and how punitive it is to have price stability before you have a steady labor economy. there is an ecb nonmonetary policy meeting in cyprus. to the talk about the potential ramifications of rapid tightening? we have seen yields on the aggregate index skyrocket versus where they were back in 2020. north of 3.5%, that is the global average. central banks pushing back, saying this is what we need to curb inflation and we get the september services index and we have had a lot of negative surprises. manufacturing data came in weaker than expected and this is what the fed wants to see, a softening. we have seen several months of
negative surprises and is this a positive scenario for global markets? are people getting comfort saying the economy is moving faster than the federal reserve is realizing? jonathan: another data point to look out for in a ton of fed speak that we are all excited about. the global cio at which a bank joins us now. a bear market rally or something more durable -- at deutsche bank joins us now. a bear market rally or something more durable? >> i would say the markets -- i would expect them to be a volatile environment because the market is too optimistic about the earnings. probably some downside from that perspective. however, i think in q4, inflation is not moving in the u.s., not moving much higher. tom: the leadership is simple.
when the facts change, -- are the facts changing for central banks? are they going to amend and adjust through october? christian: i have to say he was very early coming up with recession. i think there is more agreement that we will probably go through a recession. -- more bullish on the u.s. and the next months could be costing more growth. lisa: what should we be buying? you said at some point there will be adept. a lot of people talk about how it will be duration and we have seen that. we have seen longer data treasuries lead any rally. do you get behind that kind of deal?
christian: in this quarter, i think fixed income has some value. we think if growth comes down, then the massive rise could stop at one point in time and offer opportunity. jonathan: a final question on the jobs data yesterday. it dropped by more than one million. a pretty stunning number. can i ask you whether you think that is because you think those jobs got filled or because of economic weakness and those openings got taken away? christian: i think it is a mixture of both. from that perspective, i thought it was a good sign that there is some reaction to the fed policy. the environment is getting tougher. from that perspective, i think that is to be seen positive and that is why we think the fed is
not doing consecutive meetings. we will -- jonathan: thank you, christian nolting, deutsche bank private bank. for a more complete picture of the labor market, you have to wait until friday. lisa: although is that going to be enough? we got some information that said if we get more like what we got yesterday, that will be enough for the fed to take a pause. on the flipside, inflation is still running high and you cannot hire enough people and you are still hearing that from a lot of companies. jonathan: does not just speak to jobless claims, where they are and where they were last week and where the job openings are now? lisa: the point we were talking about earlier this week, what if this is not a good indicator for the reserve to track how much --
how quickly inflation could come down? jonathan: the dream about the soft landing all over again. tom: talking about a prime minister who has a dream. jonathan: she is living the dream right now. tom: she is. the prime minister speaks at birmingham. explain to our american audience the symbolism you see here. jonathan: it is a difficult moment for this prime minister. it is not the moment she dreamed about when she first got this job. are we going to see another u-turn on a whole range of issues are really doubled down? it was a conversation this time yesterday morning as to whether that would be -- and we got some freezing cold water poured over that. the next few months will be fascinating. november 3 is when the bank of england meets and then the pound, you have to wait. lisa: and she set a precedent where at the facts change, she
changes. does her response also change? jonathan: clearly some difficult complex things going on right now, getting the attention of organizations that typically would not way in. lisa: that is diplomatic. jonathan: futures positive from yesterday. we are down this morning on the s&p. this is bloomberg. ♪ >> keeping you up-to-date with news from around the world, i am lisa mateo. the european union has bank -- backed a new set of sanctions on russia. it includes ape -- includes support for a price cap on oil. opec and its allies may state
their biggest cut in output since 2020, cranking up tensions with the u.s. at their meeting in vienna today, ministers will discuss cutting production by as many as 2 million barrels a day. that could lead to higher gasoline prices for u.s. drivers. the world's richest person has found a way to potentially avoid a bruising courtroom battle. elon musk has revised his $44 billion offer to buy twitter. that helps avoid a trial over whether he should be forced to go forward with the purchase. bloomberg learned that his legal team says the case was not going well. president biden has pledged an additional 600 million dollars in weapons to ukraine. the package includes long-range rockets, ammunition and armored vehicles. the president spoke with ukraine's president on tuesday.
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have to change, trying to cap this and that is where financial conditions are priced. there can be no rest for financials until we tame inflation. the two are intertwined. jonathan: sterling dominated much of the concerns a couple weeks back. liz truss, the british prime minister, speaking to the party faithful in birmingham at the moment. i understand she came out to the song moving on up. tom: just who do you think you are? stop acting like some kind of star. take it like a man, prime minister if that is what you are. jonathan: the prime minister address continues. tom: it is a symbolism thing. it is a huge deal.
let's continue with twitter. we will try to give you sharp discussion from mr. musk. edward ludlow has followed this from the very beginning. let me get this straight. it is at near eight times sales. he is grossly overpaying. what will wall street listen for? ed: as part of the discovery process and the court filings, musk's only consistency was he wants to make big changes to the platform they can only be done if it was a private entity. a big part of that is moving it away from a platform that is dependent on advertising. he has these big thinking conversations with jack dorsey about twitter's role in a global democracy. they wanted to remove outside influence and the ad market does not allow for it.
tom: did they get a preferred coupon? how does this actually happen with a company that essentially makes no money? ed: it is a $44 billion deal, $12.5 billion of debt split between unsecured secured bonds and a $6.5 billion loan and a revived -- a revolving credit line. the world was a very different place in april, and i guess the question for these copartners, many of them well-known associates is how much do you trust elon musk going into a deal like this, based on the behavior of recent weeks? frankly i don't pretend to understand the psychology of elon musk. we don't know why he u-turned. one source tells us it is because his legal team look at the judge and what she had done
in the pretrial hearings and conferences and said we aren't going to win. it is pretty precarious as deals go but it is happening. jonathan: contingent on debt finance, it is happening. have we heard from the banks? ed: we have not, but you can imagine they are nervous. leveraged debt is a hard sell right now. those banks have to go to the asset managers and say not just that this is an attractive proposition, but the banks will end up with a significant loss, but also they have to sell the vision of what elon musk plans to do with twitter in the long term. this is a man who has gone on stage and said i don't care about the economics of twitter. tom: are you saying that they end up with this debt that they can't sell to their asset managers and institutional managers? ed: exactly.
$51 billion of leveraged debt sitting out there in a pile. it is a big chunk of the market right now. jonathan: this is about that time to be pushing this. lisa: there is one estimate that there is more than $50 billion of leveraged debt that banks have to sell. the issue is you are not seeing that much being sold into the new market. any supply, let alone $50 billion could potentially really cause a disruption in markets that are already tenuous. tom: explain what leveraged debt is. lisa: basically it is just debt to financing companies that is very high, debt income ratio. that is the inherent leverage in a company. that is why they are riskier because it takes more years of profit to pay down that debt. what you have is right now, people are concerned about
financing a company based on valuation of say a year ago or even four months ago given how much the market moved away from that. ed: and if you strip out the $12 billion margin loan component, even so, if he is going cap in hand to partners to close on this, they will look at the debt and look at the track record of recent weeks and say i don't want to be involved with it anymore. jonathan: the deal back in april, triple c debt is trading at about 15%. compare and contrast where we are. the unsecured part of this is highly problematic. lisa: especially at a time when other companies are not selling that debt. that is the market to market price. where things are implied, it is not necessarily tested in the new issue market because there have not been those triple c issuances.
people see this as a potential systemic risk, not on a massive scale but to disrupt the credit markets. jonathan: i like the way we have framed it this morning. elon musk has revived his twitter bid. ed: it is back to square one. jonathan: precisely. ed: i feel a real sense of deja vu. jonathan: i think a lot of people do. to sit here and say it will close, it may well but the accurate way to frame this is the deal has been revived by lung musk -- by elon musk. lisa: it is hard to take this too seriously based on all the things that have to happen. you do wonder who has made the most money from the arbitrage? what are the banks thinking right now? who had a sleepless night last night thinking how much they are going to lose? jonathan: ed, good to catch up.
getting some headlines. the british prime minister still speaking at birmingham. the priority is to loewen -- lower the u.k. tax burden. we've heard that a few times in the last couple of weeks. tom: the telegraph had a great article for dummies like me, the five parts of the conservative party. which party she is speaking to today in birmingham. jonathan: i'm proud of you. tom: the johnson group? i don't know, who is she talking to? you are the pro. jonathan: our next guest will join us on energy markets from energy aspect. this is bloomberg. ♪
in the bond market, yields down again. explain the roller coaster going on. still well-off of the highs of last week -- well off of the highs of last week. can we talk about crude? we are now talking about a 2 million barrel a day cut at opec-plus and some real pushback based on reports coming from the united states, unhappy about the prospect. lisa: there have been rumors of possibly even releasing more from the strategic petroleum reserve to offset the cut in production. jonathan: maybe constraining exports. tom: frankly, every country is political, and there is some nuance we will hear in a moment. jonathan: we've got my good
friend manus with us. walk me through what we are expecting in the next couple of hours. manus: welcome to the bowels of opec. this is where the decision will be made. they will come here and talk about a monster pivot and a monster cut of up to 2 million barrels a day. is not going to change the narrative? may in real terms -- maybe in real terms but it is redefining the forward guidance. to the point you just made, they are -- in the white house.
biden fist bumped his royal highness and what do you get? 2 million barrels a day cut. recession is the risk, recession is a moniker for this 2 million a day cut. by the way in the report, in the opec report, we will expect a demand growth of about 2.7 million barrels a day. lisa: is the russian energy minister they are, and how political is that? -- minister there, and how political is that? manus: it is the oil minister, not the gas minister. to a certain extent, the europeans have not. this is about solidarity with russia from the whole of opec. that is going down like a sack, quite literally on the others of the world.
you can be sure of this. when the next set of sanctions kicking on russia, you will look at what they will be doing with about 2.7 billion barrels of oil a day. that is what starts in december. that is the next shoe to drop in terms of the supply narrative at opec. jonathan: good morning, you are the best. manus cranny, from vienna. thank you very much. wti, 86.50. i think it is safe to say this will be controversial later. tom: joining us now, from energy aspects. how much is the ghost of 1986 in vienna? opec got their clock cleaned in 1986. how much are the saudi's afraid of that? >> i will say that i don't think that -- has been very clear and
they are all talk -- they are talking about recession and the stronger dollar. -- the disconnect between futures and the physical market. i do think a big part of this cut, he talked about that opec could do anything to close that gap but he is trying to do exactly that, get this gap to the physical market. tom: if saudi arabia goes unilateral and goes marginally less than 2 million to appease everybody in the cartel, what does the price of oil do? amrita: my understanding is they will play a very important role in the move up because it has not been driven by fundamentals. it has just been fears of
various things. the curve remain strong which tells you the fundamentals are still robust. we could very quickly be back around $100. that will be a key resistance test. from saudi arabia's point of view, they believe if they don't cut, prices could fall to 60 or $70. regardless of what you are i think, it is fear. tom: 1986, thinking japan and central banks in the 1990's. that is precisely the collective memory of the royal family in saudi arabia. don't do 1986. lisa: what is different this time as they have the excuse of they don't have the spare capacity to produce more. amrita, we've been hearing that as a peripheral reason as to why to do this cut now. from your on the ground
research, how much is the research -- how much is the move motivated by a downturn versus a lack of spare capacity and trying to protect reserves ahead of the next decade? amrita: for sure that plays a role. we've been talking about the capacity for years now. i think it is very clear. big numbers have been thrown around and even a 2 million barrel a day cut will be about one million in real life because of under production. even from the gcp's point of view, the need to conserve a fair amount of capacity. that is definitely playing a part. to tom's point, i don't think saudi arabia or any of the opec members want to be in a situation in two months time. let's assume the macroeconomic situation does worsen. they want to react ahead of it. that is a bigger part of it.
of course it helps to preserve their reserves and take a little bit of easing rather than stressing their system. lisa: there is a huge political overtone to this. we were talking earlier about president biden going and the issue of the u.s. and other western nations relying on opec-plus to produce more. is the pushback likely and how potentially damaging is it for the u.s. to reduce exports at a time when europe is arguably --? amrita: the irony of calling europe allies and then banning exports is something i'm sure you will discuss at length in some point. the u.s. have been meeting with producers for the last week or so. -- is probably why even though the white house won't admit it,
that is why they are going around to the rest of the world asking for more production. i've also heard from producers that there have been conversations for potentially restricting exports. it will backfire because this is a global market. all that will do is get wti prices down but brent prices will skyrocket. it will not do anything for gasoline prices at the pump in the u.s. jonathan: amrita sen, director of research at energy aspects. thank you very much. gas prices just recently, starting to go. tom: on radio, i agree. what she said, can you imagine october 20, october 25 and brent crude at $101? jonathan: and gasoline prices are climbing. there is a belief among some
people, bringing the spr aggressively, you have made the market more fragile, more prone to the kinds of things we are talking about, squeezes and rallies. lisa: especially if you have a lack of spare capacity, because that means you cannot increase production on demand. what i'm interested to hear is how much they emphasize that versus the onset of the recession because as amrita was saying, and the physical market there is still a significant amount of demand. we've heard from analyst after analyst saying the expect demand to increase to year. what happens if china comes back online, which you are seeing on the margins? all of these issues come to a model and you have a lack of supply to unleash onto the market like the spr, that is the point about fragility. jonathan: pushing four again, that starts to get uncomfortable
for the white house. tom: i agree. it is close to the topic. jonathan: i would argue it is one of the issues of the year so far. tom: we would be at the sink in boulder. jonathan: what would you be paying? tom: we would be paying $2.95 or $3.50 for a pitcher. out west you would just get in the car and go. jonathan: that has been the story of the year. tom: that is america. jonathan: welcome to 2022. tom: look at all of us. i haven't been below 59th street in four months. jonathan: your elite group over there. i am not a part of that.
tony from pimco is going to join us shortly. futures negative on the s&p 500. negative after a big day of gains yesterday and the day before. from new york city, this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world, with the first word i am lisa mateo. elon musk working to revive -- is great news for a number of investors that include carl icahn and traders who continue to that on the outcome of the deal for months. after mosque said he would move forward with the agreement at the original offer price, twitter stock rallied as much as 23%. the biden administration is trying to keep opec and its allies from making the biggest cut in oil output since 2020. opec-plus is meeting today in
vienna where energy ministers consider cutting production by as much as 2 million barrels a day. u.s. officials are making calls to their counterparts in the gulf, trying to push back against the move. president biden had a muted response to north korea's missile launch this week. he pledged to work closely with japan and south korea but in a bigger breakthrough, he held off on promising much more. the north korean missile was the first to fly over japan in five years. unit airlines will beat -- united airlines will become one of a handful of airlines to reduce passenger sizes to hong kong -- to resume passenger flights to hong kong. in baseball, erin judge and the new york yankees is now in the record books. he broke a record set by roger merritt in 1961. judge has set him -- set himself
up for a lucrative off-season and reportedly turned down a seven year offer from the yankees. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo, this is bloomberg. ♪ - in the last two years, we quadrupled our team and the pace we're growing, i couldn't keep up without ziprecruiter. they do the legwork and they get my job posting in front of the right candidates. i love invite to apply. i instantly see great candidates and i can invite them to apply. we have hired across all departments, engineering, marketing, hardware, field techs. you can basically tell ziprecruiter who you need, when you need it, and they deliver. - [narrator] ziprecruiter. rated the number one hiring site. try it for free at ziprecruiter.com try it for free at ziprecruiter.com
[indiscernible] >> we would caution that we have been here before. jonathan: fantastic to catch up with veronica from citigroup, global market economist. live from new york city this morning, good morning. here is the price action after two days of big gains on the s&p 500, we are lower. down 28 points. yields go the other way but you
guessed that didn't you? the dollar is stronger. euro-dollar, 99, 18. as we anticipate, the fed should have a big output cut at opec-plus. tom: this goes right into the fixed income market as it adapts and adjusts and tries to gain -- tries to gauge. the animal spirit goes from 3.4% to a stunning 1%. that is a global trade recession. jonathan: they have been very bearish. typically we joke about them coming out but i have to say the wto came out in front of most of those organizations. tom: there it is, the backdrop of 1%.
what does fixed income do, tony, given a global recession and certainly from wto, a trade recession? tony: the bond markets start to think about that possibility. that makes it an attractive period. bond markets thinking the economy will weaken but they are not sure so there is some risk premium in the prices of various assets. i think the uncertainty factor that is keeping markets on edge, because we are not sure about how inflation -- highly likely that the inflation rate will decline, there will be disinflation. the bond market will look increasingly attractive to
investors, especially if the wto scenario happens as they expect. tom: is pimco extending duration? tony: pimco has been underweight duration for some time. we would rather keep it close to neutral. thinking about duration, interest rates have typically -- talking about a directional strategy. you open up the book on bond investing you would see there is a lot more to do than simply bet on the direction of interest rates. that is what pimco is trying to do right now. trying not to make directional bets. with lots of different types of economic outcomes. with duration slightly underweight given the recent drop in yields, slight underweight might make sense but remember that bloomberg
aggregate has a duration of 6 -- lisa: you said something interesting, a slight underweight. does that imply that we have not yet seen pe yield? -- seen peak yield? tony: yields today are closer to their long-term averages. secondly, the yields in the bloomberg aggregate today, treasuries, mortgages, a bunch of other securities, today the yield is 4.6%. how does that compare historically? that is very good. that is one reason why bonds look quite attractive. where do you think the inflation rate is heading? the bond market seems to think into the low 2's. finally, if economies weaken,
there is a chance for capital gains in fixed income. one does not want to miss out on that, so you have to question, are you really interested in timing the diversification of benefits and bonds? lisa: how much are you seeing a lot of mom and pop investors pile into short-term treasuries for the first time in a long time? how much are you seeing those cash investments balloon in a way that transforms the rest of the market because that is money not going to equities or high-yield bonds. tony: we took a trip to asia, korea, singapore, thailand and met with investors. today i am traveling to san francisco from new york. it seems like -- as you can see by global funds, investors are
still leery. all of that said, investors seem to be moving to the center, what we call the concentric circle for investing. that would have riskless securities at the center and the most risky at the perimeter. investors want to move toward the center of that concentric circle and slowly work their way out as they gain confidence. there are lots of scenarios you could envision but are not in place yet. jonathan: what kind of interest would you offer on a triple see social media company -- triple c social media company? what would that be? tony: think of a solar system, that is like going way out to the outer perimeter of the system. that is a risky gambit right now
given the uncertainties surrounding economic growth and cash flow. at the end of the day, what a bond investor cares about is getting their money back. jonathan: very diplomatic, thank you. tom: he was very diplomatic. jonathan: do you think the team at morgan stanley may call pimm: ? tom: they will call the financial analysis -- 700 million plus, 120 million plus. -850 plus. i believe that is a trend. jonathan: it is a much harder sell now. lisa: in april it was considered overpriced. now it is considered ridiculous. if you talk about where evaluations are. how much pushback will there be from the banks, saying now you are doing this to us heading into the year-end? jonathan: i'm looking forward to the reporting on this and the
bank earnings. i'm looking forward to seeing what they have to say. lisa: debt they have already committed to a number of difference -- different financing that they have to sell and probably at prices that are lower. tom: let me ask the grizzled pros. if you have secured debt, do you get a factory? jonathan: do you get the offices? lisa: you get verification status. [laughter] jonathan: coming, john stoll foods from oppenheimer asset-management. this is bloomberg.
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>> inflation -- until completion is under control, monetary policy will have to try to cap it. inflation will still be stronger than they want. >> we are looking for a sign that may be central banks are looking at the high level. >> we are kind of dropping back to earlier levels. >> there is a shift to the
environment that you cannot get in one go. >> this is bloomberg surveillance with jonathan kane, , tom keene and lisa abramowicz. jonathan: good morning. this is bloomberg surveillance on tv and radio, i am jonathan ferro. two big days up on the brendan: -- on the s&p. tom: if adp jolts you like it jolted yesterday, what do these markets do. lisa: how much the market counts point and kindly respond with a rally? that is what we saw -- point and respond with the rally? that is what we saw with the bigger drop than expected in the job openings in the u.s. is this reason to feel the belief that the fed cannot go as high as they say they are going to? jonathan: it is a game we have
periods where soft landing starts to do better, you have contractions, then you have job openings drop more than one million, soft landing. and then you have cpac next week. tom: you know this shows what we're doing here. what matters is the data, as we have seen the last two days, and looking forward to october 14. lisa: i go back to what mike wilson said, which is a playbook that used to work does not work, and that is what we should be looking at it this is a game of occasion. it has -- gamificatio. it has differentrules. jonathan: i would like my crystal ball on the desk in front of us. what i was told last week in an interview, and he basically said, from here, what might
happen is yields may come in and equity markets will rally and go into earnings season, like the reverse of what happened last quarter, and you will get smacked on the head with what happens with earnings. yields came in, equity markets rallied. and then maybe they are back down towards 3400. tom: he has a meatball on his desk, turns it around, spends it around. jonathan: is that what he does? tom: that is one of the choices. jonathan: i am much more interested in the innerworkings of jp morgan because bruce has a different view on the world compared to the equity strategists over there. lisa: let's put this into perspective. you are not leaving me with a lot of room here. ok, look, a marco reus saying, the target is good, but it will be effective next year because it does not look likely this year because gosh darn the fed, why are you doing that?
tom: moving their target, that would never happen? lisa: but it goes to the question, why are people buying into this belief that this is going to save the market when the fed is saying need inflation to come down? inflation is not down, we are going to keep going.people keep fighting rather than saying, ok, this is what they are doing. jonathan: be careful what you wish for. all the wrong reasons. futures down .7%. we are negative on the s and p and the nasdaq after two big days of gains. yields are up five or six basis points. 88 on the u.s. 10 year, and the fx market the reverse of yesterday for yields up in the dollar stronger, euro-dollar negative, down .6%. tom: sterling moved a little bit. on the trust talk. jonathan: things moved. half of 1% -- .5%.
lisa: i am interested to see what happens with opec-plus in vienna. it is supposed to start around now. how much they really go into this 2 million barrel cut in production at a time when it is highly political, you have seen brent crude come down dramatically. as it backup test to -- does it pop back up? today we get a host of central banks because it is a wednesday and why not get lots of special bank speak? mary daly and raphael bostic will speak. very curious about mary's speech she made about the punitive effects of inflation, particularly on lower income individuals. as we watch yield surge the highest levels in more than a decade, how much is this the necessary pain that they need to avoid the pain that they are
seeing with lower income brackets with people releasing huge negative real wages? this comes as we get a series of negative economic surprises. this is good news but the market because people are saying, ok, than the central bank does not have to go as fast and as hard as they say they will, but to the point we were talking about, what does that mean about how quickly this economy is moving away from companies and earnings , from consumers and their ability to spend? not just policymakers. and how much they are committed to bringing down inflation. jonathan: thank you. 8:15 for the adp report later this morning. joining us is john stoltzfus, chief investment strategist to oppenheimer. let's talk about the price target area 4800 on the s&p 500 year end. it has been a difficult year for you. you cannot get every year right. unless we have a massive rally the next three months, how are you going to regroup and look at the framework and have a little
think about where equity markets are going? john: thank you for having me. this has been an incredibly tough year on the bulls and a great year for the bears, although both groups have been mauled to different points consider what has happened within different rallies. we have interim rallies, summer rallies, and the recent patch of rallies we have just gone through, but 4800 is a little optimistic here with 26% upside from their 4800 target. the problem is that right now the market really has been held hostage by technicals, i sentiment, by politics, -- by sentiment politics and geopolitics, which factor into this, but we have to see with the earnings look like and what happens tomorrow with the jobs number.
tom: i will cut you slack on the amount and the timeline of your strategy. let's say you go up 26%. let's say it is year end or somewhere out there in 2023, as well, do you need catharsis in the market together? do you need big support to go up 26% somewhere? john: i think we need some support from the bank and the more traditional sense that what we have seen, but a really forceful spike to come down. i think the most important thing to remember is that we are in this situation because of overstimulation to the economy and politicians in particular to emergency funding by the federal reserve, and the situation that was in front of it in the 21st century. we've only had one global pandemic in the 20th century i can recall, so more time zero
for the 1918 pandemic, so when you look at it, we have got to say there is a lot of uncertainty, but the market is telling us where it wants to go but it goes to rally periods. what it shows is a responsible barbell with growth, the rallies are combination of both, cyclicals and defenses, with cyclicals in the lead, clearly, but it shows the battle is between the short-term investors and intermediate to long-term investors whose goal is beyond we have gone today and these secular opportunities. lisa: you said held hostage by sentiment, the implication is the sentiment is wrong and there is much more optimism right now in the economy, which gets you to 4800. so what are you looking for? what do you have to see the change that and agree with the sentiment that we are heading to
recession that we have not priced today? john: i think we saw some of that yesterday. last week i attended a conference where you had a mix of bulls and bears. i was surprised to hear quite a bit of early bullishness from people who had been pretty negative on the markets going into this year and throughout most of the year. what it would appear to be is the numbers will show, and it has to be a sense of exhaustion from the selling. the question is, you look at really good companies that are not aggressive growth companies and have dividends, there off 30% year-to-date, yet you still see them being busy, with companies with household renovation, repairs and things like that, for example, or some big banks doing business but still are not paying a lot of
money even with rates up. you have to figure that this is something that is out of whack, and it may be that the leverage crowd is in a state of shock as we leave the state of free money, going to a place where bond issuers have to pay for the privilege borrowing money, and they are getting paid for the risk they take when they lend money as a result of buying a bond growing into inflation related to credit risk, as well as culpability risk. jonathan: when was the last time he could say that? john: yeah. jonathan: great sport, good to catch up with you. john stoltzfus of open hammer -- of open hammer. forecasting is tough. sometimes you don't get it right, and -- tom: i cannot say enough, like baseball, which i believe in hitting as you go back to the dugout, 60%, 70% of the time.
that is what strategy is like. you rarely mail it like michelson -- like mike wilson. you take the gift and you get it. does you take that gift. jonathan: lisa is our gift. lisa: talk to me like an eight ball. jonathan: from new york, this is bloomberg. >> keeping you up-to-date with the first word. opec and its allies may make their biggest cut and oil outlook since 2020. the move could stabilize prices, with risks cranking up tensions with the u.s. at the meeting in vienna today, opec-plus energy ministers will discuss cutting production by as much as -- production by as much as 2 million barrels a day. prime minister liz truss warns the u.k. aces what she calls "stormy days."
she talked to the conservative party in an attempt to get her beleaguered government on track, as she says she is determined to break out high tax, low growth cycles, and that tax cut that written is open for business. -- britain is open for business. her speech was briefly disrupted before those were escorted out. a bruising courtroom battle. elon musk revived his $44 billion offer to take over twitter. that proposal would likely eliminate the need for a trial over whether he should be forced to go forward with the purchase. bloomberg learned his legal team said the case was not going well. the european union has backed a new set of sanctions on russia. bloomberg learned and includes support for a price cap on oil sales to third countries. the sanctions also target a range of individuals and entities, including seniors russian officials and those
voice this, as well, we want to make sure that nothing will allow the energy difficulties to flow into financial instability issues and whatever measures we take will be cognizant of the importance of financial stability here in the european union. jonathan: that has been a dominant story the last weeks. that was the european commissioner for financial stability. good morning. action shaping up and the s&p negative after big gains the last days on the s&p, down .8%. yields higher, equities lower. you cannot break the correlation, can we? not by five basis points on the 10 year. dollar stronger, dollar euro stronger. crude down now, going into the opec decision. 89.95 dollars. payrolls on friday. i will give you an update on the surveys. the high right now is 389.
tom: is that how it has been the last couple of days? jonathan: a bit of a drift. 263. tom: futures -30 two this morning. our conversation of the day of the international economy and what it means for your american and britain, ngozi okonjo-iweala , the director general of the wto, who brings bulletproof that -- bullet proof, economic institutions, and all you need to know is that dr. ngozi okonjo-iweala and wto was way out front. director general, thank you for joining us. i will get to the headline. you say it merchandise trade is for the slow down the proverbial cliff to 1% in 2023.
what does that mean for the developed world, your nigeria and emerging markets. dir. okonjo-iweala: thank you. we just released that forecast. it is a little more grim than we thought. a real slow down, and it is happening for several reasons. of course, the euro rising from the war in ukraine, and household spending, the monetary spending tightening that is happening, also his plane into this, and so, a whole variety of factors. what does this mean? it means that we are looking at a situation in which global slowdown is going to squeeze out even more, and we may be edging into a recession. tom: director general, because
of time, i must interrupt and be rude, but i am going to do it because the question is so important, is jay powell, central banker to the world, impinging on global slowdown? are the central banks moving in the wrong direction? what is your advice off the board for the board of technology? dir. okonjo-iweala: it is very difficult. jay powell is in a tough decision, whether to keep tightening or overshoot and if you do that because you are looking at the data. it is very difficult to get that right. but there is no doubt that something has to be done about inflation. we just have to watch and see, and it looks like we are edging to an overshoot, but far it be for me to give jay powell advice. lisa: how much does china factor into your outlook?
how much is the potential for them to open up from a zero covid policy or e emerged from some downturns they have experienced -- or have emerged from some downturns experienced and how does it factor into the forecast or not? dir. okonjo-iweala: as mentioned, the war in ukraine, and china is another big factor with the push, and the slowdown and what it means. and whether that is going to continue and we are going to have a lockdown. and china, the economy continues to slow. that will have a big impact on the world economy, and i really fear of developing countries and developing markets. lisa: just to broaden out, we have witnessed a change where suddenly governments cannot finance themselves with deficits the way they have before, to clearly developed markets, and central bankers cannot fuel growth just lowering rates. how do you take that into consideration for not only this year's projection but projection for growth over the next decade?
dir. okonjo-iweala: well, it is obviously very difficult. what we are seeing in the projection is tremendous uncertainty. that is what i can tell you. what is making it difficult to predict -- because we have never seen this amount will be have forecasts before -- but what we do see is that we are starting to go on the downside. so that is impacting. we need to look at what can we do to turn things around? how can we slow down inflationary presence while we can restore growth? it is very difficult to predict. there's too much uncertainty. jonathan: director general, thank you for being with us. ngozi okonjo-iweala of the wto. lisa, i think she summed it up perfectly when it comes to how difficult it was to forecast next year. how do you forecast next month,
never mind 2023. lisa: in the uncertainty itself is leading to downside risk. especially if you are in a corporate executive seat, how do you come up with plans for investment if you are facing uncertainty that she is talking about with the birdseye view of the global economy? jonathan: next earnings season, tom, where is that going to? tom:tom: i don't think you can do guidance. it will be interesting to see with the conference calls are like. the equation is a complete mystery. does that keep us back towards recession? jonathan: with a tilting on gdp, potentially. the chancellor and the u.k. will meet with high street. tom: have i ever been to high street? what does that mean? jonathan: main street, you go to a bank on high street. tom: so does jamie dimon in london have -- it is not a street but concept?
i am serious. jonathan: it is the high street, you are not aware of that? tom: no, i am american. jonathan: ok. high street is like wall street. lisa: it is the same context. tom: is it like wall street? so ugly in america. lisa: it is a concept. jonathan: high street is like main street conception. tom: so when the car drops north, you walk north on this street? jonathan: [laughter] i am taking a break. live from new york, this was bloomberg surveillance. lisa: what is it going to be? ♪
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over the previous two days, more than fivefold percentage points, quite a run. compare it to last week, it moves from 435 down to 4.1% -- 4.35 down to 4.1%. yields are higher by four basis points. same story in the fx market. yesterday, it was about equities up and yields down and the dollar a little bit stronger. the one thing i want to focus on this morning is what is happening to crude. crude, still about 30% off the highs of the year looking at wti, but this one gets more interesting going into opec+. the real conversation about a 2 million barrel a day output count at a time when the white house wants opec+ to do something else. tom: you are onto something in that the zeitgeist is clearly looking at this much more than global wall street. what does that do it 96? the mood changes. jonathan: let's focus on this,
main street, a major, major. politically speaking going into midterms, prices are lower. gasoline prices are a little bit higher. are they going to push on the s&p? can they do about crude product exports, or can they leave opec -- can they lean on opec+? i will talk about them a little bit. cross price action, let's have it, lisa. lisa: you know, tom is onto something, as well. there is one name and one name only in the markets, twitter. just to give you some sense, though shares popped funny percent as elon musk came out and said, you know how i was -- popped 20% as elon musk came out and said, you know, i am still in, let's go. that left bank scratching their heads and saying, what does that mean for us? shares dip a little bit in premarket trading, but around $52 a share. still a discount to what it
would be if he does complete the sale. let's talk about why there could be uncertainty. it has to do with the debt market. banks are holding on to 12.5 billion dollars of financing commitments for the deal made in april. let's look at yields. tom: great chart. lisa: from april to now. in april, about 6%. now they are close to 10%. and they are moving vibrantly, but this is on average. the lower rated credit is even more dramatic. how much can the banks sell this? how muchwill that be the circuit breaker ? we can go into different gamesmanship where they look for elon musk to say no, and then they go back with a better excuse, but this is threatening the cause of markets that are fragile. it has been a dramatic repricing in the past five months. tom: thank you. greatly appreciated. an important conversation with someone who is influential in
this tumultuous 2022, regular staples, head of north american income at dws, joining us in studio. in 45 minutes adp, and claims, then jobs, and then the world is focused on some form of pivot. your language is soft. . what is a soft pivot? greg: i would almost call it a slow rotation. chairman powell probably felt he got burned little in june and july when the market rightly or wrongly interpreted language saying he was ready to pivot in the market rallied for eight weeks. that got him the way of tighter financial conditions he was looking for. he wants to be very careful he does not do that this time. i think he was disappointed a little bit with the rally over the last two days. he wanted to see different financial conditions. you are going to have to get that to slow inflation down. tom: the fact is it is a math three wednesday, and the index
is accommodated over the last 72 hours. to be clear, he wants to push that index to a restricted stance. greg: i think he is fairly close to it. i think he needs to do one more 75 basis point tightening, but he needs the markets to follow through. if he tightens and raises the policy rate, and equity goes like the past two days, i think that will be counterproductive. lisa: how much confidence do you have with the instability of the rally we have seen in longer-term bonds as people say they have seen the benefit regardless of what happens? greg: i have very little confidence of what we have seen the last two days. i think the general trend is higher but not the velocity we have seen in september. 4% might be a feeling, but i'm not sure we will see that again in 2022. it depends on the data we see the next couple of days. as we had talked about, wages are the driver for inflation going forward, we have a really data rich week. we see adp today, and continuing
claims tomorrow, and then friday, so many market participants and algorithms are primed to trade on those. you will see reactions if you trade on them immediately after the week or two. lisa: so don't trade the immediate knee-jerk movements, at a time when there is potential for agility. this is what people were talking about weeks ago. how concerned are you about one event that does not seem significant, say the owner of a car company going and buying a company that is social media, and then having that sold that was priced back in april? theoretically, disrupting a market. it would not seem like it would do that otherwise. but because of the fragility and lack of liquidity, this could be the difference. greg: it is a question and that often times happens in situations like this. we take a little comfort in the fact that so many other financial institutions or well-capitalized. there has been noise about credit suisse this week. we think they have high
liquidity and that is the upside of what happens with lessons we learned during the great financial crisis. i think there could be issues, clearly in the leverage finance part of major new york investment banks, you are nervous after the two most recent incidents. if you are looking at twitter, you are going, can it get any worse? i don't think that threatens overall financial instability. we will get through this. tom: explain the path of worries from liquidity to worries of solemn tea in this strange word trust? you and i have loved this. i know i am getting a liquidity line. things are wonderful, but from liquidity to solemnty, is a dangerous path. greg: it could be, and on a regulatory basis, a lot of financial institutions have more liquidity than they used to. it was forced upon them for will for times like this, but if your counterparties will not trade with you and depositors remove assets from your balance sheet, it could feed on it.
tom: you get in trouble with dws, but do you feel that swiss regulators are lacking because there are only two major banks that? greg: i think it is an issue they had to deal with. it is not something they can change. it is the world in which they live. lisa: when you see that financial stability issues will not be the same as they were in 2008, how much does that take the sort of pivot off the table that fed officials will not necessarily back off what they are doing because they're not going to break the financial system in the way that some people are suggesting they could? greg: we have talked about this for several months now. i think it is something you want to be concerned about. we saw it last wednesday when the bank of england had to step in to stabilize the gilt market. there is a concern with a lot of financial markets that something might happen within the u.s. markets. even liquidity, given some of the non-bank financial system growth that we are seeing that something like this will happen in the federal have to pivot from q2 and go back to q3.
i think they will be far more distant to turn to the marketplace to try to stabilize that they would have been in previous times. lisa: just spoke with the general director of wto, talking about how the uncertainty has shifted to a downward feeling in the range of outcome. how are you positioned? it seems like you are in that camp. how have you changed your position over the past few weeks? greg: we have been in that camp for quite some time, cautious on credit risk, interest rate risk, but before the rally the past couple of days going to the end of the third quarter, we are starting to engage the market and seeing really value in shorter duration treasuries we can invest in three or four year treasuries, north of 4%, think that is a good place to hide out. we have been engaging in the mortgage-backed security market. you have 5.5% coupons on dirty mortgage trading below par. that gives you a good running rate of -- on 30 mortgage trading below par. that gives you good running rate
. because of high volatility, you're getting paid with optionality. not going in whole hog, but stepping in. jonathan: seeing unsecured debt? greg: not yet. jonathan: just asking for a friend. thank you. greg staples of dws. you hit up from a lot of people in fixed income. but the response usually get is different. lisa: he was honest when he said banks wake up and they are just not happy. tom: would twitter be triple c? jonathan: yeah. tom: ok. jonathan: it will be difficult and run about 15%. tom: 15%? jonathan: i don't know what that one goes. lisa: basically the point is there going to charge an arm and a leg to get the deal done, and whether this is something that will be valuable for him to go through with it because of
everything, we'll have to see. that is the gamble in stock markets. tom: was this discovered today? jonathan:. -- we knew this back in april. tom: but it is worse, right? jonathan: much worse for the banks, tom. lisa: the state committed to financing at lower rates, so if they celebrate, they have to sell it at a huge discount, and this is the concern. not from a financial stability point, as greg was talking about, but their earnings will get hit yet again in an environment where it is already slow. tom: further dumb question, if they made a commitment in april, does it stand out or do they rip it up and make a new agreement? jonathan: i don't know the answer, and i will wait to see with the banks will say. if elon musk wants to make the deal happen, he would be annoyed. tom: you know that i believe every single ad in my feed? i block it.
the only when i don't is arsenal soccer. i do not delete the arsenal feed. jonathan: the bank gives you promotional ads? tom: yeah, from arsenal. jonathan: i do not want to get into the litigation around the banks right now. i am not qualified to go there. from new york city, this is bloomberg. ♪ >> keeping you up-to-date with news from around the world with the first word, i am lisa mateo. you heard about the elon musk decision to revive to $44 billion takeover of twitter is right news for investors, including carl icahn who continue to bet on the outcome after months of uncertainty. after elon musk said he would move forward on the original price, twitter stock rallied by 23%. the biden administration is trying to keep opec analyze from cutting the biggest outlook
since 2020. they are meeting today in vienna where energy ministers will consider cutting production by as much as 2 million barrels a day. bloomberg learned u.s. officials are making calls to counterparts in the guflf, trying to push back --gulf, trying to push back. mortgage rates rose to the highest in 16 years. according to mortgage banker associations, the rate on the 30 year was nearly up to 6.5%, leading to a 14% decline in applications to buy or refinance a home. in denmark, the prime minister has called for a general election on november 1. seven months before her term ends. she was pushed into calling the vote by the opposition and in july, she was reprimanded for her role in the calling of denmark's 17 million population of the pandemic. the government was concerned the animals would transmit covid to
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>> cap on gas prices be designed properly to ensure security of supply, introducing a cut over all is a temporary solution and soon we will have a new eu price index developed that ensures a better functioning of the market. jonathan: that is the european commission president. energy the main focus this morning with opec+ meeting in vienna, austria, discussing potentially a cut to output between one to 2 million barrels a day. we will get to that in a moment. let's wait for price action on
the s&p 500, big two day pop, this morning down .9%. yields higher by six basis points. dollar stronger. euro-dollar negative. crude down .5%, $86.12. do we have video of aaron judge? tom: we don't have video but we have a tweet. a presidential tweet that is important to address. aaron judge, history made. four history to make. jonathan: that is nice. tom: 10 hours ago from the president of the united states, a phillies fan. jonathan: that would make sense. do you have a favorite baseball team? tom: i have to see. aaron judge joins us with a few days to go. over to some serious stuff to talk about, big moments for the yankies. lisa: i am reading the new york
post. it is on the cover, and you can take the girl out of new york, but not new york out of the girl. the yankees offered him an extension for nearly 215 million dollars. he is a free agent, but how do you lose him now? tom: a lot of money and go to the new york mets. that is how this is working out. annmarie: he is not going to queens. tom: let's cut to the chase on gas. does the price of the gallon of gas in opec meetings, doesn't matter to an election in pennsylvania? annmarie: it does matter in terms of oil price spike that at some point will trickle down to gasoline prices, and that is one of the biggest concerns this administration has been worried about. you saw that with the spr
releases and at some point they were tweeting about it almost every day, when you saw the numbers trickle down from the five dollar peak in the middle of the summer, which is why this opec meeting is optically very difficult for the administration. we are months out of the midterm elections. inflation, gasoline prices, this is something that has been really difficult for the administration to deal with and their communication on, and now you have one of their main allies in the gulf pushing for potentially a 2 million barrel a day cut. for some context, 2 million barrels a day cut is 20 times more the amount of oil biden got after his saudi trip for the other direction, but there are caveats. a lot of the countries are not reaching their production quotas, which is why the white house is not panic stricken but disappointed with the timing. jonathan: there are a couple of options on the table. you try to work something out with the crown prince, option one. option two, you keep leaning
heavily on the spr, which was activated the last month or so. option three, you consider something they have floated much of the year, which is doing something to restrict the export of crude product. where are we on all the options? annmarie: option one, we have not seen a phone call yet directly from the president to the crown prince, but to his key advisors that deal with energy in the middle east, all recently in saudi arabia, so i imagine energy price was discussed. when you look at potentially stopping exports out of the u.s., yes, it is seen in some parts of the administration, but it just seems to be an idea and a tool they can use. but they are well aware that if you do that, that increases prices globally and potentially could backfire. lisa: there is a larger issue, how firm is commitment to u.s.
made two european allies to support them through the winter that is expected to be difficult? annmarie: they are trying as best they can to send over liquefied natural gas, and it is a record in terms of what u.s. producers are sending over to europe. the president and his advisers have made it clear that they will do "whatever it takes" really to support europe, but the issue is, europe is not set up infrastructure wise. and it is not really this winter. you have ursula von der leyen talking about today the fact that they are 95%, in terms of storage, for lng and natural gas supplies. next winter will be the problem. lisa: equal with lng, the exports there, we heard from the secretary some issues earlier this year about even restricting those. it is flying is much as they can to europe now, and it has increased dramatically on the exports, but this is not bulletproof. how much is the white house trying to make this politically
bulletproof to secure the alliance between the united states and europe? annmarie: well, at the moment, the u.s. can only do as much as they can, which is sending over any -- any private company sending over liquefied gas. if there was export controls, you would hear a lot of complaints and phone calls from european capitals to washington, but they are looking elsewhere in the middle east, which has long-term contracts with individuals in asia. but what you are getting that is the fact that what we are waiting for potentially or what we can potentially see our cracks to the unity that the united states has really worked hard to make sure that they secure with europe. but i would say what we have seen recently coming out of russia, which is its rhetoric, the sham referendum, the annexation, that it is difficult to find a country that believes the fact that they don't even know what territory they annexed because the borders keep moving,
and putin saying that he potentially would use nuclear weapons, that has only brought these allies closer together and realize that it is going to be a tough winter but it may be worth it. jonathan: did you bring the yankees jacket to work? annmarie: i did. jonathan: are you wearing that around d.c.? annmarie: of course. tom: she was going to get the gucci one, but went the american route. annmarie: he is from the bronx. jonathan: thank you. tom: recent comments on the yankees triumph? lisa:lisa: let's wait until the mets by him. jonathan: thanks for coming on, and worry a -- annmarie. lisa: thank you. it depends on how big the paycheck is. jonathan: that is true. tom does like every judge, and congratulations to mr. judge.
i have to say, i found it strange that the way this is presented and has been chased last week's is almost like barry bonds did not exist. it is bizarre. lisa: that asterisk is toxic. it does not get discussed because people cannot say -- it is not graceful to say there was barry bonds. jonathan: but it has been done before. lisa: but has it? jonathan: basically, yes. lisa: but in technical terms, has it? jonathan: kind of it has. lisa: [laughter] tom: why do they keep doing this? they had steroids. lisa: but it has, but has it? jonathan: yes. lisa: [laughter] jonathan: from new york, this is bloomberg. ♪
that is to come down for the fed to eventually pivot. >> looking for signs of a weakening labor market. i don't think we get that quite yet. >> this will feed into the fed not being happy with where things are. >> the market is sniffing out the top of the fed cycle. i think yields are overshot and just now coming down. announcer: this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: adp wednesday coming up here. the first look at the american labor economy. onto that report. jonathon: they just blanked and went 25 basis points. lisa: [laughter] really? jonathon: i imagine it will be
more than that. we have the central bank decision later. who would have thought we would butcher a central bank decision out of romania? lisa: [laughter] [crosstalking] jonathon: they actually went 75 basis points instead of 50. romania didn't blink. [crosstalking] the reason i say this is because the decision yesterday was ridiculous. the idea they had gone 25 instead of 50, setting the stage for every other central bank going less than expected. tom: daniel schulz, two days outbid. now it is wednesday. jonathon: i am with you on that. dropping more than $1 million. you can get job openings down without sending unemployment,
that could happen. lisa: just putting out, this is hardly conclusive evidence that unemployment is waiting rapidly enough for the fed to achieve a soft-ish lending. the issue is the fact that the market was poised so dramatically for some sort of reversal, and it highlights people are still playing by the same playbook at a time when inflation has not changed. tom: how important is this report in 12 minutes? jonathon: adp drives me nuts because we say they are useless, then for some reason, someone trades on it and it picks up again. i don't think you can make a big call on the labor market yet. certainly, we have seen jobless claims come in under two hundred thousand. if you are dreaming about a soft landing, that speaks to that, but you want a more complete picture. i would be looking to see if job openings have come down, because coming out of this economy,
people stepped up. tom: an update opec, please. lisa: we are looking to see what they deliver and why. how much are they going to end up cutting, one million barrels or 2 million barrels, because they don't have the ability? tom: will we see this this morning? jonathon: usually, you get a leak from delegates on what they're going to do. opec-plus looking to cut production with or without an agreement. it is been knocked down to target. tom: some video out there. let's go to data right now. it is a clumsy day of data. yen 144.48. that's not where we were.
jonathon: when you have a big pop on s&p, going back to april 2020, 0.9% on the s&p. if i can tell you where equities are, you can usually guess where bonds are. if equities are down, yields are probably up, and they are by six basis points. tom: 86.4 six on west texas intermediate. crude rounded up per barrel. we will see what we get from opec and what it means for a gallon of gas. brian nick right now. what do you see six month out in 2023? >> i think that time horizon is really important thank you for having me on. the strategy we employed is to have that same one step forward, two steps back type of market environment. we are sort of playing the middle.
we like yield, we like less interest rate sensitivity, drawing us to real assets like farmland and public markets, things that are high yield. they are doing well in the first quarter and the first two days of the fourth quarter. it has traded off so much and has a nice cushion against further deterioration. jonathon: you took us into the weeds, solid-state there. farmland. interesting to hear that on programs like this. if i am sitting at home and wondering how to get exposure to what brian is talking about, how are you offering exposure to that? >> that is mainly going to be the markets, as you say. i was trying to give an example of each public and private. variety, trying to slice and dice things like real estate, farmland as well, so investors don't have to have tens of millions of dollars in their portfolio in order to justify or have access to a piece of farmland.
some agricultural output is not quite the same type of investment, but it is available for people who don't have that huge portfolio. it is really about finding what is going to work n/a high inflation environment where interest rates are whipping around and people are concerned about what's going to happen to the economy and that three month to six month far -- time. lisa: there is this issue where you also deal with the liquidity of farmland, the liquidity of real estate. not so great compared to the liquidity of treasury. how do you offer individual investors the access to this when there is a liquidity mismatch at a time of high concern to a lot of people? what if this turns on a dime and there is a mismatch, which often causes a lot of problems? >> there's the actual investment
vehicle that prevents you from pulling money out in a rapid way because it has to be deployed in a certain fashion, but that is going to be an entirely different type of investment. for some investors, this could be a good thing. if you don't see the value whipping around because nobody is assessing it, nobody can help you with the strategies. what we are seeing in the markets is that it has been rallying a little bit because liquidity has come back in. it has had a pretty tough run. there is this tactical liquidity risk. i think we're going to have to keep a close eye on all of our portfolios as we head toward the end of the year. lisa: how has the treasury merriment change are month, for example japanese investors have
a less optimal value proposition, just based on the currency hedging kind of basis? >> i think the official stats indicate there is still a lot of foreign demand for the treasury. that is what is supporting the dollar for people around the world who are not getting real interest rates like they can in the u.s. that is attracting a lot of people to the u.s. dollar and into u.s. treasuries. we are continuing to see demand from low yielding parts of the world, which don't offer tax advantage to people. we still have demand because municipal bond yields have traded up considerably this year from places like korea, japan, where domestic rates are still quite low. i think the demand is still there. clearly, there is going to be some concern with the actual exchange rate today and how difficult it is for investors to get into the dollar at these very strong levels. i think over the curse of the year, as we have seen rates
moving up, the demand has been quite strong. jonathon: quickly, what do you want from payrolls on friday? >> 200,000 300,000 will be great. the market is interesting because they just changed methodology. there was a decline akin to what we would see in a destroyed economy, but the numbers haven't been showing that. the numbers yesterday said there were fewer drop openings, but we don't know if those are filled or people slashing those openings. i think galleries and people are paying attention is because jay powell said it is important not because there is some great amount of information compared to friday. jonathon: some lively action in data. [laughter] [crosstalking] you bka. -- yippee ki a.
tom: it's really important point. alexander novak, the deputy prime minister, just arrived. quite a moment to see such a high ranking russian official arrived in a european union capital, vienna, as work rages in ukraine. this is not a small moment. jonathon: this was mentioned early this morning paired we are said to have a conversation about a one million to 2 million barrel a day cut. we want to see completely the opposite. tom: i don't think the white house as part of the dialogue. jonathon: clearly not. but they were fist bumping with the saudi's. lisa: and how much is the u.s. really the elephant in the room here, with respect to the alliance with opec-plus, with the presence, at a time --
jonathon: and in person meeting that could go longer than 13 minutes. an adp report just around the corner. live from new york, this is bloomberg. ♪ >> keeping up-to-date with news from around the world. with the first word, i am lisa mateo. opec and its allies may make the biggest cut since 2020. they risk cranking up tensions with the u.s.. at their meeting in vienna today, opec's plus -- opec-plus will discuss cutting $2 million per day. prime minister liz truss says they face what they call stormy days. their turn to get the beleaguered government back on
track. she is determined to break out of the high-tech slow growth cycle and tax cuts show that they are open for business. protesters from the emaar mentor group greenpeace temporarily disrupted liz truss's speech before they were escorted out. elon musk has revised his $44 billion offer to take over twitter. that proposal likely eliminates the need for a trial for whether he must be forced to go forward with the purchase. the cases is not going so well. the european union has backed off a new set of sanctions on russia. embarq has learned it includes a price cap on oil sales to the country. sanctions also target a range of individuals and entities, including senior russian officials and those involved in staging the recently widely condemned referendum.
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>> right now, the pain i hear every day is suffering and the things people are going there is on the inflation side. it is a corrosive disease, a toxin. it erodes the real purchasing power of people. jonathon: the san francisco fed president. live from new york city this morning, good morning. futures up on s&p bite 0.8%. let's get to michael mckee for more. >> good morning. this may be good news. adp has change their formula and we don't know how it changes friday's numbers. 208,000 jobs on the adp payroll
creation during the month of september. that is up from the 185,000, which is the revised number for august. it is sequentially lower. it's what the fed kind of wants to see. i get that's what the markets want to see. what does it tell us much of what job creation will be for the month of september, scarves government payroll numbers? that's hard to see. -- hard to say. most are created in the medium-sized company category. we did see 13,000 manufacturing jobs go away, which kind of is in line with the numbers, which fell below 50 this week, the manufacturing numbers. we will see how much validity this report has come friday. jonathon: can we pick up on a data point that came out a little bit earlier this morning? mortgage implications down by
more than -- applications down by more than 14%. your reaction to that? michael: i'm not surprised, but what it does look like is a real pull back very quickly from the real estate business. some people say when you see a number like that, maybe it is a seasonally affected number, but this could be real because of what happened with mortgage rates going up so high. it just means that the real estate sector has already rolled over from fed rate increases. does that mean it goes into the rest of the economy and how fast does it go? a very interesting column today, a new report out of bloomberg from an agency that tracks rentals, who says rental prices are falling because far fewer people are renting now. [crosstalking] tom: they're not buying houses and not renting either.
michael: apparently, the idea is that household formation has dropped off. after the pandemic, a lot of people got out of their parents houses and got married or moved in with somebody, and now that is not happening. tom: link this together for our viewers and listeners. another headline tensions earlier this morning's data. this is back in 2006. i saw another headline saying home prices are down 17%. how bad is this going to be? after seeing 2004, 2 thousand 5, 2008, all that? michael: i was one of the people who thought we wouldn't have a national housing collapse in 2007 because it had never happened before. i have learned my lesson. i won't say that is going to happen, but it does seem we are starting to see prices fall, which would then feed into the cpi numbers.
it takes time, but if they fall rapidly enough, maybe we will get into the numbers more quickly, and the fed may be able to back off sooner. but as we have seen in the united kingdom, there can be a lot of financial stress that we don't know about out there. lisa: which goes to the financial stability issue. we have talked about, will this cause the fed to pull back from the fed rate hike? we have not heard anything about it ending up more front and center than as possibly to supersede the inflation discretion. when are mortgages going to do that? michael: they will do that in a sort of fundamental way, in the sense that the housing industry is the biggest in the united states overall and the biggest input into inflation numbers, the cpi numbers. when that goes up and down, it has an effect on the economy. lisa: we have been talking about this.
this discussion of, it is a labor market, the accurate gauge the fed will be looking at to understand how much they are taking some of the heat out of the economy to achieve their inflation goals. michael: it is the traditional way. it has been a phillips curve economy. people look at the trade-off between inflation and employment. they don't know whether inflation dynamics have changed, so they are still looking at the labor market. they admit there's a lot of questions about how you can tell what's happening to the economy. this is a nerd show, so i feel comfortable saying this. lisa: [laughter] michael: i raised this with another reporter. a paper was presented at the new york fed financial stability conference on friday that there is a level of interest rates after a long period of zero interest rates that you start to have financial stability problems.
that rate is below the neutral rate. the fed is going to have to fight financial stability problems before it can get to the neutral rate. i don't know if that's true, but it is getting -- [crosstalking] it was presented at the conference. lisa: it is actually really interesting. tom: i thought it was a cut off david bowe's last album. [laughter] lisa: this is fascinating. this is basically saying they cannot allow yields to go up to where they normally go because of inflation and growth, because of the amount of debt that has been incurred over the past few decades. it blows of the financing system as we know it, in a way that is too disruptive. tom: there is the bloomberg -- the blue book, green book, brown book. every so often, the blue book matters. jonathon: a serious question, michael, i would love your
insight on it. how much longer can the qt effect go on for you? -- go on for? global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. -- michael: we don't know. there is a big discussion underway about how far they can go. the financial system is kind of messed up right now. there are regulatory issues, supplemental regulatory. it is hard to know exactly where they are going to go and how fast they're going to get there. jonathon: if it's a choice between a financial instability and higher inflation. lisa: this is the issue. they essentially end up buying bonds, having -- at a time where they are raising rates, so they could off inflation. they end up cutting off their nose to spite their face. jonathon: the mpc is going to be -- meet on november 3. tom: it is all original.
michael, what are you looking for, for jobs on friday? michael: i'm looking for the sequential decline. if you're looking between 200000 and 300,000, that would represent the kind of decline, gradual and not too harmful to the economy, that you are expecting. if you get a really high number, that suggests the star star comes back into play. i'm glad i brought that up. lisa: i am, too. jonathon: they were saying yay when job openings came down. michael: it is just a marker along the way. along the way. jo202 pounds on golo. i've lost
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of august which will go into third quarter gdp. -$67 billion. that is down from 70.71. trade will contribute to growth, a deficit not as big. what i haven't seen yet is the breakdown. one of the questions, do we see a big collapsed in u.s. exports because the dollar is so strong? that is what people are going to be looking at in terms of longer-term implications for all this. jonathan: given how closed off this economy is, many people say the u.k.. how much does that actually matter to the u.s. economy? >> it doesn't matter as much to the u.s. economy, but it matters to the rest of the world it means everybody else has to tighten more. in a sense, that could blow
back to the u.s. and end up with a greater possibility of recession. it is a question whether policies have diverged enough from fundamental that somebody should at least say something. tom: how distant are we from merchandise trade recession? statistic for next year, 1%. stunning. michael: we are very close to something like that. the decline in global trade is burying people because it is a measure sort of of how the global economy is doing. as trade collapses, people are spending less money. it is one of the reasons that australia went holding 25 because they are much more exposed and the u.s. is.
jonathan: china, everything is tough on the economy. a little bit later, the san francisco fed just briefly. what do you want out of that conversation? >> we know they want to raise rates, keep them there for a while. they have said that over and over again. but what happens when something breaks? jonathan: in about 90 minutes' time. tom: really important fed president rings a resume and a life story that is hugely important for the fed. bank of america, chief u.s. economist three holistic on monetary and fiscal. thank you for breaching us this morning.
i'm going to go with the swirl of the data right now to what matters for you. what matters for michael? >> only one number, and that is the payroll number. a lot of distortion in the data that we talk about. it is really hard to know. what matters to me in terms of the economy, how far the fed may go is almost exclusively just payroll. tom: payroll, studies we will see on friday. three months moving average that comes out of 8:30 that everybody reads first. what is the appropriate three-month moving average for the fed to say all clear, let's change? >> to move to a slower pace of
hikes, you probably need that number to drop below 200,000. to get a soft landing, that number probably needs to be about 50 to 70. 275,000, 300,000 a month, those are still vast numbers. a slower pace, probably below 200. but to get the unemployment rate to rise, certainly sub 100. lisa: that is something that is going to see hard -- be hard to see based on all the projections. charles schwab talking about the data, you are seeing more part-time jobs appear in some of the anecdotal data. in the headline really the one that we should be watching for real-time changes?
michael: certainly, there are data points complementary to the overall picture and i would never say we shouldn't look at those. the ratio of openings to the unemployed. all those provide context and they do show than on the margin, labor demands are softening in the labor market is cooling. ultimately, the fed is not going to conclude the outlook of inflation is correct if we are still adding 200,000-3 hundred thousand jobs per month. payroll growth, employment growth over time, there are certainly other data points we should be looking at to see if we can reduce labor demand without pushing the unemployment rate of six b. was other data points that you mentioned can help give context around the story. lisa: a lot of people pushing
back and saying that inflation is actually decelerating pretty dramatically. they say looking at the data is not accurate. a way to create future policy based on a lagging indicator. would you agree? >> i do think you have to be forward-looking. only looking at the data at that moment in time may mean that you over-correct in one direction or another because there are going to be other factors that helped bring inflation down. whether it is forward commodity prices or used car prices being down seven of the last eight months, we should start getting some relief from global supply chains. that is not just the labor market, and certainly that would
increase the likelihood that you make in the sake, but in some respects, you have what you have and that is the data point that over time is going to try touse. emerging rates against the wto today was absolutely stunning. it is a 1% statistic from merchandise trade. clearly, globally, that does not get it done. what does that mean for americans? michael: as you discussed in your prior segment, not as much because we are a large, relatively-closed economy. strong appreciation of the dollar will slow the economy down. but that is a relatively narrow channel for us insert the other developed economies like europe, the u.k., australia, and so forth.
it would imply there is a very weak little growth backdrop, and that actually claims to help the u.s. because of energy prices, gasoline prices. it is immoral compass a picture when it comes to the u.s.. jonathan: you've got a recession call on the american economy. can you tell me about it? are you pushing that forward, pushing that out? > we pushed it out to begin in q1. i originally had things slowing down earlier this year, kind of pricing for that, and then things picked up. i moved it out in the first half of the year. i think the trend in recent weeks, the fed shifted, lifting its policy rate.
financial conditions, that is something around q1 or in the first half of next year. jonathan:jonathan: just to round it out, what about the of depth? michael: i spread it out over three quarters and tried to signal a little uncertainty about duration, a little above 5%. but i think in the first three quarters of next year is when we are likely to --. jonathan: and the touchdown is when? michael: december of 2023. jonathan: i don't think you have a crystal ball, that is not why i asked those questions it is interesting to me that you have that and to the year. is that original? michael: the terminal rates
about the labor market and inflation. when do they shift to more balance the reaction function? every time inflation comes up higher, it takes a while for that to show through. it is the idea that we are going to have to accept that we need to bring inflation down. it is a non-situation, but it is the fed right now saying we need economy to slow. jonathan: fascinating, just wonderful. this is the issue, i think. there an economist, and you can debate about what is going to happen, but the base case is it started at the start of the year. lisa: and basically saying that
financial stability will hold enough to allow the fed to do this. jonathan: does that sound bullish? tom: i think it is original. jonathan: coming up, looking forward to catching up on the bond markets, morgan stanley. >> keeping you up-to-date with news from around the world, elon musk's decision to revise his takeover of twitter is great news for investors. he said he would move forward with the agreement at the original offer price and stocks rallied as much as 20% the biden
administration is trying to keep opec and its allies from making the cuts in 2020. opec-plus is meeting today with their energy ministers will consider cutting production by as much as 2 million barrels a day. bloomberg has learned that u.s. officials are making calls to counterparts in the gulf try to pushback against that move mortgage rates in the u.s. rising for the seventh week a road to the highest in 16 years. according to the mortgage bankers association, the rate on a fixed mortgage rose nearly a quarter. that leads to an almost 14% decline in applications to purchase or refinance a home. in the private sector with a better-than-expected amount of jobs in september according to the research institute. the government monthly jobs report comes out on friday.
joining bloomberg this morning, the deputy prime minister of russia. lisa: going to be in vienna at these meetings in person, controversial considering it is in a major european city. there is a war between russia after invading ukraine. how much does that shape the narrative when it comes to who is on who side tom: alexander novak scheduled to be with us later this morning. right now, i have no idea why he is not in the opec-plus meeting. j.p. morgan has really been definitive on how we get to a permanent $100 per barrel. you see the demand questions gaming out nicely. suddenly, we are higher.
what is the single distinction that drives us to wanted $20 per barrel? -- $120 per barrel? >> we were seeing a repricing of oil and it is going back into control, 35%-40% of the world oil. will they spend, will they grow their production? i think we are looking at a significantly higher price which some ways is potentially what we are trying to do today. tom: the trying of opec. oil plugging 24% is my quick mathematics. how close is the cartel to a 1986? >> it all depends on how demand
response to the current price. we know that they will also be looking for a higher price. it is not just the breaking of the country, it is also what they want in terms of social resource. that price level vs with the u.s. wants, there is argued the a price war emerging. but in the end, if demand can respond, i don't necessarily see demand collapsing. lisa: where are we in terms of the u.s. and swing producer at this week? just generally throughout the energy sector. >> it is interesting. parts put back together again as well as productivity and
production, and ultimately, returning cash and getting more popular with wall street. you have to think about what price to cover. much bigger ponds -- bonds are priced in the world. i think that is the key. lisa: right now if you are seeing production cuts at opec lots, where does the marginal stopgap come in? we talk about the petroleum reserve and how much the yield has gone down on some of those reserves. further in response to some sort of 2 million barrel production cut today. is that gone, is it used? >> absolutely. the world is full of energy
across all fuels. it is sort of like saying to your customers that there is good as news. it ultimately becomes who is taking those barrels at a higher price. tom: you give a fair share to esg. the synthetics and the other things we are going to be for energy besides oil give us a sense of the esg event given the war in ukraine. is it forever altered? is it shifted? >> the industry, european-u.s.
majors represent roughly 20%. i think it is more of a hybrid as a function of the sector. ultimately, delivering energy so that we don't compromise security. that would redefine the role as opposed to being simply -- lisa: i think we've lost income unfortunately. tom: christian malek with truly a definitive report. lisa, where'd we begin with a completely bullish day? just a strange day. lisa: the best two day rally in
the s&p 500 going back to the depth of the pandemic in 2020. it is a moment where people think, ok, is this actually some sort of speculation that we are going to get a softer landing? or is this basically a short squeeze? jonathan: we covered earlier and i think it is what you got, but i'm sorry, they voted on the speech and the answer is weaker sterling. that trend continue fact three or four days. there is a signal there. lisa: how much support does she have anyway? from her own party? the more she spoke, the more uncertainty there was about wishing-adjusted welfare payments, the more with conviction of the pound.
tom: back to opec here, 92. that is migrating to $100 per barrel. lisa: looking at the inability to produce. inability to produce, what does that mean in terms of where prices go and demand disruption leading into the long term? tom: an important conversation. michael mckee and a conversation with the president of the san francisco fed. mary daly in the 10:00 hour. stay with us on radio and television. good morning.
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jonathan: yesterday was upside down and from new york city this morning, good morning. the open start -- the countdown to the open starts now3+ >> everything you need to get start of the u.s. trading. this is bloomberg, the open with jonathan ferro. jonathan: live from new york city, bear market or the real deal? >> that is the risk here. >>