tv Bloomberg Markets Bloomberg October 17, 2022 1:30pm-2:01pm EDT
that once credibility and -- trust has been destroyed, it cannot be regained with u-turns. well he apologize -- will he apologize from the cost of -- on families? the market told our -- he announced a new four-person economic advisory council and the president -- counsel. the leaders pledge to unify with a self ruling island comes ahead of a reshuffle of the party and a patriarchate public is adding pressure on presidency to move quickly especially after nancy pelosi challenge presidency --
the president of china by visiting taipei in august. in nigeria, 603 people have died in flooding. they say nearly 270 -- 270,000 acres are submerged in a water and 82,000 homes are damaged and 1.2 thousand people are displaced in the flooding is expected to get worse. across the world, the fight against climate change is looking up. u.s. households will install a record number of solar powered systems this year to help reduce electricity bills and that is according to a bloomberg analysis. in germany, a three month instrument with the chief -- transportation says -- in india, the country has released rain hydrogen production capacity to
an annual 25 million tons to 24/7 --2047. 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 am mark crumpton and this is bloomberg. >> welcome to bloomberg markets. >> green on the screen when it comes to the equity market but the bond market up to .8% on the s&p 500. a fast and furious rally and the 10 year yield not far behind, only down to basis point. you see that bond volatility showing up in the market and with the yields that are moving, you have a week here -- weaker dollar circling back now only to
the commodity space. ny crude up $.80 a barrel. >> the risk on load that we are seeing for equities is powering a lot of the technology stocks. we are seeing interest in bank stocks after the bank of america quarterly stocks. it was interesting that you had a company like roadblocks -- robloxs which had been hard hit has encouraging user data. the stock is powering ahead by 22% and some billionaire moves that are getting attention in the case of continental resources, a boosted offer to take that business private is powering those shares and we have been watching the story of foxx given the possibility of uber mark -- rupert murdoch
recombining ox court with news corp.. --fox corp. with news corp. >> wall street is cutting its -- explaining why he is calling for 4000 a year and on be based -- benchmark. take a listen. >> we have seen repeatedly these rallies that we have had that have been remarkably powerful based on the negativity that is out there and they weren't sustainable. they weren't sustainable because the issues at hand whether it is monetary policy, generally more aggressive stance, and committed stance by the fed to curve inflation, as well as political dysfunction in washington and abroad. supply chains that will not -- are still not up to pre-pandemic
levels. all this gives pressure and concerns of the market, we have to think that 12% of site from here to the end of the year makes more sense but almost 33% upside based on where the s&p close on friday so we are bullish on equities but it will take more time until the fed has effect on curbing inflation. >> let's bring in our chief equity strategists on more insight. he just said that we need more time for the federal reserve to work its magic on -- for the effects to show up should that already be price in the market and should the equity market be bottoming out? >> what he was referring to is specific to inflation and the fed needing to do more to contain inflation to soothe markets fears on inflation outlook.
it speaks to one of the concerns. it has come to our attention that twice in the last two months, the equity market has had an extraordinary response to cpi print's. we had one of our most positive days on the cpi print in the last 20 years. less prior, we had a negative day. the market is insect -- is sensitive to inflation and the marketing -- that is creating a great deal of questions about the outlook. it is creating volatility across asset prices. the affect of that is a numbers market -- a nervous market. >> we are getting some today and tomorrow the rest of the week, the earning stories and i think this question of how much profit pressure is factored in to where the market is today and you and the team did some exceptional
analysis on what has been happening on the earnings front. walk us through what you found. >> the first thing we found was the market has priced a significant slowdown in earnings but the consensus is expecting earnings to recover. the consensus has marked it's equitation for a third quarter but expect rated growth but there is a lot of moving parts that i think will create tension in the equity market and the big story is based on upon our expectations, the stock market has priced in. decline to earnings. -- for the third quarter specifically, we think we should see somewhere closer to a percent earnings growth for the consensus only 2% earnings growth is likely so you get this interesting set up work companies most likely do beat
expectations, but can they provide the confidence and the outlook that analysts are expecting? >> we will watch close. great to get your thoughts. she joins us with an equity market breakdown and let's talk about the markets especially on the fixed income side. padhraic garvey joining us. we talked about the fed matches seeing -- messaging. the bloomberg opinion editorial board put out a piece about the willingness of the fed to acknowledge errors and confront new data with an open mind and at least from the opinion seems --team's perspective, that is the best strategy. how the market react to that going forward? >> what it shows is it shows
flexibility and if you look at how the fed has reacted over the past number of cycles, they have been quite flexible when they need to be in very often, when they have been in rates cutting mode, something is broken and they have been responsive. of -- there is still no sign that we are at the peak but if you look at the global landscape, there have been many explosions going off right left and center. it hasn't been a u.s. story or problem but there are issues. if you go to the housing market and acknowledge there are risks out there, even though the -- delinquencies are low, that can change. it shows flexibility and it doesn't change the mandate that they have witches who continue to tighten rates until they are short the inflation story has been sorted. >> what does that mean for the long-term?
you are talking about inflation being sorted and there is an assumption that inflation will return to the 2% long-term target but does that take into account -- there is this massive person towards more manufacturing in this country, which will push up costs. shut that factor into these inflation goals --coals? >> for sure but the big issue with inflation is what is here. what we have is a comply constraint -- supply constraint with a big demand factor. the average u.s. household have a huge left --lift post-covid and most of the u.s. inflation is domestically generated. it is coming outside the energy sector so the important thing over the next number of months,
from the fed's perspective, is to ensure that we don't have second round effects so they have to dampen demand. longer-term, there are costs and pressures. there also cost-benefits into the medium and long-term that can contain prices. in the energy sector, there are possibilities there to reduce costs. >> i want to follow up on the point that inflation is domestically generated. >> should this really be more inflation that is imported coming from the commodity costs and weaker currencies are brought? >> yes. there has been inflation in the commodity sector and in the energy sector. in the u.s., we are insulated by a firm daughter -- dollar. it is there but if you look at
the headline inflation rate, it is around 8% and energy takes it back down to 6%. last week, we had core inflation confirmed at 6.6% which is above where it was back in march. back then it was 6.5% so that is the big --bit the fed has to look at. without killing the economy. >> great to get your perspective. padhraic garvey, i appreciate you joining us. the market has been ingesting bank -- reaping the benefits of the fence interest rate hikes with a strong earnings report. we will break it down next. this is bloomberg. ♪
have to keep raising rates. simply because, if inflation is a percent, -- 8%, the playbook says you have to raise rates higher than inflation which means 9%. that theory goes out the window if cpi goes down but i don't see a happening -- that happening. >> i am kriti gupta and that was mark mobius warning that interest rates will sort to a three decade high of 9% and that level would be eye-opening but that could help the banks with net interest income. that has been a big focus. we have shimao domestic -- sonali basak joining us. does bank of america need that help? >> you see the interest come in strong even though provisions for low boxes are higher, -- the
credit market is healthy enough to make money, and land aggressively --lend aggressively and you see bank of america benefiting. shares are 6% higher on the day and go forward because in their investment bank, you are seeing help their. you see tomorrow that -- the very high expectations for goldman even after bank of america beat on its income despite telling you that credit products and mortgages are seeing weakness in the market. could that be enough to offset pressures you are seeing in broader trading markets? goldman, as they look to reorganize your business, that balance isn't as big as you have from j.p. morgan or bank of america. both of them are rising today. >> as the industry reports
results, the industry is watching the development type to credit suisse -- credit squeeze is set to begin the sale of the u.s. asset management. walk us through some of the we know. >> asset manager as part of the big issues with green sale so it is not that the asset management didn't have issues but it is about half $1 billion of -- should they succeed on a sale of this asset manager, it would add to potential profit or potential capital inflows that you get from potentially separated -- separating a banking division and trading envision -- division and you have the asset manager. you have enough to stave off the bulk of a capital raise. >> helpful context in a
fast-moving story. she covers wall street for bloomberg news and on the first topic, we covered of the bank earnings. bank of america and some of the big themes, let's bring in david george a senior research analyst. nice to have you with us and i was looking at your commentary on -- after j.p. morgan's results where you said there is no hurricane in these results. a reference to the comments that jp diamondhead made. -- diamond had made. maybe we see a profitable picture and how would you characterize what you have seen? >> good afternoon and thanks for having me. there has been a lot of negativity in the media and rockets broadly about the economy and we are in uncharted waters as it relates to the fed and the tightening.
this has significant links and revenue -- and i think market participants have been focused on the risks rather than the rewards. we are -- you are seeing those rewards manifest themselves and the numbers we have seen so far and fully cognizant of the fact that these results are backward looking. the economy is likely to slow but there are no hurricanes in no crisis in these numbers. >> if we are looking or anticipating a recession, at least the market is pricing something of that effect in 2023. it seems like everything's going great when it comes to a trading revenue perspective. is that going to hold at the economy does go to recession? are there enough loan loss provisions for the banks to continue to make the profits they are making?
>> yes. keep in mind, and this serves as a reminder, one of the main benefit from the financial crisis coming out of it is the annual see car --ccar test. clearly, not only are they position for a downturn but they are more than adequately positions from a liquidity and a capital perspective to withstand a downturn. the industry is well-positioned and it is much more utility like and i say that as a positive rather than a negative and the price -- is deep cyclicals. this industry cannot take the risks and took 15 years ago and they have been stuffed with more capital today. the risks in this group are
overstated from our perspective. >> way to get your analysis. thanks for stopping by. david george from baird with his perspective. i am one hand talking about customer resilience and we will get to hear some more from the ceo of bank of america. our interview coming up with him next hour. this is bloomberg. ♪
>> this is bloomberg markets and i am john with kriti gupta and time now for today's what is worth. 1.69 is a current level for the bank of canada business outlook indicator and it fell sharply from last quarter. that reading comes as we prepare for another rate hike in this country. make of canada is expected to
>> now keeping you up-to-date from the world, here is the first word. russia's attack ukraine's capital with iranian made drones. legal strikes against ukrainian infrastructure. at least four people were killed in kyiv. russia and belarus will all -- hold exercises that include live fire and antiaircraft missiles. that is according to a assistance to the minister of defense up belarus. he says military units will be deployed.