Inflation Nation: Bloomberg Surveillance 09/14/2022

There are several pockets of this country that are still suffering from elevated inflation. We know the Fed is going to slow it. The Fed has to slow it. We just have to debate how much above 4 percent. They have to go to slow it. There really is twenty twenty three where you look for for inflation to come off further. There's any doubt at all about 75. They're definitely going 75. And the Fed is probably going to overdo it. This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz. It's. What a brutal session that was. Live from London from audience worldwide good morning. Good morning. This is Bloomberg Surveillance on TV and radio alongside Tom Keene and Lisa Abramowicz Jonathan Ferro. Equity futures bouncing back just a little bit. But T.K. yesterday the biggest one day drop on the S&P going all the way back to 2020. Back to the pandemic and all that. But more importantly on a scale basis let's call it the ninth worst drop in history. What I would say John is on a red zone green zone basis. It was a reset and maybe it is reset Wednesday but far more than that. John is the way we close yesterday afternoon in New York. There was no sense there of catching a ball. Most closed at the lows. Yes that I said in some. Lisa you tie up much much higher. It introduced some uncertainty. Not about next week hierarchy. It introduced certainty about next week. It's a much bigger move. Uncertainty about what would have followed in November. And after that whether this Fed is going to have to go a whole lot bigger for a whole lot longer. What you saw is all of a sudden people pricing in a likelihood of a 100 basis point rate hike come next week. No one getting them. You're saying that that's a base case in markets a better one than anybody else joining them. Well it's a one in three chance currently being priced into the market that we will get a one a full 1 percentage point rate hike even though that has not been on the table previously. And then a 75 basis point rate hike at the following meeting. What does that do in terms of changing the equation for a hard landing. And I think that that is really what we felt he was seeing. And to see some on the inflation report until this point is increased the Fed needs to go bigger which increases the odds and introduces this idea that they have to do more damage to the economy to get inflation down. Diane Swonk was out on Twitter yesterday. He's raising the likelihood that you might have to take unemployment above 5 to get inflation somewhere closer to 2. Moment of silence. El-Erian. Summers Harlan who I've just as long Schoenberg. Boy they nailed it. They nailed it. Are we done with the moment of silence. Yeah we're doing that. But I was going to say that actually talking of Larry Summers he came out. He actually supported a 100 basis point rate hike. Really. He. And you saw Jeff Gundlach push against that and say actually they should go 25 basis points because they're overdoing it. So you know there still is. There's always that. I mean the distinction yesterday between Mark Cuban of Bank of America and others was remarkable. Mark BANNERMAN thanks America. By Mudd Mike Apron over at Bank of America is looking for a recession next year. Michael Barr essentially said the Fed is going to overdo it. And what happened yesterday was an inflation print that will encourage the Fed to do it. Yeah. And at a certain point isn't it by design. Right. What does it mean to not overdo it. If they're trying to get the unemployment rate up. Right. So where are we talking here in terms of what's an acceptable amount of pain and what's an unacceptable amount of pain. And when it's just become a political issue where they have to respond if you've got used to a two year that looks like 370 388 almost 380. Well yeah. Well at what point do they get back to 4 percent. If that's where we think that the Fed funds rate is going to be. Futures with a small bounce this morning. Good morning to you. Wait for the price action just briefly with positive by about a half of 1 percent on the S&P 500 euros showing a bit of strength just about parity on euro dollar yields higher much much higher. And we add some up. Another 2 basis points on a 10 year makes the 343 33. All right. So today is not BPI Wednesday. I'm just going to say that aren't marketing it. Eight thirty a.m. Eastern Time U.S. August CPI producer price. So that is a price it. Well it is technically. But do we care. And only way that we will actually care about this number and this is my editorializing here is if it comes when it comes in more hawkish or hotter than we expected because then it will fit into the narrative that we heard yesterday if it comes in weaker. Does it really move the dial. I don't think so. It's hot in here isn't it. It's hotter than than we had expected here. At ten thirty a.m. we get the EIA crude oil inventory report getting the latest read on the US inventories of oil and gasoline. I'm curious to see whether we actually are seeing a real fall off in demand if that's really the story here or if it has been just less PR or at least fuller and through and through. And then today just sort of moving into this question about Covid 0. China's president Xi Jinping is beginning a three day travel the first since the pandemic hit abroad. And he's going to be in Central Asia and he's going to meet with Vladimir Putin. And I find this really interesting because it comes in a lot of time a lot of talk about whether they're going to use zero Covid. Does it signal anything that he's leaving the country a foreign trip. She's really ready to go. That's a good thing. It's a good idea. You know Vindaloo was working out whether we should bring on a bull or a bear or someone who was just you know someone that's just right. Let's get to someone who was just right. Max Kenda chief multi asset strategist at HSBC. Max we all read your note. Max on the way you could tell me what that means in a moment. But you have not been constructive on this market. And I imagine you're still not constructive on this market. Not particularly no. So I think if anything if we look at the number yesterday right. That strengthens this kind of positioning on fortune. So I'm delighted to see that you three are still very upbeat while still talking bearish. I'm not doing as good a job. I'm dragging myself down. So I'm not sure whether you know at the end of the section we're all going to feel a bit a bit more bearish perhaps even more. Look I guess the point reading that I would make is it's not really about whether we're going to get 75 100 in September what it's about. I think if we look a little bit ahead. Right. It's about we all sort of thought OK it's going to be 75 or 50 or 75 then it's going to be 25 and then it's going to be zero and then they're dominant. Right. The point now that what the number does yesterday is perhaps opening the door at least to market pricing not that the Fed has to do it but to market pricing in the following meetings to say actually we really need 25 basis point steps or do we need to continue doing 50 or maybe continue doing 75. Right for the next three four or five months. So where's the valuation report and valuation support going to come from it. It's just simply not that those rate increases diminish demand. Not yet. Right. That's that's the big issue right. Not yet. When Windsor would say just be seasoned particularly with your Asian perspective. When does demand actually get diminished according to a textbook everybody forgot years ago. Yeah I guess that's the big big issue at the moment because it does take time. It does take time. When you look at all of our models our models are basically saying look we had an inventory overhang that's now feeding through and into manufacturing PMI ISE. Now we're starting to see housing weak. That takes around three to five quarters until it feeds through into the labor market. Right. That then feeds into sort of forward looking consumer data. So what we're talking about well into 2023 for that weakness that's the big issue. Right. And the big issue with demand now is that whether demand craters or not doesn't really matter. Right. Because you've got broadly you've got two scenarios. You either you have the scenario. We're already now. Demand is getting destroyed. So earnings expectations growth expectations will be proved to be way way way to be bullish. Right. And that's bearish. Or on the other hand you say well actually it's not happening yet. Right. But that means we're going to get it get further. And that means it comes from valuation. This is a bad news bad news interview. I think this is bad news but that's in any news is bad but it's good news that we have you on. And let's talk about what that translates into what you actually are buying. And you were talking about how if you start buying anything other than crawling just into a bunker it will be developed market sovereign debt. Are we there yet. When do you see the value in some of the yields where we're seeing them get to you. Yeah I guess so. So first of all what would we do right now. Right. What do you do right now in an environment where real rates go up and break evens go down. Would you do as you go into the dollar what you actually find is that bonds don't do well. Right. Equities don't do well. You can't do an awful lot of relative value traits. Credit doesn't do well. Yen doesn't do well. Hi Peter. If X doesn't do nothing does well apart from the dollar. Right. So you go into the dollar you go into floating rate notes you go into short dated credit you go value over growth those sort of shorter duration trades. That's what you do right now. The signal that I'm waiting for per patch for developed market sovereigns. Now if I was a classic strategist which obviously I am is you know I would probably say well if the market at some point is more convinced that growth is really going down but that doesn't help us. I think the point the signal the market segment we want to look out for is if the dollar goes up and the yen goes up simultaneously. Because what that means is that it's big time recession fears that are now taking over. OK. I'm so glad you brought up the currency and the dollar. We heard some jawboning overnight. We heard an attempt by the People's Bank of China to try to strengthen with the peg. That was the strongest ever relative to where it had been. But really it was the Bank of Japan saying we're going to do something. We're not going announce when I'm going to come out and you guys watch out but we're going to intervene maybe even though we don't know just to sound like you believe them. So what do you think. So do you get the dollar trade. Do you lean into the yen because you're convinced they will actually do something. Not yet. Not yet. Right. I think that could be the case for you know late in the year perhaps. But the problem now is imagine if they did some intervention already now into perhaps 100 basis point FOMC meeting. Imagine they do a hundred. So imagine they do that. Then they basically they have this one silver bullet that they fired for nothing. So you don't lose it. Lean into that just quite yet. I think that's going to be something for later in the year. But if and when it happens. Right. Yen up and dollar up. It means big safe haven flows. Big safe haven demand. Why. Because then the market is really concerned about recession. That's when you go into developed markets opens. Let's talk about another signal. You've been bearish all year. What would make you bullish this equity market. Nothing. Never. I'm German. So there's you know that there's nothing that can make me ever bullish in all seriousness. I think that there is a couple of things right. When we look at China's credit impulse for example that is already. A little bit. Right. So that perhaps at the beginning of 2023 could be giving us a bit of cyclical tailwinds. There is other things like sentiment and positioning. Sentiment in positioning on our measures was running about eighth ninth percentile and in the middle of June. That however now is around 40 percent of our emissions. So we're not quite there yet. But if really sentiment in positioning following from yesterday's drop is going towards 10th percentile again actually that plays very much into the bulls hands. Most cannot thank you of HSBC. Good friend of Lisa's. You will not be surprised by that. I was incredibly bearish wasn't it. Right. Depressed. It was realistic. And he said it so cheerfully. What he's been riots and rise. Be clear about that. Yes. And this comes from the camp that has been bullish on treasuries for years. And everybody else was leaning against them has gotten it right. So that's a Stephen major camp over at HSBC that Max CAC balance. What were you thinking about that Japan. What do you think that I was thinking. I mean I just it's just amazing to me. How long can they job for actually doing the short term. It's got to be about policy they're doing and not well policy and also politics. I would suggest nothing happens in Japan until after the funeral for the queen the emperor of Japan to travel here. There's no way they're going to do anything. The emperor travelling. No way. We'll catch up with Wiley of BlackRock on the equity markets situation. It was brutal yesterday with bouncing back just a little bit right now. Equity futures positive a half of 1 percent. Live from London this is Bloomberg. Keeping you up to date with news from around the world with the first word. I'm Lisa Matteo. European Commission President Ursula von der Leyen will call for radical steps today to stem the energy crisis that will edge closer to rationing measures and higher taxes on energy companies. The key question is whether Vander Lyons proposal for a 5 percent reduction in gas consumption survives various negotiations. In the UK inflation has gone down slightly from its highest rate in four decades. The Consumer Price Index rose nine point nine percent last month from a year ago a drop from ten point one percent in July. Now that reflects an almost 11 percent decline in the cost of gasoline. Bank of England policymakers meet next week. They're expected to raise interest rates either 50 or 75 basis points. The Biden administration considering whether to replenish the Strategic Petroleum Reserve when oil goes below 80 dollars a barrel just two years ago. Democrats blocked former President Trump from filing reserve at a fraction of that price. Senate Democratic leader Chuck Schumer called the Trump proposal a bailout for big oil that cost the U.S. billions in potential profits. A strike set for Friday could prevent American railroads from transporting farm products and other key goods. It could cost the U.S. economy two billion dollars a day. President Biden is personally trying to break the logjam between railroads and labor unions. Labor Secretary Marty Walsh will meet with railroad and union representatives today. And Queen Elizabeth the second's coffin is now at Buckingham Palace. Today there will be a procession through London to Westminster Hall where she will lie in state for four days before her funeral. Members of the public will be able to pay their respects 24 hours a day. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts in more than 120 countries. I'm Lisa Matteo. This is Bloomberg. In these times it is wrong to receive extraordinary record revenues and profits benefiting from ISE on the backs of our consumers and over all our proposal would raise more than 140 billion euros from member states to cushion direct target on the back if energy producers energy companies sell off onto land. The EU Commission president live from London this morning. Good morning to you. Yesterday. Absolutely. Brutal futures right now bouncing back on the S&P 500 positive by six tenths of one percent. This equity market a four day rally amounted to about 5 percent higher on the S&P colliding with a hotter than expected inflation parade and the equity market cap lower yesterday promo AWAs. So I used that word again bright. So yeah it was actually based on me. It basically erased the rally that you'd seen over the four previous days to give you a sense of the brutality of the law. So I'm trying it out. I know you don't seem happy about it. Just can say I'm not happy about explaining you. I just wanted you up a little bit. Know it's up. Take some real time. Yeah. The key phrase there's four days that we that we gave up four days or four weeks or whatever on a long term basis is just more of a volatile inflation churn. Someone like David Rosenberg expert on inflation says you never can predict what it can be. What I would say John the number one research item I saw was a single sentence. The necessities showed sticky inflation. That was the story. And that introduced the number one thing for make some in a South Side recession yesterday off the back. If this is the step down the equity market both we're looking for from 75 to 50 to 25. Simple questions about that now about whether the Fed can actually deliver that step down that sequence over the next few meetings. We're excited about our Fed show next Wednesday. Really looking forward to that. Back in New York right now we're excited about Annmarie Horden in Washington and joining us from Strasbourg France. There's always a reason to be in Strasbourg for Maria today or Maria today or what is the attendance of Mr. Putin at these meetings of European leaders. What is the Putin effect this morning. Well Tom I think that the effect here is he. He has created or has seen the start here in Europe of a war economy. And then when you look at the language from the head of the commission that is what's in store for the European economy. She talks now about demand destruction that becomes mandatory. She talks about solidarity from companies. She talks about sanctions that will stay on. She was also very defiant. I think if you move away just from the details of the energy the market really cares about this. But to me the bigger point is the fact that today she made it clear the sanctions are going to stay on as she had a line here which to me was the key. She said Vladimir Putin is waging war on Ukraine but he's also doing that on the European welfare on the European market on our economic stability. And this is something that's now a fight between autocracy and democracy. So if you asked me what's a boating effect. I think it's a worry economy for Europe. Right. Maria Tadeo the great historian Stephen Sestanovich who's helped us so many times here on surveillance tweets on today and writes to The Daily Beast of Putin wanted to be Peter the Great. But Putin maybe being more like Milosevic of another decade in the recent history. Have things changed at the dialogue at these meetings because of what's happened in Ukraine in the last 48 or 72 hours. Well it has that it has to do with the Ukrainian army and the advances that they made on Saturday and I know would talk about this all the time and I go on and on about this. But the conversation in Russia has really shifted over the past three days. I was struck when a Russian television yesterday someone went. Perhaps we should stop seeing the Ukrainians don't exist that Ukraine is a fake country. There's a huge debate in the country about should we now declare a full war. Is this conscription. But as always and this is a point if you're a Russian man you're underpaid. You've been to military training for a month and you've been watching a war like it's reality TV. Do you really want to go to Donetsk and fight Ukrainians who up until a year ago were your Slavic brothers in the name of Vladimir Putin. I think that's a real question and that's why he's shielded the Russian population so much from the war on a daily basis. Can he sustain that. That's a real question. And we've been talking about how even if the conflict does end or even if Ukraine does make a lot of inroads it's not going to change the policy. Anne-Marie it's really raised some questions as the energy crisis moves global into how to shore up prices for consumers while encouraging fossil fuel companies to invest. And I wonder how much that was behind the story that you reported on yesterday breaking the news that the White House is looking at buying oil when it reaches 80 dollars a barrel to refill the Strategic Strategic Petroleum Reserve. Yeah I would have to dip below eight dollars a barrel I think for them to really be able to go after this and do this. But part of the problem they have is that yes they were able this summer they worked really hard with their messaging with this Strategic Petroleum Reserve releases. We've seen last week by the way was the biggest release ever on record. And right now when you look at the SPDR inventories they're the lowest they've been since 1984. So they're thinking about how do we put some stock back into it and entice really the Permian Basin Basin. And having our blossom was writing about this just this week the fact that there's a deceleration in rigs. There's a deceleration in growth in the Permian Basin. And that is what is really going to be relied upon if you are concerned and you are U.S. official about potential oil price spikes in the winter when Europe and these sanctions come into play in terms of blocking off Russian crude if there is no price oil price cap the way they envision it. So they're really trying to make sure they can do a number of things at all frames. They obviously would want lower prices for consumers and obviously inflation is there. One of the biggest headwinds going to the midterm elections. At the same time they want to make sure they are enticing these fossil fuel producers and giving them a little bit of a pat on the back to make sure that they continue that investment because of course a lot of these shale producers need a higher break even point. It's also interesting all of this comes on the day not just after the inflation report but today the president going to Detroit to talk about electric vehicles. Just briefly can you walk us through how bizarre yesterday was to see the equity market down by 3 4 percent to see inflation come in ha and the president must do some kind of victory lap for the Inflation Reduction Act. It was a pretty odd moment at the White House. You have hundreds of people there and someone looked at me and said this feels like a concert. And it did feel like a concert because there were performances there. And the president even though he was talking about the Inflation Reduction Act he did start by saying something I wanted to do when I entered office. So almost admitting that the name Inflation Reduction Act was obviously political spin and there's really was just a smaller version of the build back better plan. But he completely ignored the data. There was no mention of yesterdays worse than expected inflation report at this event. And this was what Republicans really harped on what Senator Mitch McConnell saying that the Democrats yesterday were his words tone deaf. A strange moment I might. Great reporting by the way down in Washington alongside Maria Tadeo of plain fact. So a rather strange moment if they say yes especially because it was just an incoherent report. You're seeing people double down on their message. It's not just the White House. We're hearing that around this. Politicians worldwide they write features posted by half of one percent. That was almost diplomatic equivalent of almost. Live from London this morning. Good morning. Equity futures pushing higher by half of 1 percent on the S&P 500 yesterday their biggest one day drop on the S&P going all the way back to the summer of 2020. That's how big the losses were on the S&P 500. Futures bouncing back just a little bit. You go to higher gain though by 2 basis points on a 10 year to 343 33 year to year to year still through 370. And Lisa seemingly at one point yesterday it felt like we were going through 380. It felt like people were just basically right to go straight to 4 percent and keep it there because that seemed to be what the Fed was signaling. And finally the market seems to be catching up just a little bit. So I'm catching up and questioning. Not next week. Seventy five for many. Well perhaps even bigger if you're listening to Nomura. But it's beyond that November. Max Candid with us about 30 minutes ago talking about the need perhaps the willingness of this fed to go further. And then we have to think about the consequences of that the damage that it will do to this economy to get inflation lower. I would make it global in the day after the Fed meeting is suddenly important. As you saw Sterling at 114. Fifty seven and the shock yesterday. Can you imagine a one 13 sterling. Yeah. And can you imagine it's Shery Ahn 75 basis point hikes. No I cannot wait. Is it an immature. I can only add the ECB. Our are. Going to get it from the Fed potentially. And it looks like perhaps perhaps the Bank of India might follow. We speak of economics finance and investment. But right now we turn our attention to a path to Monday in the funeral of the queen. Lizzie Burn expert on this. Is it one of the most historic parks over Westminster Irvington Green next to the jewel tower and off her right shoulder Westminster Hall. Lizzie tell us about the path from Buckingham Palace to Westminster Hall this day. I have to say there's a helicopter flying overhead eerily quiet here in Westminster. And it's a reminder of the loss of someone who is above politics. Later today the queen's coffin is going to travel from Buckingham Palace through the streets of central London which are close now to the palace of Westminster behind me. And it's going to be a really poignant moment because her children and grandchildren are going to follow on foot. And it will remind many Britons of the movement 25 years ago when Princes Harry and William followed their mother's coffin. You're going to hear the guns fire in Hyde Park the bells toll and Big Ben. And from the moment the queen is a coffin arrives at the Palace of Westminster behind me until the funeral. She's going to lie in state on Monday and people will be able to file past it and pay their respects. You've already had people queuing overnight despite the rain despite the warnings that it could be 30 hours that they have to wait. Remember in 2002 200000 people paid their respects to the queen mother in that way. And so this is likely to be beyond that an outpouring of national grief. The scale of which we've never seen before. Lucy tell us about the funeral on Monday. I was stunned to see that the emperor of Japan will return but this will be a gathering of world leaders. Who else will attend. Yes. The capacity of the army is two thousand and it will be heads of state. Royals dignitaries from all different countries not notably Russia and Belarus. The invitation hasn't been extended all day. Vladimir Putin has said that he would have accepted it. What about this. Vladimir Zelinsky as well has sent a message of condolence. But of course we'll have to continue with the war efforts in Ukraine. But it is also going to be a bit of a logistical nightmare. There are reports in the U.K. press that these dignitaries heads of state will have to come on buses because they won't be allowed to come on their helicopters and private jets. So it really is something that has been years in the planning but it's almost impossible to plan for. Lizzie thank you. It's gonna be a deeply emotional morning for a lot of people in those events. Tom will take place in the next couple of hours. Typically that walk from Buckingham Palace down the mouth towards horse gas parade and then across through Whitehall and onto Westminster perhaps would take on foot 15 minutes 15 minutes or so Tom. This procession could take something like 40 minutes. They speak which I find unimaginable a one hour service John. Maybe an hour and 15 minutes. That just seems to me just not doable. It's got to be long. Lizzie talked about the wait there for people lining up to see the queen. I read today over the next four five days Lisa the waiting time 30 hours. And by the wait you don't hold your position. You have to keep on moving. Can you imagine doing that for more than 24 hours. Well it speaks to the emotion. And I have to be honest I have been surprised as an American in London how many people continue tearing up or call their parents and are very deeply emotional about how close they felt to the queen and the loss that they feel. Some of that will be from the House of Lords. We've been advantaged by Lord O'Neill of course with Goldman Sachs for years and Lord Stern with his environmental effort for the United Kingdom. And then there's this. He's professor emeritus of London School of Economics. But that barely captures his contribution to Indian society in his United Kingdom. He joins us today from India. Lord decide what does Prince Charles need to do forward to coalesce the United Kingdom across many religions and many ethnicities. I think you know in a sense his mother has done the job she has left behind a good and stable most every shoe every distributed. I mean in a sense she did it. My mom made a religious gun too strongly but sort of quietly and steadily. Yes she is an Anglican and she played that thing. Prince Charles had said some time in the past that he wanted big changes both from being different but also sees two different faiths. I need to include every religion. I hope he doesn't do anything like that. His main job is to keep quiet and do it straight. And his mother did and just let everybody rely on the things they have done really well all the time. My main interest he replied in a word too much too soon. And that may upset the courtroom before. But I think it isn't. The economy's difficult develop. I think we ought not to disturb the political balance too much either. I know. I'm hoping that figure for the side is a stronger present. I'm just going to quietly decide. I'm curious your vision for the communal life going forward considering some of the discussion since the queen's death that she was in some ways the end of an era. Do you think that the era of the comments looks very different from the era of which she oversaw which changed dramatically under her tenure. I do shit so to vote because I think the time has come up to once the last year of the Queen's ROOM through. Shared the responsibility of helping the Commonwealth three other Commonwealth countries. But she lost Commonwealth heads of government meeting in London about four five years ago proposed to bring the results of that was should be the head of the Commonwealth after her. So she she close that. No. I think we have isolated powerful Commonwealth countries. Some didn't read hoping to be the public. So on. That is not a problem for the Republicans to the Commonwealth in DAX pioneered the solution. But it is very important that Prince Charles DAX in conference the leaders of the Commonwealth because they announce substantial country in very good faith in terms of GDP and you know the other folks who come inferior. I think he will have to snipe environment away from the overwhelming importance of the UK. ISE head of the Commonwealth. I think it requires some forensic costume on the spot. Whatever is good advice from minister. Thank you for being with us sir. We appreciate your input on an important day for this country. Those events that we've been describing in the last five or 10 minutes they're going to start at about 9 20 Eastern Time. We'll catch up with Guy Johnson Bird and to guide you through some of those movements that sequence as the queen goes from Buckingham Palace onto Westminster Hall. We also need to talk about this market front and center for a program like this one. Equity futures are bouncing back but yesterday it was brutal. And that's word you're gonna hear a lot from Lisa Knight and perhaps tough too much this morning that three or four percentage points in a big big move through the bond market tend to use much harder to year. Absolutely surging as we start to re-engage with the idea that this Fed is not done. And Lisa they're going to have to do a whole lot more. What I thought was interesting was that actually longer term inflation expectations fell yesterday. And the question is not the credibility of the Fed anymore. The question isn't whether we eventually will go back to an era where we will see inflation under control. It's what's required to get there and the pain change. The pain factor yesterday change at least the perception of it in markets. And that I thought was the most notable shift not just where the destination was but how rough the path is going to be to get ahead and just want to beat it down. They want to bury it. Right. And to bury it they've got to keep rates higher for longer. That's what I think communicates him in. Somewhat bizarre about this moment is that for the Fed chair he doesn't need to change the script based on what happened with the CPI print yesterday. Correct. It just has to repeat what he's been saying over the last month. We're using an analog Paul Volcker and it doesn't work. At that time. We had 10 11 12 14 percent interest rates. It was a completely different environment. I take real issue with a compare back to Volcker given where we are. With that said they've got to use the x axis which means they have to articulate their path into 2023. And I'm in the camp is way too much communication. There's way too many interviews with John Farrell from president. This is that he's got to get out and articulate. The message is that the promo for our Fed interview is a. We have a Fed show where we will consider. I keep thinking about that Twitter viewer who wrote in that the only way could have been more Huck Jake Balance coming with the Holocaust show that he had a tattoo on his T-shirt and security was probably tweet of the week wasn't it. Like you said he could just give his Jackson Hole speech again just rip it out. That's exactly what's well features positive four tenths of one percent. Tom Keene to the sound effects. Good at that. Live from London this is Bloomberg. Keeping you up to date with news from around the world with the first word. I'm Lisa Matteo. The Justice Department says Donald Trump is trying to have it both ways when it comes to classified documents seized from his Florida home. In a court filing the government says the former president argues that the documents are personal property and also covered by executive privilege. The government wants to keep using about 100 documents all a so-called special master reviews them for privilege issues. In Japan the yen has rallied further away from the closely watched one hundred forty five per dollar level. According to NIKKEI the Bank of Japan conducted a so-called rate check in the currency market. It's a move considered a precursor for intervention. The yen has fallen more than 20 percent versus the dollar this year due to the widening interest rate differential between the two nations. Travelers in Hong Kong with Covid will no longer have to stay in isolation hotels or quarantine camps. Instead they'll be allowed to remain in designated quarantine hotels. That marks another easing in the city's travel policy. The move comes as Hong Kong prepares for several high profile events including a summit for global bankers and an international rugby tournament in Germany. The government is open to the historic step of fully nationalizing the country's biggest natural gas importer. That the concern is that the energy system faces a collapse. Chancellor Olafur Shultz's administration is ready to inject more capital into Juniper and increase its stake to about 50 percent. Juniper lost twelve billion dollars in the first half of the year. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm Lisa Matteo. This is Bloomberg. You've been bullish for two years now and we've just all we've seen is this gyration particularly led by uncertainties around demand. I think there is a degree of sort of confusion as to where demand will ultimately emerge who will trend to over the medium term. We still believe that demand will ultimately continue to grow 207 rebounds by 20 30. Kristen Malik the global head of energy strategy at J.P. Morgan Securities so called to catch up with him just yesterday. Equity futures right now up four tenths of 1 percent on the S&P 500. If you want to take a look at crude positives by about three quarters of one percent. Eighty seven ninety three what did AMH his reporting points out yesterday Lisa. That going to come in potentially by it. Eighty dollars to refill the SPDR right. That once it falls slightly below eighty dollars they will Covid in. And it raises questions at a time when you would wonder why they're putting the floor in for prices there. I mean that's sort of this speculation or is this really an attempt to appease oil companies saying look we do have your back we're not just driving you out of this class. You both and some perhaps could speak to this what you think about how politicized the EPA has become how politicized always been that I was just thinking that the Chinese were more somewhat Jason Kelly today. Well I think we have a special kind of relationship. So I'm thinking back to the pandemic when the Trump administration went to refill the SPL a much much lower prices. So there was some real pushback for the Democrats at a time political from day one. And there were some experiments with President Clinton where we tested actually what the microeconomics is. The price theory is of what's going on. But nothing like what we're going through right now. And I would suggest some of this has got some real uncertainty to it. We really don't know what's going to happen on the margin. Is we real refill whatever we're refilling. Well I still don't. Where is the strategic reserves. It's at the low. It's in Topeka. Oh you mean like the physical geographic location. I'll get you some water. I think that we wouldn't know that random the precise effects of weather. Get on it. John I'll get on top of it. Absolutely unaware. Ogre CAC Grover joins us now. Deputy Director European Energy Security Atlantic Council Global Energy Center the Atlantic Council with some real commitment to talking about the effect of hydrocarbons on our lives. Oh God I want to get beat on the winter and the discussion the headline discussion if you will. How does Germany as John as mentioned many times change their policy to a better oil outcome. How did the Germans actually affect a policy change. Thanks so much for having me. I mean it all starts about completely shifting the energy system of reliance on Russian energy sources creating an energy system that is a lot more efficient. Looking at alternative supplies and making those connections and those kinds of agreements. So it is an unprecedented shift and it's also relooking at its industry. One of the biggest economic drivers in Germany of course. That is why Germany is suffering so much at the moment is because some of the industries are forced to curtail. So. So these are the things that you know that Germany would have to look at. Oh what's so important here as you say that in every American viewers and listeners deciding if they should get in an Uber today that's a Chevy Suburban. I mean we look at Europe like it's already efficient. And part of that is nuclear energy led by the French to the French reaffirm an atomic commitment coming off of this crisis. Yes and no in France. Nuclear energy has always had robust support not so much in other countries such as Germany. Take a look at how long the conversation starting in February when the war the brutal war attacks started. That conversation about restarting nuclear power plants in Germany has gone on for over six months and there's finally been a decision to extend them for several months not even go not even maximizing into how long that could be extended to three months. And that's and that's it. And there's a lot of pushback against it. So yes in some ways he has reinforced the value of nuclear clean reliable energy. At the same time for some countries they're still struggling with that. But to add another layer of complexity we're also seeing climate change and warm waters making it more challenging to cool off nuclear power plants. So this is a barrier that's absolutely impossible to overcome in the future. Anticipate further climate change impacts and further higher temperatures. But this was something that was unexpected to be another layer of crisis this summer. One of the biggest notes of disagreement or divergence I should say between the European Union and the United Kingdom is to some degree. The United States has been how to incentivize energy companies to invest at a time when they want to reduce prices when they want to reduce the income essentially to some of these companies are seeing Germany proposed nationalizing for example some of their energy companies. And then you have the windfall tax. The European Union the aversion to do so in the UK and now potentially a floor under gas prices and oil prices in the United States. What's the right approach. Right. So yes first of underlining her State of the Union address did mention addressing revenues and being able to take some of those back to the consumer. That's a different conversation. I think a way to be able to encourage companies to invest in companies and industry. They want long term contracts. So we talk about 50 minimum 15 years excuse me at the least 20 20. So 15 years at the least 20 years ideally. Now as these countries are looking into what their energy mix will be in five 10 15 20 years and also meeting European climate strategy and Paris goals I think there's a role for the EU governments to be very clear about. Look these 20 year old contracts would still be valuable. And if you're concerned about risk for you for not sure about what your energy mix will be like we will come in and we will mitigate some of that risk for you. But that is the way to drive more investments in the sector because sector wants long term commitment and then purchases in countries utilities and nationalized or not nationalized. They want that level of flexibility. But it's also interesting because we're seeing companies respond to that and provide flexibility in terms of attaching and saying OK at this point you can guarantee that you will receive net zero LNG or reduce carbon intensity LNG. We're also looking into this many years of being able to blend in this much hydrogen. We're seeing these new creative tools. And of course some companies are coming in and saying you know can they shorten those contracts and they in any way. And but for the most part they really want this 20 year old 10 year commitments to drive those investments. Okay. Thank you. Olga CAC over there at the Atlantic Council. And here's the answer Tom. They own the sole cabins of four major facilities here. Two in Texas two in Louisiana. I didn't know that. Amy from New Jersey. Listen we all know that. Remember the quantum that came the e-mails that did just double check e-mails and says oil's not in Topeka. I didn't know you were here. We knew that much. I think we knew that much. Yeah. We're gonna try and refill it anyway. If it's a crude guess that's what's at stake. Exactly. And then there is this political question about the use of the Strategic Petroleum Reserve in a political matter although you could argue that that's sort of what it's designed for. Right. To mitigate crises. The question really is just when you get a crisis. I'm going to go to crisis ahead of the midterms. I mean you could make the argument that that supported some of the retail spending that you've seen and continue to go which is possibly why we saw a faster than expected pace of CPI. OK I can make a lot of connections you know. Yeah but I'm just saying. I mean some explanations always go up later. You know your audience detects a little tension. Here is radio. We love each other and we NYSE right on London. Been friends for a long time. It was positive. Four tenths of one percent when the BlackRock is coming up very short. Looking forward to that after a major selloff in the equity market. I think we can call it that. That's the biggest one day move lower in the S&P 500 since summer 20 20. And this is a small bounce. There are several pockets of this country that are still suffering from elevated inflation. We know the Fed is going to slow it. The Fed has to slow it. We just have to debate how much above 4 percent. They have to go to slow it. There really is twenty twenty three where you look for for inflation to come off further. There's any doubt at all about 75. They're definitely going 75. And the Fed is probably going to overdo it. This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz. Did you notice that Lisa walked into breakfast this morning told with an extra skip hopping about a massive smile on my back. Not she said I love price action. Laughs from London this morning. Good morning. Good morning for our audience worldwide. This is Bloomberg Surveillance on TV and radio alongside Tom Keene and Lisa Abramowicz. Some Jonathan Ferro equity futures with a bounce up four tenths of one percent. T.K. off the back of the biggest one day fall on the S&P 500 come back to 2020. A big move. I'm calling it reset Wednesday because what I really saw there John with one exception I'll mention is that it was just a jump condition reset to where we were before the soft landing disinflation dance. The one exception is the way we closed yesterday afternoon was not good at the lows. And now it's a hard landing conversation. And Lisa credit to you. I'm only joking. You've talked about the reality of the situation. How hard is this for financial conditions to loosen in the face of what this Fed is trying to achieve. No one is going to cheer a one and a half trillion dollar rout in the S&P 500. If anyone does that is a prayer unsavory thing. So I don't want to think that anyone to think that that is sort of my feeling here. There is a sense that there is a dissonance out there a feeling of unreality that is starting to change. And I think that that is what we're going to see. I did it. Well it does PPA matter right. It will matter if it confirms what we heard yesterday. Will it matter. Sure. If it does it really raises. Seriously then I'm with you. I just think that right now people are now on the hawkish bandwagon. So let's set the stage right 75 for next week maybe something more. And it's really not even about that about what happens afterwards. Because yesterday in that Fred introduced the rest of this Fed has to go even bigger for a whole lot longer. And I heard that from pretty much every single bank. They were all looking for a step down 75 to 50 down to 25. And that's the risk that doesn't develop. This is the conundrum right. If you allow consumers to keep spending if they get a reprieve from gasoline prices then they have a better time of it then does that actually lead to a more aggressive fed. That has to curtail the economy that much more dramatically and harsh. How much damage they wanted to do at some unemployment in a year. And next week's interesting not just because we get a rate hike at a news conference with Chairman Powell. It's interesting because we always look at the projections in the summary of economic. Yes. So you get the forecast. We've had a lot of pushback against some of those forecasts. I do agree that the forecast this time around a matter after what we saw yesterday. I would suggest with their dual mandate I believe John you mentioned this yesterday in the Blur. They have a dual mandate. And the idea that they're going to slam America into recession really pushes against that mandate. I just I I'm in a camp where they may be assertive but they're going to be assertive over time. Will that dual mandate be in conflict pretty soon. Can we clear something up here quickly. You know I think it's very important folks as Joe mentioned that we all saw each other breakfast today. The breakfast we have are completely different. I'm doing the Churchill full English thing. You're in some damn oatmeal fruity pie granola feel in Lisa's breakfast folks is to go run five miles and then Brad Stone latest. No you what I would say let's be honest. I'm just I get started a little bit earlier. That's all at six thirty in the morning. Yes. No not. No problem with that whatsoever. Features a positive Thomas this massive breakfast anyway. And the S&P a four tenths of one percent. Yields are higher as well up by 3 basis points on a 10 year 343 not a one. We've talked a lot about the shorthand the front end to the curve through 370 leaks and approaching 380 at one point in the last day or so. Yeah. And Tom you raised a point earlier where you were talking about how it's not just the Fed's response to these numbers in the US it's globally. What the response strongly for hearing from the ECB chief economist today who comes out and says that inflation is still way too high and that policy is still way too accommodative. So that's why we're hearing the latest out of the rest of the world at 830 and we get us August CPI. Does it matter. It will matter if it comes in higher than expected and confirms what we saw yesterday perhaps on the margins if it comes in much weaker it will confirm things for people who are coming out and say you guys I'll have it wrong. Either way we are coming off such a high level. The bar is pretty high to really move the needle at ten thirty a.m.. EIA crude oil inventory report. This comes after that reporting that really helped to put out there yesterday about what happens if oil prices get down to lower to eighty dollars a barrel too low. I guess I'm saying in quotes for this administration they will come in they will buy. How much do we actually see demand. Destruction starting to abate and people going in and actually using more gasoline now that prices have gotten lower and today. This to me is a big deal. It's a huge departure from the Covid era policies with Chinese President Xi Jinping beginning his first trip out of the country since the pandemic. He is going to be in Central Asia. He is going to be meeting with Russian President Vladimir Putin. How much does this signal a shift that goes beyond just his personal travels. A dictators convention that will all be watching closely with words. The global chief investment strategist at BlackRock joins us now. Well they want to go straight to a quote of yours on a recession in Europe. You've been on top of that story for a while. You've pushed the same story recently and you've asked the question why aren't equities pricing get. And you're not alone. Why Lee why do you think that's the case. Why do I think equities are pricing in not a recession. I think there is a lot of hope in markets that the innovation of corporates would eventually continue to come through and margin will stay. Ali Visa's But in our view actually that is unrealistic to to expect that in this environment where cost of production is going higher. A labor shortage is prevalent not just in Europe in the US as well where I am and I feels like a man in your studio for you today is in that kind of environment. We expect margin to actually come under pressure and eventually the current market consensus for earnings growth not just in Europe but also in the US will have to come down to meet the reality that we are heading into a recession. Europe this year and a one in the US like broke next year as well. Really I find your note to be the grimmest note on Europe I ever read. I will not mince words about it. It's very very difficult. Does Madam Legarde have the nominal GDP firepower the economic animal spirit to affect the rate path you suggest Kent can do they have the interior structure to do higher interest rates. I want to pick up on something that Lisa talked about which is is the idea of unreality. So we're in a environment shaped by supply constraint which is very very different from the great moderation that has been shaped by demand and spending. And in this environment actually the tradeoff facing central banks are so much harder the trade off between growth and inflation. And so far what we have heard from Madam Lagarde is perhaps some lip service to this tradeoff but not really acknowledging how costly it would be to actually bring down inflation through hiking rates and what that means for growth and what it means for the labour market. So we believe that until a central bankers acknowledge that trade off and choose to leave was inflation we are going to be in this environment for an extended period of time where the politics of inflation will be prevalent and instead of the economics of inflation will which will become clearer as we enter the next year. But right now all eyes are fighting inflation which based on what we saw yesterday. The core part of inflation is proving to be sticky and persistent. Way a lot of people would agree with you about Europe and you're hearing a lot of notes reading them that are saying underweight Europe. It's not so clear in the US. It's not consistent in terms of the messaging. How far away from realistic pricing do you think we are in equities even after what we saw yesterday. Right now obviously markets are moving very very quickly yesterday. Very dramatic sell off but today bouncing back a little bit. We believe that actually more needs to be given back to properly reflect the fact that we should be looking at a earnings recession. So right now if you look at year to date market pricing we think that actually the rate path is to some extent fully reflected in actually pricing. But the fact that earnings is going to stall greatly is not yet reflected in comparison. However credit is pricing in the vertical for growth stalling which is why in a whole portfolio context we prefer a two on credit over over equity and just be building on this idea of unreality. Now Liza you asked about a us. We also believe that the Fed has yet to acknowledged that very difficult trade off between growth and inflation will pay attention to the economic forecast next term next week. But in our assessment actually in order to bring inflation back down to 2 percent over two years we could be looking at 3 million additional people out of a job and also deep recession to present a contraction which is currently not being talked about. This is the sort of tough trade off that we're looking at in this environment shaped by supply constraint. And we think that markets will wake up to that in time. Well of BlackRock Way fantastic as always was that the big reality check yesterday to get us to think about those things just a little bit more deeply. What was a reality check when it comes to the right path. I think what we're talking about is kind of echoing what we've heard from Mike West. Listen. Morgan Stanley it's the earnings recession story and how deep that will go and which sectors will experience it that the most directly. And you didn't see that with the semiconductors for example yesterday disproportionately selling off because that just sort of exacerbates the trend that you're already seeing being priced in and communicating with some of them. And as this conversation about a soft landing Lisa and maybe a short and shallow recession the short and shallow get it done to achieve what this Fed ultimately wants to achieve. Isn't that what ways really speaking to right now the Bank of England is the only real major central bank right now. They're essentially forecasting a recession. They want to really be that person. I mean I'm sitting here saying that you know you get to choose when you make the forecast when you come across the nice guy. The. It has a lot of people are saying that there is a soft landing scenario but it looks like it's pretty unlikely that I'm Stovall is going to join us from CFR. Right. So I'm looking forward to that one. ISE equity market bounce of four tenths of one percent. It's important to have Sam Stovall join us here to talk about what's actually going to happen the dynamic of revenue and critically of earnings. Looking forward to the conversation you'll tie up by three basis points of your tenure. Three. Forty four Mrs. Bloomberg. Keeping you up today with news from around the world with the first word. I'm Lisa Matteo. China is facing its biggest drop in oil demand in more than three decades according to the International Energy Agency. Chinese demand will decline by two point seven percent this year. Now much of that is blamed on restrictions imposed as part of China's Covid Zero policy. Ukrainian troops are keeping up the pressure on retreating Russian forces. Ukraine's border guard services said the army has now retaken a town just two miles from Russia and was seized on the first day of the war. Russian troops have been seen withdrawing toward Moscow controlled Crimea. Google has lost most of the first round in its fight to overturn the EU's record four point three billion dollar antitrust fine. Judges upheld the vast majority of the European Commission's arguments but they cut the fine to four point one billion. Google is accused of imposing unlawful restrictions on manufacturers of Android mobile devices and mobile network operators. A strike set for Friday could prevent American railroads from transporting farm products and other key goods. It could cost the U.S. economy 2 billion dollars a day. President Biden is personally trying to break the logjam between railroads and labor unions. Labor Secretary Marty Walsh will meet with railroad and union representatives today. And Queen Elizabeth the second coffin is now at Buckingham Palace. Today there will be a procession through London to Westminster Hall where she will lie in state for four days before her funeral. Members of the public will be able to pay their respects 24 hours a day. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm Lisa Mateo. This is Bloomberg. The stock market doesn't necessarily reflect the state of the economy as you well know. The economy is still strong. Unemployment's low. Jobs are up. Manufacturing is good. So I think it's a I think we're going to be fine. We're going to be fine with the message from every single equity market both to clients. Yesterday after the inflation report that was the president of the United States. Equity futures right now positive a third of 1 percent on the S&P 500 time by 3 basis points on a 10 year 343 not a one with passive back on equities. You just keep pushing up in the affects market right. Dollar just about holding on to parity 1 0 0 0 0. Some that currency positive 31 percent. I mentioned that John. The real yield I did the math. I think it's 221 basis points from the bottom of a number of months ago up to 100 basis points positive now. And that changes the decision tree for every one up there. And you've got to lay a Q T on top of all of this. Yes. I guess I'll take you back to late 2018 and when markets really start to fall apart particularly in credit and this Fed has to look at me. You look at Bramble and their question. No it's different because inflation is a completely different story. And they can't back away. They can't back away. So it's actually very different than 2008. Makes you wonder why credit spreads aren't. They were exactly in way. Lee was saying that they have priced in more of a slowdown than equities trading. A whole host of questions in my mind anyway. They really haven't done that much. Here's a paragraph as we go to Michael McKee and Annmarie Horden is well the 2022 referee. Strikes are an ongoing industrial dispute that has seen the largest instance of industrial action in the country since nineteen eighty nine. That would be of the United Kingdom. So true suddenly in America. Michael McKee let me begin with you. I thought we were strike free in America for the most part over 30 40 years and yet we must consider railway strikes. Oh we must consider them. This is a hand grenade rolled into that rosy scenario that Joe Biden was talking about yesterday. Ironically because he's the most labor friendly president in years. But one hundred thousand railway workers for freight rail railroads including Union Pacific CSX B.S. BNSF which is Warren Buffett's railroad. Norfolk Southern. They could walk off the job starting tomorrow. And it's almost impossible to overstate the damage that would do to the U.S. economy. Most of the U.S. economies of farm products move by rail and it's almost harvest season. And remember yesterday food prices went way up in the CPI. Already one railroad Norfolk Southern is not accepting cars new cars for shipment across the country. As of today they don't want cars stranded out there. And we've been short. New cars and prices have been rising. And so there is an inflation problem. There is a recession problem. This could really really screw things up. Anne-Marie talk to me about the politics of this and how you expect Secretary Walsh to engage in what might McKay's talking about. Well he's gonna have a big meeting this morning with both the rail carriers and the union representatives to try to get an agreement. And while Washington does seem somewhat calm David Westin is talking about this with me yesterday. There's always these 11th hour deals right. You wait the last possible moment to strike a deal. The White House at the same time is drawing up contingency plans and looking at what emergency powers the president would have to enact to make sure that what Mike is saying these flows of goods could continue. One of the problems they already have though is that already you see certain goods. They're starting to stop things like ammonia which is desperately needed for fertilizer which also of course is needed to grow crops and to feed our table. Huge inflation story. It is also used in hazardous explosive products. You can't leave that idly by in a train car. So already you are seeing these companies stop some of these goods. So the impact already is there. And what they want to do is really try to warn this off. They need an agreement by Friday because politically this is not a good look for this president less than two months away from the midterm elections especially as he said he wants to be the most pro union president ever. Well that's exactly why I wanted to go to build on what John was talking about which is this is the delicacy and Marie of the dance for this White House and for Secretary Walsh who has been a big labor proponent. Does this pit them against the labor union. Are they going to talk about some sort of financing to try to get this through. What's the solution. Well it's very awkward because they want to be seen as pro labor but at the same time they also need an agreement and they need it very quickly. They need it by Friday or really today because if you want to make sure those goods are starting to flow in and they're not stopping them from from loading the it's it's a tricky one. And you're going to see them delicate politically in the press come down the line in the middle. But they're obviously going to be putting pressure on both sides here. Mike let's cut to the chase. What matters certainly do fools like me on the East Coast. This is about freight. It's about moving America's stuff. Does this affect the SLA. Does this affect the northeast corridor and passenger trains for that matter nationwide. Got bad news for you Tom. It does. Right now Amtrak has already suspended its long distance train service because they use freight railroads tracks. And we've also heard from commuter rails in northern Virginia California. They are going to shut down if the railroads shut down. So that'll affect further commerce in a whole lot of cities in America. So this is a pretty big deal for everybody. Guys thanks so much. Michael McKee Annmarie Horden thank you so much for that brief. In America I want to get a brief right now in London with John Farrell. John let me cut to the chase. Why do the trades in Switzerland Germany France. Why do the trains at your United Kingdom run so much better. The disgrace is a man. I wish I had a 60 second answer to that sum so I could correct everything. So does the average. I don't know. But I think we've both experienced the seamless transition from one train to another in Switzerland. I was actually just reading a story here. The metro in London about London Heathrow today. They are canceling some flights out of respect for the queen to ensure silence over central London. OK. They come in would you make of that shows you just how big and how big a deal. This is DAX incredible story. So let's paint a picture of this John. Help me out here because I'm back in economy while you're up front. Looking out the window. Coming in. You overshoot London. Come around. You just a broader jam. Circle circle circle and maybe circle. And then you turn around and you get a a rock star view of London. You have literally. Am I right. Literally flying over Buckingham Palace. That kind of direction Tom. Depends how many times I've never seen them yourself because you know when you're coming down at 6:00 a.m. and then everyone's coming down at 6 a.m. and you have to keep going round and round. Yeah I've done that. I've enjoyed London Heathrow. Anyway that's a separate complaint. Your tour guides getting a little bit too personal. At nine twenty Eastern Time. Lisa stop laughing. Nine twenty Eastern Time. That very emotional procession is gonna begin that journey from Buckingham Palace. The gates will open and then the coffin of the queen will be followed by the royal family. The senior rose all the way through the mouth up through horse guards parade through Whitehall and then on to Westminster Hall. And we'll be following some of that for you just before the open about going into that opening bell. Equity futures just about positive. But let me tell you there's no planning that is going to fight any live from London. This is pulling back. The bounce fades this morning. Good morning to you. Futures just about positive by two tenths of 1 percent on the S&P 500 equities up by seven points. Tyreke gain by four basis points on a 10 year 344 sixty eight. We were just above parity on euro dollar. We give that up to you right on a still positive by about a quarter of 1 percent. But things starting to develop in the last I'd say 30 minutes or so into the same direction we traveled just yesterday just without the milestone velocity. That was a brutal move. That's the first time I've set brutal so far this morning Brianna. That's the joke because you've said it pretty much said in a speech last hour. I just want to point out that if you take a look at two year yields they're basically at three point eight percent that we got right back up to the highest level that we've seen since. That's the poison in this market right now. It's the move at the front end. It's the move as Tom said. Tom you've said it many times over the last day. The move in real yields is just so so big. Let's go through that very quickly here. Before a qualified guess you take the nominal yield the one we quote all the time when you take out whatever inflation component you're using and you end up with the inflation adjusted yield John which is the real you. And that's what this Fed is trying to achieve. Get real. Yo what's out. Get financial conditions to get inflation back down clinic down. A brief for global Wall Street everyday. Who's saying. He joins us right now. He's been a huge value for us with senior interest rate strategist at Columbia Threadneedle Schroder. Good dark on the door today. I don't want to cut to the chase and look at what the pros look at which is a spread market. But I want to get away from the vanilla to 10 spread the difference in yield between the 10 year and the two year which is a spread that gives you most information and give me the turmoil the brutal moment we're in. Yeah I need to your point perhaps one of the most important spreads right now is the steepness and the your dollar curve and the front end. So in other words expectations for what the Fed will do between now and let's say the middle of next year. And what's been happening is we're front loading hikes we're raising the terminal rate. In other words the high watermark to which that we're going to and where we're pricing the Fed to stay there for longer. All of those are tightening financial conditions. Right. Zero hedge. You had a Bloomberg chart and I think it was last night where they had a terminal rate that rate out there somewhere I believe four point three three percent. Let's not guess what that rates could be but what level does it become harmful in terms of price down. Yield up. Well of does it become haha. It's tough. I mean the current level of yields that are priced for the front end. To your point about let's say point a quarter to four and a half percent by the second quarter of next year they are starting to damage the economy. No doubt. Right. You can see that in the in the housing market most prominently but there is a lot of damage that's in the pipeline right now that we will see hit the economy with a lag. So the extent that that starts to materialize we will see the front end start to stabilize over time as that long end gets to about four and a half percent. And we've been talking about what we're pricing in right now we're definitely pricing in a more hawkish Fed as we've seen the two year yield climb to the highest level since late 2007. But within credit. Are we seeing corporate and debt price in the revenue slowdown the profits slowdown that Whaley of BlackRock was talking about that Mike Wilson at Morgan Stanley is talking about and that perhaps the sell off yesterday really represented. Yeah I would say there's sort of two things happening in credit. One the underlying corporate balance sheet strength particularly investment grade credit remains very solid despite the marginal slowdown in the economy in the high yield space. We're starting to see obviously on the margin low quality companies experiencing refinancing issues. But by and large credit markets have behaved in a very orderly way. So to the extent that we are tightening financial conditions credit spreads are wider across both investment grade and high yield. It's happened in a in a much more orderly way than the moves we've seen for example in equities. So are you seeing opportunities within the rate space and are you seeing yields get to a place where you've seen the highs. For example are getting close to the highs the 10 year. Yeah I know that's a dangerous thing to say because every time someone says I've been a test set the next day but I'm wondering if we're getting to that place where you're starting to see value again in duration. Yeah I mean durations but very interesting. I think we've been early in terms of seeing value in in duration. The 10 year yields moved you know plus minus 100 basis points to be you know six to eight weeks. So there's not been a lot of stability interest rate volatility. This has been exceptionally high. But if you take a step back what's happening here is the Fed's putting a lot of credibility in play in the front end of that curve. If we look at inflation expectations further out they are at year to date lows to to Tom's point on 10 year break evens. And as this process plays out as inflation starts to cool and as the economy starts to slow progressively into the middle of next year tenure yields a three and a half to 4 percent will look exceptionally attractive. And I want to go a retail on your right now. Forget about spreads forget about Delta and all the rest of it the hedging and such retail out there on radio and TV. Now with Bloomberg Surveillance is going wait a minute. Price down yield up month after month. What happens if we break through to new lows on price. Looking at different Bloomberg total return aggregate indices is there like panic like equities. We've never been here. What happens when we break down to new price lows in fixed income. Yeah I mean there's been significant outflows in the retail space out of fixed income given given the drawdown. And you know add to your point the drawdown has been exceptional this year. Two pieces of good news on the horizon. Right. In terms of yields increasing you know we started I would tell you yields at you know 50 basis points a year and a half ago. To the extent that yields are rising yields rising for 50 basis point to 1 percent do a lot more damage than yields rising from let's say three and a half percent to 4 percent. So the pace at which the drawdown is happening is decelerating. And then if you take a step back the income component whether it's from high quality credit or treasuries now is a lot more active. So you have a lot more cushion as a retail investors coming coming into the fixed income market right now. Is 78. I believe 79. You get a monthly statement. Loss next one loss. Third monthly statement. Loss. That was child's play compared to where we are right now. For people that own bills notes and bonds. Yeah a bear market in bonds is not something that people hear about very often when you talk about 10 20 percent of a drawdown. Let's go global here and take a zoom out. There had been before this past year this search for yield and the US was the haven spot. A lot of that money was coming from Japan. We heard overnight about the possibility of abandoning a or not abandoning. We didn't hear any specifics whatsoever. But there are policy steps here to modify the yen to support the yen with concern. What's going on. How closely are you watching that situation with the systemic import of that currency and frankly the entire Japanese Japanese GDP market. Yeah it's very important you know both in terms of what's happening in the European rates market and the Japanese rate market increases and rates there could spill back into U.S. rates particularly the long end of the treasury curve. No doubt at the same time in the grand scheme of things the Fed strategy and the domestic inflation story here dominates by far. And so if you if you're a cross market investor and you're looking at U.S. rates European rates of Japanese rates U.S. rates in my mind continue to offer the best value in a risk risk adjusted basis right now. Very quick. Well you're not doing the dance. Let's do it right now. What do you expect next week. You know no doubt the feds are signaling that there is more work to be done. So to the extent that they had a terminal rate I think the medium term rate was three and three quarters. That probably moves higher let's say four for four and a quarter to four and a half percent by the end of twenty three. And very likely they start to incorporate a slower economy. So higher unemployment into into their forecast. Thank you. Well the guests going into New York into the studio. Just one word. Not that. You know it's I think it's a coincidence. I've got no idea. Here. They're not around. Tom's not there. Let's go. If you own your phone anyway ignoring everyone else. Sunny of Columbia right NATO. Ed thank you sir. As always you're trying to be very diplomatic around the outside story. I agree with it. No no no. Yes they're right. It's just yours to tell us what you really think. They say they're trying to job on the U.N. to a stronger place. They're saying they will intervene if things get out of hand. They aren't going to Warren. They aren't going to give details but they're going to do it. What are they going to do. Abandon the peg out of hand right now. I mean I just am wondering do they have any sense for exactly at what point what's the threshold for them getting involved. Are they just trying to throw this out there to scare people away from shorting yen too aggressively. They keep saying like almost as some kind of disorderly dislocation the effects but has been for a while yet. It's so highly intuitive. We can all explain it. Everyone else is hiking by a lot. And the Bank of Japan is not. And they're also doing something. In addition to that they're capping 10 year yields. I believe the upper band is 25 basis points on a 10 year. So they're not just doing that. Right. So are they going to abandon that. And if that's the case what happens to the Japanese bond market. How quickly was at risk. Price who is going to be there in their pricing considering how stagnant it's been. That has not been a market for as long as it has. You know what I'm taking to be useful. He struck people right again to tell me. Heathrow is the worst airport. Oh I disagree. The taxes are the worse. You're responsible what you pay in fees. Why. Why would take that. I did what I said back. Oh I think Les Mis about JFK. Oh I love the harshest on departures JFK. You know it's now we can beat up on them because LaGuardia looks nice. LaGuardia looks good. It looks really good. I agree. LaGuardia looks better. Yeah. Okay. I'll go there. But I'm sorry. It's like the trains in Europe they just somehow do it better. Can I just stay within the wonderful time or have a euro amid the funeral on the somber news of the queen's moment. John the vindaloo that you and I had last night that fiery red was never let us do that. Got it. What did you get for Indian dumped by the river. You know was it good. I couldn't taste. It was so delicious. Yeah I don't do that. OK. Would you like me to recommend someone for you. Yeah. You know you're going to do some hedge fund only something. Yes. It's for you would be something like Jonathan Ferro in Mayfair. Oh no. You're kind of thing flying at least when I go somewhere else. But we're trying to different venues. OK Muschamp is going to join us very shortly from MasterCard. Just things to say. Import Mark Gurman Secret Service. Horton thinks the housing market is well. Given where rates have gone. So just wow. Put a positive two tenths of 1 percent. Live from London. This is Glenn Beck. Given you have today with news from around the world with the first word I'm Lisa Matteo. European Commission President Ursula von der Leyen laid out plans to raise 140 billion dollars to reign the biggest energy crisis in decades. The funds would come from capping revenue from low cost power producers. Fondue lines proposal is just the start of what's likely to be a fraction of discussions among EU nations. In Germany the government is open to the historic step of fully nationalizing the country's biggest natural gas and water. Chancellor Orloff Schultz's administration is ready to inject more capital into unifier and increase its stake to above 50 percent unified lost 12 billion dollars in the first half of the year. The Biden administration is considering whether to replenish the Strategic Petroleum Reserve when oil goes below 80 dollars a barrel just two years ago. Democrats blocked former President Trump from filling the reserve at a fraction of that price. Senate Democratic leader Chuck Schumer called the Trump proposal a bailout for big oil that costs us billions in potential profits. U.S. job growth is expected to slow this decade as the labor force ages. That's according to the latest projections from the Bureau of Labor Statistics. The report shows that point five percent projected annual growth rate is half the pace recorded in the decade through 2021. About 9 percent of workers they're expected to be at least 65 years old roughly triple the share three decades earlier. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts in more than 120 countries. I'm Lisa Mateo. This is Bloomberg. Bring inflation down to 2 percent over two years. We could be looking at 3 million additional people out of a job and also deal well session 2 percent contraction which is currently not being talked about. If this is the sort of tough trade off that we're looking at in this environment shaped by supply constraint I don't think I've ever heard. Wiley is that bearish. That may leave the global chief investment strategist at BlackRock about 50 minutes ago. Equity futures this morning faded. Not much of a bounce now up a little more than a tenth of 1 percent on the S&P 500 after a move lower yesterday. The biggest one day move lower. I went all the way back to June 20 20 on the S&P. Yields are higher by four or five basis points on a 10 year to 345 27. Talked a lot about a two year three three seven eight. If we breach three ISE each 380 that we go to 381 at this critical critical key quiet. And that's why we're seeing this equity market some rollover. We're going to watch our effects as a litmus paper of the system you're in to see Sterling go down under a 114 fifty seven a breach that weaker sterling would be something. We're not there yet. Every day every year every week. Surveillance is buried with hundreds truly hundreds of books. And then there's one that trots across blocks for you and you go yeah yeah yeah. And it's on oil. It's a poverty boss. Made an incredible splash with his book his effort here on the trading of oil worldwide. We're honored that we could join him in his London this morning. The theme of this trip on hydrocarbons is no one's willing to pay the cost. The social cost of where Europe is where America is for that matter where age is when do we start paying the cost of Mr. Putin's war. Well we are beginning to establish pay. And now businesses in Europe have been paying it for several months already because they don't have price caps as household has in many European countries. So businesses particularly small and medium enterprises have been fully exposed to very high electricity and gas prices. And that's what we have seen a lot of companies actually reducing production or shutting down in countries like Germany. And now governments are going to have to start paying those calls because they're going to have to bailout not just families they're going to have to bailout entire economies because the current electricity prices are nothing and really wars in countries like Germany. You've seen the plans come from respective countries and the European Commission as well. Do you think they've confronted reality just yet. Our based on what you've heard. Debt beginning to confront reality. But there is this sense in Europe that they are doing a lot and that the worst is behind. And I I keep saying to myself we are only started to do in enough to keep things rolling on either. No the war is over. I have absolutely no insight whatsoever on what is in it what's in Putin's brain. But I know one thing and you can see it behind us. It's kind of sometime today in London and it's a very pleasant day of September. We had a muddy winter yet. We have very difficult months ahead. I really would say the wars he saw there when we told have mid-January. But to say that once he is already mid-September. No no way. I think we all wanted to ask a question about that. Is the worst of it just about the severity this winter or about the prospect that duration of this story could be longer than just a single year. I think this is a combination of both. But but one thing that is very important is the duration. A lot of people in the industry when I talk to see also in Europe a lot of people plan for a few weeks perhaps a couple of months or high prices. We had a month number seven. Probably we have another six infernal pass through that window of very high prices under potential. But you are mentioning even if prices come down a bit. I saw one reminded me I twittered a year ago just today precisely that gentleman. Electricity prices for that one get ahead have sort of passed the hundred euros per megawatt now. Where are they now. And that was like amazing news. Was an all time high. No one could really think 100 euros. Are at 500 now. Even if we come down we are not going to go back to what one day was normal and also very important that 100 euros which already double what it was normally before that we are 10 times normal. There is a question about how to support the build out the quick build out of the resources. And this speaks to the John's question about the length of the crisis whether it's going to be a next winter in the winter after we see in the United Kingdom an aversion to the windfall tax an aversion to taking money from the big oil companies for fear of the big gas companies for fear of cannibalizing from their investment. The EU the European Union is taking a different approach which is right. While my politics will say probably the European Union is more right than the UK but at the end of the day everyone is going to tax. So how to pay for these is a question of who you tax the. Or the families and the whole economy. But the UK is going to spend 5 percent of their GDP over the next few months supporting the economy through the crisis. That's going to be borrowing money and that's going to have to be pay through taxes in the future. It's a question of whether you tax everyone or a good tax particularly some of the companies that they're benefiting from the high prices. So if you try to crimp demand if you get it from that side which I know a number of countries have started to do. How much activity has to get taken off line. How much production of factories has to be put aside until 8:00. The European Union has put some numbers. We need to reduce consumption of electricity in particular by 10 perhaps 15 percent a peak time. So we need to reduce activity by probably 10 15 percent and at a time. So some people will not sound like a lot but that's reducing the GDP activity hugely. I don't know that they even possible. Europe is going to do. The European Union is going to do. Berry and the U.K. they're going to do a very interesting experiment. They're going to have to do that reduction in demand. We saw the market signaling for a reduction in demand is going to be governments who are going to have to mandate a reduction. And we're going to see every company every lobby telling the go. But my sector is more important than everyone else. So it's fair to mine iron and reduce the demand from that one. That all that one. I don't know how they're going to have there. Just quickly what you make of Germany's approach to this crisis with Germany at the epicenter of it compared to Germany's approach to the last crisis in Europe and say twenty ten eleven twelve with Germany on the outside looking towards the periphery. I just gonna have to for one moment forget that I come from one of their southern countries. I'm going to try my best. Putting aside that I think that Germany has been very slow. The European Union has been very slow in recognizing the magnitude of the problem. People were warming then a year ago six months ago two months ago was common. How is possible that only today is strong measures have been announced and these measures are not going to be approved for another two or three weeks. That to me is mesmerizing. This is out of character because you're not diplomatic in your column at all. It's been very diplomatic about the situation now. Yeah the columns have been really forceful violent. Very quickly here. Your book is about trading. Trading is about every once in a while there's tail risk and loss. I think there's an immense quiet about the commodity risk to Wall Street firms worldwide and the independent firms you look at. And they're trading risks right now. Are they exposed through leverage. They're supposed to to leverage to that exposed because the market is moving a lot. But so far what we have seen is that they are doing fantastically well. Some companies have made in six months. What do you usefully made in yet. This is a fantastic situation for the independent commodity drivers. They're more they're making. What about major Wall Street firms. I want to see if firms are also they are taking risk but so far they have been on the right side of the race and are making a lot of money. They have less to say about it and say look at less of Olympic opinion coming up. Sam Stovall chief investment strategist at S.F. Ray. On an equity market rally a bounce the face. Pretty quickly I can say anywhere negative now but down a tenth of one percent on S&P 500 futures from London. This is Bloomberg. The main feature of the US economy right now is that it's doing better than anybody thought it would be doing now. We all hope for a soft landing. Certainly I would hope that's what the economy can achieve. There's the possibility of achieving that. You're going to hear Fed officials that emphasize that possibility. The Fed wants to see not just one print lower. They want to see two or three maybe four prints lower. We do see risks that the Fed over. Does it. We do see risks that there is a recession next year. Seventy five obviously is on the table I think in November. This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz. There goes the bounce. Live from London for our audience worldwide. Good afternoon. Good afternoon. This is Bloomberg Surveillance live on TV and radio alongside Tom Keene and Lisa Abramowicz. Some Jonathan Ferro Michael Barr down and down hard in yesterday's session. We were looking for a bounce this Wednesday morning. Some that bounce fights had faded John. And it's the way it's food. As Lisa mentioned in the break it is correlated. But I would note sticking out like a sore thumb is a 10 year you real yield to a new high level one point zero one positive yield. That is a change for everybody listening and watching on Blu ray. Let's take it from tens and bring it into twos. Lisa we thought the headline has got 3 3 7 6 and then we just made another one. Yeah I'm just watching this because honestly this has been the direction of stocks just in the opposite direction. If you take a look at two year yields they have climbed out through solidly through three point eight percent and keep climbing. The pace of move has been jaw dropping. The pace of resetting. The understanding of what the Fed is going to do has shifted quite a vast CPI print 24 hours or so ago has just disrupted the whole narrative around this step down from seventy five basis point hikes to fifty to twenty five. Every single note I read from everybody writes the same question. ANDREW HOLLAND HOST The city's been on top of this more than most. He's looking for 75 next week and the potential for another seventy five in November from the Fed. It raises a lot of questions about how much more work they have to do and more importantly the risk assets how much more damage that needs to be done to the economy to get inflation lower. We make fun of his whole good news his bad news kind of conundrum. But really what this means is the more momentum there is in people spending the more ability to withstand higher prices to sustain them even higher. It causes the Fed to have to really slam on the brakes that much more more dramatically. And that's the problem. John Tucker push against the gloom. An announcement moments ago about what you're going to see from well-run corporations Comcast. I believe they're in the television business as well with a share buyback authorization and 20 billion dollars in June. This is the economic challenge the grimness as you mentioned the brutal show that we're in and corporations looking at persistent revenue persistent cash flow. Where do we invest. We're not sure what buyback our share how much business will actually get done. You've seen the guidance we're getting from the banks going into the quarterly earnings season that basically touting get investment back revenue and not create it. So what you're making isn't happening in a big way. Yeah. Well J.P. Morgan said what it was down 50 percent saying a deal making revenues. Time you're not losing. Does that mean we're not going to do the spec reporter anymore. I think that's not what you said. ISE for a while. But partly to that. To your point Tom you are seeing companies buyback their shares. There isn't necessarily the level of gloom in corporate America. Much is the gloom elsewhere. But do they have to get gloomier for the Fed to achieve their mandate. I think that's the question. Can't just say how proud I am of the team that we never did the spec stuff. We just take notice when it whenever you see a celebrity on TV promoting some kind of financial instrument. Right. Just kind of run up. You know we get the same pitches from the same firms. We make a big big effort not to make it happen. Just gonna throw that out there and then quickly switch to the price section that's set up to be able to get through. I've got things to say OK. It's up by five basis points. Its angle what they want. Let me have it. The bridge not some asset 346 on a 10 year on a 10 year in America. It's the two year was so focused on Lisa from 360 to 370 and now out 3 3 8 8. So where are we headed. Right. I mean do we stay at 4 percent. If that's where the Fed says they're going to go. And what does that do to earnings estimates. And that's really the question for a lot of stocks. Just want to move. Sam Stovall happy to say joins us now. Chief investment strategist at S.F.. All right. Sam can we just start with the big draw down. We called it that yesterday the aggressive selloff to pick up the pieces this morning. Sam how do you approach a sell off like the one we had yesterday. Well I would approach it the way Tom seems to be approaching it. That is when life gives you lemons make whiskey sours. So basically you look the history that you know history tells us that whenever we have had a 4 percent one day decline that we usually see a bounce of about 1 percent the day after that's happened about two out of every three times. But then we sort of trade sideways for the next week as well as the next month before resuming an uptrend three months down the road. So basically you know I think investors just have to hold onto their hats right now. Sam I've been dying dying dying to talk to you about a concept I heard maybe 10 days ago which is a lot of good ideas out there in common stocks but you can't get scale. You can't buy accountable number of stocks do you see a father a fine that you've got a number of good ideas and then it's hard to find other good ideas. Well I think what you're finding is that as time goes on you'll find that there were fewer and fewer companies on which you have solid conviction because what our analysts do is they're looking six to 12 months down the road. They're not really looking for the next couple of weeks. And so yeah they they take a look at the change in economic projections in earnings forecasts. Look also at momentum. And sometimes that list tends to get trimmed as a result. But we still have a solid count of stocks that we regard as being five star or strong buys. Sam how do you reject this idea. We're going to see an earnings decline that has not yet been priced in. This is what we leave BlackRock with saying and this is what Mike Wilson of Morgan Stanley has put out there. Basically what the bond market is reflecting is work that the Fed is going to do that will essentially crimp the activity of a lot of companies. Well I think it's a logical assumption that that's going to happen. Traditionally in bear markets associated with recessions since World War Two we've seen a one third trimming of the P E ratios. But since the market tends to anticipate the end of recessions by almost two full quarters we have to in a sense wait two more quarters into the bull market before we get a trough in earnings. Right now we've already seen reductions in estimates. Q3 earnings are now expected to be up four point two percent. But on June 30th they were expected to be higher by ten and a half percent. In terms of 2000 then 22 and 23 estimates now we're looking at six point eight percent for this year versus eight point nine. At the end of June and next year seven point four percent growth versus 8 8. So we're already seeing a reduction in forecasts. Sam I'd love to squeeze this in just a little bit more of a sector focus. This looks it takes a bit deeper financials. It's a bit cold of the start. The deal to go in our right to climb and get into the banks hasn't worked out. Energy now is a focus for a lot of people. This Fed is set to crush growth. That's the fear that a lot of people have if they're going to Caroline Hyde can interest rates by 75 75 75. Do I want to be long Kenichi. Do I want to be long financials given the expectations we've got off the back of that CPI report. Well historically what you find is that consumer discretionary technology and financials are underperformers in a a hefty inflationary environment which is what we saw back in the 1970s. We are looking at financials that are trading at a slight discount to their long term PE ratio. So about 5 percent discount whereas energy is trading at a 55 percent discount to its average PE over the last 20 plus years. So I would tend to say things are done more on a relative basis. And right now on a relative basis investors are gravitating toward the defensive consumer staples utilities as well as the inflation hedges of energy and to a lesser extent materials. Sam Stovall thank you sir. A CFR right. The other one we've had recently as well. Lazarus the small caps. Yeah. Off the back of the concerns around the effect storing the witness abroad that basically the domestic strength is going to uphold some of the stocks that have gotten the most beaten up until now. I think that that's also the reason why it's valuation story. If you read Laurie Covid over at RBC basically saying they've already seen so much pain. Perhaps there's some value in what Marcus Ashworth said yesterday about foreign central banks after that print which he called the inflation printing quickly shifted towards talking about the Federal Reserve and the market fallout and then some. Marcus Ashworth sat in that seat and he said this is the worst news for other central banks. And the rest of the way I agree with the rest of the world. The key thing here I'm enough old school where I'm worried about Ecuador. I'm worried about nineteen ninety two of Mexico and any number of other items of the past. There is a certitude now that E M is different this time and I'll buy it for a minute or I check every morning Thai baht Philippine peso all the rest of it. And you're just you never know where it's going to be. You can think as hard as you want and you never get it right about which is going to snap it somehow. Were you thinking about how much work those central banks in the AMA we've done to hike interest rates and try to stabilize the situation they've got domestically. They don't have a dual mandate. They've got a formal mandate. And the formal mandate is take Indonesia. Is the people of Indonesia ginormous nation OD oh pack energy in between this there and I'm sorry mostly it's a social mandate that we don't hear from the Western Bank. You've got the debt issues on the one hand. And if something into that you've got the effects dynamic as well. And that's really what Marcus was speaking to yesterday not just in the EM problem that if you want to call that an A.M. Central bank around the corner on Threadneedle Street like that governor is a little bit too clever or might avoid that one just in case. A seamless I walk out the door is a conversation that want to have the other people having it. Well the question is whether it's the Fed's world and they're just living in it. And they have no say really even if they do raise rates sufficient to match the Fed. And that's certainly what we've been seeing in the currency has what's coming up next. Ben Duncan Republican from Virginia which we're to discuss with your politics the politics of America. We have these three primaries yesterday New Hampshire and others. And now what for his Republican verge on a scale some carried interest loophole stuff I gotta say. I'm not telling you to but it would be interesting. I couldn't stand a sent from London. This is. Beat you have today with news from around the world with the first word. I'm Lisa Mateo. China is facing its biggest drop in oil in demand in more than three decades according to the International Energy Agency. Chinese demand will decline by two point seven percent this year. Now much of that is blamed on restrictions imposed as part of China's Covid Zero policy. Ukrainian troops are keeping pressure up on retreating Russian forces. Ukraine's border guard services said the army has now retaken a town just two miles from Russia that was seized on the first day of the war. Russian troops have been seen withdrawing toward Moscow controlled Crimea. A strike set for Friday could prevent American railroads from transporting farm products and other key goods and it could cost the U.S. economy 2 billion dollars a day. President Biden is personally trying to break the logjam between railroads and labor unions. Labor Secretary Marty Walsh will meet with railroad and union representatives today. And Google has lost most of the first round in its fight to overturn the EU's record four point three billion dollar antitrust fine judges. Judges upheld the vast majority of the European Commission's arguments but they cut the fine to four point one billion. Google is accused of imposing unlawful restrictions on manufacturers of Android mobile devices and mobile network operators. Hong Kong will quit moving travelers with Covid to isolation hotels or quarantine camps. Instead they'll be allowed to remain in designated quarantine hotels. That marks another easing in the city's travel policy. The move comes as Hong Kong prepares for several high profile events including a summit for global bankers and an international rugby tournament. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm Lisa Matteo. This is Bloomberg. If there's any doubt at all about 75 they're definitely going 75. We thought they would be stepping it back to November to 50 in November. At this point you would say seventy five is certain to be on the table there November and maybe beyond. That was Jay Bryson the chief economist at Wells Fargo. If you were looking for a bounce this morning I think we're all looking for a bounce after the losses of yesterday. You know get him walk. It's very small. Briefly negative in the last 30 minutes or so. Right now. Positive. About a tenth of 1 percent on the S&P 500 up by two or three points. Only up by two or three points. Aggressive losses yesterday. The biggest one day losses I've said repeatedly through this morning and many others have as well. Biggest one day loss come back to June 20 28. Yields are so much higher over the last few months up five basis points on a 10 year to 346 24 I said coming into this week. We've had six consecutive weeks of 10 year yields climbing. It's not just the 10 year to year as well. Lisa just quickly where I'll be on a two year we re I'd say we were at 380. We're now three eighty one. I just this incredible rise and then correlated a commensurate drop in the S&P and now it's okay. I want to move that. Spent 3 I plus causes you to watch here this morning and of course data dependent. But certainly watching foreign exchange is an international measure of where we are right now. And this is the most interesting time to speak to the gentleman from Rice University with mechanical engineering is a background. He went on to engineer all sorts of efforts in private equity and venture capital. He is the governor the Republican from Virginia Glenn Young. And we're thrilled the governor could join us this morning. Governor I cannot think of a time to speak to you with someone who pro-business pro innovation dealing with a Republican Party that wants to bob bomb. Rob Portman and the rest back to an antique business time. How anti business anti young can is your Republican Party. Well I don't think the Republican Party is anti business and in fact Republican governors all over the country have been leading the recovery coming out of the pandemic. And that's exactly what we've been doing in Virginia. We've got taxes down. We're open for business. We're seeing great announcements from companies. We have a lot of open jobs. And that's one of our biggest challenges is getting people back to work. I am really concerned about the inflationary policies that we see coming out of the Biden administration and time we see the ramifications of that yesterday which is. And anybody who thought that this was going to be short lived has been shaken because what we're seeing is the persistent result of bad policies inflationary policies grocery prices up fuel prices up and Virginians and Americans feeling it in their wallet and they're having to make compromises as a result. We have iconic American companies moving for instance from Chicago to Greater Washington D.C. translated. Virginia. We've got entrepreneurial companies such as your announcement today on an innovative company and on a wage basis. They're competing with Amazon who's lifting compensation for drivers in hundreds of thousands of their employees. Is there a wage spiral in Virginia. Well there is. There is a real wage inflation challenge there. These these wages are growing but they're not growing as fast as inflation. And the cost of living. I'm really excited about these new companies that are coming like plenty unlimited that we're announcing today that is going to build the largest indoor growing facility in the world. And we're going to see them right here in Virginia. They're going to compete for talent. This is why we have to get people back into the labor force. We've seen labor participation drop substantially in Virginia. We were up near 67 percent prior to the pandemic. And unfortunately we dropped and we're in the sixty three and a half percentage. Now we've got to get people back to work. These great jobs these next generation kinds of opportunities will pull people back into the workforce. But we've got to stop all of the underpinnings that have encouraged them to stay home and out of the workforce and get them back to work. Governor this indoor vertical farming company and indoor vertical farm that you're espousing really speaks to an agenda more commonly associated with the Democrats in terms of trying to make things greener and make things more modern. With respect to the carbon footprint do you find yourself bumping up against that stereotype when trying to have a more modern approach that brings in more young workers. Well not really. I mean agriculture is Virginia's largest private industry and technology is one of our fastest growing sectors. And so to bring agriculture and technology together in the Commonwealth of Virginia makes perfect sense. And in fact we have absolutely become the hub. With today's announcement with plenty which is going to build a 300 million dollar facility right outside of Richmond. Three hundred new jobs. In our announcement two days ago with Arrow Farm we will have the first and second largest indoor growing facilities in Virginia. Yesterday we announced another company Beanstalk expanding their facilities. So we're bringing together our agriculture roots our technology future and forging the way for it. For an industry of the future ag tech uses far less natural resources has higher yields and a great product. And I just think this is part of the future of agriculture is happening right here in Virginia. Just real quick Governor I remember speaking with you and you had your private private sector hat on about infrastructure and plans that you were looking for and I'm wondering now that you're in the public sector if you've been surprised by the partisanship that prevents certain things from happening or have you been surprised at the other way. Well I do believe that investing in infrastructure broadly is critically important to facilitate growth. I mean we're seeing capacity issues across our infrastructure. I mean we're still rated a D as a nation. We got to address this. So we're doing it in Virginia. We moved up substantially in the ranking of that infrastructure. Our port is being deepened and widened. Our road infrastructure is being improved. Our connectivity and broadband is taking a huge step forward. And this is the kind of progress that we must make. We're doing it both with government led thanks but more importantly with public private partnerships. And I think investing in infrastructure will continue to be one of the great challenges and the great opportunities in Virginia and the nation. Lisa is that one step closer to asking about count interest. You wanted to go to the governor next week. We're out of time. So you've you're. You're in luck. Governor I know we had some technical problems. I'll start the interview. So we have run out of time sir. But next time we'd love a longer conversation. Governor Glenn Young Connect Virginia. Governor thank you. Great to catch up with him. Yeah he's a really interesting person. And speaking to him when he was at Carlisle he was really big on investing in infrastructure. We didn't time to get to send but I think an important conversation with somebody straight talking to a young can is OK but can you find common ground with Democrats with the American disgrace which is child care. He wants you know the usual Republican chitchat about get people back to work. And yet we're living in the medieval age just like Westminster Hall. We're living in the medieval age of child care in America. I think that it's a big issue. You want me to comment on that one. No I just didn't play it tangible. He's been very vocal about education. We live in that. That features up a tenth of 1 percent in the way it was going last month to Tom Keene. This is. Alisa said it's PPA Wednesday so we're going to some people data and a couple of seconds features into that RTS tenths of 1 percent on the S&P 52 futures just about pushing high yields are as well by 5 basis points with the data as Mike McKay 54. The numbers are just coming across for producer prices. Final demand on a month over month basis falls by a tenth of a percent. And that was what was forecast. The core low rises by four tenths. That's more than the three tenths that was estimated. That's ex food and energy with PPA also take out trade services which is basically an equivalent of retailer margins and you have a two tenths percent rise. Same as last month. Same as forecast. So this leaves us with a final demand year over year at eight point seven percent. That's down from nine point eight percent. The core seven point three down from seven point six. And the core with trade services five point six from five point eight. So some significant changes in the for the better on the PPA side and the producer price side contrasting with what we saw on the side of the consumer price index. So maybe our buy can get a little happier today. Maybe just a little bit of perhaps not quite. IBEX. Thank you. Equity futures pushed just a little bit higher up by two tenths of 1 percent on a S&P 500 yield still higher by five or six basis points three forty six. Forty three on a ten year. Two year still three. Three. I take just about brown. Lisa said if you ask me out to the shop. Basically this data point was about whether it confirms your fears about yesterday. It didn't. You just ignore it and look ahead to the real. You don't agree with that. That's basically what you said to ask me how the markets move it. I stand by it. Should we start the countdown clock to retail sales tomorrow. Would you like to do twenty three hours. Let's go. You should go in red line the circulating London right now. I'm gonna see the queen and just count down. Should raise hell. Sounds like hell. Yeah. What you talkin it. I could stay there for three or four days. Seriously. Huge queue to see the queen. We'll bring that to you in this next. Salads. It's just crazy. Yeah. This is really history being made folks. So please stay with us in the next hour through the weekend into Monday as well. Right now. And this is really an honor because I can give you a story about how economists become stars. Michelle Meyer is a MasterCard economics institute with far more. One day a girl fell out of Boston University and everybody stopped and said wow. Does she know housing. Michelle Meyer joins us now after years of Bank of America and truly expert on your next mortgage and rent payment. Michelle let me cut to the chase. How bad is it. How bad and how persistent will the housing inflation be. Well thank you Tom for that wonderful intro. You know I think the big challenge for the housing market right now is simply affordability. And that comes from two factors. One is that home prices increased at an extraordinary rate across the country of the last two years running in double digit rates for the major metropolitan areas. By our metrics and we looked at home prices relative to income growth across all of those really specific metro areas about 65 percent of the country is considered overvalued. So you have that coupled now with this extraordinary increase of mortgage rates and that has created a huge shock to the housing market. So as you know home sales have been falling steadily since the beginning of the year. Right. Multifamily to the rescue. That's what always happens in the cycle. Can both family come to the rescue in Nashville or Denver. Never to a rescue in New York. But as more time family are we getting more units. We are. We certainly are. I mean if you look at housing starts they're still running above what you would consider a break even rate particularly for multifamily. And remember the lags with multifamily is while it takes about a year from the beginning of the project to completion on average once the construction start. So you know we had a lot of projects that were ongoing. The development was happening. And now you're starting to see those completions. So you're starting to see those projects enter the market in a bigger way. So you still have supply hitting the market particularly in the multifamily space. And that should help because you can have some conversion from owning to renting. Given the affordability strange in the housing market but look at owners equivalent rent in last and yesterday's report and CPI that is accelerating further. So there's still rental pressures as well which further strains affordability across. What can rate hikes do about that. Well can rate hikes do about that. Rental price pressure. We're same build. Well I would argue that that transmission from monetary policy is quite apparent in the housing market right now and we'll be increasingly in the rental market as well. You know these are interest sensitive sectors. And the fact that the Fed is increasing as rapidly as they have and you could argue for reasons that are quite clear to contain prices and inflation that increase in interest rates has slowed down demand of housing. And in turn it will put that type of downward pressure on home prices as well on home price appreciation which then spills into rental inflation. But that all takes time. It is not immediate but I would argue it's already underway that transmission. Well at least on the housing price side. But on the rental issue. I just want to pick up Jon's right to bring up the fact that rents are still climbing and faster than people had previously expected at least based on the CPI report from yesterday. And there is an argument that the higher prices go on houses the more people are forced to rent the less affordable it goes especially given the high mortgage rates. Where is this potential for an overshoot at the same time that the people who are least able to handle inflation are feeling all the more pain. Yeah. I mean look these are these are these are certainly some of the challenges here in terms of finding that ultimate equilibrium in the economy after creating you know some real imbalances in terms of excess stimulus. And I think you know the adjustment is is happening but it's not complete. And in the interim. Yes. You've seen this you know some push into owning to renting which is increasing demand for rentals when there's still some lag in terms of getting all that supply into the market. But it will come. And frankly you know one of the ways it will come in terms of normalizing inflation normalizing particularly rental inflation is through the demand side in the sense of weakening the broader economy particularly the labor market. You have a bit of an income shock and then naturally you start to see that that feed through. And that's what Fed Chair Powell I think has been saying quite clearly which is that they are keenly focused on price stability and reducing inflation. And that does mean sacrificing some real growth. But this really leads to the question of how much pain needs to be inflicted on this economy and how much pain will be inflicted on this economy based on the rate hiking cycle being priced into the market in a way that we are not anticipating because of the lag time because we're not seeing it yet in some of the metrics. What's your sense of how likely or unlikely a hard landing. I hate using that but a recession that's somewhat significant is given the report that we got yesterday on CPI. Well I think the report yesterday showed two things. One is that you are seeing relief on the supply side and that you know you have. We've seen a drop in energy prices. We're starting to see some easing of goods inflation. That and more should come. Given what you've seen from container costs coming down supply chain issues easing but the demand side there's still a lot of inflation there and the services economy is feeling that. So for the Fed that has somewhat control over the demand side. It does give them that type of push to continue to raise interest rates to cool down the economy. And Lisa to your point it is taking time because the starting point was really high. Now as we've been talking about ISE I'm talking to you off the last few months the consumer's healthy their strong balance sheet. Right. Consumers fill out their spending and they're navigating this inflation environment. Sure. You've been brilliant on that. And of course you've got all the resources of MasterCard to figure that out. Jim Glass sort of. J.P. Morgan is pushing against the blow. No one I've ever seen in the decades he's done this hopeless where the Glassman Meyer consumer how booming is the consumer right now. Look from our data we're looking at our spending pulse data for the month of August. There was an acceleration in the year over year growth rate of consumer spending. And that's you know even controlling for these movements in gas and oil and autos et cetera. So the underlying demand that did accelerate. So we'll see what the retail sales report shows tomorrow. But you know it seems like we're setting up retail workers day. Retail Thursday. I'm sure she will give her credit for it. Michelle knows this rich out that retail first MasterCard. I think so. I think it's so important. This is a brutal reality and a brutal fact. James Glassman of JP Morgan and Michelle Meyer over at MasterCard is saying all of this continuum we talk about the consumer. Every seat on the airplane is taken absolute. There's boom. So let's say that's straight and a lot of people are on board with that view. Well they're saying that some ultimately is that because things are resilient the Fed needs to do more north. My trader Adam Switzer an account I know you love. He said this. The Fed will break it until we make it. Think about that. Yes we can talk about the same thing at the same time. The two issues talk. We've got a resilient economy but also the Fed needs to break some stuff to get inflation down. Well the more resilient the economy the higher inflation will remain. Unless there's some sort of exhaustion this event bring it down and some supply side. Right. Exactly. Exactly. Was that soft landing. We'll hope for that right. Exactly. Which is the reason why there is a narrow path to a soft landing. But if the reason why people are getting bearish because things are so resilient things are so good for the consumer and that's why we're seeing the two year year through 380 which is just sort of shocking on retail sales and just in the equity markets to digest that it's back to normal. 3 ISE How did you get back to normal. And we're all going to survive. Thanks Tom. That's my. You know it's not like Senator Edwards seems to be the speech from the president yesterday. We'll see the speech of the president yesterday was he looked foolish because he did not address the immediate inflation report. He could have scored major points show by being presidentially optimistic and note the inflation that's crushing a huge part of U.S. to some nice comms team. What what did they do it. What did they think kept me going. Don't give me some type celebration of the Inflation Reduction Act on a morning like that. This is a delicate moment. And he's actually done better in the polls over the past few months because of gasoline prices. And now it gets a little trickier. Three seventy nine. Eighty six on a two year. Coming up as we count down to the open about Oksana are enough for J.P. Morgan Asset Management. Looking forward to that. Zach reports on there's always a price and semi. Samantha is joining us from Wells as well. What you got in the back. I think the Dow is up 52. Life goes on. I take a break. OK. We'll take one from London. This is Bloomberg. Keeping you up to today with news from around the world with the first word. I'm Lisa Mateo. European Commission President Ursula von der Leyen laid out plans to raise 140 billion dollars to rein in the biggest energy crisis in decades. The funds would come from capping revenue from lower cost power producers. Bond Airlines proposal is just the start of what's likely to be fractious discussions among EU nations. In the U.K. inflation has gone down slightly from its highest rate in four decades. The Consumer Prices Index it rose nine point nine percent last month from a year ago a drop from ten point one percent in July. That reflects an almost seven percent decline in the cost of gasoline. Bank of England policymakers meet next week. They're expected to raise interest rates either by 50 or 75 basis points. Comcast is doubling its share to buyback program to 20 billion dollars. The parent of NBC Universal is taking advantage of the shares having lost a third of their value this year. Comcast has already bought nine billion of its stock in 2020 to global tech investors. Softbank reportedly is considering the launch of a new giant startup investment fund according to the Wall Street Journal. It's part of a plan to rebound after the poor performance at its two earlier funds. Softbank has been hit hard by the route and tech stocks. It posted a record 23 billion dollar loss in the quarter ending in June and hotter than expected U.S. inflation data had caused Jeff Bezos his wealth to fall nine point eight billion dollars yesterday. It was the largest plunge on the Bloomberg Billionaires Index. Elon Musk's net worth dropped by eight point four billion. And they're not alone. The fortunes of America's richest billionaires fell by 93 billion dollars. The ninth worst daily loss ever. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists. I'm Lisa Mateo. This is Bloomberg. This is an extended edition of Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz ISE live from London for our audience worldwide. Good afternoon. Good afternoon. A special edition of Bloomberg Surveillance The Countdown to the Open begins right now 30 minutes away from the open about futures trying to generate deliver some kind of bounce after a brutal. They have losses in yesterday's session alongside Tom Keene at Lisa Abramowicz. Some Jonathan Ferro T.K. struggling to put together a bounce this morning to go bounces a better taper a bit ago. And then there was a real ebb too. And it's sort of claws back. But to me it's highly correlated. And it is a data dependency that's sobered everybody up yesterday shifting from Sadr soft to what kind of landing. And the question is John Kerry's what's the next data dependent in between us and the Fed is tomorrow's retail retail sales. Lisa will it actually make a difference considering everyone's on board now for seventy five from this Fed next week. It just will bake a difference on the margins for the progression from there. In other words how much does the Fed have to stomp on the brakes. Right. I mean this is basically a market looking to the Fed to reduce the momentum to by design engineer some sort of slowdown that is going to by design have to be a bit harsher than they previously to render what these forecasts look like next week. It's a good question. Are we going to see much higher unemployment. Baked in to get CPI where they wanted to be. And do they change them between what we saw yesterday and then. And my answer is they do come right up to the end. We're going to look forward to that. Michael Barr right here on Bloomberg TV and radio features shaping up as follows just about positive on the S&P and on the Nasdaq say certainly not the story of yesterday but the S&P 500 down the most since June 20 20 with positive two tenths on the S&P on the NASDAQ up by about a third of 1 percent. Lace has been all over the bond market quite rightly. It's not just about tenure. You know it's higher. It's about a two year. That is much much higher up 4 basis points. And briefly this morning through 380 at the moment 379 65 might NIKKEI got a lot to say. Mark McKay we need to talk about the data yesterday this morning and tomorrow. Yeah John take a look at what we saw this morning from the producer price index. And you might think things are not all that bad because producer prices on a headline basis fell a tenth of a percent. Exactly as we had anticipated. But it was the core rate once again that is a little bit higher than had been expected. We see it come in at a four tenths gain up from a three tenths gain the month before. But it really just piles on to the whole headline CPI core CPI story from yesterday that you guys were just talking about. If you look at what's happening with CPI there is one line that just should scare everybody. And that's the number of categories that are seeing inflation above 4 percent. That's the purple line there. That is 60 percent of the categories in the CPI are seeing inflation above 40 percent. And that white line is the number of categories that are moving towards zero. And that's getting smaller. So you do see as you guys were saying you do see this Fed probabilities move up. We've now priced in for March four point three almost four point four percent. So you can see the bottom there where we're going next month or this month rather next week and then where we go from there. I just have to conclude by sort of pointing out everybody has an opinion about what is going to happen. Larry Summers said the Fed needs to cut by 1 percent. Jeff Gundlach said they are raised by one percent. Jeff good luck said they need to raise only 25 because they're gone too far at Haidi Lun. Must says they should cut 25. So who's the Fed going to believe. Mike Frame retail tomorrow. And I know there's an inflation issue there with the enthusiasm for the consumer. I hear from Michelle Meyer MasterCard from James Glassman at Citigroup and others that all this talk of fed and the financialization and the money side of the business buttresses is up against a buoyant consumer. Is the consumer buoyant. Well it's gonna be interesting to try to divine that from the retail sales numbers tomorrow time because first you have the overriding issue of did people have more money to spend on other things. They were spending less on gasoline. And do people want to buy goods instead of services. Now we do have this retail sales report encompassing the back to school season. So there might be some news there but also housing collapsing. We saw another drop in mortgage applications today. And so what's happening with furniture with appliances building materials. Are those going down with the rest of housing. It'll be interesting to see this tomorrow. Mike thank you Mike McKay. That breaking down some of the dates that some Lisa Mike Apron of Bank of America out just moments ago. Lisa he's not like 75 next week. There was a lean towards 75 and went from 50 to 75. Is that number 4 percent on Fed funds by year end. That has quickly become consensus hasn't it. And that is a game changer from where we were a couple of months ago. The question is if they're going to hold it there. Right. And basically the Fed officials have said we're not going to cut rates next year. Stop thinking that. Stop pricing that end. If they hold rates at 4 percent to Tom's point can the economy withstand that given the amount of debt in the economy given how much people have gotten used to zero. I would suggest you will you will clear out the zombie companies. A good part of the economy will withstand it. We've had a zombie ization said we're done because you're right. Some David Ingles for you Larry. There's been a zombie a vacation of the American economy and we're going to clear it up. Those really raises the question why credit's been so resilient in the face of some of their sacrifice. Joins us now to look it up CBS investment great strategist at Credit Sights. Zach can I begin with high yield and not investment grade. Can I ask you why you're seeing the signs of resilience in that part of credit that perhaps surprising some people. It is surprising Jonathan when you think about the move in risk markets broadly yesterday and see spreads hanging in relatively well. And to us we think that there is a lot of bad news priced in. And we recently looked at the wall of maturities coming up and you're just not seeing a lot of maturities that are going to need to be refinanced at these higher rates in the near term. So from a fundamental perspective we think there a lot more flexibility for some of these high yield issuers the higher rated high yield issuers than you've had in some past cycles that aren't going to have to absorb these higher borrowing costs in the near term. And it's going to come down to what we were talking about earlier with the consumer. Is it as resilient cannot remain buoyant and keep earnings buoyant over the next couple of quarters to keep high yield. Hang in there. We think there's a decent chance although our base case is spreads widen a bit into Tehran. So is that going to double down this and really get you to explain because we heard something similar from Wiley that a slowdown was already being priced. If the credit spreads even as you had the like of J.P. Morgan's Bob Michael coming out and saying actually there got a lot more to widen. They have to recognize the pain that stocks are starting to price in on the margins and moves like what we saw yesterday. So what exactly what kind of slowdown are credit spreads currently implying. I think you're seeing an implication of something s of potential GDP at least. I'm not quite sure that you can say a recession is priced in yet. And we're not calling for a recession. We think that you're going to see a growth slowdown when you have the Fed tightening rates like this. You have a 10 year real yield moving as high as 1 percent. That's certainly going to have an impact on the economy. But it's tough to balance just how much of the fiscal and monetary stimulus you've had over the past couple of years is still floating around in the economy. We still see indications that there's money to be put to work. You certainly had a big reopening of the investment grade credit market after the Labor Day holiday. And not to point to something that we've been talking about for it seems like months but all the cash on the sideline in the Fed's repo facility. So I do think that there are some counterbalancing factors. I think there's a slowdown price. Then it's hard to say exactly how much at this stage. How long would rates have to stay high before it became a problem. And I say this with respect to what you were saying about the maturity wall how it's going to take a number of years before some of these companies actually have to refinance. What's the time that they have the breathing room. I think that's about a year maybe a year and a half. And if you have rates remaining high or moving even higher still that's going to be a problem because you're obviously not going to wait up until the very end. As these maturities come due they get refiled a certain amount of time ahead of ahead of the actual maturities. And so when you think about if the Fed were to take the policy rate all the way up to four and a half percent which seems very possible to us and hold it there for something like a whole year in which the market is certainly not priced for I think that's going to cause problems for the economy and for credit I believe is good credit sights. You people have the pulse of what corporations are doing. I see corporations that are under dated one particularly quality corporations is rates go up. What kind of sweat the CFO is have. Are they breaking out a cold sweat. Because they're saying the issue now is you now or do they pull it in. I don't think the cold sweat is here yet. Time and again it kind of comes down to this story that maturities are not significant in the next year or two because of all of the opportunistic refinancing at very low rates that we've had over the past couple of years. So again it gives these corporations especially higher rated ones a lot more flexibility coming into a time of economic headwinds and monetary policy headwinds. Are you monitoring that. They're using debt issuance simply for equity retirement equity share buyback. That's definitely something that we monitor and is a cause for concern if there is too much issuance to simply do share buybacks. But I think that given the clarity at least around tightening perhaps not the exact degree balance sheets are being short hop and some of those considerations are being taken a bit more or less lately I suppose to be the way to put it. And so that's not something that is keeping us up at night just yet but definitely factors into our overall outlook. CEO diplomatically was there. I think it's been pretty absolutely nil. It's got a new. So it's been very diplomatic. He's just been to say Zach strangled that ISE. Congratulations on you. Say it's going to catch up sir. Zach GRIFFITHS that you. Credit sites on the edge of constructive on the credit market that rama would you say on the edge of constructive. Certainly more constructive than a number of people who should that credit spreads still need to widen. It kind of goes back to the theme that we've been talking about all morning which is just how deep is the slowdown that you have to expect to get inflation under control and. Well that's what it's equity seems suggest yesterday. But Mr. Johnson just. Yeah. He was clearly just putting that out there you know is going to join us in about 20 minutes. Oksana are enough of J.P. Morgan. I'm guessing Oksana is not constructive on this credit market. I would guess not. I'm curious what she has to say about some of these other issues that people are raising such as fundamentals that look pretty good. The fact that they don't have necessarily a maturity wall and this was the other point that Zach mentioned there still is so much liquidity in the system it hasn't yet been drained. Does this perhaps be the place that we've talked about quality Kutty. Yeah. That's where I'm going with that. So if you compare 18 to now and we've touched on this a few times over the year and I know we did it early this morning as well. The biggest difference between now and late 2018 is that it's worse but that it's better because we don't have a central bank puts anymore. Correct. And you also have the quantitative tightening that's accelerating. So when people say well they're still looking to buy things. Yes they are because we don't have necessarily that withdrawal of liquidity yet when it starts to kick in. Does the conversation start to change. How long before we start talking about the Fed pivot again. My stomach based on a job market. That's okay. A payroll. We can help. That looks like Goldilocks and we could have 50 moves on again. Well Chairman Powers wants have to read the same speech twice three four times. We've mentioned that few times. Two futures up a third of one percent on the S&P on the NASDAQ of four tenths of 1 percent on a rustle up two tenths of 1 percent. We've talked about yields climb and discussed that all morning on a 10 year two year briefly through 380 of one point this morning. J.P. Morgan blames Oksana. Aren't always going to join us in just a moment alongside Wells Fargo Samir Somalia. We'll do that around the opening bell. Before we get that look at the sun in London. If you're on radio right now you're missing out. Glorious day. Developing stories in London. That's the queen's coffin is set to move from Buckingham Palace to Westminster Hall guiding us through that messy burden of Guy Johnson. In just a moment. Live from London with equities higher. 17 minutes away from the opening bell in New York. This is Bloomberg. The stock market doesn't necessarily reflect the state of the economy as you well know in the economy still strong. Unemployment's low. Jobs are up. Manufacturing is good. So I think it's going to be fine. We got the inflation number though. No I'm not. President Biden brushing off inflation concerns after an upside surprise at the same time. For more down in D.C. Olympics and break I am. Let's start there. How cumbersome. A lot of people thought that was just yesterday clumsy almost to be looking at inflation where it was markets with what markets were doing. Getting the message that we've received from the White House at the same time. Yeah it's quite awkward. And Greg Valliere leads his note with it calling it tone deaf saying rarely have we seen such a tone deaf day in this city. Then yesterday as markets were crashing the president with hundreds of people were celebrating the quote Inflation Reduction Act. You had James Taylor singing Fire Rain and Fire. And at the same time there was no mention at all of the inflation data that had just come out that morning which was worse than expected. So for many it was an awkward moment. Even someone said to me did anyone calendar to match up that you were gonna get this inflation data and have this other celebration. So that was quite awkward. And then the president had said later in the day when he went to Delaware to vote that he wasn't worried about yesterday's print. My most depressing part of his trip in memory is knowing that you're not sure if it's fire and rain or rain fire for James Taylor. I can tell you when that storm broke I was at the University of Colorado thunderstruck of a James Taylor did with his left hand guitar. Why was James Taylor at this event. What is the message. Gene the president and John mentioned this earlier the clumsiness sometimes of the message there. How do you drag the songwriter from Martha's Vineyard and do an event at your White House. Yeah. What's interesting and I think given the fact that I just stumbled on his song where you can show that the administration wasn't exactly going after the youth vote with this one but it really has to do with his moves on climate. And he spoke about that. The fact of climate change that with his big message as he was giving this performance that he wanted to make sure there was this legislation to enact big money going towards climate change. The president is also going to take that message today to Detroit at the auto show. He's going to talking about electric vehicles and these tax breaks that can go to these. And this is part of their transformation of energy crisis another kind of awkward moment. At the same time the White House's biggest metric right now on the economy has to be gas prices. That's it. Ron Klain was tweeting about this morning. So the White House has been tweeting about for weeks because right now it's in a much better place. Going to the midterm elections than it was at the peak in June. I'll go one step further. I've never heard the song. You've never heard the song. The song that unless embarrassed. Now no not big on this show. I'll sing. I'll sing. Oh I look forward to that in the break. I'm ready. No doubt in D.C. I am. Thank you. Like a T.K. kind of song. God like a good voice. Do you want me to do it. No I don't think so. Let's let's skip that. We got some special team coverage right now with Glenn Beck's Guy Johnson in London and Jesse Bird and at Abington Green. Let's start with you guys. What we're about to see in about 30 seconds time as these palace gates open here in London due to start any second now. Twenty two minutes past. We. Twenty one minutes past hour. Bound to twenty two minutes past. You can see the pictures coming from Buckingham Palace a procession that will take the queen's body to Westminster Hall. That will be a ceremony there that will last around 20 minutes time John. And and to that at 5:00 p.m. this evening. The gates will open and people will be allowed to pay their respects as the queen lies in state. Some suggestions that the queue could be reaching up to 10 miles long. They're preparing for five. It could be as long as 10. The British public want to pay their respects. Lizzie you've been watching the whole scene. Lizzie what's your sense of how deep some of these lines are and how much the crowds have been assembling. Well they've been king for days they've been touring overnight despite the rain despite the warnings of 30 hour long queues. But people are jovial in the queues. They seem to be making friends with each other asking just hold my spot so that I can go and grab some food. They're just desperate to pay their respects. Show their affection for the queen. I think it's poignant to remember Boris Johnson's tribute to what he called Elizabeth the Great. It's unlikely that we'll ever see an outpouring of national grief like this that we have seen long before or that you would have a British monarch reign for 70 years in our lifetimes again. This really is history. Guy Johnson in the morning we've seen the last number of days. We also have myth building going on. It is about a United Kingdom including King Charles. Yesterday in Northern Ireland that mythmaking is ISE attention. And in Westminster Hall we've seen that the judiciary history there including the gunpowder plot is extraordinary. How unified is this nation around the imagery that King Charles is trying to construct. He is building on his mother's legacy. He clearly wants to use that legacy to launch his own reign. Understandably it is a is a long and storied history. The Queen Elizabeth has been able to generate and a lot of goodwill goes with it. I don't know yet. It's too early to tell. We will see what happens ultimately as this story develops how he handles himself not over the first few weeks but over the first few months and years I think will be really significant here at the moment. We are still in the afterglow of the Elizabethan era. We don't know what comes next. That is the challenge that must be shaped. And I think that is going to be a difficult job for the new king to to achieve. I think it's going to be a difficult job to generate the same kind of love and enthusiasm that the queen whose casket you see there has been able to produce the king's royal troop for side salary taking the queen's coffin down the mountain up towards horse guards parade and then on to Whitehall time and then from there on to Westminster Hall. Diana typically this would take what 15 minutes to walk. I imagine this procession is going to take a whole lot longer. Absolutely. That is a gun carriage from the Royal Horse Artillery. The Royal Horse Artillery I think seven or eight. She will also be firing a shot for every minute that it takes. I think they'll probably be firing a number of rounds. I think it's going to be a slow process a process that is that is a recognition of her legacy. There are people that want to see her. This is about pomp and circumstance. It's about legacy. It's about one thing to show our appreciation. And that is going to be measured in some ways in time here John. This is a long drawn out process that we are going through here right now as the news of the queen's debt to her funeral. It is a long drawn out process. And that is a recognition of her impact not only on this country but the world. With the trend millions watching and listening. Come on come on. I'm not saying I don't know. You can't scoff seconds but look at that back. NASDAQ future is poised to eke out just a little gain. Come on. I'm not going to sing that since the opening bell. I'm building up a third of 1 percent on the S&P. NASDAQ futures up four tenths of 1 percent. A big move lower close almost at the lows in yesterday's session. Tiny bounce and he affects market you're right just a little bit stronger up by two tenths of one percent stronger against the U.S. dollar and yields higher by 3 basis points on a 10 year 343 72 2s this morning some three. You guys have been on a two year old today. And you're correct on a standard deviation basis. I want to point out the VIX didn't pop to a 30 31 32. The VIX was like a twenty seven ish. And that's. As I mentioned earlier we reset. We did not collapse. Am I getting it sunk. Oh see there was a I was going to fix enough that I can clip that now. Correct. Joining us now with some stocks around the open and is Abby. Hi Abby. How much better that you're singing than me Lisa. For sure. And I can't believe John that you've never heard that song. As for stocks they do of course have a little bit of a rebound after the worst day. So March 20 20 for the Nasdaq 100. That has everything to do with the fact that you're apples and Microsoft are higher on the day after the worst day for Microsoft and Apple going all the way back to September of 2020 and that surge in yield. Occidental Petroleum popping one point two percent up with oil. So it's a little bit of a broad based rally. You also have your banks higher. J.P. Morgan had been up a little bit more earlier with yields higher. We would be remiss though if we didn't talk about the railroads because of course there is the possibility of a strike if a deal is not struck by Friday one hundred twenty five hundred thousand workers may go on strike. If that happens John of course it would mean rising prices in the form of higher shipping costs. The railroads on the day are down including Union Pacific. Abbi thank you. Got a sense the inflation story big upside surprise yesterday. That front fueling the biggest staff declines in more than two years on the S&P 500. CAC ISE has more. Hi Heidi. Yesterday was an absolutely brutal day but it was more brutal for certain areas of the equity market in particular. Brutal time. Yes indeed. The likes of the homebuilders consumer discretionary technology all the big laggards on the day yesterday although this morning they are seeing the smallest of rebound. Still very very small. In fact the homebuilders now turning negative as is the case for some of those retail stocks as well. Obviously even the gains of today we're seeing for the likes of technology doesn't do much to unwind the pain of yesterday. The homebuilders for example down 7 percent on the day retail on payroll each down about 6 percent to at the tech names down in the ballpark of 5 percent as well. Crushed brutal whatever you want to call it. It hasn't just been a one day story. It has been tough going for these stocks really since we saw inflation first become elevated in May of 20 21. And for obvious reasons the homebuilder decline of about 21 percent since that time period goes hand-in-hand with the idea that if inflation is high. The Fed has to raise rates to rein it in. That means mortgage rates go higher and housing demand cools. We've already seen that borne out in the economic data. And for consumer discretionary and tech stocks we know that that is because a lot of those stocks command higher multiples. And when you command a higher multiple and rates are rising that value of earnings going forward that so much of your price is based on is devalued which is why we're seeing a lot of these stocks coming back down to earth. And of course that is a higher rate story which brings me to the bond market. We've seen so much work done in treasuries on a year to date basis specifically at the short end with the two year yield up 300 basis points or more since the year started up a nearly 200 basis points for the 10 year. But it's not just nominal yields really that we need to look at. It is real yields inflation adjusted. We are very close to 1 percent on that 10 year real yield John 300 basis points year today on the end to get real. Candy thank you. By the way we're total returns. This is really important. No one is prepared for the simple breakdown in price of the Bloomberg aggregate total return index. We're not there yet. We're close grandma. That move is phenomenal isn't it. It really is. Especially considering that for years people were saying that this economy couldn't withstand a 25 basis point rate hike or 50 basis point rate hike and suddenly or climbing very quickly. We're seeing a real shift as people expect that much more. Compare and contrast this cycle. This rate hike cycle to the last one. Yeah. How much they did oversight three years and how much they've done in six months. Front loading. Right. But when do we see the actual effects and how long it takes to trickle into the economy is when we've asked the question be front loading or just delayed and catch up. What was it. Christine Laggard. Who is that. Jim Bianco. I was champion Carol Massar research. Going to play nice today. I'm going to play nice. I just thought what Giuliani said was brutal. Great. Brutal is the word of the day. J.P. Morgan's Oksana Enough joins us now alongside submissive men both through global market strategist at Wells Fargo Investment Institute. Oksana let's go first to you. Are you seeing any value in this market yet. Well first of all let's level. Tom mentioned the performance of Bonds year to date and for the global aggregate the Barclays Global Aggregate bonds are right up there with equities. Equities in the U.S. down 17 percent at 17 and a half percent and global bonds down almost 17. I bet you no one could have possibly expected this turn of events. And of course you know earlier this year have been very very assertive in my view that it was too early to get into bond risk. And that continues to be the case. And I know that sort of the preferred mantra out there at least as it relates to credit is that oh you know the maturity wall is still out there. It's not kind of breathing down anyone's neck. However it's important to remember that half of all high yield maturities occur about two years before that maturity will materialize. So happy to talk more about that. But obviously as stress continues to make its way through fundamentals through profit margin. Right. And we're starting to see some of that strength particularly in the leveraged loan space where we are seeing elevated defaults and downgrades. We're going to continue to see now the credit markets start to catch up to the reality around us. I'm going to suggest RTS. This is original territory to use the all time cliche when we break down under a negative 16 percent price move negative 18 percent. What will be the action of those debt holders. How will be. We've never been here. How will they respond to those simple price declines. How do you think they will respond. How have they responded in history. Right. Right now we're with you. You're not going to view it. I mean I think we've we've seen this all play out before right. Investors do not typically like to sit on losses particularly not on losses in what's supposed to be the most sort of you know bullet proof part of their portfolio bonds. Right. So investors sell and we know there's research around this. Investors tend to tend to sell at the worst possible time. And that's really going to be the capitulation point which we certainly haven't seen in the credit market. The credit markets are still pricing well well below any sort of recession. And we are increasingly staring at if not already in recession. And we're seeing you know one of the areas that also gets talked about a lot is the fundamental strength of the corporate market. And I think that that is present. However if you look at the trend you see that profit margins. Yes they have remained strong in Q2. But if you strip out energy and transportation which of course benefits from lower energy prices you see that those profit margins have actually come in at negative 1 percent quarter over quarter and minus almost 6 percent year over year for the rest of the lower rate and market. And they're led by lower profit margins and retail and health care and food. So all the areas that find it very difficult to pass higher costs on to the consumer. And that trend will continue. Profit margins will continue to experience problems and we will continue to see it reflected in spreads. So next time we have Zach GRIFFITHS I'll bring you on and we'll have you together so we can really get a tit for tat. It seems like you guys have opposing views. Samir Sumaidaie. I'd love to get your take on this because we heard earlier in the program from Zack GRIFFITHS who is a credit Seitz who is saying that credit spreads have already baked in a significant slowdown. And talking about the maturity wall and the corporate strength where do you stand on this. Do you agree with Oksana that there is much more that credit spreads have to widen that there has to be an inference of greater pain inferred into the credit market than his currently. I think there's there's a restrained kind of fair value and kind of where the Fed has to take things and they probably ought to take things beyond fair value just because things are overheating right now at least on inflationary standpoints. You know again you know you can have their value being overshot. That being said a credit spreads right now probably don't fully kind of embed the reality that's probably ahead of us. I mean the that's going to take you know interest rates the short end to forward forward forward by year end. It seems like a big jump on board with front loading now which should mean the slowdown. The recession probably is in the first half of next year which is what we've expected for some time. You know then credit probably does have one more shoe to drop. Now that being said there are emerging pockets of opportunity. You know I think what's happened with commodities you know the fact that oil is kind of in the low 80s is not that unusual. Commodities like energy equities you know those continue to be a very small percentage of the overall benchmark. We think there's some attractiveness there. But we would continue to fade you know consumer discretionary and real estate. Those are probably both rate sensitive and haven't caught up to where the consumers health is going. Given the carnage that Tom and I have been talking about with the total return index and bonds where do funds fit in your portfolio. Given what we've seen with 60 40 this year so we really like the short end. Right. You're getting paid to kind of you know sit and kind of put coupons in the short end. We also ended the year most unfavorable on long term fixed income. We took the opportunity earlier in the year around three and a half to go to neutral. That's probably a good spot for now. That being said if you do get overshoot to kind of the 4 percent area or maybe even higher I think we would see that as kind of a longer term opportunity to kind of have that balance in our portfolios because again we do believe the Fed will eventually get interest you know inflation back down to that 2 percent target. Summit let me just ask you a question on that. If I do get inflation back down to that 2 percent target will matter say it is time horizon a damage done of what time horizon and how much damage will they do to this labor market in between. So I think it's going to take a lot of time. I mean you could easily bleed into twenty three maybe even twenty four. And yeah there probably is a good bit of damage done to the labor market. Unfortunately the Fed's kind of been you know in this have your cake and eat it too standpoint where unemployment's only got to tick up slightly and you know you're going to somehow get inflation back down. We've just not been in that camp for some time which is why we remain very cautious on equities. Right. We're underweight small or underweight emerging markets under we developed markets were fading. You know the consumer oriented sectors. I mean we're in a pretty defensive posture. I think we'll get some opportunities to get more aggressive. But I think we're on the front end of this. So Miss Amanda thank you sir. It's good to catch up with you. Santa Ana is going to stick with us for a final word. Lisa that was bearish and it was kind of the bearish time we heard from Max CAC of HSBC. Well we start the program first thing this morning. We've heard a lot of bearishness. I mean it's not just us. People can accuse us of having sort of a tilt in whichever way we want to have it. But this is a reflection of what we're hearing from an increasing number of people which is why it's sort of surprising that the reaction yesterday was as violent as it was the prospect that the Fed was actually not lying when it was saying that they were going to raise rates and they were going to raise rates until they saw inflation come. Well the mistake was the rally going against the number 40 rally into CPI top 5 percent rally. I think a hundred. I take issue with the idea it was a crater a panic or crush whatever you want to call it. It was a reset back to where we were five days ago. Sure it's different than the action. With that said the way we close yesterday afternoon was ugly. Ugly. It was brutal. It was brutal. Yeah. Of course to me we agree on something. You remember James Taylor was as an American Economic Association convention. I didn't know that we did the concert. I think Robert Mendell spoken and Taylor got up. He's got the J. Did you 50 go in in that. And he goes in he goes do me wrong to me. Will you show to me lies. Get the inflation call right at our place. Roy did you play the guitar. No I did not. He played the guitar. He played the guitar. You can slide guitar solos diminished chords or something when you make your way to t case home. There is a guitar and it's written just sort of on the floor. What they want on the floor. Why are they all on the floor. Why didn't. Instead of just saying there's just just just all on the other. And each reason I've never understood. I said to David Gergen he goes What's the next guitar. And I go We can't talk about the D 45. Martin that needs to be in there. He set up a whole studio. Now I see it all sounds pretty impressive. It's very cool. His passion is his passion for when his wife was Chief Taylor at the White House. I don't know if James Taylor just never made it to the U.K. It just wasn't. That's interesting. This was like baseball just wasn't a thing that was interesting. That reason just by yourself one handed old and the new one of the soccer. So we used to play at school. So like if I saw you. That's what helped me. John. Oh my. His advice to me. Know they rammed us like this. You're ignoring me if I say there were bad traffic. The case case you know acoustic traffic not. Are you serious. We can talk about it in the break. James Page. In these times it is wrong to receive extraordinary record revenues and profits benefiting from war. And on the back of our consumers our proposal would raise more than 140 billion euros from member states to cushion the blow. Direct the lines that the European Commission. Just a bit earlier today she went on to talk about Randy's us how it came to baseball. We'll do this after this. I'm Joe CAC. I couldn't help but a half of what you wanted. It's not just the firm by half of one percent of St. John. I was just vandalized. As a former defense minister of Germany's encyclopedic on Germany's ability to help Ukraine. Yeah something people don't know. She's a great cyclist also in cycling through all the mistakes. Yes they might. Yes. But she's truly encyclopedic on their military ability of some enough. Back with us for a final word for JP Morgan and Oksana on Europe. We've had a lot of guests on the program and they approach the situation in Europe as follows. Not if there'll be a recession how deep it will be. You have the same approach right now. Yes definitely. Europe of course is dealing with issues that the U.S. is somewhat insulated from. You know we talk about energy and how energy has led up here in the U.S. for example. But European gas prices are on the rise again. And so without a doubt there is definitely a lot of focus on how deep that recession will end up being. And we're seeing it in investors being you to the extent their underweight equities are really majorly underweight. European equities specifically write a much much less so in the U.S. They're essentially flat in terms of their U.S. equity exposure. So without a doubt the issues there are much more significant. We're seeing it in higher spreads slightly more elevated spreads lower returns year to date. So. Absolutely right. What's your visibility to 2023. I'm fascinated by the September reset. It's way too early to talk about a year in review. But do you have any view Oksana to how to invest into 2023 or just making it up as you go. I will tell you one thing I take a lot of issue with what the market is pricing in for next year which is nothing other than the Fed making a U-turn and becoming accommodative. And it is quite clear to me that the Fed is going to pursue its aggressive stance and eventually become perhaps neutral but not accommodative. And that's not what our prices are reflecting right now. Someone earlier mentioned our last hiking cycle the 2015 2018 which was extraordinarily benign. We had inflation but barely 2 percent. We had a higher unemployment. And still we had for example you know lower credit spreads. After the last Fed hike back then were in the high five hundred's five seventy five. I remember correctly. And today you know when someone talks about fair value and credit. What's really what's fair value right now high yield is pricing significantly below 20 year average. Forget you know a 20 year recession average. So I think there is definitely a lot of complacency. Sense is still being placed into this market being priced into this market. And we need to really be focused on high quality floating rate very short but floating rate preferably and really wait for that capitulation point. That will be my tip off to start to really get more aggressive. Just to put a bow on this side how much of your portfolio is in cash like instruments and how much have you been building that. So we came into the year already quite defensively a position and we've been building it throughout the year. Yes we've been tactically trading you know the curve and taking advantage of the backup in yields at the front end of the curve. But as far as sort of more strategic allocation to longer term risk in the interest rate driven or credit maturing markets we've really tried to stay back and actually build our liquidity. We are still or actually have arrived now at around 70 percent liquidity which is you know focused again on those high quality floating rate structures. And we think that that capitulation point will happen. We're just starting to see markets reckon with the reality that this Fed means what it said with the reality that higher cost of capital is not going to be great for fundamentals. And even this is really important to understand that we don't need to see you know 2008 or some kind of dramatic recession occur. We just need to see historic defaults or defaults start to move towards historic average in the corporate sector of three and a half percent. Right now they're one to start to see those spreads widen dramatically compared to where they are today. Oksana you need to let us know when you're ready to put that cash to work. We need to cash out when we get to that moment in summer. Are enough at JP Morgan some in fancy to our Dow Jones 70 percent liquidity floating rate. She's on the edge of the triple leveraged on cash. I would say that was pretty pretty gloomy pretty bearish. Yeah I have to say that's a lot of cash from 70 percent liquidity. At what rate. They get that conviction to deploy I think is the right question. 30 minutes ago the late quit making the final journey from Buckingham Palace to Westminster Hall. Lizzie Bird is back with us from Abington Green. Lizzie walk us through the next couple of minutes. Well the queen's coffin is making its way from Buckingham Palace to the Palace of Westminster. It's already been down power. Male horse guards parade its approach to Whitehall really pieces to people outside the UK perhaps just names on the Monopoly board. But this is the Queen showing her old adage too. She needs to be seen to be believed. The coffin is going to arrive at Westminster Hall and it will be she'll lie in state until Monday when the funeral happens and people are going to be able to file past and pay their respects. They've been queuing for days overnight despite the rain despite the warnings of a 30 hour queue. But really this is the magic of monarchy isn't it. The king is going to begin his reign with this sharing of the national outpouring of grief. You've got this king flanked by his children and his siblings on foot behind the coffin. It really is a symbolic moment and it evokes the memory of when Charles and William. William and Harry Roy behind their own mother's coffin 25 years ago losing I would say the imagery right now. And for those who on radio it is as you would expect except we're seeing generational imagery. This is really the first time Lucy we've seen the generations of her descendants together and compare anything. I think we're having technical problems. OK thank you. We've lost Lizzie Bird and that happened some. Abington Green was 400000 people there. They're going. So Tom a deeply emotional moment for this country. The queen's coffin making its way to Westminster Hall followed on foot by senior Rose the royal family including the king for that matter as well. Thomas I mentioned a little bit earlier this morning. This walk from Buckingham Palace up the mouth through horse guards parade through horse guards arch onwards through Whitehall someone to Westminster. There are like 15 minutes or so. This is taking about 15 minutes giving everyone the opportunity to pay their respects as the Queen makes that final journey. Tom Keene to Westminster Hall and the compression here. John I think for so many particularly in America including myself we don't understand how all of this bureaucracy of government over centuries is all compressed into this square mile. So where they're going through through Whitehall at the moment Tom. They are the offices of government and then on to Westminster and the House of parliament and the buildings that you're so familiar with. So we did this walk together just on Sunday mornings. I've said a couple of times already. It is the final journey. This queen to Westminster Hall where she will lie in state for five days from today through to Monday morning the opportunity for this country to pay its final respects to the late Queen Elizabeth. The second.

Channel: Bloomberg Television

Views: 69,605

Keywords:

Id: ye_-sYG5iHw

Length: 167min 41sec (10061 seconds)

Published: Wed Sep 14 2022