Transcripts For BLOOMBERG Bloomberg 20240702

On radio and television, what you need to know, a data check into our discussion this morning. The markets are on the move. Just one icon from the Northern Pacific rim, the japanese yen through 1. 50 is historic. Lisa its not just the yen, the bond yields are continuing to go up and youre seeing softness in areas where we see companies outperform. When we reach a Tipping Point . We are not there yet. Tom Julian Emanuel will join us later. Its real simple, he says the fed cannot be happy. You see that with the unraveling of the two sent spread. Lisa the market maybe is doing the work for them but its not clear its actually doing the work thats needed. We will get a gdp figure today that shows a reacceleration in growth that is not what the fed wants to see. We saw a blowout number yesterday of new home sales. The fed is not counting on this to drive down inflation. Tom im drowning in the narrative. Katherine greifeld is joining us this morning. Gdp, first look, 4. 5 . We are struggling. Katie we also have initial jobless claims. That could just add to it. Tom the character of 4. 5 to me is to americas. They are affected by the data and havent looked at the 30 year mortgage. We are moving. The market has moved in the last 24 hours and nobody is talking about it. Lisa the feeling is of when do we stop. Every time someone steps in and says i like to ration and tech stocks, you are looking at a scenario where the yield keeps going up. Stocks keep feeling weakness. Tom eight. 1 . Katie no one is happy with that. Tom are there no speakers today . Lisa there is a speaker but its not about fed policy so doesnt count as fed speak. This is a quiet time. Words will be spoken quietly. Tom we need to get to the brief because we have an wonderful guest to synthesize these markets. Im going to look at the data and futures are ugly. The vix gets my attention. 495 and the 10 year yield. I dont have the time to go into it butbbdxy blows through to new blended highs. Strong yen through 190 nine, 1. 50. Lisa people are looking for intervention and we havent mentioned that 8 15 a. M. We get the ecb Rate Decision followed by the press conference by Christine Lagarde. The expectation for them is to be on hold at 4 but im more interested in the Balance Sheet which is the secret story underpinning the moves in the bond market. The Central Banks are not buyers, they are sellers and this is a shift. Tom im looking at the thermometer of a system of the difference of the yen between italy and germany. When ac milan plays a soccer game, you can channel this. Italy has a higher yield against germany shows the tensions in europe as well. Lisa and the difficulty of the ecb to address this. We get Third Quarter gdp in the u. S. We expect 3. 9 . Janet yellen will join us in d. C. At 1 30 p. M. We havent talked about this, amazon and intel earnings. Amazon may give us the cleanest read on how they are capturing some of the cloud spend and whether it means google is falling away. After year to date gains, up 44 for amazon, people are looking for a reason to sell. The nasdaq at the worst day yesterday since february because maybe people are looking for tom google, 2 . Katie alphabet, worst day since march 16, 2020 yesterday. Lisa just keep talking. Tom Christina Dudley joins us now. She is with franklin templeton. How do you manage money right now . As though things are what the date it is telling you. We keep talking about the fact that there is a recession coming but every data point youve given me is positive. Gdp is in the 4s and thats a positive data point. Jobless claims continue to come out and they continue to be positive. We are focusing on the negative and companies are more cautious and almost being told dont be the optimist in the room. As an investor, thats when you make money when your opinion and what you are seeing is different than everyone else. Tom how do you make money right now . There is the basic idea of youve got to choose. Active management has been a challenge but where is the opportunity given the correlated market . I would look at our portfolio and saves the most balanced that i have seen since ive been managing. We have opportunities that exist across the markets. The benefits of us being a global manager is i can go shopping in any market like japan and pick up goodquality franchises there. Thats what we are looking at where there is the dislocation to the market and where youve got u. S. Stock that trades at premium to good european or japanese. There are the opportunities we are finding with these active managers that for once, we are not seeing the opportunities crowded into one sector. They are really dispersed. Lisa how much can you bank on a corporate model of time when you have unhinged bond yields in a real uncertainty about whats behind that given the fact that there are Central Banks selling and there are shifting buyers around the world . We talk about the Central Banks selling but the consumer is buying yield. Its the first time they can look at their money market accounts and make 5 on their money market accounts. They are able to go into the treasury market and make real yields. I think thats were some of the money is going to come from. What are the implications from a company by company basis . Weve been talking for over 30 years of how low yields of cap these businesses in business. The rising bond yields potentially flush out some of these companies. For the remaining companies, it makes them better and they can gain market share so its a good thing, some of the rising bond yields. Lisa yesterday,meta came out with betterthanexpected earnings and they said we are subject to volatility in the revenue outlook is uncertain for next year. People were looking for reasons to sell. Are you coming in and buying . Everyone is looking for reasons to sell everything. The regional banks are similar. If there was a negative commentary on the Fourth Quarter , the stocks have tanked. Everyone keeps looking to these negative data points but if you stand back and if you are objective and didnt put labels on this and i was to give you some of that date in terms of what we are seeing on the job market in particular, you would be bullish. People are employed. Companies are still struggling to find labor. Even though someone like meta has gone through layoffs in the past, probably a little overstuffed antique and taking that down to normal but those comments put fear into the market that we dont think is supported by the real action of companies. Katie the pushback would be that you have a robust labor market in particular but you think about what that could mean for the fed to get inflation back to 2 that they will have to tip the economy into recession to do that. How are you thinking about that risk and alan finkel against your portfolio . I dont think they need to tip the economy into recession to get inflation up or down. The first thing we need to recognize that inflation is a backward looking measure and the fed has forwardlooking models where they think the market is going. I think the comments they are talking about is for is higher for longer, they are also not talking about rate cuts and we are not expecting rate cuts to come. In terms of the narrative, the fed is not looking to tip the market as a recession. That is the bed case outcome in this recession. They are trying to make sure the economy has enough support to get through this and to muddle along. Katie you said you could go anywhere right now. Are you Going International . We have increased are waiting in japan significantly. If you are on the ground in japan, the essence of what is happening is tangible. Youve got reforms out of the stock exchange. We are talking about simple metrics like priced book which is followed up by a lot of other things. You have those dialogues with shareholders that these Japanese Companies have been doing for so many years, improving returns on equities, improving their Balance Sheet structure and getting rid of Cross Holdings and buying back stock in the market. Japanese companies are doing what we like to see them doing and what we like to see a good company two. I think thats what makes us optimistic that she valuations, low roes and a mindset change. Tom i was stunned that katrina is here. Katrina dudley was stood up by the president last night. Rick springfield was set up by the president. Were you stunned you didnt get into the state dinner last night . I have been here for 25 plus years so my australian accent maybe strong but i aligned so much more with americans in my residency here. Tom how close are the tensions in the South China Sea . Australia and the United States have a long history and we are not going to back town from that. The countries are so alike in the way they operate in the way they see the benefit of capitalism and the way they value entrepreneurial spirit. Tom with what Rick Springfield did on general hospital, he was stood up for the australian state dinner . Lisa was he crushed . Maybe some fashion reviews . Tom i let the veronica has take care of the fashion reviews. Katrina dudley of australia, thank you so much. The state dinners are amazing. Thanks for cnn for lining up the guest list. Lisa to shift gears, ups shares came out. They are falling toward a three year low after revising lower their outlook. They are talking about Package Delivery numbers coming down. This is a bellwether type of stock. Tom i cant say enough how much i agree with you. This is really tangible on the American Economy. In the 7 00 hour, he is focused on the fed and these markets and turmoil, Julian Emanuel of evercore. Stay with us, bloomberg surveillance. I am so grateful and so humble. I got a unanimous vote on the floor by on my colleagues. We will dispense with the usual ceremonies and celebrations the following new speakership because we have no time for either one. The American Peoples business is to urgent in this moment. The hour is late in the crisis is great in america. , we hear you tom america, we hear you, the gentleman from louisiana there in washington, d. C. Getting through 4 to get to a House Speaker that will carry on in the tradition of sam rayburn and others. Mike johnson is from louisiana. Theres been an uproar over some of his track record. You look at the zeitgeist thats out there and people are bent out of shape. The middleground seems to be bent out of shape. Lisa theyve been pretty beaten up after this backandforth. They felt like some of the things, matt gaetz might have one. Mike johnson has to as a consensus builder. Can he heard cats . Tom you see were the bond market is. We dont have time to go into this but ive got a 49510 year and a 50830 year bond. You walk away from ponds and you wonder if its about the debt and deficit. Katie mike johnson made it clear he has priorities. He talked about the need to form a Bipartisan Committee to address the debt. I have to imagine that his priority list will fall below ukraine and the looming potential shutdown. Tom we will have to see on that. John lieber is the managing director of eurasia group. Hes extremely busy looking at the eastern mediterranean. Mike johnson has to lead a fractious house to the senate. Great, weve got to pass some sort of war funding for a set of wars, maybe a set of border debates as well. Can speaker johnson get it done . He can get it done. Speaker johnson wanted to get a bill on the floor that passes the senate, he would most certainly pass the house. Its not a question of if he could come its a question of whether he wants to. Johnson is a guy of the right and is not a Freedom Caucus member but hes aligned with a lot of their views. I think of him with as jim jordan without all the baggage. A lot of conservatives in d. C. Are happy this morning as they see johnson is giving up the mantle of jordan and moving with that. That probably means he will try to extend current government funding into next year meaning the november 17 shutdown threat will probably reduce today relative to what it was yesterday. Next year, he will try to leverage another Government Shutdown to try to cut more Government Spending. For Foreign Policy on ukraine, israel, border wall and money for taiwan defense, these issues are not popular on the right. Even though they have massive bipartisan support in the house and the senate, im not convinced johnson wants to put that on the table. I could see him trying to leverage that stuff for spending cuts on the overall appropriations side which is ultimately where i think this is going. Lisa he has been vocal about cutting Social Security and cutting medicare and some of these other entitlement programs. How much can he get that going . Do you expect that to be on the table . Not at all. There is no chance congress will cut Social Security or medicare. There is maybe five or six lawmakers who would vote for a plan like that. For a plan to be meaningful, theres very few lawmakers who would support that. Its not on the table now. The fight will be over these 12 Appropriations Bills in the fy 24 funding. Johnson has laid out a plan to cut fy 24 funding and start the fy 25 budget cycle. Thats to give republicans some momentum going into the 24 elections. This is not about expanding spending despite the fact that there is multiple potential global conflicts that are brewing now that the u. S. Could get involved and come its about cutting spending and earlier, you mentioned the bond issues in the treasury market. In some ways, these republicans are a little bit ahead of the curb because they are talking about cutting spending at a time the rest of washington is talking about expanding spending for these Foreign Policy issues but they are in the minority now. Lisa there are different ways to cut spending and there is a real question about the immediate threats to different u. S. Troops around the world. Its not only in the middle east but also in other areas. How concerned are you that the u. S. Cannot come through on its obligations of the can i get a financing bill passed through congress and it looks less likely at this point . I think ultimately they will pass ukraine and i think they will pass israel aid. Thats overwhelmingly popular in both parties and ukraine aid probably will hitch a ride and travels with that. Thats the plan in the senate and thats why think this is going. It will be a lot less than the wonder to six billion dollars President Biden asked for. Thats because of the resistance in the house and the other issue is the timing. The first obvious Inflection Point where that can get this done is on november 17 which is a Government Shutdown date. It johnson decides he cannot go there and its got and its not good for the conference, he may delay it. Katie lets talk about johnson himself. Even Steve Scalise was joking about people needing to Google Mike Johnson after he won the speakership and him being relatively unknown to the American People. When you think about the process of building consensus, what shot does mike johnson have . This whole thing is a reminder of what an inside game the speakers race has been. Theres been speculation and the more famous members that popped up and then this guy gets through because hes the last person standing. He is acceptable enough to enough members after the multiple round of votes. I think that so mike johnson slid through. In the 1990s, this is out eddie hastert slipped through when the former speaker was taken down in a scandal. This is not the first time we have seen an obscure member rise to the forefront. Tom thank you for the brief, really timely. I will do a complete data check. Equities, bonds, currencies and commodities, what is your peak attention this morning . Lisa i am looking at the incentive to sell in the tech space. Earnings have been pretty good. The fact thatmeta beat earnings but said they dont know its going to happen next year, who does . Tom what do you see in the market that has your attention . Katie coming into this week, the hope was you see these Big Tech Companies come out and reset. Some did but not enough. What you saw in alphabet yesterday was overwhelming. Maybe amazon will be the savior here but there is a lot resting on that company now. Tom it will be interesting to see. Bloomberg technology will brief you this afternoon. I want to look at the date and now. 1. 50 en with weakness in the vicinity of 1986, the 10 year yield in japan come i really this word, is a moonshot to a higher yield. The index shows restriction right now, negative point 23. Chairman powell has to make note of that. 2. 3. Sterling, Jonathan Ferro has an umbrella and his cocktail. Right now sterling, 1. 20. Futures are 20 and doubt futures are 80. Tension in the market, 20 point 20. 21. Bloomberg surveillance. Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. After military service, you bring a lot back to civilian life. Leadership skills. Technical ability. And a drive to serve in new ways. Syracuse universitys Daniello Institute for veterans and military families has empowered more than 200,000 veterans to serve their communities and their careers. From professional certifications, to job training, to help navigating programs and services, we give veterans access to support from anywhere in the world. Tom good morning. Katie greifeld in for Jonathan Ferro. I spoke to him yesterday. On his cruise, you can look out the portal into core window. Lisa he can avoid seeing anyone. Tom he says it is not been a seas but he says he can look out for windows and it is not constructive. Katie is that like the penthouse of the ship . Tom it is not the penthouse. He is scheduled to return monday. He would want a data check. Some real attention moving from the 1819 level the last 48 hours. You see this critically through the market when they are trying to correlate for this you. The dollar stronger. Im going to take out dollar. Euroyen 1. 54. Lisa the macro story, we have not hit the Tipping Point. What im looking at is for the micro trends. Which is why i was hinging on ups. Revenue fell almost 13 , below expectations. The shares are lower by 2. 5 . The shares were already lower it 15 yeartodate. We are looking at a company that sees revenues declining. This is going to be a real question. Is this macro or specific execution . Katie this is a labor story as well. They signed the new contract with the teamsters. It is frontloaded in the first year. It is going to hit Profit Margins. Tom metamaking ups is making under . 10 a dollar. There profit is one third or one quarter of facebook. It is a different world. Lisa well said. You are seeing that. That is fantastic. We will talk more about ups in a bit. Morgan stanley selecting to succeed james gorman as ceo. 30 year veteran of the form. Gorman is stepping down after a 14 year run. He will stay on as executive chair. Tom one is in the oxygen in vermont what is in the oxygen in vermont . What is it about middlebury . Lisa he is holding a grudge. Tom it is a grudge. Lisa it is going to be interesting because there is titfortat in Goldman Sachs and this is one person credited to given Morgan Stanley the upper hand. Tom we have talk about the other people in the derby. Katie they are saying on which is unusual we look at the big Bank Succession stories. They are staying with Morgan Stanley which is a testament to this process. Tom we are the world. We are all sinking kumbaya. Lisa sonali basak will sit down with ted pick. Uaw with ford, ford offering to restore costofliving allowances, pay increases over the fiveyear term of the contract read theyre expected to reach or exceed the unions 30 percent target according to reporting for bloomberg. Tom i am glad you brought this up. If you look up at chrysler, it is like, what do we do . What is the celt what for the other two companies . Katie looking at the negotiator, uaw told ford workers to go back to work to put pressure on the other two. We will see when that materializes and it may be some bills. Lisa you pointed out ups, some of the deals the companies are cutting two, how much does it shrink margins. The ecb Rate Decision just under two hours away. Central banks keep rates on hold for the first time in over a year. Theyre going to science their run of hikes working to bring down inflation. Economists serving unanimous predicting a hold. The team at the Bloomberg Economics adding ecb to communicate main policy rates on hold for the first half of next year. Tom it is a really good team in europe we put together. I think the other day Christine Lagarde was adamant to get back to 2 a but i really wonder with the tea leaves you and i see, it is like 12 00 noon when we see them there and they still indicate inflation. It is no other way to put it. It is none of this David Rosenberg disinflation chat. Lisa they may not raise rates further but you might end up seeing a Balance Sheet for says. That is why i am focusing on that considering the pressure on who is buying the bonds. Katie we were talking about the divergence between big Central Banks, fed Balance Sheet versus the ecb. They are still saying reinvesting the maturing securities through 2000 24. That is a long time. Tom with jane foley of rabobank we will talk about the hedging business across the world, actual use of Foreign Exchange in business, on this day, will talk about European Central bank. First principles. The yens weakness back to 1986. What does it mean for japan and the people of japan . Jane it probably means Something Different this year than admitted last year because last year you had commodities across the board rising. The yen was emphasizing that. Japan does not have its debt to resources. It was a problem for the medium and a smaller size businesses who cannot export out. This year you still have della prices but some Commodity Prices have slipped so potentially the yen remaining different to some firms but it is still a problem. You see this in the reports. The small and businesses medium size businesses, unit weakness is an issue but the question as to what degree with the pressure come through unto the bank of japan. Do they see yeah that enough for them to want policy next week . Tom if we move on to the truth, japan needs to buy u. S. Bills, notes, and bonds. How does ¥150 change the appetite of japan to buy our paper and keep the bid up . Jane or if we do see yields going higher in japan, if we have yield curve control, we see speculation suggesting the bank of japan may be prepared to have the 10 year yield to rise. How does altered the dynamic for domestic japanese investors looking at u. S. Treasuries . That is a concern potentially for u. S. Treasury at a time when see potentially less buying from chinese investors and a time supply is going to be a constraint perhaps through november with the refunding. Theres various elements to this outlook. That is why i think next week japan is going to be important. Are they going to announce another yield curve control or not . Lisa japan has been out of sync with the other global Central Banks that are reducing their Balance Sheets and it moving in the opposite direction. I want to talk about ecb and announcements we get soon. How much are you expecting them to talk about the Balance Sheet and how quickly that can continue unwinding at the time when people are talking about long end rates . Jane this is going to be fascinating today and going into 2024. It raises questions about italy and italys debt. We saw the rightwing wing government say they cannot meet the pledges they had for the deficit next year and they want to give their voters welfare payments they voted for. Next year we could run into some constraints with brussels and italy. We will see new revised targets from brussels as to where budget and deficit should be. This comes into the environment, for the ecb and its programs, if we do run into issues between italy and brussels, to what extent is to be willing to use its tools or not . The ecb could see we reports the last weeks, sources suggesting if italys debt come into trouble, that is because the politics of the budget scantily i not relieve the problem of the budget in italy and not relieve the problem of the ecb. Katie will you think about the delicate dance the ecb has to do, keeping the eye on the different nations, you think about recut expectations, being pushed out for the ecb to the second have and then some of next year, is that realistic . Jane given the ecb has a target just on inflation, that is probably what they are going to focus on first and foremost. We have seen core inflation come down in the euro zone. We see the pmis earlier this week suggest labor market is listening. Inflation is about target and therefore one of the communication aims for today will be to try to stop the market from pricing in Interest Rate cuts too soon. We have the european higher for longer team going on. If we run into difficulties, tying debt during 2024, if italy growth does flow significantly, that is going to be potentially an issue with the central bank but i think for now the signaling is going to be about trying to control the inflation outlook, trying to promote this higher for longer, do not price in Interest Rate cuts too soon rhetoric from Christine Lagarde. Katie lets bring this conversation to the currency market. You look at euro usd at 1. 05. I see your view is at 1. 02 on three month view. What gets us there . Jane i think a large part of this will be the european story. We are forecasting euro zone could be in a recession right now, the second half of this year. We were concerned about the outlook for germany. We are concerned about the impact for Higher Energy prices. We got to look at natural gas is still not back to prerussian invasion of ukraine levels. We got labor market issues in germany. That could alter the outlook for industries and significant concerns about the outlook for European Growth over the medium term and i think that is going to be an important part of the equation. Katie Robert Mundell and others would it you sequential interventions become ever weaker and weaker. Do you assume action by boj or mof is a weaker effort this time . Jane they certainly have not done an awful lot of intervention. I think they understand the view. They show their hand or use some of ammunition, it does weaken. If they can get to those much value by verbal intervention that is what theyre going to try and do. This is what they try to do this year. However, if we do not see a tweak to yield curve control next week, if we see the bank of japan take this Monetary Policy settings, i think there are going to be a lot of best, speculators pushing the leg and above that 150 level. Dollar yen above the 150 level. Tom thank you for the brief. There is jane foley from britain, she is going back to cromwell, 1642. Japan is keeping their powder dry is what she meant to say. Lisa i think you can make a lot of analogies. Try to get your handle around the macro picture is not easy. Tom can you imagine making a bet right now . Lisa no, i really cant. Tom Katie Greifeld portfolio. She is with us this morning. State with us, beautiful thursday. This is bloomberg. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. Explore endless design possibilities. 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Katie comiskey looking for the violence to sustain and i believe indicated yields to sustained and i believe indicated for them to move higher. What we see in wash with speaker johnson. What we see in wash attend with speaker johnson. The markets be strong dollar today with major currency weakness. Today the major currencies are weaker against the dollar. Lisa we expect to get a gdp print for the Third Quarter to be 4. 5 . The whisper number is higher which is getting people for link may be the u. S. Continue to diverge. Its a share is not diverging from the rest of the complex. Tears falling after the company warned of an uncertain revenue outlook the shares falling after the company warned of an uncertain revenue outlook. Although this dashing hopes for longterm recovery in the companys advertising business, spending note in other areas, artificial intelligence, Virtual Reality. What do people hinging on to come of this hope of uncertainty . Tom it is just instagram. Lisa Mandeep Singh. Bloomberg intelligence joining us now. What does it tell you they came out with good earnings based on the fundamental basis and to say there is uncertainty and the shares selloff . Mandeep they gave a broad guidance. When you see that sort of guidance you know companies is not sure. They did not have that uncertain guidance on the expense side so they said reality losses would mount and i think the companys billing the investors failing the investors, not given the markets around what they are doing. We are losing 15 billion a year on reality labs and not telling what youre investing in. We know apple has a Virtual Reality headset. Theyre investing in something that nobody knows and i think that is uncertain. Tom how is a. I. Different for zuckerberg, google, microsoft . Mandeep there is an overlap between google and metas version of ai versus microsoft and microsoft corporate messes is you are consuming meta, youre consuming instagram feed, facebook feed. How can a. I. Enhance that experience for the consumer as well as for the creator was creating content for the feed. Ai can offer tools to generate images. Theres a lot ai can do in messaging. Customer service, was at. Whatsapp. Tom amazon this afternoon. Mandeep the story is about computer. Training the models. Everyone wants these gp used to train their Large Language Models gpus to train their large luggage models. They are upgrading their 365 version two microsoft. That is the think about the generative ai. It is about quite a broad. Every company can use it in different ways. Some focus on the training models. Some focus on inference use cases. Tom it feels like a skit. Robin williams is going no. Everyone has a different definition of ai. Mandeep i think they are trying to play for different part of this large pipe everyone sees large pie everyone sees. Katie katie lets talk about the Cloud Business. Aws, you saw sales growth. We note the Cloud Business is why alphabet had a bad day. What are we going to see out of the Cloud Business in amazon . Mandeep expectations are lower for amazon and were talking about growth for a debate u. S. And it hasnt largest base in cloud everyone perceives them to be behind and it has the largest base in cloud and everyone perceives them to be behind. There is room for an upside of sons they prove they are catching up and offering the computer Everyone Needs to train their models. Katie you think about what happened at alphabet. I am stuck on the share price move yesterday. Down almost 10 per year at worst day since march 2020. Was that an overreaction . Mandeep with alphabet it felt like an overreaction because the search business did remarkably well. Unlike metawhich continues to see added pricing decline, alphabet saw ad pricing increase. It is an auction mechanism so advertisers are bidding for your ad. Clearly alphabet had a positive print on the side and on the club side, expeditions were too high and that is where amazon may have an advantage going into the printer. Lisa i want to understand the psychology of the Investor Base in detect names. What are we learning about what triggers are going to be to buy and to sell after the gains we have seen so far . Mandeep the cost of capital is going up so i think the days of spending 3 billion a year on the shots are probably gone even for larger companies. As long as i keep delivering the plus growth, meta, everyone is ok with the spending on reality labs. The moment the good decelerates is when the 50 billion loss becomes a Sticking Point for Free Cash Flow. Lisa is it why you expect things for amazon to be positive . They have a w as scum the major player in cloud space they have aws as the major player in the cloud space. Mandeep i think everyone believes digital transformation, generative ai our secular trends and right now for mensa to spend 30 billion meta to spend 30 million and did not have a clogged something equivalent sticking out because that could be a source of diversification for them. Tom do you see the Cloud Business, i have no idea what i am saying, when you see the Cloud Business, is it a classic duopoly or sha duopoly . Mandeep oracle is investing a lot in tom do you believe people can grab share and come down to it fundamental Free Cash Flow generation or squeeze into a triopoly . Mandeep no, think you can because nature of computers changing so does not cpu consumed under the cloud, it is gpu, different types of accelerators, different databases and at that is where if you do not have a legacy business which microsoft does, i think google has an advantage, amazon has an advantage that they did not have up a legacy business. Tom Jonathan Ferro just ringing in. It is a cruiseship pop here. People are out spending money. Symphony of the sea. Lisa i just googled. Im getting these pictures. Tom i do not know what deceit they are in. We keep it private. I do not know what seat they are in. We keep it private. Rich truman in radio production, he lives for these things. Katie cruises have been crushing it all year. Where caribbean is up 66 so far this year Royal Caribbean is of 66 so far this year. Lisa also reporting betterthanexpected earnings. The shares are up about 4 in premarket trading. Jon, thank you for doing your part. Tom we installed four terminals. Katie we have to get a camera crew there. Lisa do you want to volunteer for that . Tom they have a separate beach for people on vacation going where is the 210s. That would be jon. Julian emanuel coming up. This is bloomberg. adventurous music be ready for any market with a liquid etf. Get in and out with dia. Nice footwork. Be man, youre lucky,et watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. The dynamics in inflation and a and demand has shifted. The fed is going to be higher for longer. We got to the higher rates. What is next . The upward movement in 10 year note reflecting in new fair value which i do not think markets have discounted yet. Everybodys been trying to catch them. This is bloomberg surveillance with tom keene, Jonathan Ferro, and lisa abramowicz. Tom good morning create markets on the move. Good morning. Markets on the move. Dont infer. Katie griefeld is in for Jonathan Ferro. Many narratives. Every think blown aside including ecb meeting by resurgent violence. Yields. Lisa how much do they expect this to do the work for them . How much do they lean against the idea this is the last rate hike they would not raise rates further from here. People are wondering whos going to buy all this debt. Governments are facing rates like this. Tom my price analysis. We go to a analysis. That does not work. The bids slips away for the japanese yen. Lisa is a reason why i think the reaction to the tech earnings have been the most interesting aspect. Theyre not all the same. It is a motley group of companies but there have been Companies Reported good earnings and have gotten beaten of. Is there a message in that it is highlighting this feeling of concern underpinning everything . Katie the question becomes where is your haven because whether or not you agree with the logic, tech has been your safety trade. Youre not seeing that in tech. Youre not seen that in bonds. It feels like slim pickings. Tom it is also the dynamics of the spread market. Lisa you have seen spread wide and eight which is something people continue to express widening which is something people continue to express however, there is recently a bit more of a bid. You see a feeling that things are not cracking but you are feeling nervousness and that is the headline. Tom the guest is so important here. The white space, the yield to space, i have spread widening. Dxy is going to give me 1. 07 in one hour. Lisa at 8 15 a. M. Is the ecb Rate Decision followed by express conference by Christine Lagarde. This will be a difficult decision. Does she repeat what jay powell did and say youre not hiking rates, would keep them at 4 between rate hike linked her. We may hike later. 8 30 a. M. Talk about dollar strength, thirdquarter gdp is to be accelerating. This team is going to be highlighting the dispersion of the u. S. Economy with everyone else. Expectation is 4. 5 gdp growth in the Third Quarter. Plumber economics expected to be 4. 9 . Janet yellen will comment on all of that. 1 30 p. M. New york time. This is underpinning everything. Tom i think the narratives are extraordinary. My head is spinning. I do not know what to do. Lisa after the bill we get amazon and intel. Bell we get and intel. As amazon give credence to the idea that google is falling behind with Cloud Computing . Tom we want to talk about the stock market with Julian Emanuel at evercore isi but we have to pay honor to his publication today in the Harvard Business review. On a i, he has done this with a cohort of true techies. You took economics and Service Sector analysis and brought it into Harvard Business review. What did you say, i got this wrong about ai and this is what i learned. Julian the bottom line about a. I. , we understand her in a period where information, we understand we are in a period where information the Bigger Picture and gems of a. I. Is that it is not going to be a discrete job killer like everyone says. What it is going to do is help companies connect with their clients and the way you connect with your clients is by using the technology to enhance what humans do. Tom do not give me your fancy technobabble, who gets run over by a. I. . Julian if you look at it, it should be the higher income earners. The people in finance. I told you, your safe. You do communications. Interpersonal relationships are not going to disappear. Tom interpersonal. Hold my hand. Lisa this goes into the question with respect to some of these earnings, Katrina Dudley earlier came on the show and she said, if higher rates push out the losers of the business and they give more dominance to the big players, who is winning based on what we have seen from earnings . Julian you saw it yesterday. The Worlds Largest software company, the Worlds Largest search engine, the undertone is negative because their product seems to be falling behind the rest of the players in the space. Lisa is there a logitech a week, it is difficult to come out with an overarching tech thesis, but there is is there take away people are hesitant to pile in to the tech names and evaluations where they are . Is that an accurate take away to earning so far . Julian 5 yield and geopolitical situation we are confronting right now is compressing valuations. You will have stocks that do well in earnings. You will have stocks that do poorly in earnings but at the index level, theres hesitant to the conversation. There is one safe haven. It is toms triple leverage cash fund. Tom people think im doing a massive payout on that. Im not getting net return. Julian youre going on leverage because the cost of leverage is too high and frankly, that is one of the issues we are seeing in our institutional investors. Tom katie is taking this on this. Katie im seriously surprised triple leverage cash etf has not been launched yet because there is an etf for everything. I want to talk about what this means for managers. You write it is still a stock pickers market and someone told me yesterday if you want to look for stockpicking opportunities, look in small cap space. There is carnage of their. Julian there is. If look at the russell 2000, we are on the cusp of breaking through the 2022 lows. As negative as that sounds is a headline, to us the likelihood is going to be that is going to cause more consternation in the market, more volatility, more fear. The fact is there has been no fear this entire cycle since the top in january 2022. The fear is will create the is what creates the buying opportunity. The small caps will end up being the other side. Katie should i look at the small caps . I been looking at a credit spreads the past few months and im not seen anything but you look at small caps and it is a different story. Julian small caps, and weeding it itself has been a headwind. Index weughting it itself has been a headwind. Look will get credit and they are not stress yet. We do not think the cycle will end until we can see a degree of stress there. Lisa where are we in the cycle then . Julian we think this idea for a slowdown coming next year that we have more downside. This idea of the russell 2000 taking out the 2022 lows will put a bit more consternation in. We think somewhere around 200 week moving average in s p 500 would represent about 14. 5 below the july top. That is where we think consternation becomes a buying opportunity. Lisa what are you doing right now . Are you going into the new etf . Julian know, because this whole idea of dispersion amongst all assets and whether it is credit or equities, is creating opportunities. We like energy for the obvious reasons. We Like Health Care because health care does not care about geopolitics and is not care about Interest Rates. We like some of the ai centric beings. Themes. Tom you and ed as he tries to get out his report and there is one elephant in the room and it is the banks. Do you perceive true stability in the Banking Industry . Julian the question is, where having these discussions. You have stocks in the Banking Sector trading tom i got citigroup, 3. 86 prereverse split. Julian will the cycle and without more stress in the financial space . Probably not. However, we got an implicit guarantee in march by the fed. We are probably going to need to hear more. Tom Julian Emanuel, thank you so much. Look for the important and say in Harvard Business review this week essay in Harvard Business review this week. But is great about the article, is in english. It is a discussion. Lisa we hear medication is a good thing, going to practice my interpersonal communication skills with my children at home to make sure they clean up after themselves. I would encourage them to try. Tom futures deteriorating. Standard teachers. Standard futures. You have a solid move here. The vix, 21. 61. The standard is down. 8 . Lisa that is coming from some of the other names who are in like southwest which i want to point to quickly because we saw ubs come out. We see southwest myths and revised over. Missed and revised lower. The idea of how much they are charging, prices are going down. Katie those earning stories are just overwhelming what youre seeing in the bond market which is some semblance of stability. 10 year yield up about one basis point after the moves we have seen maybe does not matter but for once at the center of volatility tom either print in 10 year a lot of print in the 10 year yield. Back to volker, back to normal time we thought. Bob seeger was on top of the chart. Lisa this is the at new places. Stability at new places. Tom please stick with us through the day. Edward mills joins us on your stable washington. This is bloomberg surveillance in new york. Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. The chase ink business premier card is made for people like sam, who make everyday products, designed smarter. Like a smart coffee grinder, that orders fresh beans for you. Oh, genius for more breakthroughs like that i need a breakthrough card. Like ours with 2. 5 cash back on purchases of 5,000 or more. Plus unlimited 2 cash back on all other purchases. And with greater spending potential, sam can keep making smart ideas a brilliant reality the ink business premier card from chase for business. Make more of whats yours. I want to say to the American People we hear you. We know the challenges you are facing. We know theres a lot going on in our country domestically and abroad and we are ready to get to work to solve those problems and we will. Tom speaker johnson of louisiana. Mike johnson. With some real controversy. Legit balance of power this afternoon look to balance of power this afternoon to look into your new speaker of the house. Abenberg at the of this i have been more guilty of this. This is a brief for the market deteriorating. Rear of 1. 90 on the vix. The dollar continues to grind. The dollar strength. Oil does not play here. Sterling. Do we get to 1. 10 . Euro do we get to 1. 04 . If john was here, he would be hyperventilating with the ecb. The ecb. What a tough set of cards they have. Lisa how did they craft a message that is powell esque and say we may not hike again but we may high and not get complacent because we are not. Tom there is an email. We cannot make that meeting and he wondered what she will convey in the press conference the core petrified inflation versus an exterior using inflation as a constructive trade tool. Lisa people keep saying this is an ecb that was dramatically late and fell behind the ball. That really remains the for link at the ecb we expect to hear from Christine Lagarde. Katie tom help me with this. There is just not technologically this impacted as we are see the. Katie a structural difference between European Equity market and u. S. Stock market. We talk about doom and gloom on u. S. Side but you saw nasdaq 100 up by more than 30 year to date. You do not have that heft in the european side. Tom this move to politics. Edward mills usually experience. Hugely experienced. Working with of new york. This new speaker, the uproar i hear and a Research Note says he can drive to the center. How does mike johnson move the republicans to eight Global Center a doable center . Edward i think it will be a tough task. Having a unified Republican Caucus is not something we would have thought but the big question in my mind is this is a speaker who is not been vetted, as he is vetted, how does he come out . What narrative about his leadership . I think we are talking about for him to keep the seat, for him to be able to govern, you do need to find a middle because we have seen the fringe does not support many legislative packages. That is paralysis. Tom help me with the sequences. Is november 17 and the Government Shutdown the prior to the defense allocation, you mentioned the first task a senate house housesenate is war funding, is that going to be before november 17 . Edward i think it is a toss up between the two. To start with november 17 deadline come up do not have a Government Shutdown. It looks like we will punt government funding either into january or maybe as far as april but in doing that, there will be conversation about the fed is funding. The president has sent up to congress a robust supplemental package and what we are hearing is the senate will want to have a strong bipartisan vote on that, trying to put pressure on the house, not differentiating aid for ukraine, israel or taiwan. Lisa how do you understand the fact that mike johnson has made a real important issue of his cutting the deficit and yet there are all of these requests to finance big military expenditures how much would that be a Sticking Point that makes it uncertain whether we get the eight across aid across . Edward im confident we will get something passed. The question is timing and the scale of this. When you go back to the other pushes to become speaker, this is probably most focus during the push for jim jordan, the only way some of the defense talks within the Republican Caucus were willing to support him and its rotation the only reason why they are willing to support johnson was that i needed to get a guarantee on a robust defense bill, extra defense spending and Defense Authorization act before the end of the year. That a group is far greater than if you want to keep that speakership, he is going to get defense aid to pass. The geopolitical environment is different now and end his political position has completely changed. Katie johnson really needs to find the middle here but if he does not, the senate is still functional, that is the saving grace because at the end of the day, the house would do what the senate tells it to. Do you agree with that logic . Edward largely. I think when you see the senate and they pass eight votes, does not 18 votes, it is not political tenable position to not have a vote on that in the house and you have a vote on some of the past with the hundred votes in the senate in the house, it is near guaranteed to have a majority go to the president s desk. I think johnson has leeway here where he does not have the baggage of the previous months. Government funding, defense funding. He is not necessarily going to get blamed for the position republicans are in because he is new to the job. Tom i was taking annmarie through civic lessons and i guess every speaker has a lot of power. Is he going to blow up the leadership with the Republican Party or what attached himself to the hockey player from minnesota and the others . Edward i think you attach himself to the majority leader. I go back to the last time we had a speaker that no one really had heard of which is speaker hassard, you have the most empowered majority leader in decades. When you saw him have i was watching Steve Scalise come majority leader from his state of louisiana, was standing right behind him and told him exactly what to say. He said next question, lets talk about policy. Mike johnson said next question so he is lockstep with the current majority. Tom thank you so much for the wisdom on capitol hill. Lisa congressman tom massey said nobody hates them, talking about mike johnson. That is his best asset. Tom that is what Jonathan Ferro says about me. Futures 35. The market here. The important ecb meetings. I am looking at it and reveling. Unraveling. 10 year 4. 79 . The yen 150. 34. Good morning. On the ecb, Alberto Gallo would do that next. Will do that next. This is bloomberg. The first law of thermodynamics states that energy cannot be created or destroyed. but it can be passed on to the next generation. when people come, they say theyve tried lots of diets, nothings worked but it can be passed on to the next generation. Or theyve lost the same 10, 20, 50 pounds over and over again. They need a real solution. Ive always fought with 510 pounds all the time. Eating all these Different Things and nothings ever working. Ive done the diets, all the diets. Before golo, i was barely eating but the weight wasnt going anywhere. The secret to losing weight and keeping it off is managing insulin and glucose. Golo takes a systematic approach to eating that focuses on optimizing insulin levels. We tackle the cause of weight gain, not just the symptom. When you have good metabolic health, weight loss is easy. I always thought it would be so difficult to lose weight, but with golo, it wasnt. The weight just fell off. I have people come up to me all the time and ask me, does it really work . And all i have to say is, here i am. It works. My advice for everyone is to go with golo. It will release your fat and it will release you. Tom bloomberg surveillance worldwide. Thanks for joining on radio and television. Ferro on assignment. Katie greifeld with us today. We will do data chance but we will not do them now. Basik showed up and said can we get to me . Vix widens out, 26. 1. That is the data that you get right now. Lisa a little bit more data with respect to meta, sliding in the premarket, trading despite a thirdquarter beat on revenue, on comments about the outlook and uncertainty. Meta contributing to the losses that we have seen in the nasdaq yesterday. Amazon set to report after the closing bell. I think this will be interesting. The response will be the most interesting thing with amazon. Katie the stakes are superhigh after what we saw this week from the market perspective, as Mandeep Singh was telling us, maybe expectations are lower when it comes to the Cloud Business. Lisa what has been driving the response. In detroit, ford and the uaw coming to a tentative agreement to and sixlong strike. Ford agreeing to a 26 increase in cost of living wages. The deal still needs to be ratified among 57,000 employees who will get back to work in the meantime. All eyes on gm and stellantis. They will be meeting with negotiators. Basically they have to say we will go along with it, ford set the tone again. Tom is that what we have here on under surveillance . Lisa even more. But wait. Morgan stanleys ted pick will become the new ceo, taking over from james gorman. Pick, is a current copresident will take over in january. Bloombergs sonali basak will be interviewing them in about three years time. Three hours time. Ted pick was rumored for the ceo spot for the better part of a decade. Now you have others in consideration for this top spot saying staying on. What will he do to keep them around . On top of that, Andy Saperstein has been taking on the Asset Management business. How do you make sure that you inspire him to keep that ship running, particularly if the economy gets tough . Tom the fact is, everyone will pounce. Which kind of institution though these two go to . Sonali pick inherited a blessing. When james gorman took over, it was a 40 billion company. Goldman sachs was more than double the market cap. Now Morgan Stanley is worth about 20 billion more depending on the day. If markets get tumultuous, can he keep up the trading . The most recent quarter they missed. Tom where do these two guys go . They are not going to stick around. What kind of institutions would want to pick up these valuable talents . Sonali you have the ceo of the firm, also a contender. He is looking to do deals to expand predium, expanding its Asset Management base. Harvey schwartz, goldman, carlisle, they are picking up talent. Katie Morgan Stanley under ted pick, it will not be two different, not expecting in the way of huge strategy shifts. This is the Morgan Stanley we know. Sonali you think about the big deals that Morgan Stanley has done. The largest financial acquisitions since the pandemic. James gorman said they could do more deals but if you have ted pick coming in, is he willing to do more transformative m a when he is still getting the seat warm . The transition period for him and what he looks like as a leader, this was a man five years ago who was known as able in a china shop. Gleefully profane is how he was described recently. He has become much more of a leader, poised. Watching him become a leader has been fascinating over the last couple years. Lisa i am curious, what took so long . It took a while after they announced it. Sonali that was the scuttle in the market. If we knew that ted was going to be groomed, what took so long . Where their doubts at the end of the day . There are things that are unresolved, including a block trading investigation, equity performance has slipped a little bit under ted pick. Is Asset Management the future of Morgan Stanley . Tom we will look for that in the 10 00 hour this morning. Right now, im sorry for this, folks, 7 35. Alberto gallo joins us from andromeda capital management. What is Christine Lagardes greatest challenge today in the press conference . Alberto the ecb was too late to hike. The plane lifted off too late and now they are trying to keep the plane in the air but the economy is running out of fuel. In europe, we already see signs of lower earnings, technical recession in germany and italy. Keeping this 4 ecb rate will become a challenge. On top of that we have the hawkish members of the ecb who are not talking about balancing production. Ecb has been late to the game and now is trying to cling on the same stats as the fed. The u. S. Is a much stronger economy and the worry is that the eu will break something. Tom how much of europe is in the vicinity of recession . Reporting on the german slow down, maybe due to china, this and that, but is the continent, is the general statement in malaise . Alberto we have growth. It is not a bum, not a heavy recession, but high rates do not help. Going into next year, we have european elections, elections in the u. K. We dont have the same momentum that we had on the fiscal side that we had this year. This specially the second half of next year, curbs into spending, there is no discussion about austerity. U. S. Gdp growing at more than 4 . Globally still in a positive growth environment with the ecb is stuck in this situation essentially tried to copy the fed. The european Banking System has giving them that is given them a good amount of strength. No European Bank was in trouble. But it was the real economy that is not doing so well. So what breaks . You have countries that want to continue to spend, but very high Interest Rates. Something is going to break. They have to choose between keeping the euro above parity or keeping bdp spreads where they are. Lisa how do you invest if you are waiting for things to break, if you dont have confidence, if the ecb can save in on the other side . Alberto what we are seeing today is there are a few things they are bending. We have to choose those that are bending but not break. You have to choose companies that do not have a Sustainable Business model, used to funding a 2 , now at 10 . We dont look at that. Then there is the good stuff that is sometimes expensive, sometimes cheaper. Then there is the ugly, companies that have to sell assets. Sometimes they will get government help. A lot of european firms get government help. It is much better to look at corporate or bank debt. Governments do not want to have high unemployment, and they help firms. The marginal safety is very important, Value Investor concept. We are always looking for things that can survive 10 to 15 default environment. Even in a large crisis. That is starting to be cheap now. We are happy to see that there is a bit of fear because we are getting paid for it. Lisa how about the European Banking space, a bunch of earnings coming out, the latest with Standard Chartered this morning, highlighting how much the chinese story is hurting its financials. How can you get confident in a Banking System that is not breaking but doesnt show signs of really thriving in this environment . Alberto a big differentiation. The u. K. Is in stagflation, declining property markets. If you look at the eurozone, we are focusing on commercial banks, investment banks. Still a lot of challenging business environment. We are looking at commercial banks, the large ones. The large commercial banks in europe are pretty much killing it. We are still in the phase where high Interest Rates helps earnings. The economy will do a bit worse, nonperforming loans will start rising, but lets remember that banks have gone through a lot of consolidation. Think about unicredits results, how they want to buy banks in greece, gone out to investment grade. There are areas of the market that are coming back from being highyield rated back to investment grade. If you look at earnings, banks are doing pretty well. You might think it is an equity trade, no. Equities have done pretty well. Earnings going into next year will probably be weaker. You have a pretty good buffer of returns and profitability before you start worrying about solvency. That is also true for corporates. Leverage is low. Default rates are going to rise, but they are going to rise to 4 to 5 from 2 . Not in a 10 default environment. They are not getting opportunities. Tom that will have to wait for another conversation, the tone of money out there. Alberto gallo, thank you. Within the hour, we get jobless claims. I said jobs report. I was chastised by a listener. Claims is weekly. 8 30 is when a spectacular number, we will see what that is. Katie, 4. 5 , that is the whisper number. Katie it is higher in that is apparently scary. Weve been talking about this awkward position that the fed is in. Alberto gallo brought up the fact that you look at u. S. Spending, the fiscal side is working against the fed. A lot of resilience. Lisa this is not what the fed wants to see. Torsten slot coming out earlier and saying most underestimated think is what the fed needs to do to get inflation under control. Tom the vicinity of 4 . Markets are on the move. Complete data checks through the morning. Standard and poors 500 down 44 points, down. 8 . Lisa when you talk about the whisper number, the Bloomberg Economics number is 4. 9 for u. S. Gdp. Trying to get your head around the idea of a reacceleration heading into a period where, yes, we are worried about weakness, but we are seeing it on the margins. Tom housing starts, were they good . There were housing statistics yesterday that were like really . Katie i keep asking people about it. I keep getting the Housing Market is broken. Homebuilders are in a strange spot. They have been profiting all year. Stock prices have been shooting higher. But now it is getting trickier and the data is backandforth. Lisa new home sales came out yesterday at 10 00. The expectation was for 680,000 new home sales. It came in at 759,000. You know that it is broken. People are not buying existing homes because nobody wants to sell them. Two by them, you have to take out a mortgage. But a lot of these developers are offering a rate lower than 8 to move inventory. It is a separate market to avoid any kind of connection. Tom can you imagine me being in the suburbs . Threecar garage. Perfect for you. 8. 09 . We can deal with that. My head is spinning. Michael nathanson the new york yankees. We do that next. This is bloomberg. The biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . J. P. Morgan Wealth Management knows its easy to get lost in investment research. Get help with j. P morgan personal advisors. Hey, david ready to get started . Work with advisors who create a plan with you, and help you find the right investments. So great getting to know you, lets take a look at your new investment plan. Ok, great this should have you moving in the right direction. Thanks jen. Get ongoing advice; and manage your investments in the chase mobile app. What do you see on the horizon . And manage your investments uncertainty . Or opportunity. Whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined Risk Management are needed most. Drawing on deep expertise across the worlds public and private markets in pursuit of longterm returns. Pgim. Our investments shape tomorrow today. I think we are already seeing those low upgrade rates. 2. 7 this quarter was one of the lowest ever. You are already in a run rate, because of the high prices of the phones, people are taking their time. We are putting offers out there right now that allows people to have a look at moving faster if they would like. There is an audience that wants a new one every year, like me. Tom michael sievert, tmobile president and ceo. What is the number one thing incorporate in analysis that ive been wrong on for years . I got john totally wrong. I had the honor of speaking with him, the guy with the pink tshirt on, long hair. He is not going to do a nasdaq opening. This guy is a buffoon. Tmobile is going nowhere. What do the germans know . Boom. They changed the world. Lisa and they are trying to continue in that vain. Was that a hoodie . Tom the number one corporate story i have been most wrong on in a million years. Lisa how do they feature into, you never have to pay for your new iphone because they will help finance. Is that the game now in the mobile phone space . Tom 31 on the spx right now. Nasdaq down a full 1 . Vix, 21. 47. In the bond space, little bit of dis inversion. 10year of 2. 35 . 30year mortgage, 8. 09 . Jon ferro is on assignment, Katie Greifeld is with us this morning. Michael nathanson joins us, Senior Analyst researcher at moffettnathanson. You know the story better than i do, lisa. Lisa i want to start with a one note of caution that really drove all of the price action. We dont know what will happen. What else is new . Advertising, who knows. How realistic is this, or instructive of what we can expect for the year to come . Michael i was disappointed with the fact that the market took that and ran with it. I year ago people were thinking this business was dead. All the momentum was behind them. I dont think it is that big of a deal. Their guidance is still pretty strong. This is an amazing story. This could be the second story that people just underestimated, the strength of the business model. The recovery has been amazing. Lisa a lot of questions around the Online Advertising business, especially when all content creators are facing off with consumers who do not like advertising, are willing to spend to avoid it. How much are we seeing with respect to consolidation of market share at meta, at a time when google saw an increase in and spend . What does that tell us about the overall market compared to the overall leaders . Michael those companies, the growth rates of meta and alphabet are back to where they were in early 2022. The past couple of quarters, all kinds of worries about ecommerce slowing. It is getting better. It says to you that the market is actually really healthy. You are seeing the structural tailwinds of ecommerce, Online Gaming continue. We had a tough 2022 but that is behind us. I feel good about the health of the business. Snap, twitter, good luck to you, it is not going to happen. Tom netflix has done a double. Review for us in the winter of streaming. Is netflix and microsoft equivalent even at 30 times earnings . Michael it is different from microsoft because you dont have the operating leverage longerterm. You have to keep investing in content. The great thing about software models, the incremental margin is massive. Once you build it, you benefit from scale. In the streaming model, you have to keep investing in content. They will have margin leverage but nowhere near what we saw with meta or microsoft. In streaming, they are a winner because they are such a tough business compared to everyone not on that looks right now. Disney is not even a winner yet. They are turning cash flow. Tom i brought up the disney chart. We did this for Michael Nathanson to give him some angst here on a thursday morning. Disney is back to 2014 pricing. When does it turn . It has been like the new york yankees, it is a disaster. When does disney turn . Michael bob iger came back at 90 bucks, and its been painful for me. Until i sell houses in the suburbs. Here is what i think will happen. 2024, they have to consolidate disney plus. Netflix in the 20s. To me its about streaming profitability in 2024 and they have to get hulu inhouse. I think that will happen by the end of the year. I think this is your meta in 24. A year ago, people were killing the stock. Disney could be a great stock in 24 but you need streaming markets up to a level where people start caring about. Katie its interesting to hear the conversation because you are still a buy on disney, but to meditate on your netflix, comments you are still neutral on the stock. What would bump you up to a buy . Michael earnings numbers. Valuations are pretty full, compared to google, alphabet, meta. It is having faith in numbers that are above consensus. I think we all have the same numbers now, we have modeled what the companies have told us. No reason to doubt it, so we are just debating multiple. People dont have an edge on earnings. Our numbers are where consensus is. Meta and other names, above consensus, and that is our call. Katie when it comes to netflix and streaming business in general, how does netflix maintain market share here . Does it all come back to the content slate . Michael it is interesting, when they built their business, they borrowed other peoples content. We said that that was a dumb idea. They would rent the office, friends. What could happen longerterm is they could blend from making all of these originals, which is a tougher business, to renting peoples movies and tv shows. Given the state of media companies, that could happen. I dont think disney could do that, but warner, paramount, Nbc Universal talked about licensing contact content. Lisa what do you expect after the bell with earnings, particularly having to do with sports, the last death knell for cable . Michael very bullish on the stairs opportunities. They will be looking at the nba. The nfl, ratings are up a strong about this year. The nba is the next big package up for grabs. Theres a good chance they could get a slate of games, tuesday or thursday night games. They will tell you it is going well. Your chance to really this intermediate cable networks. Amazon to us is really in the second or third position behind espn to getting the next big rights deal in sports. Tom decades of good news here. Disney will sell into 24. Michael nathanson with moffettnathanson. We are going backandforth because he knows i know the game. I do this at lectures. When you lose money, really, really, really think about what you got wrong. That is far more important than going, i nailed meta a year ago. What did i get wrong about this . Once again with disney i would opine, these are structural changes. I dont have this enthusiasm of streaming because everyone is watching youtube. Lisa it is also an age thing. People with Young Children might be using streaming. Tom how many young people are there out there . Netflix is not looking at a segment. Katie maybe they should be looking at tiktok. Tom are you on . Katie unfortunately i am. It is the future. Tom ferro . Lisa absolutely not. He is not doing the dances. Tom claims in 30 minutes. Lagarde, next. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. So, youve got the power of xfinity at home. Now take it outside with xfinity mobile. Its possible. Like speed . Its the Fastest Mobile Service around. With the best price for two lines of unlimited. Only 30 bucks a line per month. Thats hundreds in savings a year when you wave bye to the other guys. All on the most reliable 5g network nationwide. You really shouldnt walk out the front door without it. Switch today at xfinitymobile. Com. We are in a stagflation environment already. We are at a point where there is some interest tobuy because we have come so far in this disinversion in the yield curve. The assumption is these rates are punishingly high. If not, theres still room to move up. This is bloomberg surveillance with tom keene, Jonathan Ferro, and Lisa Abramovitz lisa good morning, welcome back. Bloomberg surveillance in new york jon ferro is off this week. Katie greifeld is sitting in. We have almost forgotten ecb and all of the other news. They are not expected to do anything. They also have a very difficult problem on their hands. Tom it is different from the u. S. Im going to call it euro sclerosis. Maria tadeo in attendance. Lagarde yesterday, a massive victory lap, all they have done out of their challenges. Things, the best that europe can be. Deflation, 12 , inflation, now down to about 2ish. That is a victory lap for the Prime Minister. Lisa who cannot have a victory lap, anyone in germany, italy. Plenty of those economies she will be grappling with. How much of this is a european story and the u. S. Story, contrast with what is happening with european stagnation and the u. S. Strength we are expecting . Tom are they combined . It is a venn diagram. I am not sure, the linkages and all that, but inflation is inflation. If you are Grocery Shopping in athens, it is the same as london and in new york. Dont give me this threemonth annualized baloney. Prices are up big. Lisa which is a reason why people are wondering how much she can lean into any kind of pause. How much she has to take a harsh tone saying this is unacceptable even though europe is in recession. Katie it is a difficult needle to thread. All the different nations she has to keep an eye on. So far, it is interesting, the playbook seems to be similar to the fed. We are going to signal that we are keeping rates on hold, but the big difference is the Balance Sheet. Why do we get any news on that. Lisa the big difference is the tech story in the u. S. It is telling on this confusing brew of different points, u. S. Gdp, amazon coming out after the bell, geopolitical overhang, the tech earnings have been driving also the u. S. Strength on a host of levels. How much is that going to offset whatever the european region can do because the u. S. Is leading . Katie driving it to the downside to this morning and this week and it comes to the u. S. Stock market. It is interesting, the messaging coming out of europe, the idea that the bond markets in general are going to do the work for the central bank. If i were a central banker, i would be uncomfortable with that narrative because that is a very fine line. Something unsustainable. Tom the markets are a bit better over the last two minutes, but i dont think anyone can say i have confidence forward. I dont know how lagarde Shows Confidence today. I believe that pulls over to november 1. Powell will be the same way. We will know gdp in 26 minutes. But the answer is, i dont get much conviction out of this meeting today or what we will see november 1. Lisa Mohamed Elerian pushed back on the idea of following data that is backward looking at a time when you need a theory drive you forward into the future. This uncertainty can only work for so long. That is what we have seen pretty consistently. We have seen that with a bit of softness to the tape even after yesterdays worst day for the nasdaq since february. I am watching the euro this morning. I think it will be interesting to see how it responds to anything that Christine Lagarde says. What happens if she comes out and is hawkish . Does that give the euro a lift or does it beat it up because that makes it more difficult for the economy to come down . Tom she will try to say nothing. Dxy near 1. 07. Yen at 150 level. To me, going in here, she can address this, her work with the french government. The Banking Industry at the end of day is what im watching. Individual stocks, i have not looked at bnp paribas and the others, but when i see the bloomberg screen the way it is, i better watch the banks, financials. Lisa regionals husband telling a pretty dire story. A number of banks have not been positive as those in the u. S. That is something that has come to the fore. Nine minutes from that 8 15 Rate Decision. Jeremy stretch will be combing through all of it. Head of g10 epic strategy at cibc. If Christine Lagarde comes out with a hawkish tone, does the euro gain or lose versus the dollar . Jeremy first of all, toms point about trying to say nothing is probably right. If he talks about additional timing or addresses the question of faster adjustment to the Balance Sheet, we may get an initial kneejerk reaction higher with the euro. Going back to your point about eurozone sclerosis, that would provide better opportunities, better levels to sell into. In the context of the next half an hour, we are seeing the ecb, u. S. Gdp print. The contrast between the momentum in the u. S. Relative to the euro zone, even looking at backward looking data, still favors the dollar. If we do see any hawkish narrative from lagarde, it is likely to be used as fodder for better levels to sell. The path of least resistance is still to a cheaper euro. Tom we will have a conversation with mr. Paik of Morgan Stanley, their newly minted leader. I just want you to take all of your years of experience and fold in the ability to have instability given what you see in the currency pairs. Do they signal instability to come for Financial Institutions . Jeremy i was listening to your discussion about the Banking Sector in europe. If we are going to have a protected period of underperformance in the euro zone, that will prove to be a challenge for the Banking Sector, particularly those banks heavily leveraged into the eurozone, impacted by that relative underperformance. I think we are still in an environment where the dollar is proving to be the safest haven. That continues to perform strongly. There is a urgent between what is happening between the fed and the other Central Banks. I think we will see further instability playing out over the course of the next few weeks, well into 2024. Of course, you also have to think about not only the Macro Economic variables which are challenging but the overarching issue of geopolitics and the influence that has the energy market. Underlying the uncertainties ahead which makes investing in some of those financials certainly a challenge. Tom staying on the euro. Claims in 21 minutes in the u. S. , lagarde in seven minutes. What is your call on euro . You mentioned all the different challenges. On a flow or rate story, do you model out, can i get shocking and say you model out euro to 1. 05 to parity . Jeremy i wrote a piece a couple weeks ago asking if we are ready for parity. I dont think we are yet. I think we are likely to see a retreat back to 1. 02. If we do, the potential for a blowout to parity is amplified. I think we are in a scenario where the rate trajectories are still in favor of the u. S. Over the euro zone. From a positioning standpoint, we are still in a scenario where there are still stale longs in the euro need to be washed out. That does provide scope for additional euro weakening. Tom the ecb in fence. In athens. Let me translate here. 1. 05, 1. 04, weaker euro. Parity is 1. 00, where the euro is the same value as the dollar. 0. 99 would be ever weaker euro. I tried to do that in english because my greek you see me in classics. Classics for me, toronto or montreal, which is better . Katie in any case, i started on the fx desk here in bloomberg. One thing about fx, it is pretty cut and dry. Tom brought up euroyen an hour ago, and its been trading sideways for the last few months. When we talk about a weaker euro, parity, how much of this is a u. S. Dollar story, the dominant u. S. Dollar . Jeremy it is very much the dominant u. S. Dollar. If you look at the dollar against the sterling, new zealand dollars, the dollar is gaining, remains resilient because of that macro backdrop, which is very different and supportive than elsewhere. But there are specific factors that are remaining on the front foot. We continue to see weakness in terms of those flash pmis. German manufacturing near a depression scenario. There are plenty of domestic headwinds which are dragging on the euro valuation. At the same time, looking at the yen, you are also seeing that differential when it comes to the Monetary Policy standpoint playing out. Continued gains in dollaryen raise the specter of potential katie extend the conversation to what we will be hearing from the European Central bank. When you think about those domestic headwinds, desire for the ecb to stay on hold, to keep rates high, how long can they stay on hold before they eventually have to cut . Jeremy the language in the statement will reference being sufficiently long in duration. I think that probably takes us into the middle of next year. I think the ecbs forecast in december will be hugely helpful in terms of the narrative. Holding this 4 threshold probably until the june meetings when we have updated forecasts. These are particularly instrumental. June the year will be the key meeting if we see inflation coming down, providing a more constructive backdrop for the ecb and their policy narrative. Tom jeremy stretch with cibc with us. Commercial free through the ecb decision. We will see that here in two minutes. Maria tadeo is in athens today. I like the idea that they travel around. Can you see the fomc and mr. Powell in dallas . Lisa that would be cool. Going to different diners, talking to people. Katie with all the uncertainty in the world, isnt it nice to know . Tom i was asked to go to the greek consulate, i said of course. I show up, and it is greek in crisis. The Prime Minister was there at the time, greece was falling apart with 12 inflation, spreads were blown out. Lisa, you know better than me. It was a very emotional discussion worldwide. A beautiful autumnal day, if i can remember. If i would have known then, the victory lap that lagarde has on greece this morning, i dont think so. Lisa i am sure maria tadeo will continue her European Tour standing in front of beautiful backdrops, discussing the latest. Athens will be a fascinating place. It also benefits from that weaker euro. Think about tourism. We have been talking about that, the greek islands, how much that bolster the economy. Tom all we are trying to do is get a threeisland tour of greece. This is whereferro weighs in. I remember. Futures 31. Dollar, continued strength. The euro, 1. 0540. You heard jeremy stretch speak of a tendency to get from 1. 05 to 1. 02. Exceptionally important day for the ecb. Here at 8 15, a set of headlines will come out on the ecb. They leave their rates where they are. Ferro would be apoplectic now. I am not going to try to do it. The first place i saw him was in frankfurt. Lisa the ecb is leaving their deposit facility rate at 4 . The expectation. The main Financing Rate at 4. 5 , as expected. Ecb saying inflation is set to be too high for too long. Again, this is very powellesq ue, that the right level must be sustained for a sufficiently long amount of time. Tom 30 or so headlines flying by. The reaffirmation of getting to 2 . I would say for the euro, that is more like 2. 1 . 2 for the u. S. , maybe 2. 6. There is that reaffirmation i heard from lagarde. Lisa they dont want to make the same mistakes they did last time. That is what we heard from jeremy stretch and others. Tom one more before we go to taddeo. Ecb, price outlook underlying dynamics, transmission arche. Are key. In athens before the Lagarde Press conference, maria tadeo. How difficult is it to transmit Monetary Policy across the fractured nations of europe . Maria it is difficult. But either way, there is a reason we are here in athens. European central bank every year takes one meeting away from frankfurt and rotate among the different euro area members. Conveniently this year is in athens. As you say, they keep rates unchanged, but i would go deeper into the statement to answer your question. There is a lot of debate as to whether they would try to accelerate that. They say it will continue until the end of 2024. They also say, the right level must be maintained at this level sufficiently long time. The way that i read this, this is a central bank switching to the higher for longer. People believed that once you hold, you hold, and the conversation turned into how long. To answer your question, yes, its difficult. We are seeing pmis across the euro area showing an economy that cannot take a breather. What is unusual here, it is the German Economy that is suffering the most. That is a different narrative to the one you would expect in a country like greece which just got upgraded to investment grade. To some extent, the tables turning as a result of many issues, predominately the more and Energy Crisis. Lisa but we are seeing in the market is not a significant reaction. Yields coming in a little bit on your region bonds. The euro still lower on the dollar. What is the challenge now for Christine Lagarde, now that it seems like she is following a very powelllike speech in terms of the roadmap here . What is her challenge in communicating this to a lot of people that have questions about what sufficiently restrictive means, and what kind of fissures in the Financial System could make them turn around . Maria we should also note this decision does not come in isolation. We had the pmi data, Lending Survey from the ecb, geopolitics from yesterday. We had a preview from the head of the ecb, gave an interview to a greek tv station, and she said we are not there yet on inflation but we are improving on our battle to tame it. Keeping a close eye on the geopolitics. She also suggested the ramifications, assuming you contain the conflict between israel and hamas, will have an impact on the energy. They are keeping an eye on that. From what we see in the statement, the message from the European Central bank is on hold. It will be interesting to see what is the rationale behind it. That pep investment doesnt change, inflation is still too high. Switching from higher for longer. This is still an ecb that is frankly pretty dovish. Katie we were talking to jeremy stretch. He made the point that he is looking at june of next year as the key meeting. When you look at the next seven months for the eurozone economy, the inflation picture, what does the trajectory look like there . Maria its a good point that you mention also italian ptps. The argument to accelerate the ending of the pep reinvestment would precipitate, could trigger the bond market. They have to once again balance out the many implications. To me, it will be interesting how she pushes back or not on this idea of cuts. They definitely did not want to precipitate the debate around cuts. She doesnt want to go there, except right the market to go into that conversation now. Tom maria, thank you so much, from athens. I wish the Federal Reserve would do this. One meeting a year away from washington would be good for everyone involved. We continue with jeremy stretch with cibc as he considers these headlines. Not Much Movement in the market. Euro, 1. 0540. A key question to me, the idea of what to percent means. These are different economies, different nations. Do you look at it as 2. 0 , is the ecb going to hope for 2. 2 , while the feds two point 2 is 2. 8 . Jeremy the eurozone is a difficult beast to manage. Lagarde is mindful of that. There is a different degree of performance and activity, different economies across the zone. Eurozone an ecb is aiming to get inflation back to that 2 target threshold over the mediumterm. Notable that inflation in september did flip forward faster than the ecb expected. The next meeting in december will prove to be particularly instructive as we get forecast out to 2026 for the first time, also looking at those longer run expectations. If those are back to the 2 threshold in aggregate across the zone and that is the difficulty. We still get divergence in the individual nations. As an aggregate number, theyll be aiming to get back to that 2 shoulder over the next couple years. Tom going back to jeanclaude trichet, talking about transmission, the diffuse mitt of an economy across borders. Europe doesnt have the transmission mechanisms of america, do they . Jeremy one of the inadequacies of the eurozone project is the difficulties on the fiscal side on a relative basis, which the u. S. Obviously has. The u. S. Has the federal system, we do get that disbursement of federal funds across the fiscal dynamics. We are in a situation where the plumbing if you like in terms of the euro zone economy, monetary and fiscal policy is very diverse. Fiscal dynamics are still very much at the behest of national governments. The other thing to consider moving into 2024 is that the euro is thinking about bringing back those fiscal thresholds that were suspended during the covid period. That will be an interesting dynamic to add into the wrinkle of that fragmentation risk. That is one of the big concerns that the ecb has to be mindful of, even if president lagarde will try to downplay any concerns at this point. Tom jeremy stretch, thank you so much for staying with us after this ecb announcement. He will prepare for the Lagarde Press conference. We will be going to mike mckee on data. Im going to switch to the American Economy because i dont think enough has been said about how wrong tom keene was claims in six minutes. It is not the jobs report. I was lectured on this earlier. This was maybe the most botched gdp call i have ever done. Mike mckee will set a straight. Lisa no one expected a reacceleration. This has to do with the labor market, the fact that you have seen strength, unemployment claims coming in below 200,000 for several weeks, and now we are expecting 207,000. All of this goes to the question, is this consistent with getting inflation back to 2 in the u. S. . We just heard higher for longer from Christine Lagarde. Is it going to work in the u. S. At the level that we currently have . Katie when you look at what we are expecting out of gdp in six minutes, that resurgence is expected be driven by the u. S. Consumer. U. S. Consumers are still spending out there. Marry that together with what the labor picture looks like, people have jobs, people are spending. Lisa this is different from europe. Did you see mercedes earnings . They said people are pushing back, even the luxury buyers are feeling inflation where it is right now, crimping sales. Tom i will go to this message from this morning. This super core, which i dont understand. Michael mckee understands it. It is like game of thrones, it is written. Katie how much of a comfort is that . At the grocery store, you see prices going up. That is felt inflation. I dont know if that is captured in the super core. Tom there are two americas. And narrow slice that is prospering and everyone else is getting hammered. We are going to key Economic Data here with Michael Mckee. Lindsay piegza will join us, chief economist at stifel. An eventful thursday. Bloomberg surveillance. What do you see on the horizon . Uncertainty . Or opportunity. Whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined Risk Management are needed most. Drawing on deep expertise across the worlds public and private markets in pursuit of longterm returns. Pgim. Our investments shape tomorrow today. Hi, im katie, ive lost 110 pounds on golo in just over a year. Golo is different than other programs i had been on because i was specifically looking for something that helped with insulin resistance. I had had conversations with my physician indicating that that was probably an issue that i was facing and making it more difficult for me to sustain weight loss. Golo has been more sustainable. I can fit it into family life, i can make meals that the whole family will enjoy. It just works in everyday life as a mom. Tom bloomberg surveillance from new york. On a thursday. A number of narratives out there with futures 28. And Ford Exchange speaks volumes in the bond market. But it is and what it is doing toour Financial System. 30 weight 30 rate bank mortgage. It is time for american Economic Data 15 minutes before our presser numbers are coming up. Michael mckee has the envelope. Mike well, the winner is gdp. The u. S. Posting a 4. 9 growth rate in the Third Quarter. Thats a little lower than the atlanta fed but higher than the consensus of Bloomberg Economist survey that is 4. 5 . Katie greifeld has been out spending money. Consumer spending goes on 4 after a. 8 rise. We will get the latest update numbers in just a second. Theres a lot of data to run through. Jobless claims, to 10,000 210,000 revised from 200,000, it is still very low. Continuing claims they are. 1,790,000, up about 70,000 from the month before. Trading, the trade deficit is at 85. 8 billion that is up from 84. 6 billion. That would be a subtraction from the gdp numbers. Durable goods orders coming out this morning for the month of september and the preliminary number up 4. 7 . A major increase in business investment. That is after. 1 decline the prior month. Capital goods orders, nondefense x air, the rocket it for business spending up. 6 . Lower than the 1. 1 we saw the month before. I imagine the markets are trying to react to all of this. And let me look into what the latest numbers are for the gdp breakdown. Tom is there any other way to look at this answer is a quietessent response. And with your statistic today, it is a jump to a bland American Economy. The dollar pretty much unchanged, futures more constructive, 25. Vix comes in in a little bit. And abramowitz, i would say you are billed will bewildered, the yen 150 and the bond market. I have no clue what to say on the bond market. Lisa i cannot understand it you see yields across the board lower. On the margin, it was a big beat on the gdp, it was expected to be a beat and you saw the gdp price index come in at 3. 5 versus the 2. 7 expectation. Everything came in above expectation, indicated strength instead of one area. Marginal increase bigger than expected jump in jobless claims by not very much, 3000. Continuing claims rose substantially to 1. 7 9 million. Are we looking at parsing through any weakness . I do not understand what else it could be. Tom Michael Mckee would swap me with his Denver Broncos paddle. The answer ears here is i have a 4. 9 percent gdp, i add to that the gdp price index. I simplistically can say my nominal gdp, to hedge it, it is above 8 . No one called that in march of last year. Before we go to mike mckee, what is your observation . Katie im with lisa. You look at the two year yield. They had a session height and then they immediately drop moving lower on the yield front. If you look for stability you may find it in futures. Maybe it is what we are seeing an initial jobless claims. We are seeing some weakness around the edges. When you have two huge reports come out at the same time, one has to win out. Tom you when you look at this, we welcome all of you on radio and television we have a spike in proving this in the s p 500, 130 on the state standard futures. Not 17. Watching the vix carefully, it does not have the fear of one big figure point. It is a more quietessent market. Lisa a viewer wrote in that core pce was down quarter over quarter. Maybe a reason we are seeing disinflation continue. Tom mike mckee looking up 47 pages of data what does page 42 say . Mike page 42 says businesses did not spend as much money as we thought. That seems to be one of the most interesting some data points. Investment down. 1 it was up 7. 4 in the second quarter. So, that is a major drop off, i dont know the explanation for that other than equipment fell 3. 8 . We did see structures continue to rise, 1. 6 . We talk about all the buildings going up for the factories that are reshoring and things like that. Goods purchases were up going back to the 4 gain in consumption. Services up 4. 6 percent. Evenly divided but people were switching from goods to services, we are not quite there. The change in inventories, 80 million up from 14. 9 million a major change that adds to the growth. Im not as sold on the pce numbers, they are quarterly average. Tomorrow we will get the latest pce Inflation Numbers and the fed will pay much more attention to that. But its good news to see it drop. Tom we want to jump in here. One key question how much is the 4. 9 percent statistic very with the second look and third look at gdp . Mike it will vary more in the second look. We get more precise data. And as we noted, we got trading data that would take away a little bit. But we get more updated Consumer Spending numbers. By the third revision, we have a whole lot of change. Look at the next one. But we had 4. 9 , it will not change technique italy. Larry meyer in fact said that if there was a surprise, the revision goes in the direction of the surprise, not the other way. Lisa one thing thats over shattered in these overshadowed in these results is that jobless claims rose substantially. How much do you Pay Attention to that is that metric of weakening around the margins and the labor market . Mike because it is claims it is hard to know exactly what it means for the labor market because it does mean that those who did not get jobs have taken a little bit longer to be reemployed, but you have to combine that with the length of time of unemployment that will come with the jobs were next week report to see if there is a real slow down. But as you point out, it is an interesting canary if the trend continues. Tom market starting to move on this. Michael mckee thank you for complete coverage on this. We go to Christine Lagarde here in about 12 minutes to review futures. 25, 18, the standard futures down. 4 . The vix comes in with a vengeance. We were almost at 22 now we are at 21 06. And lisa, help me i have curbed his inversion but the real yield comes in. What do you see in full faith of credit . Lisa we will find out it is not priced in real time when it comes to corporate credit. To me, the fact that you are not seeing a pop in yields on the fastest pace quarterly growth in the u. S. Going back two years, to me that is surprising. Tom october 30 apple will announce a new mac book row, linzie pas is pleased with that because as she ran her xl spreadsheet on the American Economy and part of her macbook earlier. She joins us now from slight tifel right now. Dr. Lindsay we have a lot of international factors that are impacting the markets expectations. We do have now unprecedented fiscal variables that we are trying to account for. I think right now the market is discounting the thirdquarter number focusing instead on the latest central bank decisions. The boc, the ecb is a proxy for what to expect from the fed next week. Suggesting developed Central Banks around the world despite elevated invitation inflation or pulling back in anticipation of a slower level over longer term growth. The market anticipating the fed may be moving to the sideline for a long period of time but may be indefinitely at this point. Katie to crystallize what you are saying, are you saying the fed can through what we are getting out of his low out gdp rent or that is the market expectation . Dr. Lindsay no, that is a market expectation. The but the market has been calling a fed rate hike and wrongfully pricing in rate cuts but the fed however has been clear eating the drum of higher for longer very consistent in their message. When we look at the the the underlying data in the q3 report the resiliency of businesses and consumer, and to your point, we see a uptick in claims and continuing claims. And broadly speaking the labor market is extremely pop tight. So the fed is looking at all these data juxtaposed with it still too high. I think there is more work to be done before they reach a sufficiently restrictive level to ensure we remain on a disinflationary trend at 2 . Katie youre getting to what im wondering about this is a binary question we live in a shade of gray world. But when we look at the numbers we got this morning, we look at the blowout gdp print and the initial jobless claims higher. What is the stronger signal they are. What should we focus on . There. What should be focus on . Dr. Lindsay we did not want to look at one data point but the underlying trend in claims. It is low signaling a tight labor market condition. This will continue to perpetuate the ability for upward pressure on wages and further purchasing power for the consumer in the marketplace. Suggesting the backbone of the economy the underlying support of the economy with the consumer remaining resilient. Lisa theres been angst underpinning the selloff in the market, the long end that has not been tied to the fed at all but tied to widening deficit and increase in spending, how much will the fan find itself the fed finds itself in the midst of fiscal spending. You talk about the need for the fed to do more. How much is the strength we are seeing in the gdp print tied directly to the Government Spending . Dr. Lindsay absolutely. This is one of the problems when Monetary Policy and physical all of cr moving in opposite directions that will force the feds hand to counteract the expansion of government outlays. We no federal stimulus is included but there is other physical simulates coming out of the pipeline with the result of legislation passed in the last 1218 months. The ira, the chips act and other spatterings of state and local stimulus spent on constituents. There is a lot of purchasing power and borrowing and investment power in the marketplace that the feds death ridley desperately trying to drain out of the system. The more we see monetary fiscal policy move in the opposite direction that is a barrier for the fed to achieve its role of christ stability. Lisa a lot of people are writing in saying i did not have a right to be confused because it is core pce. When you look at inflation it is growth but it is disinflationary you see a reduced pace of growth when you strip out energy and food. How much credence do you give the idea in the gdp print that the core pce read of 2. 4 , is that the number to hit off . Dr. Lindsay it is encouraging, but when we look at some of the other data metrics, when we look at headline pce, when you look at the headline cpi, we are not seeing the clear downward trend of disinflation. Of course Monetary Policy rice pressures we strip out the volatile energy components. Tom it looks like we have some technical difficulties. It is the American Economy bringing the lines down. A stunning American Economy. At my gdp call for 2023 is not it but it is an honorable mention. I do not care with the revision is. For 9 , i mean that is not. N uts. Nuts. Katie it is surprising to see two year treasury yield down on the gdp print. It is confusing. We have a raft of data but focusing on the headline how do you read it . Tom with ups it was not really good. Southwest air, it was really difficult out there. Katie yeah. Tom 4. 9 gdp. Lisa theres pockets of strength and pockets of weakness. And there is microsoft, eight you saw the disappointment in the shares, but it is called google, it is called what we saw with meta at what point does that average out into something that has is disinflationary while still expansion . That seems to be a little bit of a story that was painted by todays data. Tom bright failed with the best data on bloomberg surveillance. You failed and i failed but greg failed Katie Greifeld nailed it. Spx up a solid 9 . It is october, we are making money. Nasdaq up 23 . Here is the composite, this is not the 100 beatty stocks as well. It is amazing. Katie it is amazing it is the unique feature of the American Economy and stock market. It was a big weight last year of course but here we are. Tom right now thank you to all of our guests today. It is a photo opportunity for Christine Lagarde. She is the president of European Central bank. It was a joy to speak with her at the imf meetings i think it was 10 days ago. She has a full plate in front of her in their meetings in athens, greece today. They are on the stage for those of you on bloomberg radio. It is a podium today for the people in frankfurt. I think we will get introductions started here. Lets stay with lisa and katie as we wait for introductions. We will be prompted when Christine Lagarde comes in. What you think she will say . Lisa i think she will have to say we have to see what the data will show us but we are committed to bringing inflation down to 2 . And they will maintain the course if they did not raise rates at this time they will do it next time. Next question please. Tom do they go up to 1 . Maybe they take a longer lunch. The answer here, moving from frankford to the other bank is a striking tone of court europe. We are really upset about 6 inflation here or they are. Lisa it is often flipped on its head. The German Economy was the strong one and greece was the week one and now, they are in athens one of a bright spots in a otherwise troubled picture. Tom we like to degrassi or on surveillance. Javier blas has not been good about the trillium or crude or west texas intermediate but the game changer athens, greece mediterranean the price of olive oil. It is a true moonshot. Katie how much is it . Tom there is a ticker it is like gloss index. I dont know what it is but the agricultural region here, this is a Climate Change debate. You really felt it in america but in the north and in space and and greece spain and greece. And we have Christine Lagarde the president of the European Central bank. And if you ask questions based on the camera and microphone, with that i headed over to president lagarde, please. Christine thank you and good afternoon to all of you. The Vice President and i welcome you to our press conference. I would like to begin by thinking governor stone a haas for his kind hospitality. And i express our special gratitude to his staff or the organization of todays meeting of the governing council. The governing council, today, decided to keep the three key ecb Interest Rates unchanged. The incoming information has broadly confirmed our previous assessment of the mediumterm inflation outlook. Inflation is still expected to stay too high for too long. Domestic price pressures remain strong. At the same time, inflation dropped markedly in september due to strong base effects and boost measures of underlying inflation have continued to ease. Our past Interest Rate increases continue to be transmitted forcefully into financing conditions. This is increasingly dampening demand and thereby helps push down inflation. We are determined to ensure that inflation returns to our two percent mediumterm target in a timely manner. Based on our current assessment, we consider that the key ecb Interest Rates are at levels that maintain, for a sufficiently Long Duration will make a substantial contribution to this goal. Our future decisions will ensure that our policy rates will be sufficiently restrictive levels for as long as necessary. We will continue to follow a datadependent approach determining the appropriate level and duration of restriction. In particular, our interest Rate Decisions will be based on our assessment of the inflation outlook in light of the incoming Economy Economic and financial data. The dynamics of underlying inflation, and the strength of on a terry policy transmission. The decisions taken today are set out in a press release available on our website. I will now outline in more detail how we see the economy and inflation developing and then will then explain our assessment of financial and monetary conditions. The euro area economy remains weak. Recent information suggests that manufacturing output has continued to fall. Subdued foreign demand and tightening financing conditions are increasingly weighing on investment and Consumer Spending. The Services Sector is also weakening further. This is mainly because weaker industrial activity is spilling over into other sectors. The impotence from reopening effects is fading, and the impact of higher Interest Rates is broadening. The economy is likely to remain weak for the remainder of this year. , but as inflation falls further, household real incomes recover, and the demand for euro area exports picks up, the economy should strengthen over the coming years. Economic activity so far has been supported by the strength of the labor market. The Unemployment Rate stood at a historical low of 6. 4 in august. At the same time, there are signs that the labor market is weakening. Fewer new jobs are being created , including in services, consistent with the cooling economy gradually feeding through to employment. As the Energy Crisis fades, government should continue to roll back related support measures. This is essential to avoid driving up mediumterm inflationary pressures which would otherwise call for even tighter Monetary Policy. Fiscal policies should be designed to make our economy more productive and to gradually bring down high public debt. Structural reforms and investment to enhance the euro area supply capacity which would be supported by the full implementation of the next generation eu program, can help reduce price pressures in the mediumterm while supporting the green and digital transition. To that end, the reform of the eus economy governments framework should be concluded before the end of this year and progress towards Capital Markets union and the completion of Banking Union should be accelerated. Turning to inflation, inflation dropped 4. 3 percent and september, almost a full percentage point lower than its august level. In the near term, it is likely to come down further as the shop prices our prices and energy and food recorded in 2022 will drop out of the yearly rates. Septembers decline was broadbased. Food Price Inflation slowed again although it remains high by historical standards. In annual terms, Energy Prices fell by 4. 6 , but most recently have risen again and become less predictable in view of the new geopolitical tics tensions. Energy excluding energy and food dropped 4. 5 in september from 5. 3 in august. This fall was supported by improving supply conditions that passed through a previous declines in Energy Prices and the impact of Monetary Policy on demand and corporate pricing power. Goods and Services Inflation rates fell substantially 4. 1 two 4. 1 and 4. 7 respectively with services and inflation being pulled down by pronounced base effect. Price pressures in tourism and travel appear to be moderating. Most measures of underlying inflation continue to decline. At the same time, domestic price pressures are still strong reflecting also the growing importance of rising wages. Measures of longerterm Inflation Expectations mostly stand around 2 . Nonetheless, some indicators remain elevated and need to be monitored closely. Let us turn to the risk assessment. The risks to economy growth remained tilted to the downside. Growth could be lower if effects of Monetary Policy turnout strongerthanexpected. A weaker World Economy would also weigh on growth. Russias unjustified war against ukraine and the tragic conflicts triggered by the terrorist attacks on israel are key sources of geopolitical risks. This may result in reforms and households becoming less confident and more uncertain about the future and dampen growth further. Conversely, growth could be higher than expected if the still resilient labor market and rising real incomes mean that people and businesses become more confident and spend more or the World Economy grows more strongly than expected. Upside risks to inflation could come from Higher Energy and food costs. The heightened geopolitical tensions could drive up Energy Prices in the near term while making the mediumterm outlook more uncertain. Extreme weather and the unfolding Climate Crisis more probably could push food prices up by more than expected. Lasting rise in Inflation Expectation above our target, they are higher than anticipated rages in increases in Profit Margins could also drive Inflation Higher including up in the mediumterm. By contrast, we could demand, for example, owing to a stronger transition of Monetary Policy or a worsening of the economic environment and the rest of the world meaning greater geopolitical risks, it would ease price pressures, especially over the mediumterm. Looking at the financial and monetary conditions now, longerterm Interest Rates have risen markedly since our last meeting reflecting strong increases in other major economies. Our Monetary Policy continues to transmit strongly into funding has become more expensive for banks and Interest Rates for Business Loans and mortgages rose again in respectively. Higher borrowing rates with the associated cuts in investment plans and house purchases led to a further drop in Credit Demand in the Third Quarter as reported in our latest bank Lending Survey. Moreover, credit standards for loans to firms and households tightened further. Banks are becoming more concerned about the risk faced by the customers and are less willing to take on risk themselves. Against this background, credit dynamics have weakened further. The annual growth rate of loans to firms has dropped sharply from 2. 2 in july two 0. 7 in august and 0. 8 in october. Loans to households remain subdued with the growth rate slowing to 1 in august and a 0. 8 in september. The mid week amid weak lending, the annual growth rate fell to 1. 3 in august, lowest level recorded since the start of the euro and still stood at 1. 2 in september. In conclusion, the governing council today decided to keep the three key ecb Interest Rates unchanged. The incoming information has broadly confirmed our previous assessment of the mediumterm inflation outlook. Inflation is still expected to stay too high for too long with domestic price pressures remain strong. Inflation dropped in september including due to strong base effects and most measures of