The top stories this hour wall streets fear gauge wres up, sending stocks to a fourmonth low. Signs of official yen intervention after the currency is ranked 150 to the dollar. Haidi republican hardliners revolt, dumping maccarthy as House Speaker and sending a Fractious Congress into further disarray. Shery plus new Zealands Central Bank expected to deliver a hawkish hold trying to capably keep a lid on inflation expectations. Haidi we do have breaking news off the top of the hour, the australian pmi numbers, the judo composite number, taking a little bit higher in the september final reading, at 51. 5 from 50. 2 in the prior indicator. We saw the september inal reading when it comes to the services comont, also taking higher, 51. 8 from 50. 5. A little bit more firm into expansionary territory. Unlikely to really move the needle when it comes to with the rbas doing given we saw the central bank keeping the key re unchanged with the tightening bias last tuesday really gauging the impact of already what weve seen as four Percentage Points of hikes. Shery take a look at how futures are coming online. A little bit of a mixed picture. Not a lot of movement after we saw the s p 500 today struggle and fall almost every sector was in the red. There was a lot of volatility. We had the treasury wrote route deepening with multiyear highs, the vix, at one point climbing above the 20 level to the highest in 16 months and settling a fraction below that. It was really about not only more hawkish commentary coming out of fed officials today but really the data that sent yields, the 10 year yield to the highest level since 2007, the 30 year yield also at the highest level since 2007. That narrative, that we are going to see the fed higher for longer, given the data, take a look at u. S. Job openings, it toped all topped all four for the month of august. 9. 6 one million 9. 61 one million job openings. We are talking about resilient data. Layoffs are still low and a lot of the job gains, coming in the professional and Businesses Services sector. Just ahead of the payrolls numbers coming out on friday, which of course everybody will be on the watch out for to see if the labor market starts to cool and what that means for the fed. Haidi fractious politics domestically also at play. We mentioned republican Kevin Mccarthy has been toppled as u. S. House speaker, the first of history, by dissidents within his own party and a tumultuous nine months in the job. Lets get more details on the historic move with jerry schneider. What led to him being voted with judy schneider. What led to him being voted out . Hes been in the role for really not that long. A little over nine months, as you said. The way that he became speaker was fractious, too, it took 15 rounds of votes. He could not get over the threshold. To get tv to get there, he had to make deals that ultimately led to the demise as speaker. Saying any one lawmaker could basically vote to vacate and have a motion to vacate could bring about a motion to vacate and there would have to be a vote on the house floor with that. That is just what happened today and he did not get enough votes, 216 members, all the democrats who voted and some of the republicans voted to vacate, which means he loses his speakership. 210 voted for him but it was not enough. With a very slim majority in the house, the band of dissidents in his own party make sure that he would not be speaker anymore and the democrats did not come to his rescue. Some things including basically moving forward with some impeachment hearings for President Biden over some of the things over allegations about his son, hunter biden, really angered democrats. They also didnt like it, the way this played out recently. They didnt feel they were respected enough. They didnt feel they could trust speaker so they were not rushing to his rescue. Shery to be fair, he could technically run again immediately. Given the 15 rounds of voting you mentioned, who is more likely to succeed him . He could, he certainly could, and he may. We have not heard from him yet. He left the chamber silently. But if he but it would be very hard for him to become speaker. Those democrats again are not likely to change their mds. It would be hard to change the minds of the people who voted against him. There are some other names. Right now patrick mchenry, the head of the finacil services committee, a very powerful committee in the house, he is the interim speaker and has said he does not want thjob. We have heard the name of steve scalise, tom webber, who is a whip. Who is going to satisfy that wing of the party . Mccary made deals with them to get the speakership and likely someone else would have to, too, they dont seem to like he way that the house was run under kevin mcathy and in the two previous speakers of the house, two previous republican speakers before him, they also were not ousted in such a dramatic fashion but they left. John resigned and paul did not run again. They chose not to do this given the fractious caucus. Haidi what could be some of the broader political and even Financial Market and economic applications . Moody is the last of the rating agencies to keep the top grade for the u. S. They recently warned about this political dysfunction that is aptly. The uncertainty of something the markets are looking at. They did pass that spending bill to basically fund the government for a short period until november 17th, that was passed this weekend with democrats going in with republicans. Something the wing of the caucus did not like that Speaker Mccarthy relied on some democratic votes. But that runs out november 17. If theres not much action in the house, we are going to be there very soon. Theres also ukraine funding which was not and that bill. Thatll be a contentious issue. And these broader Economic Issues the house is not taking up. It is also an Election Year next year. The whole house of represented runs again. If there is no resolution to all this, straight only the democrats are hoping this makes the republicans look bad and theya they are in disarray and that could help them retake control of the house of reps. It is still 14 months, 13 months until then, so we will see, but the larger issue right now, the most significant pressing issue is november 17th, the deadline when they run out of money again. Shery bloombergs political director, Jodi Schneider there. Lets see how we are setting up for the asian session. It may be a challenging day. Annabelle thats right. Youve got political dysfunction, but the big theme still remains the fed and Central Banks generally, and its narrative, higher for longer, is still the story here. For equities, we are pointing ahead to and move to the downside in aussie stocks. We are tracking the moves in the bond space. The aussie tenure yesterday reaching its highest since 2011, still continuing to move higher. Kiwi bonds as well. Kiwi assets broadly. We have the rbnz physician in a moment here decision in a moment here. They could possibly leave the door open to a further hike. The move in treasuries, the japanese yen, if you change on now to hit the 150 level against the greenback. This is typically when we watch for a sign of intervention from officials. You saw the sharp move higher in the dollar against the japanese currency. What drove that was the japanese government intervention. Could there be Something Else aptly . We will be discussing the chance. Perhaps to do with options positioning. Shery selling the dollar at the 150 level could be one of the reasons but we are also thinking intervention chatter is growing. Lets get more with our. Isabel with our across asset reporter, isabel. They have warned against these currency fluctuations. Why is that 150 level so important . It really is just a psychological level. Around this time last year, the japanese government first intervened, the first time in 24 years. This is a level a lot of analysts are watching. This could just be a Standing Order that funds are firing strategies but some are speculating there might be intervention. They are saying that around this time last year, the japanese government intervened. Some are also saying, not really. When they intervened last year, it did not happen during u. S. Hours. Some said if they did intervene, they would not be so happy now, because it bounced back so fast. It is not the first time that this happens. Shery the says it haidi this is it, the problem of going up against a hawkish fed. Is there much to game in intervention in terms of how costly it could be . Intervention is very dangerous. Not dangerous, it is something people should be cautious about. The finance minister said they are ready to watch their own standby but they are going to intervene not based on currency levels but based on volatility because any excessive moves in the currency market is definitely dangerous. This is really a story about the feds higher for longer narrative and that is why we are seeing the bloomberg spot dollar index climbed to the highest since november. Because of that we also have a weaker yen, and that is going to make imports more expensive for japan and of course more things. This is definitely a space to watch but it does not help the fed is standing pat on attire for longer narrative. Shery bloombergs across asset reporter there. We will be watching kiwi assets today with the central bank expected to keep Interest Rates on hold later. We are 10 days out from general election. Tracy joins us from wellington. There are inflationary risks starting to pick up. Energy prices affecting all Central Banks, not just new zealand. Are we expecting a hold today, albeit a hawkish one . We are expecting a hawkish hold. At the very least, the banks will say that rates must stay restrictive for the foreseeable future to make sure markets dont start pricing any rate cuts into the sort of positioning. You are right, there is inflation pressure brewing, but again with the election just around the corner for us, its very unlikely the central bank will want to go out and make a bold called at this point. We are expecting to read the language very carefully, to see what the signals are. Shery at the start of this global tightening cycle, the Central Banks were reluctant to pause rate hikes just to resume them again but we have seen a few Central Banks already do that, is not a possibility for the rbnz here, too . It is a possibility. Markets are pricing about a 5050 call on whether there will be another quarterpoint rate rise in november, the final review of the year. Theres is a small minority of economists calling for that. There are issues like strong immigration and the rising housing market, which may fan a bit of domestic inflation. On the other hand, Consumer Spending is seen as quite weak over the next 12 months. They might be prepared to wait and see what happens. Shery bloombergs tracy weathers with a preview of the rbnz decision today. Sam bankmanfrieds fraud trial begins fear that an update begins. An update, later this hour. And why the bond rout is overdone and he expects and rob williams with why the bond rout is overdone and he expects a recession next year. This is bloomberg. E. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Im very optimistic about the u. S. Economic outlook. Shortterm inflation is coming down in the context of an extremely strong labor market. We are now gauging a very substantial program of investments to strengthen our economy. Shery the u. S. Treasury secretary there. Our next guest says the bonds selloff is overdone. Lets discuss where the opportunities are with rob williams, the managing partner and chief investment strategist at sage advisory. You think the fed has pretty much done its job at this point. Do you think there is further to go in the momentum we see in the bond market . You know, i mean, these things take a life of their own. There could be an upside to rates in the near term. I think the correction at this point is done. I think the markets have struggled with the fact that stronger data has forced the fed to adjust for guidance. There is no reason for them to hike anymore. The Forward Guidance is doing the job for them. Longer was not a unit of time. They to come to terms with what longer meant. You are getting the reaction in the rate market and equity market. Im not sure if it is overreaction yet. The soft landing narrative and Data Resilience didnt match what the fed had laid out six to nine months ago for easing, we had 200 basis points of easing in 2024 price then back in april. That is a big adjustment. Now youve got two possible cuts in 2024. Markets and rates had to come to terms with that. But i think it is overdone. Fair value further on is that we are going to cut rates eventually in 2024 and into 2025. As the market rules forward, they will realize, in 2024, i need to start pricing in those cuts that will come later in the year. We think the growth revisions are already baked in. A lot of positivity has been baked into upside Growth Potential over the last month. And so, the trajectorys still down overall. I think its going to be harder for the economy to surprise the upside going forward. Remember Forward Guidance follows data. The data has been stronger. Forward guidance and rates have gone up. If data starts weakening and disappointing, rates go back down. I think ultimately rates are kept capped. The weakness is down the road in the economy. Haidi does that mean you are defensive when it comes to equity positioning . We are defensive. In fact, it doesnt sound nothing sounds great this week. When you watch rates go up in a short time and you are not accruing income that quickly, fixed income doesnt look that great. But over the medium term, i would say bonds over stocks in this market. Time and carrry time and carry is to your advantage. With fields over 5 , you are carrying yield of almost half a percent a month, that is going to smooth out a lot of problems over the medium term. Think about the scenarios that we face. The economy either reaccelerates intoan expansion which is the lowest probability and the fed acts to hike multiple times or they are done hiking and we got o sort of soft dish landing and rates stay hi which is good for bonds, or the economy weakens more than we think. The consumer finally runs out of gas and we get some weakening and some f hose cuts get priced back in. Two of those scenarios are positive for bonds. I think the one we reaccelerate is probably the lowest probability, duration is kind of your hedge, bonds are your hedge against an economy that doesnt deliver on kind of this optimistic view we have builtin in equity drawdown. Shery talk to me about the u. S. Consumer at a time when oil prices are high and there is an extra tax for the American Consumer and we have those student loan repayments also happening mostly this month. How healthy is the American Consumer . Look, they are healthy and the sense they built up a tremendous cushion and we are not sure when the cushion will run dry. They have done revisions to the savings rate and data recently that kind of showed may be we had even more cushion built up than we thought. But they are getting assaulted from all sides. The Inflation Higher rate is going to take their toll. Its taking longer because they built up a nice cushion. Remember resilience in the economy cuts both ways. The longer they have to keep rates higher to metal inflation and prices battle inflation and prices are still high increases the medium term risk for the economy and for the consumer. The fed may be focused on core inflation but energy prices, food prices are the things that do impact Consumer Spending. Airfares, a lot of the components that are going up that the fed is not bank is not paying close attention to is impacting the consumer. We think it is a slow erosion of Consumer Spending. All cycles dont have to end in a flash like they did in 2001, 2008, they can erode slowly and that is what we are having here. I think we will still get a soft recession its just been pushed back a little bit sometime in the first half of 2024. Shery at least the u. S. Dollar seems to be going further for people these days given its strength against other currencies as well. Do you have a way to play that especially when we have seen such incredible weakness with the japanese yen and the euro as well . Look, we have been favorable. U. S. Stocks are still the best game in town even though their valuations are higher. You can hedge certain currencies. Etfs have currency hedge vehicles if you were in japan youve gotten a nice return, so theres a lot of things you can do. What you bring up a good point. A strong dollar but you bring up a good point. Youve seen the strong dollar usually traditionally into a risk off. A lot of the big picture factors like a strong dollar and the inverted curve are still telling you that we may have more to go in the equity market and i think the rate markets are close to being done by the equity markets have not felt the real pain of an economic slowdown correction. They are just feeling the pain of a rate related correction right now. They have not felt the pain of an actual risk off due to economic slowdown. That is the next leg. We have not seen credit spreads, they are starting to crack a little bit now. Your signal for the equity market when the real trouble starts is when you start to see spreads gapping out a little bit in the credit market. Shery more risks ahead. Rob williams, good to have you with us. You can get a roundup of all the stories you need to know to get your day going on todays edition of daybreak. Terminal subscribers can find that on dayb. You can customize the settings so you get the news on the indues and assets that you care about. This is bloomberg. Shery take a look at australia and new zealand bondswe really see treasuries perhaps looking pretty oversold. Taking a look at u. S. Easuries, 10 years and up, falling to the le in nine years. Taking a look at the momentum gauge, eig oversold conditns we are seeing much of that picture when it omes to everything from the short end of t thre