Transcripts For BLOOMBERG Bloomberg 20240703 : vimarsana.com

On tv and radio. The only reason we are on tour is bramos birthday. Happy birthday. Lisa thank you. Jonathan what else do we do on the birthday tour . Lisa im going to camden this afternoon. Tom hot, brown water with the king . Lisa you are appreciating yourself. It is a proper hot water. Tom 80 with crumpets. Jonathan lets restart. Fantastic guests, lets start with equity future on the s p 500 positive by. 1 . Not talked about enough this morning, we are very close to highs on the tenure this morning. 434 in america. Tom it is underplayed in america. 10 year real yield as the benchmark, against two percent, anything past 2. 03 is something new. This is underplayed right now. That is going to change abruptly. There is a meeting on wednesday. Jonathan there is neither another meeting on thursday. Your favorite line come that phrase from the disney movie, a whole new world. Tom it is a whole new world. Jonathan when wage gains do not get it done. Tom for the american audience, it is stunning to land here. And come here to a strike of Junior Doctors and 75 years. Much like uaw. In 75 years come you have nhs strikes over the pays these make. Residents, these guys make nothing here. Jonathan compared to the United States. Starting at 40 , down 36 at uaws. Lets go 3. 20. Nothing. Uaw does not want to play. Lisa if it is not 22 , if it is not extra sick days, is it just a full thing or else nothing . This does tie together with the angst in the bond market. People coming out and saying, this is going to keep inflation present for a longer period of time. Tom i thought our conversation was tough. Should i dial one 800 mustang and call ford, what are we going to do . I do not since that as we go through the week. Jonathan we have never seen anything like this. Dazed and confused. We talked about the structure ahead of the deadline. We have been talking about he has not followed this playbook. Lisa that was a feature of this entire program. It was to shocked and ought to try and clawback some concessions made in the aftermath of the financial rices. Ahead of Artificial Intelligence and changes technologically. Tom much of this, including tension in the United Kingdom, is get it while we can. If you lock in a disinflationary tendencies, many people suggest you better get it while you can. Do you like my bowtie . Jonathan it is beautiful. Nice. Ok. You want to move on . Tom move on. Jonathan [laughter] lets start with the price action. Equity futures positive by. 1 . Federal reserve wednesday. Thursday, bank of england action. Friday, the boj. Look at this bond market. 4. 34 is close to cycle highs. Crude at new highs for 2023 alongside it. Lisa driven by real yields bumping up a hair way from 2 at a time where people are gaining out, what does this mean for longerterm . 10 00 a. M. , Saudi Energy Minister is going to be speaking at the World Petroleum congress in calgary. Im curious what he says about how much they are going to continue prolonged meant of production cuts at a time where brent crude is bumping up against 95 a barrel. Meanwhile, the u. N. General assembly is holding a session this week. Vice of china is meeting with secretary of state Antony Blinken on the sidelines. Curious about this which came together quietly, especially in light of tensions between both nations in the european leaders in china. Today, kicking off a week of monthly housing data, 10 00 a. M. , u. S. Nhp Housing Market index. Housing affordability is the most negative, the worst it has been in the history of the series going back to 1986 by the National Realty association. I am wondering at what point you start seeing that feeding into some of this price wage spiral . Rents are getting expensive. Oil prices are not affordable. How do people deal with that . Jonathan should we share local knowledge . Rents in london up more than 17 yearoveryear. 17. 1 percent. Compare that to new york, manhattan rent being up more than 7 yearoveryear. 17 yearoveryear. That is phenomenal for the wrong reasons. Lisa you wonder why people are striking and saying, we have got to get paid more. It is staring at them when they see their rent increase, the bill at the grocery store. When they see their petrol bills. See, i am adapting. Jonathan you bringing this back to new york or just while we are here . Jonathan lisa i am not madonna. Jonathan good morning, jeff. It is good to see you. Yields at 5 of the front end pushing cycle highs on a 10 year. Is this the new normal . Lets go back to real yields. You can deflate headline cpi by wage gains or potential wage gains. If you take the 20 real wages nominal wage gains if realized, that real yield is actually a negative still. Central banks have to catch up. There is a risk owing back to your point about the wage price spiral, that is not going back anytime soon. Tom here we are, 2 . Whatever it is, there is a length of this new real yield. Where is the tension point the next year . Geoff where potential gdp growth is, if that headline number, nominal number, 3 to 4 , if it is still 2 , that real yield needs to go to 3 . Tom are we at a risk where the Interest Rate becomes less then the small g as others worry about . Geoff when does this become tom this is a nerd fast on the side of the desk. Geoff wages versus price spiral and oil prices where they are now come you get a price spiral accord new that when labor markets are tight. Are the unions making the gamble, or determination in manufacturing, labor markets are still tight in the u. S. Lisa is this signal or noise . Yes, it is tight. On the margins, you are seeing signs you are getting some sort of labor market softening. His this the last is this the last gas of labor market power or Something Else that has a stickier nature . Geoff this does feel like a last gasp. It is all about relative differentials. I think u. S. Markets will tighten compared to europe. I think labor has more Bargaining Power in shortterm, no Dollar Strength. That puts the fed on a more vigilant footing. Netnet, i think that is in the price right now. Jonathan very cliche of you. Lets talk about wednesday, we get a set of objections. Most people assume the 2023, revised growth figures are going up. Revised inflation figures are going down. What does 2024 look like for you and the team . Geoff it is more about, how long do u. S. Rates stay where they are . That is what the boj will be looking at. Central bank of brazil, central bank of turkey, centralbank of south africa, they are all deciding. When they look at their nominal effects exchange rates, they are looking at how long can the feds projection keep the dollar strong and will have to recalibrate their own forecasts. Jonathan is that dollar problem bigger in europe . Geoff it is. In brazil, much higher real gates. Tom suddenly, oil, 94. Where is the price of brent that is the tip point that accentuates that global slowdown . Geoff lets look at individual markets. China is a slowdown already. Unless you are looking at a real acceleration of china, the 5 or 6 you get into a demand issue. That becomes a problem globally. That can be a tipping point. If it is the u. S. Alone and u. S. Energy dependence, it is more manageable. Lisa the wall street journal had this expose, china might be weaker than you think. They talk about focusing on the Housing Market. Other people have said that from a u. S. Perspective, this is what people want to see but it is not what is happening on the ground. There is a great deal of strength right having been in china recently, what is your view . Geoff i was there three weeks ago. It was basically, several rose before you could sees the soldiers. On the way out of the beijing airport, barely any connecting flights coming out. Going back to the Real Estate Market, the Financial System in china stabilizing the Real Estate Market means stabilizing the Financial System. Shadow banking, for example. That is where i think theyre doing the right thing. How much more downside can you price in . I think it is limited. Tom do you partition china and the domestic Balance Sheet site domestic Balance Sheet challenges . Do you partition or not . Geoff at this point, china is self financed. We look at International Financing for chinas growth, it is limited right now. The transmission is, if things go right if things go all right, can they track down further . Jonathan there is an ev battle taking place. To a greater extent, the transition to evs is at the epicenter of this conversation. Are we heading towards massive tariffs for auto imports in places like europe . Geoff if you asked me two weeks ago, i would have said no. Jonathan what changed . Geoff for the first time in three or four years, european manufacturers looked and realized this is much more pressing than we thought. Jonathan german manufacturers are scared of what is coming out of china. Geoff absolutely. China saw this in advance. With the cooperative approach, you have seen backlash and they have seen the backlash from beijing. Jonathan this is only one industry. Do you think there is broader things that play that influence things like flows which contradicts cause in Foreign Exchange . Geoff that is going to feature heavily in terms of flows in asia and europe. The importance of employment especially in germany and Eastern Europe politically speaking, this is central to europe. Jonathan this was fantastic to kick off the week with you in europe. Grandma, i am with geoff, something did change on this front in the last couple of weeks. Lisa we have reports auto manufacturers in germany were shocked at how much further ahead they are and have more access to lithium. They own that market. At a certain point, if you cannot compete, you can regulate. Jonathan it is not just tech and supply chains, it is cost. That is why these negotiations with detroit three and the uaw get bigger and bigger. When you see 20 start getting declined, how do they compete with chinese evs . Lisa how do we survive this if we are trying to compete with them and the uaw said, figure it out, because we do not want to lose our jobs . Jonathan big story this week. The other story, it is rameaus birthday week. Bramos birthday week. Live in london, good morning. Were not writers, but we help you shape your financial story. Were not an airline, but our Network Connects global businesses across nearly 160 markets. Were not a startup, but our Innovation Labs use new technologies to help keep your information secure. Were not architects, but we help build stronger communities. Were not just any bank. We are citi. Still and this said they offered 21 . What are you expecting in tomorrows negotiation with them . That seems forward movement. We have asked for 40 pay increases. The reason why is because in the last four years alone, the ceo pay went up 40 . 21 is a no go for you . It is definitely a no go. We made that clear to the companies. Jonathan uaw president speaking on cbs. We are living in a world where 21 wage increases do not get done do not get it done. Lisa, how do you respond to this when ceo pay goes up and they turn around and say what does the ceo say . Lisa they say, you are trying to put us out of business. That is why ford came out with a layout layoff plan. They are trying to get the little power they have remaining before there are massive changes. Jonathan tk, ultimately 40 pay increases meaning you pay existential risk. Why are you getting one . Tom it is going to be interesting what Auto Companies say. Pseudoengineering analysis versus an ev, there are stark differences. My answer is, so what . This is a cultural statement, which is simply, we sacrificed in euro bankruptcies. With that sacrifice, we need to get some payback. I think that is where we are headed. Jonathan question of the week, how long of a visit will it take for tk and bramo to pronounce aluminum right . Lisa aluminum sounds better. Jonathan equity futures on the s p unchanged. 4. 34, close to cycle highs. Looking at crude, new highs for 2023. Euro, week 49 consecutive weeks. 1. 06. Tom there was not a bid off sterling through this morning, breaking through 1. 24. Sterling needs a bid. Jonathan coming and diverse coming up to the anniversary of the liz truss budget. Tom i have got my bowtie. Jonathan did you see what mr. Carney said . Tom i saw that. Jonathan yeah. It was argentina on the channel. What did you make of that address . Tom it was carefully worded. I thought i read the entire address and thought it was a very careful statement. They will move forward in the debate. Everton lost arsenal. I had to watch it. Jonathan ok. Because he is an everton fan. I did not know that. Tom right now, we need to survive american politics. Chief u. S. Policy strategist at agf, on Washington Post, they talk about five ideological factions of the republican party. I did not know that. Do you actually by the idea, given labor up rest in america, a possible Government Shutdown and mr. Mccarthy is dealing with five ideological factions . At least. It is quite a spectacle right now. He is on thin ice. I do not think he can get a deal before the october 1 deadline. We have a shut down. I call it a shut down light, it is not going to be the end of the world. We are not going to kill Social Security and medicare benefits. If you want to go to a national park, you are out of luck. I think this shutdown is going to last a while. Tom is there a shut down in detroit . I see them picketing and it is seven people out front. It looks like a lineup of dennys waiting to get in. Is this a real strike of labor like you and i remember, or is this pretend . Greg it is not like what we remember, that everybody went out and you did not selectively target factories. I think there have been some sign of progress. I think lord has been the most conciliatory. Florida has been the most conciliatory. Joe biden knows michigan has 16 electoral votes. I think biden will be influential in the final agreement. Lisa what will that entail . What will it take to get it done, or what that means for the viability of auto manufacturers that have traditionally added to the gp and fostered strength in the u. S. . Greg it will have to be close to 30 in wages, 40 is out of the question. Number they may go back to pensions. They may have less than a 40 hour work week. It will be generous and at to the perception that wages are sticky for the Federal Reserve. I think sticky wages are going to be around for a while. Lisa does this pressure lawmakers to get a budget deal done to avoid the extra hit on that front, especially at a time where there might be agreement on Border Control between republicans and democrats . Greg these people are on a different planet from you and me. They are fighting these parochial fights, knowing they are going to lose. It is clear this compromise over the weekend would never make it through the senate. Im not sure it would make it through the house. We are going to go through this exercise and sadly, i think this drags on into the holiday sales and holiday season, maybe after, before we get a deal. Tom over the weekend, lots of discussion about the president s age. Our listeners and viewers are exhausted by the debate. I want to know the timeline to where i get an lbj announcement like march of 1968. You and i were sitting on the couch watching the bruins lose. How do we get joe biden out to where lbj was in march of 1968 . Greg i do not think he realizes there is a problem. More democrats i talked to, almost all of them, say they would like to see biden step down. Two problems. Number one, he is delusional and is not think there is a problem. Number two, there is no logical successor. That is the problem for the party. Jonathan do the polls scream there is a problem . Greg absolutely. About 70 of democrats say they would prefer a different nominee. I have never seen a gap like that. You could have more pressure. The other thing i should mention is that filing deadlines are fast approaching, by late october, early november. It is to late to file. They talked about some lastminute rescue for the party, is unwarranted. Jonathan before you run, before you go, have you heard about that missing f35 . Greg the missing what . Jonathan f35. Fighter jet. Gone missing. Tom in the carolinas. Jonathan what on earth is going on . How does the military lose and f35 . Greg it is quite a story. I think is going to get bigger. Jonathan greg, thank you. I will share the Washington Post story. It reads, and advanced f35 lightning jet went down somewhere near charleston sunday afternoon. The pilot ejected safely and was in stable condition. The responders are not sure where the plane ended up. The jets transponder which usually helps locate the aircraft was not working for some reason that we have not yet term and. We are sitting here and somewhere, someplace, there is an f35 that the military cannot find . Lisa it raises questions about whether someone interfered with its signals and then maybe to get some rest. What else can you question . Tom i can question the moment i saw the news jon, i am you brought it up the Conspiracy Theory people will come with a vengeance. Obviously, someone screwed them big time. Jonathan at some point sunday, there was an f35 flying through the sky without a pilot. That makes no sense at all. Lisa correct. Jonathan we will see what happens with that story. Lisa it is interesting. Jonathan madame jones is coming up. Before we get there, price action for you. Equities on the s p 500 up i. 1 . Up by. 1 . 4. 34, huge week for central bank this visions. Wednesday, Federal Reserve. Thursday, the bank of england right here in the city of london. Friday, the bank of japan. Live from london this morning, good morning. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Jonathan equities on the s p 500 slightly higher by point 1 . Likewise on the nasdaq 100. Coming off the back of a mild week of losses on the s p for a second consecutive week. Bond market, 10 year yield close to cycle highs. 4. 34 on a 10 year, yields up by a single basis point. Intraday cycle hi 10 year and the summer, 4. 36. We are not far off. Lisa how much of this is being driven by wages . This concern wage price spirals is going to keep boosting inflation. It is underpinning the underperformance and questions and markets going forward. Tom across the pond, they would probably say it is a bridge in the economy. The bridge and the demand function lifts up yields into maybe a higher nominal gdp than anybody imagine. Jonathan crude, 94, 91 wti. Tom it is a shock to see how fast oil is moving. This morning, it was 94. 74 intraday high on brent crude. Jonathan it is amazing to see near close to triple digit crude where we are meant to be talking about recession at the end of the year. I want to finish on Foreign Exchange. Nine consecutive weeks against a weaker euro. Stand out decision of last week, ec president pristine lagarde rock in a hard place. Tom 1. 07 is where euro is. The answer is, weve got resilient dollar. Jeffrey you made clear short term that will continue. Jonathan 1. 05 on the euro this morning. A key week for Central Banks starting with the central starting with the fed on wednesday. Eoj rounding out . Lisa people looking at the dot plot and what they are understanding do they upgrade their expectations for the Economic Growth in this country and assume inflation can keep this inflating immaculately or does that raise questions on how far will they go . Jonathan are they going to mark to market their forecast because they got it wrong . Tom exactly. Jonathan based on incoming data, we are expecting the gdp revision up, inflation down. It is 2024 that is going to catch my eye. How much would is there to chop . How much can you push against rate cuts next year . Tom lagarde not go draghi on us. You are not going to get that from powell. These guys are going to be focused on datadependent meetings into next year. Jonathan they are getting desperate to get through 2023. The update on uaw, the president rejecting a 21 pay increase from stellantis as the strike rolls on. The offer coming in below the 36 raise the union is seeking with him calling it a no go, signaling the union and automakers remain far apart. Is it 40 or 36 . Lisa i do not understand. We do not understand what the line in the sand is. It seems detroit automakers are paying vastly more than tesla. They are paying about 66 on average versus 45. Wells fargo estimates if they conceded to all demands, that would go up to 136 per hour on average for all employees. Jonathan the final story, british Property Market breaking another record. Rent growing at the fastest pace in a decade. Tenants paid 12 more than a year ago with average rent in the u. K. , britain 1300 pounds a month. He highest rent on record. Tom give us your context. I do not need the details. Give us a jon ferro anecdote about how people are living in this. Jonathan we should do the compare and contrast. It is so different in the u. K. Because of the Mortgage Market structure. If you have got a 30 year mortgage in the United States, sit on it, hold onto it. Tease people about it. I do not know what happens. Lisa you think they would believe you . Jonathan are you going to hold onto it or are you not going to sell . In the u. K. , that anecdote does not exist. You will see an effective rate in the u. K. , much more higher and quickly then in the United States at the moment. Lisa how much does that fortify wage price spiral if people are realizing they cannot lift with the same salaries at the same levels . It keeps going up and it is this whole spiral. Tom governor bailey has a short and fixed. Jonathan he has stared down the barrel of eight presence 8 wage growth. What is intriguing about the boe decision thursday is, i see a lot of people expecting a rate hike. I look at recent communication from the bank of england, they are not screaming rate hike. There is a divide between communication i am hearing and what economists in london are expecting thursday. Tom i was having my hot brown water this morning. My phone rings. It is kathleen. Kathleen says, my daughter is going to be on with you today. Make sure you pronounce her name right. Matta aligned. Madeline. Jonathan it is not mattie. It is matt aligned madeline. Tom madeline jones, good morning. Thank you. Tom you live the nonfixed, floatingrate market. If you were to speak to your mother, anybody yesterday, what is your world of floatingrate debt due to the people of the United Kingdom . The floatingrate market, bank loans which are supplied to single be average quality Credit Companies these are structures that go back years ago, maybe more than that, when floatingrate was negative. In europe. They were not designed to contemplate rate hikes we have seen in the environment. Tom when they reset, to be clear, you are price up and asset volume goes down. Madelaine it is not as linear as you are making it out to be. As it comes back down to, what is the structure of that Balance Sheet look like and cannot company tolerate that inflection of floatingrate under nine rates we have seen. Some companies can, some companies cannot. I think the good news for europe is a lot of companies can tolerate it. They have not got debt maturities for some time. Some of them with fixed rate arc it would have to sentiment. We have had years of shocking environments, not just covid, but the ukraine invasion in europe. Companies have been quite conservative with Balance Sheets, paying down debt but not making big acquisitions, not doing shareholder buybacks and Dividend Payments but becoming more aware of the fact they have got rising costs of debt a have to deal with. Although we believe there is a cohort in their which is structurally challenge because of the Balance Sheets they put on years ago, we do not think there is a huge problem for the market. Jonathan can we build on that more, the difference between the transmit can the transition mechanism in the United States and europe . Does that mean the magnitude of the past rate hikes into the real economy is different . Madelaine on the corporate side, more inflating rate corporate debt. Feedback to the corporate is quick. Transmission mechanism to the consumer is still slow. I do not think we have seen that yet. I think for managers you have to decide, can we rely on that consumer being robust and the economy still thing isolated from that, or is that something delayed incoming other down the track and a recession may be pushed out a year or so . Down the path tom when will the transmission effects come into the economy for the consumers, . And what we are seeing at corporations lisa borrowing costs to not seem to have torpedoed corporate models. Why have things been so resilient after 10 years of people warning it would be armageddon if we got anywhere above zero . Madelaine it is partly delayed because the fixed rates part of the high yield bond market a lot of companies have a combination of mixed debts. Some of them hedge that out so it may not be as clearly impacting today as you might think. With the fixed rate, they are going to have to wait until the debt matures before they feel the pressure of that rising rate. Maturities, they are not that significant this year. Next year, they start to creep up. In 2025, you will see a higher rate need for refinancing at that higher cost. Lisa as an investor, how do you get in when the going is good . How do you know when there are opportunities when you are expecting to stress to come down the pike in a more material way, when you see the potential for yields to go even higher but are not able to capture more yield relative to where it used to be . Madelaine the job is to dissect that. I think the market the market is good at that. It has decided which of these company Balance Sheets are not sustainable. These are trading at . 70 on the dollar. It is around 5 , the markets down there. The market is saying that is a structurally impaired Balance Sheet which will need restructuring, cannot survive in his higher rate environment. For the rest of the cohort, a sizable market is going to be fine. You have to be very careful. Default avoidance is in our dna. We have to focus on protecting ourselves and stress test that thin layer of cash left in some of those companies. Tom the real estate people published an important article for new york city. Old buildings have an uncertain future. Old buildings with an uncertain future, that is a huge opportunity. How do you play commercial real estate in london, in manchester . Jonathan manchester is north of london. Tom how do you play across the United Kingdom . How do you play commercial real estate as an opportunity . Madelaine that is where you have to have the Analytical Team to understand the geographies and markets and what is the supply and demand fundamental looking like within the location . Europe is varied and across many different theogonies geographies. Tom where is the city that has an opportunity right now . Madelaine i think corporate real estate is not in my wheelhouse. I am in the corporate debt markets. You will find not so Good Companies with lots of good markets. Some places have been traditionally some of the best because they tend to get over levered. Jonathan name them. [laughter] madelaine as a geography, everything is built from one issue. Granular, up. It is not taken on a top down. When you look at us and our portfolio where we were a year ago where we are today, someone like germany has become a lot less significant in our portfolio because we found a lot of industrial germany was successful because it relied on lower cost of energy. Now that that dynamic has changed initially, they did a brilliant job of shoring up that Energy Shortage crisis. It is still structurally more expensive and that challenges competitive nature of industrial germany. We have tailored back down some of our exposure there. It is things like that. You can start to see a picture of where those events are taking place. Jonathan thank you. You want to do a shout out to her mom . Tom kathleen, i hope i nailed it. Madelaine. Jonathan are you flirting with madelines mum . Tom briefly. Jonathan Energy Aspects on dollar crude, up next. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Jonathan should they worry about 90 crude . They should. Otherwise, they will repeat the same stake they made in 2022. Services were inflating. If you wait long enough, services will distantly. The feel was that goods were deflating. That will keep people up. Jonathan that was Mohamed Elerian speaking to me on friday about the impact of higher oil. Potentially for the Federal Reserve, which meets on wednesday. Crude this morning, 91. 45. This is stuff we have not seen. Crude is at the heart of everything right now. Tom the three of us got together, we almost never see each other because of the crazy new york schedule. It is something here. This morning jonathan let me cut in. I come in downstairs today. Tk is having a fruit bowl. You were there for it. What came before the fruit bowl . Tom [laughter] you nailed it. The lead story this morning for global wall street is not happening, the bond market is moving. We are all jaded by it. The levels according to real yield, these are substantial numbers. They changed the dialogue of these three fed meetings, the one we are underplaying at yen in japan. Lisa this speaks to this question of goods disinflation and goods reinflation. Because of petrol and how it influences everything. Tom bramo is killing it. Jonathan i will ask the question i asked mohamed, is this something the fed can ache nor on wednesday . Lisa they cant ignore it. They are going to say it is transitory. If they see goods inflate, can they say that is transitory to . Can they say it is manipulative . How can we know if oil prices are higher because of demand or cuts . Jonathan i think for a lot of people who have their annual Wage Negotiations looking at what is happening in detroit, kind of matters. They want a bigger share of that and want to ask for it. Tom lisa put out that chart on union and it has spiked up. It is back 15 years to the angst we are seeing now. I agree, it percolates. The percolation of what you do to make brown water. Jonathan do you want to explain what you think is hot, brown water . Tom in richmond this weeken d, what was great was walking down the street and people were walking by me. Jonathan where did you go . To the ballpark . We are going to stop this now. Wti, 91. 54. Tom [laughter] let us move on. Amrita joins us now to save us from the ballpark and joins us from canada, which is an oil producer. Within your industry, are they looking at this as a surge that can and will or is that can ebb, or is this a new pricing to stay . Amrita it is still early. It is not even 5 00 a. M. Here. If i had to guess, i would say they are going to be happy. There is one Petroleum Congress open with ministers all around the world that are gathering. There is lots and lots of talks with both consumers and producing companies the next couple of days over here. The reality is, demand has surprise to the upside regardless of recessionary fears we have seen. What is interesting for me is, yes, crude is getting the headlines now. If you look at products and crack spreads, they have that have already been high for the last few months. Gasoline and diesel have been trading at 120 plus per barrel. Crude is catching up. Those prices have not necessarily gonna further. This is one of the redistribution between refiners and producers. I do not know why the media is focusing on crude. I do not think the end user is necessarily seeing that big of an impact versus a few months ago. Tom right. What is a representation or tone of china . Is the marginal demand 11 in the room at the congress . Is china there in a big way . Amrita i think there is going to be presence, for sure. I think the dichotomy between chinese micro macro and oil demand is going to come up. In the west and western analysts keep looking at the chinese macro data and saying, oil demand has not been performing at, oil demand has been hitting record highs because it has become consumer oriented. China has Strategic Oil reserve filling going on, as well. Having locked in favorable prices earlier in the year. Lisa what is the pressure on the prince today who is speaking around 10 00 a. M. Eastern time at the calgary conference to increase production, especially if this is driven in part by demand, not just supply . Amrita he has been clear that there is a lot of uncertainty, be it from the fed itself or even china, all the noise coming around. He has to be 1000 confident that there are not going to be any surprises with fed. It is a chicken and egg. If oil prices go up, what does the fed do . I think they are going to be cautious. They want to ensure inventories do not build because of those macro concerns. Saudi arabia has extended the cuts year end, so did russia. The main thing they want to provide is stability. I think that is what he is trying to do and what he is going to focus on today. Lisa it is a interesting confluence of events. The United Nations are holding a conference, the focus is going to be on Sustainable Energy and moving away from fossil fuels. You have electric vehicles underpinning discussions with the uaw. How much is this underpinning saudi arabia to get more profits now before some of these groups facebook fossil fuels for they become less of a focus later on . Amrita that goes both ways. That is why other countries went to make sure they do not have stranded assets afterwards. I do not think opecplus policy works like that. We have written about this. Saudi arabia and most companies opec companies are revenue optimizers. They are trying to say, if this is the price and we cut or raise production, what is our total revenue going to be . They are concerned about longterm energy transition. I would not use the word concerned, they embrace it. They are doing a lot around it. They are aware that oil has to fade over time. They disagree with the timelines the iea has put out. Tom what is the timeline of an oil vector in june or july of 70 something, up to 94. 51 right now . Is that a continued vector up . Do you see 96, 97, etc. , etc. , etc. . Amrita price forecasts or q4 was an average of 92 for brent. The question is an average of 92, we are putting on a piece later today calling for 100 by halloween for rent. This is a trajectory. This is a short term thing. I am not saying it is going to average above 100. Could it average 100 for a bid, absolutely. Jonathan did you say by market did you say by halloween, or was that just a marketing mechanism . Amrita i think fundamentals are strong right now. Also, positioning. That is one thing a lot of hedge funds are under position because of macro concerns. We are seeing passive money come back. The money combination of that could be a temporary upswing in crude. We are expecting it to average above 100, but it could go above 100 in the next couple of weeks. Jonathan only five dollars away. We will run with that headline, 100 crude by halloween. It is around the corner. Tom i need my outfit for halloween. Jonathan what are you going to wear . Tom i will go as a barrel. I like that idea. Jonathan 100 crude. Tom i think this is a smart idea. That is what he said. Jonathan 94. 51 on brent. I have seen it out of the corner of my eye. Andrew of pimco, coming up next. Live from london this morning, good morning to you all. Equity futures slightly positive. This is bloomberg. sirens [due at ta] copy that. Make a hard left down the alley. Networks got you covered. [please confirm requesting backup. ] changing route. Go. Roadblock ahead. Back up, back up. Reverse reverse next level moments, were 30 seconds out. Need the next level network. [north corridor, hurry ] coming through or 3, lets go. The network more businesses choose. Transplant received. At t business. Every business thats why comcast business de is launching theal. Mobile made free event. With our business internet, new and existing customers can get one year of unlimited mobile for free. Its our best internet. Powered by the next generation 10g network and with 99. 9 reliability. Plus one line of free mobile for an entire year. Its the mobile made free eventhappening now. Get started for just 39 a month. Plus, ask how to get one free line of unlimited mobile. Comcast business, powering possibilities. We have yet to see the full effects of the previous tightening comfort to the real economy. The structural imbalances in the u. S. Nobody wants to deal with in washington. The big concern is things get unruly in china. The fed will be very paying close attention to the path of energy. The fed will pause and indicate they are data dependent. This is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. Jonathan live from london on the edge of san good afternoon good afternoon for our audience worldwide. This is bloomberg surveillance on tv and radio. Alongside tom keene and lisa abramowicz, i am jonathan ferro. Just a touch positive on the s p. Massive week of federal Bank Decisions. Wednesday, the Federal Reserve. The boj around the corner. Tom translated, 94 forecast i would suggest the bank of england 7. 24 for a gallon of petrol in the United Kingdom. Jonathan that is real money. Tom that is real money. Lots of electric vehicles here, way more than i would perceive in the United States. But inflation is there. As you said earlier, at our leisurely english breakfast, powerful english breakfast, it is just real simple. All in. Inflation is the story, higher yields. Jonathan this hurts, even with wage growth in this country. A lot of difficulties in the u. K. , just as there are in the United States. At the moment, we are looking at a growth forecast that is set to be revised higher for this year. I have no idea what 2024 is looking. Reflecting that, crude near the highest we have seen for the whole of this year. These kinds of things percolating and have hardly been talked about this morning. Bond market, right by the intraday cycle highs, and i do not see a headline on it anywhere. Lisa and it is driven by real yield, which means the expectation of inflation breaks in the market versus the actual yield is the highest going back nearly to 2009. We are bumping up against 2 . At what point is this a statement about some of the Wage Negotiations pointing to some sort of wage spiral, at at what point is this pointing to some sort of fiscal pushback, and at what point is this just great deal, go get it . Tom i am not in the wage spiral andrew ballss next to me, and will bring him in any moment. The query the key question is the benchmark the fiveyear real yield has uncommon value to me. It is a meltdown just to give you a flavor of what is happening cross asset, futures slightly elevated on the s p 500. Last week, a very mild week of losses. In the bond market, a single basis point higher. Just to finish on the euro, nine weeks of Dollar Strength against a weaker euro. Trying to bounce back from that. Lisa the eft did a poll of economists. 40 of them expect more than two more rate hikes at least in the next couple of years. Today, we are looking at oil. At 10 00 a. M. , we get some words from prince abdulaziz bin salman. Very curious how he does supply against demand. The increase really has come from a stronger than people give credit to china to the rest of the world. We hear a lot about electric vehicles and Renewable Energy from the u. N. Assembly, which is beginning. Perhaps a discussion with the u. S. And china. Jonathan just to say that is why we are here. To avoid this. This is like the worst week of the year, living in manhattan. I hate it. Traffic everywhere. I wish they would move it, u. N. G. A. Tom after schools are being shut down this week. Lisa honestly, we all had the same thought how lucky are we to be in london . Jonathan take it to queens. [laughter] lisa meanwhile celebrating a birthday. We would love to do it every year. Meanwhile, also celebrating a week of housing. This is when all the data gets put out, the nahb Housing Market index. This comes as affordability hits the lowest levels in the United States going back to when the series was created in 1986. This raises the question, what goes first, the price of houses, but or do wages go up to respond . Jonathan a sneak peek at the rest of the week as well. With us around the table, andrew balls, Global Fixed Income cio at pimco. Fantastic to be with you. Is this a moment in time, buy, buy, buy, walk it before it goes away . Or can we live with this . Andrew we are in the middle of our discussions, so we are still talking about this with the investment tom give us a head start. Andrew but it looks attractive. If you have a high quality bond fund, 5 , 6 yield in u. S. Dollars with more credit, maybe 7 , 7. 5 yield, this looks attractive. Equities have done very well this year. Looking forward, 6. 5 percent type deal for a bond fund looks good. Lisa does this look attractive now . And where is the where does the move come from, is it higher or lower . The two different discussions with how sticky this will be, how big is the argument now in some of these meetings at pimco . Andrew you are talking about real yield, and i was nodding. When you look at real yields and longterm history, it is starting to look attractive. We had this period after 2008, quantitative easing and all of that, depressed real yields, but you are now seeing real yields at attractive levels and nominal yields i was quoting before look pretty good to us. The outlook, you have inflation still stubbornly high at the core level, improving much faster in the u. S. Compared with europe. But i think the jury is still out there. Dont forget the Recession Risk and we have had significant global tightening across the world. Yes, to date has been better than expected, particularly in the u. S. , but Central Bank Tightening takes time to feed into the real economies, so looking forward, the jury is still out on inflation, but that Recession Risk remains significant. Tom critical question for pimco and it is not only the heritage from bill mohammed and the great call you made a number of years ago you have got the advantage of the former vice chairman Richard Clarida darkens the door. I can see balls and clarida in a debate on where we will read start restart. Do you sense, within all the great work that you do, that we will reset in a new rate regime, something we have never experienced before . Andrew i think it is an interesting debate. Rich and i tend to agree on this point, that as you look forward beyond this inflation episode, the cyclical rise in policy rates we have seen, there is good reasons to think our star mutual rates are at the lowest levels we have seen for the last several years. We will see this in the feds projections this week, but chances are the fed will also see 2. 5 as their long dodge. Compare the 4. 5 for the 10 year treasury or look at the forward rates and compare it with that neutral anchor. We believe that anchor remains the correct way to do the analysis. And then the longterm outlook first is that it looks very attractive. Tom does bailey have an rstar . Andrew they all have their variations on this. I think the fed has been happy to talk about it sometimes, but looking at bund yields now, even in japan, youre getting to levels, in terms of the 10 year yield where it is starting to look more interesting, controlled for volatility return, per unit volatility return. Once we get beyond the yc sea, beyond the yield curve control. So if you think you have that anchor, and we do, you will look at the five year yield forward rates, the longterm expectations beyond this central bank cycle, that is the environment, when it is much easier to be positive like i am today compared to the lows of the covid period. Jonathan we do not spend nearly enough time talking about this, how different this regime is compared to the last version before the pandemic. How different is it for you, the approach away from zero rates and forever to potentially the ecb going to levels i never thought they would get to here we are at 4 . How different is this for you and the team . Andrew it is very different, and as a bond manager, you like to see these high yields at the front end of the curve. It becomes very interesting, the value at the front and them of the curve. Zero yields, number those . Something we have hopefully consigned to history. One thing important to look forward is uncertainty around inflation. We see inflation coming down towards central bank targets a little bit above, but coming down over the course of next year. But clearly, there is much more uncertainty in the inflation picture for the next few years compared to the last decade. So back to the discussion for, you should be getting term premium. You should be getting paid appropriate term premium for holding the 10 year parts of the curve. But comparing our forward rates with our expectations, it looks like you are getting fair compensation after a period when, with quantitive easing in all, risk premiums were compressed. Lisa what about credit . Given the fact you are looking at raider vulnerability to an Oil Price Shock or a unionization shock or a technological shock, some of the things that become more important when your question is that much smaller . Andrew i think the baseline for credit looks fine. Credit should do well in an environment where you avoid details not just about recession but real recession, not just a technical recession. And if inflation is coming back into line. With that fairly benign middle path, credit should be fine. From our perspective, we want to guard against the tails. If we get deeper than expected economic downturn, that will be painful in credit, credit up in quality. Avoid cuts to credit, avoid any kind of exposure to real default risk in what remains a really uncertain environment. It is not often you have these sorts of tightening cycles globally to such an extent. The final thing is there is lots of other stuff we can do in the world. The u. S. Has seen mortgage as a highquality instrument, very attractive in terms of the valuation. Again, if you can get to the 5 , 6 type yields on core bonds, that looks pretty good to us in terms of the next few years. Jonathan always a privilege. Andrew balls of pimco. Bond market, the twoyear just north of 5 , the 10 year just about 4. 44 . The s p positive bite literally nothing, 0. 0 4 higher. Outside of that in the Foreign Exchange market, the euro positive by 0. 1 . Crude, 91. 52 on brent. Tom are they going to go up or down . I love who watch who played chelsea . Bournemouth, maybe . I cannot remember. I love the little stadiums. There is no american equivalent to how close the people are. Jonathan whats the norwich stadium like . Andrew very loud. I go as often as i can without knowing my annoying my wife. Tom but it is like there are 10 fenway parks here. Very cool. Jonathan and the new owners want to come and rebuild things. Tom so who are you playing in the efl . See how i did that . Andrew leicester. Top of the table clash coming up. Jonathan from london, this is bloomberg. captivating music the first law of thermodynamics states that energy cannot be created or destroyed. but it can be passed on to the next generation. i feel we have made Good Progress this weekend. I want to make sure we do not shut down. I do nothing that is a win for the american public, and i definitely believe it will make our hand weaker if we shut down. Ive never seen anyone win a shut, because when you shut down, you give all your power to the administration. Jonathan i cannot believe there is another story i follow less than this one. House speaker Kevin Mccarthy discussing the possibility of a Government Shutdown over the weekend. So many people who listen to this program find this subject absolutely tedious, and they start to ignore it. The ignore it, and that it starts to matter. Does this matter . Lisa it seems unlikely they will, with a proposal based on the fact the proposals they have out there will not even past measure within the house. When do people start caring enough to possibly get on the same page and get to some agreement . When do people care enough to put that into economic projections, considering it does have something of a drag . Jonathan how much does this mess with the impeachment inquiry that started a week ago . Lisa i honestly will not, with rationale, but right now, there is a bit of try to cater to the right of the parties that you can get some sort of deal through so youre not accused of shutting down the government, and that is part of the wrangling. Jonathan as if hes s p up by 0. 1 . Yields just about unchanged on the session. Came close to intraday cycle highs on the 10 year earlier this morning. In Foreign Exchange, 1. 0669 on the euro. Crude near the highs of the year, 91. 40. Tom that gets my attention. I am riveted with what we heard from andrew balls. The three of us at norwich against leicester on the 20th. Jonathan i was not aware that andrews brother is no longer the chair tom they start 441. Thats a draw, not a tie. But that is good to see you from norwich. Speaking of norwich, we go to your message come away from the follies of washington, is you are watching the things away from the green marble of that United Nations. What meetings really matter . Annmarie the meetings that happened this week are the things not happening at the uns general assembly. What we learned is president Bidens National security advisor met with xi jinpings foreign minister in malta. What those two were talking about, a number of issues, but really the potential for xi jinping and President Biden to have a meeting. These two leaders have not met the g20 in bali. But obviously we have seen highlevel meetings from counterpart to counterpart in beijing care this could potentially see xi jinping coming to San Francisco for the apec summit. Then wang yi will meet with sergei lavrov. So i want to see what happens between that wang yilavrov meeting, which is on the heels of Jake Sullivans malta trip. Tom why is the u. N. Suddenly a nonevent . I have a memory of being at the council of Foreign Relations and qaddafi walking behind me. It used to be a big deal. Why is no one showing up . Annmarie it is still a big deal. For diplonerds, you can potentially run into erdogan. But these moments have happened, and you can get these moments where you can see what they are who they are speaking to, but it is the side line meetings happening alongside the u. N. , like President Biden will be sitting down with benjamin netanyahu. Interesting that it is not happening at the white house. Obviously, there have been some tensions between jerusalem and washington. I am just saying, in the broader aspect of the geopolitical landscape, the most important meetings, when you look at Jake Sullivan and wang yi, then wang yi to moscow, these meetings are outside of new york city. Tom its like a bylat lisa as i immediately googled diplonerds. Theres is a whole website dedicated to it. I am curious, where are the forums going to be held, in what kind of space, to bring power together at a time of increasing divergence . Is this something people are really talking about at this u. N. G. A. Meeting . Annmarie at every u. N. G. A. , or u. N. General assembly meeting, people will cast, is the u. N. Obsolete . The past year and have has showed just how constrained is the u. N. Russia sits on the security council. Can the u. N. Actually do anything to stop this or . No. And that is part of a lot of criticism that u. N. Gets. But really, it is just a forum to bring individuals together. Another interesting story that will be happening along the sidelines i reported this last week. The Iranian Foreign ministry confirmed it. We will have a Prisoner Exchange between iran and the United States. I also have reporting that 6 billion of iranian funds held frozen in south korea have been delivered as of this morning, about 4 00 a. M. This morning to qatari banks. What our colleague is reporting is potentially there will be some discussions on nuclear i program inran between intermediaries with the United States and iran alongside u. N. G. A. This week. Tom following lisa following up on what you are saying that one of the most important meetings already took was between tony blinken and his chinese counterpart, was it something to really shore up Foreign Relations . Annmarie this Jake Sullivan meeting is the preview to the President Bidenxi jinping meeting. They can speak a little more candidly than yellen and her counterpart. Jake sullivan and wang yi are the ones who can really set the parameters of this meeting, which United States has been asking for. Xi jinping is dealing with a difficult economy domestically and also difficult issues within his government. We still have missing the former Chinese Ambassador to the United States, who was the foreign minister. He is the one who should have been sitting with Jake Sullivan, but he has disappeared. Unclear where that individual is. And li shangfu, the head of the defense minister, who they refuse to have a meeting with lloyd austin with, because of the fact he was sanctioned by the United States. You see movement within the chinese government. Potentially this is the time xi jinping comes to the table, and it will be on u. S. Soil. Jonathan we have got to squeeze this in. How has the u. S. Military seemingly lost an f35 fighter jet . Annmarie i do not know. Ive been looking to see what the command center has been saying. The pilot was able to evacuate, but still this f35 seems to be missing. I have a lot of questions, as do you. Jonathan amazing story. Annmarie at the u. N. G. A. Lisa i hate it. Actually, its really fun. Tom u. N. G. A. , u. N. G. A. Hooked on a feeling somebody did a remix, and they go unga, unga, unga. It was a huge hit. Lisa i think it would be great. Lets do it. Jonathan how do you lose an f35 . Lisa i dont know. Heres my question, what do they know that they are not saying . Is this an issue of the weather needs to clear to go into the lakes or wherever they think there may have been some sort of accident . Was this something about the Transmission System and what could have gotten hooked in . Jonathan was it on autopilot still with fuel. Lisa i do not know the details. We do not even know why he ejected, the pilot. Jonathan pretty fascinating story. Catherine Katherine Neiss from pgim fixed income coming. Live from london, this is bloomberg. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. se fue la luz its possible. Pero todavia tenemos wifi para hacer las tareas. ¿y eso es algo bueno . Wifi y estudiar. Buenisimo. Wifi y pedir una pizza online seria buenisimo. Presentamos storm ready wifi. Solo de xfinity. Ahora puedes mantener una conexion confiable durante apagones, con datos celulares ilimitados y bateria de respaldo de hasta 4 horas para mantenerte conectado. Obtenlo solo con xfinity. El hogar del 10g network. Enterate mas hoy. The power goes out and we still have wifi to do our homework. And thats a good thing . Great in my book who are you . No power . No problem. Introducing stormready wifi. Now you can stay reliably connected through Power Outages with unlimited cellular data and up to 4 hours of battery backup to keep you online. Only from xfinity. Home of the xfinity 10g network. Jonathan coming off the back of a mild week of losses on the s p 500. Trying to bounce back, but no sign currently. No drama this morning. The week really begins wednesday. We will talk a lot about Central Bank Decisions this morning and through the week. In the bond market, the twoyear, 10 year, 30. Your 10 year yield came very close to a cycle high earlier little earlier this morning, within a basis of it this morning. This morning, we are just about a faces point away from it. Still in the 4. 40s in the 30 year. Lisa we were supposed to be at 3. 5 for some. We were supposed to be talking about instead, we are talking up out a 10 year to the highest levels back to 2007, raising real questions what the fed will do wednesday. Jonathan climbing for three consecutive sessions, building off some of the moves we have seen. I want to finish on Foreign Exchange. It has been nine weeks of Dollar Strength against the weaker euro , and those numbers tell a story. 1. 0666 for the ecb. Lisa is this a driven by u. S. Strength, or both . How do you get the dollar dictating what we hear, not just from the bank of england and the bank of japan this week, but also the bank of sweden and turkey and everyone else. Tom i really want to state something we have not stated. The resilience of the equity markets is shocking. If you give me the news flow, including u. S. Government shutdown right now, i said just we pop down 8 , even 12 , on equity markets as a guesstimate. Jonathan question of the moment reflection of the extension of the cycle or eight recipe to end it . Prude in the 90s, the twoyear act 5 , what is it . Lisa depends on what is driving it, especially crude. If you look at it on an inflationadjusted basis, it does not look that reason to relative history in the u. S. When it comes to rates, is that being driven by healthy inflation or unhealthy inflation on the heels of some of those crude moves . Jonathan top story this morning, the fed met to make its next decision wednesday. Meanwhile in the labor market, they have got to talk about this. The uaw rejecting a 21 pay raise from stellantis. Negotiations will resume today. If 20 does not get it done i spoke to david welch about this about two weeks ago going into the deadline, and i said what do you think it it on . He thought 20 , around that kind of level would get it done. 21 is not getting it done. Lisa so what does it have to be, and what does it do to the detroit auto manufacturers at a time of incredible competition . Tom i am sure it is not just about the pay, it is about the other themes as well. And the whole ev dynamic is interesting me more and more. They want a Union Electric vehicle jobs. Aunt mary bar is physically saying and mary barr is basically saying no. Jonathan europe is facing the consequent is of under investing on the continent the hind this race. Ultimately means competing with chinese manufacturers that do this at a much lower cost. And as we mentioned, something changed in europe over the last couple weeks just on this front. It feels like the e. U. Are not going to tolerate that competition. Lisa because they understand how much ahead china is when it comes to that. But from a workers perspective, how much are they getting into tried to affect how some of these technological changes affect their jobs before it is too late . Jonathan Kevin Mccarthy calling for an 8 spending cut to domestic agencies and for work resume on a border wall. The house expecting to vote on the measure thursday. We are doing this all over again. Tom i level the Washington Post said, where there is five ideological cohorts of the republican party. My basic idea is even the least fist least sophisticate of people know and a percent budget cut, i assume nominal, maybe that even mean real it is just foolishness. Why waste our time, of all political persuasions, doing that . Lisa this is not popular with voters. Nobody likes seeing Government Shutdowns. How divorce is washington getting from voters, whether from the republican side or the democratic side . It raises this question, at what point will political this may at a potential Government Shutdown actually mean anything ind. C. . Jonathan we talked about the economic perspective, but lets talk about political perspective of oil pushing 92 a barrel . It is push by supply and demand and continued cuts. The Saudi Energy Minister is excited to speak at 10 00 a. M. Eastern time. Energy costs putting pressure on businesses and Central Banks, arguably even putting pressure on this white house, going into an important 12 months of campaigning. Tom my intention here is i do not see people going up and back down again. I do not hear many people saying we will wander back to 85 a barrel, which, wrigley, is still high for people. Jonathan do you have to bake that into forecasts next year . Tom that is a loaded question, because they have this foolishness of core inflation. I am old school i put less weight on it. I think our core analysis is valid. I just dont buy, for a minute, the core analysis. Jonathan through getting close to 95. Tom 95 a barrel. We will see how it fulton to the markets. There is wonderful cross asset analysis right now. Lets start with basics, dollars 101. Despite surprising stability of the dollar. Does it sustain . Yeah. I think we are in the midst of an unheralded dollar. This is the first piece of research i turned out at thematic markets. I look back and see what drives these is, huge 17 year cycles. What it seems to relate to is innovation cycles. Until the cycle dishes, the dollar does not finish. We are not done with the cycle. Tom if you believe in a car the chief cycle and you tie it into innovation, that screams to me american excellence. Is that overplayed . Marvin i do not think it is. There are a couple things going on. One of the things different is the shortness of the investment cycle. As we are seeing every day, the Technology Cycle is getting shorter and shorter, so the u. S. Is still running ahead of everybody the way it did not in previous cycles. The second is take a look at data. U. S. Per capita incomes left europe hind in 1990 and have never looked back. There is no convergence anymore. And now it is starting to happen against emerging markets. Tom what is interesting is your investment cycle was to already half days . Jonathan you are going to get me in trouble, just for the record. [laughter] are we done with that . Lisa we are done with that. There is a question about what it means in terms of Central Bank Policy or if that is not relevant, because people here are accepting the ecb to be dealing with a more tractable wage spiral and inflation problem than the one in the u. S. , and that will leave a tighter ecb policy, all things considered, for longer than the u. S. You are saying it really does not feature in here in terms of the dollar cycle . Marvin it absolutely does, but one of the key things people forget is Central Banks do not set rates, they respond to the economy. If you look at the fed forecast, they did not tell you there were going to go this high. They had to because the economy told them to get all the things you were highlighting earlier about the mystery of why the economy is doing so much better than expected, why earnings and the equity market is doing so much better than expected this is all a Technology Cycle. They have to respond. Lisa if that thesis holds through, then wouldnt the chinese, u. N. Be doing better considering the innovation around electric vehicles and how underestimated the has been based on reaction from german automakers . Marvin this is a great question. If i go back to some of the previous research, i got wrong early on. It is about something called localization. If you look at the data, it is not geopolitics or covert or any of that. Those accelerated it, driving the move away from globalization. But it is the localization of production that is enabled by technology. No one is doing it better right now than the u. S. That is what is driving this. Jonathan havent we proven also that preventing conflict to has totally failed . Marvin you can go back to world war i. Who were the largest trading partners with each other . The u. K. And germany. This is a failed concept. I do not know why people thought it would work this time. Jonathan where does that leave china . Marvin china has its own set of problems. China pursued this massive industrialization policy through subsidizing capital, repressing consumption. The same thing that many of its east asian predecessors did, just on a much grander scale. It will not have to pay the price. Fortunately for china, it is the creditor to itself, so like japan, you will not have a Global Financial crisis type thing, youll just have a lost decade or so. Lisa which is the reason why, what is the most important meeting this week, the fed, the bank of england, or the bank of japan . Marvin i do think the bank of japan is the most interesting one. The fed, they are finally caught up the curve. That does not mean they are at the end, but they actually have a chance to pause. So it is a tossup there. But the bank of japan is actually potentially changing course. Tom i love the big picture you have taken. I will go back to a podcast, some of my favorite people, on economic history. Are we at a junction here where there is a newnew, where leadership at the u. N. Can actually piece together a new world, or will it by a marvin barth slog here . Marvin one of the themes ive highlighted about localization is that this is holy n wholly new in human history. We have records, before homo sapiens existed, about increasing trade among hominids. It is all speculation specialization of labor. When i can substitute a machine for all different variants of human activity, intellectual and physical, why do i need to use the cheapest labor anywhere in the world trade with that Specialized Labor . Tom do i need a new iphone . [laughter] i just want to know, do i need a new iphone . Marvin yes, because they are limiting your memory and speed. Tom thank you. [laughter] jonathan we believe that there. Marvin barth of the medic markets. Tom will you come back tomorrow . Marvin of course. Jonathan s p negative in the last 10 minutes or so. In the next hour, dont miss this conversation with gilles moec. The line above guests some of the headlines, triple digit crude by halloween . Andrew balls of pimco talking about buying duration. And the 10year in the 4. 30s tom for global wall street, this is a must listen with gilles moec because he woeful in some of the on the gloom basis, where is germany six months from now . But it is much more the holistic view of europe. Lisa and why have stocks been so resilient to where we are in terms of real yields, in terms of yields, in terms of yields come in terms of oil prices . We are looking at a market that is not what anyone expected it will be six months ago, three months ago, three weeks ago. Tom do we have to go to break here . Jonathan in about 30 seconds. You have a bit of time if you want. Tom i just think Larry Mcdonald was great about it. There is a wall of money that has to go somewhere. Jonathan into the equity market so far this year. Coming up next, Katherine Neiss of pgim fixed income. A triple header the fed wednesday, central bank thursday, boj friday. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. sirens [due at target in 5 ] copy that. Make a hard left down the alley. Networks got you covered. [please confirm requesting backup. ] changing route. Go. Roadblock ahead. Back up, back up. Reverse reverse next level moments, were 30 seconds out. Need the next level network. [north corridor, hurry ] coming through or 3, lets go. The network more businesses choose. Transplant received. At t business. I think the markets are will thinking inflation will drop towards 2 , and therefore, the fed will cut rates and cut them aggressively. The fed is pushing back, saying we will essentially be higher for longer. Not just the central bank but others will be optimistic the fed will aggressively cut rates starting early next year. That is not going to be the case. Jonathan Nouriel Roubini speaking early today on bloomberg brief. A new show, catch the at 5 00 a. M. Eastern time. S p futures just slightly negative on the s p. In the bond market, we are totally unchanged at 4. 3365. Absolutely fascinating to see yields get very close to cycle highs again on the 10 year within a basis point this morning. Commodity markets have crude back in the 90s. A conversation about maybe 100 brent by the end of october. That is a surprise, given where we were in the summer. I think it is a move of Something Like 35 on wti since june. Tom i think you are talking june or august, and it is a 30 raise. The fact is, here we are, and we pride ourselves here with will kennedys desk, and you look at the Bloomberg News hydrocarbons analysis, and all the experts how many people do we see saying we are going back to 70 in oil . I do not see it. Jonathan what i hear and see is what you will see. Lisa, you blame saudi and russia, it is not about demand but supply. But it holds up, given slowdowns in china and problems in europe. Lisa the only person calling for prices to come down is ed morse at citigroup, and he is the one who got it most right this year. He says the swing factor is supplied. The u. S. Is producing a record amount of crude. If they continue to do so, that could potentially change the scenario. Jonathan near 13 Million Barrels a day, 12. 9 Million Barrels a day in america. Fire fighters on this in the last week. We talked so much about antifossil fuel stance at the white house. As it make a difference if we are pushing 13 Million Barrels a day . Lisa good question. You see a difference in the actions of the white house versus the rhetoric. Tom one of the great things in economics is every region, every school, has a specialty. British columbia owns eco nometrics. She is out of british colombia, Katherine Neiss kg gets to tell bond managers she is smarter than they are. Thank you so much for joining. I want to go to the right hand side of the algebraic equations you are and expert at, the upsilon. What is the level of uncertainty . Is it such a jumble that uncertainty is off the chart . Katherine i think what is going on in uncertainty is looking very different to the world we have got used to in the decade before the pandemic. And i think that is particularly the case if you look at longterm, where we think longterm nominal yields are going. We were in a world where, effectively, Central Banks were promising to the buyer, and we saw a lot of risk premium compression. We saw low, stable inflation with little variation around that, very little volatility. That led to further compression in the risk review and premium. In terms of the real economy, we were not seeing huge, well side shocks. On all of those friends now, things look to have turned, so i think this question of where is uncertainty taking us in terms of Market Pricing is a really relevant question. Tom i totally take your point, ive talked about it many different times everybody is in the financial world, and you are overlooking the real economy impacts does that put a deafening on global gdp, as the imf calls for does that put a dampening on global gdp, as the imf calls for . Katherine the u. S. Issuing showing real resilience, you have substantial this cult spending. I am hearing about the Inflation Reduction Act through the european lens that is where my focus is. Policymakers in europe are really hyperventilating on this Inflation Reduction Act. They are very concerned about that negative spillover effects for europe, whereas if you look at europe economic activity, it is already slowing. That is not something on the horizon, it is already looking quite weak. So the prospects for the real side of the economy is the potential is there for a divergence between what we are seeing in the u. S. And the euro area. Lisa which is the reason people are talking stagflation in europe and why they are not using the sword in the u. S. How long can europe stay in a stagflation environment . Katherine how long is a piece of string . Potentially, this could persist for quite some time. If i think back to the experience of the u. K. , the u. K. Is a small, open economy. The euro area is a large, open economy. It is quite different. We experienced, here in the u. K. , a series of large relative price shocks that meant that inflation deviated from the target for almost four years, and this happened against a backdrop of very little sign of pay growth picking up, certainly not to levels that were inconsistent with the target, a recovering but tepid economy. It took four years for inflation to get back to target. That suggests these shocks will take some time to work their way through, and if we get more such upside shocks, like we are seeing with energy prices, the potential is this gets drawn out. Lisa what is the Monetary Policy response . Is this even relevant if this is Something Else, if this is being driven by other features that are not related to growth and are not related to what the central bank can control . Katherine it makes it a lot harder for the policymaker for sure, but my and this is a debate to be had with bank of japan framework review, the potential of a fed framework review down the line, is the potential of a targeting regime flexible enough that it can account for this . My view is one area we have not explored is the horizon around which policymakers get inflation back in target. Building back to that framework is an understanding that, if an economy get hit by a large price shock, the policymaker should look through that, and it a take longer for inflation to get back to target. That was a message we were hearing from Central Banks when inflation was undershooting, and there may be more of that message if it looks like inflation is undershooting, on the proviso we do not see shocks. Jonathan if we said what should the inflation target the in new zealand, with they come up with something closer to 4, for the period we are in now . Katherine there are no strong and compelling economic arguments that have an inflation target at 2 . If you are starting at a blank sheet of paper, i think 3 or 4 is equally if not more since will place to be. The problem is we are not starting with a blank sheet of paper, and my view is it is going to be a very difficult thing to change. If it is not a good idea to change it when inflation is below the target, if it is not a good idea to change it when inflation is above the target, it seems odd to change it when youre at target. That tells them he we are where we are but maybe we need to think through other elements of their framework, like the horizon with which we get back to target and maybe the measure of inflation itself. Is it really accurately reflecting what people are spending their money on . Jonathan most people feel like no and have done for a long time. Isnt that a sophisticated way of saying just push it out . We cannot hit it now or in two years, so lets just adjust the time horizon, so basically saying just lets tolerate higher inflation number, isnt it . Katherine for a period of time, yes. That has always been part of a framework. It has not really been needed to be utilized because we have not really been hit with these kinds of upside real shocks. Tom this is what is so important about going to the shock of 2008. Who is doing that . No one is looking outcome as katherine is, over the longer timeframe. The answer is, as you say, it is longer. Jonathan we set it this morning. President lagarde just wants to get through 2023, never mind 2027. Katherine neiss, thank you. Coming up, sophie lundyates. S p futures negative by 0. 2 . Live from london, good morning to you all. Oh, booking. Com somewhere, anywhere. I just want to lie motionless in a chair booking. Com, booking. Yeah 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. se fue la luz pero todavia tenemos wifi para hacer las tareas. ¿y eso es algo bueno . Wifi y estudiar. Buenisimo. Wifi y pedir una pizza online seria buenisimo. Presentamos storm ready wifi. Solo de xfinity. Ahora puedes mantener una conexion confiable durante apagones, con datos celulares ilimitados y bateria de respaldo de hasta 4 horas para mantenerte conectado. Obtenlo solo con xfinity. El hogar del 10g network. Enterate mas hoy. I think we may very well be at the end of rate hikes. The doubledigit losses of last year are clearly behind us. I think the s p 400 is going to 4800 by the end of this year. This is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. Tom good morning, everyone. Our studio is Queen Victoria studio. We are looking at bonds, equities, the rest of it. It is time to look at the equity markets. Jonathan you want to look at it right now . Tom not right now. Jonathan i will look at it right now. S p futures slightly negative. It is time to look at Bank Decisions. Tom greenspan had a good feeling. Real concern over oil near 94 a barrel. Price down, yields ever higher. There is that good feeling. Jonathan this is the dream. On wednesday it will upgrade its growth forecast, and downgrade its inflation forecast. We have an equity markets seeing doubledigit gains on the gear, and we are doing this with on the year. If i dont if that can stick, i dont know. Tom on the back of this is the social aspect, not only the uaw strike but the very fabric of this nation is being tested with the nhs Junior Doctors strike. I was shocked at the impact of residents and interns walking out of hospitals in the United Kingdom. Jonathan the United States is getting a taste of what they u. K. Has been dealing with, and that taste is hurting automakers. Uaw have said no thank you. That is not where a lot of people thought we would be. They thought 20 would get it done. There are a lot of pieces outside of just of the wage peace. To see 20 batted away the way it was by the uaw means there will be trouble on the horizon, if they want to compete with the likes of china. Whether the u. S. Will just turn around and allow chinese competitors to come into the u. S. Market is another thing altogether because based on what is happening here in europe, the prospect of bigger tariffs to insulate the economy and german manufacturers from lowcost competition. Tom lisa, i think you nailed this. The fear is that you do get into some form of wage spiral. Lisa that paired with oil really challenges this idea of a soft landing. It challenges the idea that we can remain in goldilocks for long period of time. It challenges immaculate disinflation. How do you get immaculate disinflation with Wage Negotiations in the u. S. And around the world . Tom help me here. I will rounded up to 2 . Round it up to 2 . Jonathan tom was not wearing his glasses and lisa is still a bear. That is the latest feedback this morning. Tom brutal. Jonathan yields up a single basis point. Jackets off because the aircon in europe is just not that great. It is not like he u. S. Air conditioning that is superpowerful. Tom in the u. S. You walk down a sidewalk on lexington avenue and there is a store with its door open. Lisa we are getting more european. Jonathan on some fronts that is a good thing. Lisa i will quote you on that. Tom a gallon of gasoline for an ittybitty car here is seven dollars. Jonathan a lot of that is taxes. Tom you did that data check. It will be a great week here in london. We have a credit conference we are doing. Jonathan on thursday, tom, with jim zelda. Tom it was great when we started talking about it, and it is now even greater. Credit is really front and center. Jonathan ive the compare and contrast between europes experience and americas experience. Tom we will have complete coverage for you. Lead equity i am gasping. It is the hot brown water. Sophie, i look at the equity market and everyone is flabbergasted at how resilient they have been. Why is there this is the big one. I im someone in the camp who is a little bit of a bear. I still have my jacket on. Is that ok . That is not the vibe i am getting. Jackets aside, in terms of what we are seeing, there is a great deal of optimism, and that is what you are alluding to hear. That is not going anywhere. Alluding to here. That is not going anywhere. Consumers are not behaving as if there is a recession coming around the corner. There is a great deal of resilience in the consumer. Everyone is excited. There is a great deal of this notion that Central Banks are going to be sticking to the script and Interest Rates will be doing exactly what everybody predicts it to be happening. That will not necessarily be how this plays out. There is potentially some over excitement in the markets. Lisa what does it mean to be a bear in equity land . Sophie are we throwing in the towel . I am on the cusp. For me, what i want to shout about and what i think is getting forgotten here, and i know it is boring, but lets not forget fundamentals. There are so many people out there talking about incredible thematics and megatrends but fundamentals are where people need to be landing. Im talking about looking at consumer staples, where is that being consumer staples, nondiscretionary funds, where are those being funneled . I think they are getting left by the wayside. Lisa speaking of fundamentals, and pairing it with this idea of the latest tech thing, there was a huge boost to european markets with the idea of a weight loss drug. Suddenly, people were talking about how this will rejigger the european markets because this will be the preeminent type of trade. We were talking about some of the side effects of this. How do you get ahead of fads that are bigger in name than they are in reality . Sophie it comes back to the fundamentals. When we look at big pharma, we know for a fact that you are looking at hundreds of millions of dollars falling off of that patent cliff. Obesity treatment is a really exciting megatrend. It will generate a great deal of money. In terms of getting ahead of that trend and making sure it is not just a fad, you need to look at what else these companies have on their books. What is rnd like . If their pipeline is just this, that is problematic. As a megatrend, i think obesity treatment, a lot of that excitement is warranted, but it is not enough on its own. Jonathan how investable are carmakers right now . Sophie i think there is a lot of strength in this sector still. There are it will be bumpy . Yes, i do, but there is some strength. This is not a sector that is created equal. The divides are becoming much, much larger. So much of it is going to come down to this pricing pressure as well. 20 plus jonathan 20 plus makes automakers uninvestable for you . Sophie it is borderline. The risk outweighs for me a lot of the excitement. When we look at more of the exciting names, there are quite a lot of opportunities, but this industrial action we are seeing as well has a lot of read across for broader equity inputs as well so people who are supplying car parts, those areas of the market too, they are quite vulnerable right now. Tom help us with your savings and resilience index. Bring it over to the United States. Tell me about our savings and our resilience. Sophie here in the u. K. In particular, the Savings Rates that we came into the pandemic with, the u. K. In particular we had a far higher savings rate than a lot of our peers in particular. That means this is feeding into our inflation problem in a big way. We are only just starting to chip away at that, whereas in the u. S. That resilience and those savings levels have already been depleted, so that is feeding into things and pulling things down in the trajectory you would hope for. Jonathan this was great. Sophie, lansdowne. Did you see no business attire on the senate floor . Sophie [laughter] i missed it lisa [laughter] i missed it. Jonathan i have strong thoughts. If you are leading a country, shouldnt you dress for it . Lisa no trainers . Jonathan those hybrid things senators have started wearing anyway with suits . Lisa what if they have feet . You think they have to have a doctors note . Jonathan you are representing the people of the country. If schoolkids have to do it, why cant they . They should wear a business suit. Business attire is the right way to go. Im surprised you are silent on this. Tom decorum has slipped. Lisa there is also a sense of respect, but there is also a sense of service, and this goes back to a discussion of you representing, are you serving a nation o are you tryingr to be an instrument . Tom my mother got dressed up to go to the grocery store. Jonathan well said. Lisa you have such issues jonathan he has a lot of problems right now. The gray suit is one of them. If you are just joining the program, the s p 500 negative here by 0. 16 . In the bond market, yields are unchanged. Crude is in the 90s, 91. 27. 3 major Bank Decisions this week. Tom the resiliency of the markets is stunning. Jonathan given where the dollar has been over the last two plus months, given where the 10year is right now, it is big changes. Lisa which equities . This is important. You have seen a market underperformance of the big names in the u. S. They have not kept up. This raises a question is this the beginning of something, or is this the dip people were waiting for . [laughter] tom you dont see this on the radio, but behind jon i just saw some birds back there. The birds, tuppence a bag. They are doing it jonathan are you going to sing us out . Is it desperate to sing. He is desperate to sing. Lisa [laughter] Jonathan David welch, coming up next. Explore endless design possibilities. Find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Flu shots at cvs are pretty. Flex. Schedule one for you. Or the whole crew. Plus, theyre free. Really . Healthier is getting a flu shot on your schedule. Cvs. Healthier happens together. An average of 92 a barrel will allow oil to go to 100. We are pulling for 100 by halloween for brent. This is just a trajectory. It is a shortterm thing. I wont say it will average above 100, but could it go to 100 for a while . Absolutely yes. Jonathan craig right now 91. 37 crude right now 91 point 37. Outside of that the equity market futures are negative by 1 . We have talked lots about that record run of dollars strength. Positive this morning on the currency pair by 0. 08 . This story for the three of us all week potentially, the strikes from uaw against detroits big three, not one, not to but all big three manufacturers over in detroit, and we ask, 40 , 36 , what they have been offered is 20 over still went this. That was not entertained in any way shape or form. Tom i am looking at the ability of the union to capture present and future electric vehicle jobs. Jonathan how do these guys compete with china . Tom how did they compete with bmw in the carolinas . Jonathan how did they compete with tesla . I get it, tesla bowl, if youre tesla bull, if you were bullish before, you are bullish now. Lisa some people think the reason you are seeing this playbook is to capture some of the workers from tesla. We can make inroads at a time of technological change. They are throwing it all out there, is a lot of people view this as their last opportunity to do this, and if they dont get those workers, it is game over. Tom we have been so advantaged by our detroit shop. He is our detroit guru chief. David welch joins us no the worry of on the worry of industrial the client. We lived on the new york thruway. It was carrier and syracuse. It used to be a huge operation for syracuse, new york and then there was manufacturing decline in the eastern rust belt. Is there worry here about manufacturing decline in greater detroit . David there is always a worry, but it was not just career. It was ge, miller brewery, and a lot of other things that are not left up there now. There is concern about being competitive with tesla, with being competitive with japanese and korean factories. It 10 of costs comes from labor and if you boost pay up 5 to year, it is not as if every vehicle loses money. It cuts into record profits, but it does not devastate. There is a competitive disadvantage of labor costs. The union is going to make a big stink about this, and they have been saying they need to organize tesla. They have never been any good at it. They have routinely failed. They have never failed to disappoint. If they get a new contract, they will have to go back in four years and say we did organize. Jonathan have you been surprised or understanding or interested in how the executives of the three Auto Companies have reacted . David i have. They have voiced frustration. You can see that from pharaoh way. Marie is always composed. She is frustrated with the union really. She says they are having a tough time with sean fain. Bill ford said to the bargaining committee, i believe this is a fair deal. I dont think he is wrong. It was a pretty good deal that they got. Union is going to try to get more. Jonathan what do you think gets it done . You said Something Like 20 . That is the offer right now. What do you think gets it done now . David it is tough to say. I dont think it is a lot higher than this. Clearly, you and i were wrong about that before. The tenor of things did change over the weekend. The union made progress with ford over the weekend, kind of a more neutral to positive view of meeting with general motors. It went from heated, nasty rhetoric about awful ceo salaries to we are making progress. 21 would get it ratified with membership but does the union really stick to its guns on pensions or was that a throwaway demand in order to get leverage for debtor better cost of living allowances . Lisa unionization has fallen dramatically. 6 of the working population in the United States. Is this whole action by sean fain going to get more membership, increase the actual participation in areas like electric vehicle making . David i think he will have success organizing some of the battery and electric vehicle plants because of the relationship with detroits automakers. They have already organized a plant in ohio owned by lg. I do think that will help. In fairness to the uaw there is a moment here for labor. Public perception of unions is much better. It is favorable, 75 now, which is double what it was two years ago. You have had successful drives at starbucks, distribution centers. Look at what the teamsters got out of ups without even going on strike. If fain can score some victories here, workers will start to see the value of joining a union. There is a lot of anger out there. One of the dumbest things for the companies to explain, everyone knows the ceo will make a lot more money than a rankandfile employee with a degree. Someone put up a figure, that it is 200 times what a worker makes, when it was 40 times a decade ago. It is tough to explain that to a public that is very anxious about ai and worried about using jobs and worried about income disparity. With the cost of housing and tuition soaring faster than income does, it is difficult to explain why wealthy executives get to more than compensate for that type of inflation and workers have to eat it. Jonathan is almost impossible for them to explain currently. Thank you for your time there. David welch on this battle between detroits big three and the labor union to come to some sort of agreement. Lisa this to me as one of the biggest questions. We are seeing this boost in union activity, striking activity, which is now the most over the past of this year going back to 2000, and you are starting to see real pushback. What is the next sector to get hit with this . Tom imagine if teamsters had lost at ups. The fact is that they won at ups. I did not hear that from the understanding is that they will win here. I dont hear that from david welch. Jonathan what is your position on morning shows . Did you see what bramo has got for her birthday . Lisa i am shoving that in my mouth. Jonathan do you see what they eat on morning shows . Burgers and ice cream. Birthday bramo. Jonathan t. K. , absolutely crushing bramos birthday cake over the break. He is calling it hot brown water. Equities on the nasdaq we are down by 0. 2 . Flat equity market, down on the week last week. We are down by 0. 1 . 2 year is still not 4 . 30 year is still in the 4. 40. We are expecting no change from the fed decision. Tom the guesstimate from mike mckee is they will raise. Jonathan and then look to 24. Tom lets go back nine months. We are on the edge of august here. Go back 9, 10 months. Did anyone think of equity markets would be here . No way. Lisa how many stories have you read recently about how wrong everyone has been . The Financial Times survey of economists was talking about how more, than half of them or almost half of them think the fed is going to raise at least twice more before they are done. Jonathan i am often reminded they are year end forecast. Lisa they could be right, just a late. Jonathan could you do a 2024 outlook right now . Lisa i could provide you with one. Jonathan 24 . No idea. Will we be pushing out the recession game again . Tom i predict there will be more recession bullish. Jonathan ok recessions bullishness. Jonathan ok. Tom we are really trying to piece together 2024. There are political conventions in america, but front and center is we need tickets to the paris olympics. Giomo is with us. Mr. Macron and the paris boom. Can paris get any boomier then it is now . Tourism is helping a lot. The city is having a good run. It is going to continued until the olympics. Now the country around paris will be more complicated. We had a good first half of the year. There is a lot of positivity at the moment in france because if you compare yourself to germany things are not so much better. If you look at the latest Business Confidence survey, it is not as bad as it is in germany. Tom this is important. To our listeners and viewers, particularly in america, when we say we went to france, we dont have a real picture here of the greater european economy. We just see the room of european boom of european terrorism. Separate european terrorism boom of european tourism. Gilles tourism is a function of that weakness, the rebound in the u. S. , the appetite for traveling to europe even in the most tourism sensitive countries in the euro zone, the rest is the usual stuff that is dependent on demand in the general sense of the meaning or fund spending. Spending in france has been contracting for 2 quarters in a row. We have to be a bit jonathan that takes us to the ecb. Lets be slightly provocative. Should we add lagarde, september 2023 . Gilles they are trying hard not to fall into that trap. If you compare this with 2011, there was not a great sense when they hiked. They were selfrighteous. They delivered where they needed to. This time it feels like it is the last hike we probably need for technical reasons internally. I think it is true there is a resilience of inflation that is more tangible in europe than it is in the u. S. The language from Christine Lagarde last week was, yes, they are setting the high for long. What happened in 2011 must to be on their minds. Even the hawks are getting less vocal. Jonathan what can we learn from the European Experience on the others of the atlantic . You see germany go into a recession. Is softer growth the cure for what we are experiencing at the moment . Gilles i know a lot of economists have been wrong on that for the last year, but history would tell you it is very hard to get inflation without proper pain in the economy, especially when inflation is no longer about you. As long as it is proven otherwise, but is happening in europe is probably a lesson for what will happen in the u. S. , even if u. S. Resilience is amazing at the moment. The big difference between the 2 is in germany there is a more structural issue, which is coming back to bite them at the moment, which is to some extent disconnected from Monetary Policy. They would probably be in a softer patch. You want to kill inflation, especially when it has started to get entrenched. You need to engineer some softening of demand. There is not a lot in the textbooks that would tell you otherwise. Lisa is europe completely different from the u. S. In terms of how it can withstand the oil shock . Gilles i have our they can problem for the past few years has been gas rather than oil. We tend to be more sensitive to oil shocks than the u. S. For complicated reasons due to the fact that even if we are less oilintensive than the u. S. , the actual price of a gallon of gas in europe is much higher than in the u. S. You are probably more sensitive to that particular item. If it was just about oil prices, we would not be really concerned. I think most are focused on what is going on with food prices. Hopefully, it will continue to slow down. That is what wholesale markets would tell you. We went through last winter, much more positively than what was expected. We need to do it again this winter. Lisa which feeds into the whole discussion of wage spirals especially in line with some of the Labor Movement we have seen in america and around the world. How much do you think that is more noise, in terms of wages staying sticky and labor power continuing to be stronger than it has been . Gilles i think there is something profound happening there. There has been a change in the balance of power between employees and employers. In europe where we have most countries a collective wage bargaining system, what we tend to have is more inertia in the way wages react. In the u. S. You could make the case that wages accelerate when people can actually go back to their employer. It is not the way it works in europe. Some of it happens, but a lot of the increases here have been a result of bargaining. It takes a while for people to realize may be a will be time to move back towards wage reiteration, but you need proper proof. Even in europe, and that is one of the big positives of her current situation, even in countries, which have been used to inflation for decades, the economy is ok. If you had told me that france would be able to deal with that 10 years ago, i would not have believed you. Tom i have eight ways to go here, but because of time, can you say europe beyond eurosclerosis . Gilles we have a magnified we are a more acute version of what will happen in the u. S. The one point on which i think europe is doing better than the u. S. Is preservation. Our preservation rate is much higher than it was before covid. It is the exact opposite fo what is opposite of what is going on in the u. S. We have put more older people back to work. We are benefiting from structural reforms. Not spectacular ones, but gradually we have a much better functioning labor market than what we did years ago. Jonathan that is a bright spot. Thank you for being with us. You find yourself in a difficult spot after the ecb decision last week. It felt like a tradeoff between doves and hocks, a deal that was struck hawks, a deal that was struck. Even the hawks were not screaming for a rate hike, coming into this decision, which speaks to the moment we are in right now. If you hear from may hawk on the fomc, they will talk about the prospect of going one, but they are not calling for 50, 75. Tom to go back to our earlier conversations, it comes down to a mass adjustment over a new rate regime, and the negative rate regime, yjr answer the answer is a negative rate regime is gone. Jonathan and we are likely not going back to it. We are just short of 92 on wti. 91. 99 just months ago. 91. 83 a moment ago. Lisa markets are buying into the idea that the fed might not cut rates in the future, at least not next year. That is the change. Jonathan slowly internalizing that message in a more profound way. Welcome to the program. The s p 500 futures are negative by 0. 09 . We talked about that crude move at 91. 80. It is quite a start to the week. That week really starts on wednesday. Then it is on two wednesday where we get that Federal Reserve decision. On to wednesday where we get that Federal Reserve decision. Tom im still recovering from this weekend. Thank you for teaching me about formula one. Jonathan what race . Tom singapore they are on the streets of singapore i have been on. They are wicked narrow like monaco. The violence, jon jonathan serious, serious endurance test. I am taking off from jfk yesterday morning, there are 10 laps left, and restart taxiing. I dont get to see the last five laps of this race, and the last five laps were magic. You have mercedes chasing mclaren and a ferrari. Tom he goes off on the last lap. His tires wore out. When he won the tires were barely working. Lisa he came to london and spent an entire day watching formula one. Tom the difference is we had it on a gulfstream. Jonathan David Livingston of citigroup is coming up shortly. From london, this is bloomberg. Oh booking. Com, im going to somewhere, anywhere. A beach house, a treehouse, honestly i dont care find the perfect Vacation Rental for you booking. Com, booking. Yeah. If youre trying to get a view of the whole organizational Financial Health and youre trying to do that through multiple systems, that makes it very, very cumbersome. Its not just tech, its not just people. Its how they Work Together to provide that experience to the customer. As a finance organization that is what you want to do. One important thing looking forward is uncertainty around inflation so if we see inflation coming down towards the central bank targets over the course of next year, clearly there is much more uncertainty in the inflation pitch for the next few years compared with the last decade. Jonathan andrew, fixed income ceo at pimco. I have to put my jacket back on for our next guest. S p futures slightly negative. Yields unchanged 4. 34 on the 10 year. Eyes are on crude. It is just short of 95 on brent. Rita was on the program with us earlier this morning. Triple digit crude by halloween . Scary stuff. Tom at the end of october, what we will see including jobs day, is fluid. 94. 79 on brent crude is there any other story . Jonathan that is happening. Equities are softer than. We are going nowhere here, lisa. Lisa i went to take a look quickly at the auto manufacturers, the other side of this whole debate. For the cilentos, it is very much negative. They pop this morning after the wall street journal put out a report saying saudi arabia is in talks about possibly tilting an ev factory in that nation. I am curious about the solantis underperformance. Is there an indication here from the union saying no to a 20 increase in their salaries . Will there be that much more in profit erosions after years of record profits . Tom when does the president speak again . What is the path forward . Jonathan he spoke on friday and handled the situation well, i thought, given how difficult this position is for him at the moment. We set a lot of weight on his shoulders to come out in favor of the union. Tom balance tonight with Annmarie Hordern and matthew with what is going on in the United States. We are in london, which means a sense of International Banking for the banks of the United States. It is an emotive restructuring citigroup. James frazier has called it is a mode of restructuring citigroup. James frazier has called upon david living stone. David, thank you for joining bloomberg this morning. What did jane frazier say to you, these are the marching orders, go . David what did changes the structure that will implement that. In my new role as the chief client officer, which is a new role in citi is very much to say we cover clients across the world. Are we doing it the best way we possibly can . Are we as coherent as we can . Are we delighting as much as we can with our capabilities . Our number one is to make sure we bring that tom you were an undergraduate in australia decades ago. What will be the defining feature of citigroup in 5, 10 years out . There is always going to be two dimensions on that. One is we offer a broader set of capabilities and secondly we do it on a geographic dimension. We are the most international organization. We do business in 160 countries around the world. That serves our clients with crossborder needs. That will continue to be the distinctive feature of citi. Jonathan job cuts will they be focused on certain geographies or functions. What is the approach . David job cuts is not the story here. It is unfortunate, we will have people leaving the organization, but that is not where we started. We started with the need to simplify our structures and management routines, and therefore the job cuts are the output. My former role as the chief executives middle east and europe, the asiapacific layer, they are being taken from the organization as are some of the capabilities we had above our products. Our businesses now report directly to the ceo. Jonathan do you have a decent idea of numbers already . Tom we are not talking about david were not talking about numbers at this stage. Jonathan because you dont want to talk about them, but internally there must be an assumption of what the number will be. David that is not the core focus. Of what we are doing the reason people pick up on the idea of job productions is it seems like even though banks have lisa s lisa the reason people pick up on the idea of job productions is it seems like even though banks have how difficult is it at a time when you see fears of recession looming on the horizon . David different parts of our business, in different by geography. The u. S. Is flush with liquidity, stimulus from the u. S. Government, so loan growth and demand at the institutional level has been more muted. If you take what has happened to Interest Rates, and look and say what is the profile of Interest Rates and what is the right time, to buy, it is not that there is no activity, but there is conscious activity in terms of taking on additional or new leverage. Lisa how do you acknowledge the complexity of the different regions that is specific to those regions while simplifying in a very new structure . How will that be a challenge that you will work through . David we are not taking the geographic dimension out of citi. That remains very sound. We will continue operating the company as a Single International organization outside of america. We will be giving more autonomy and authority in order to drive the client activity happening within their geographic clusters. Tom you are deeply experienced at this. It is outside your remit to talk about shareholder return, use of cash, etc. , but the crushing disappointment to ms. Frazier has been the share price. It has not moved since 2007. How do you counsel jane frazier to move that stock price higher to where your competitors are . David jane takes counsel from many people, but she is also decisive in her own right. What she has done in terms of this reorganization, where our structure now fits our very Clear Strategy is we now have the best possible platform now in order to make it clear what our reserve potential is but ultimately it is returns that will drive the share price. Jonathan lets finish on some easy stuff. What is Office Attendance like in london for you guys . David it has improved. Jonathan is it better than new york in london . David in some parts, i think it is. New york and london are pretty much on par. I think it is becoming very clear, not only to management, but to the Broader Organization that being in the office is so much better. Jonathan are you making the fiveday push . David our policy is 2. Our policy is 3 days. Jonathan thank you. I know that was something you were focused on, tom, Office Attendance here. Tom my sense is that it is better here than the disgrace in new york disgrace in new york. Lisa basically this is the Global Executive class coming out and being like it didnt work. You need to come back to the office, and t easing into it. Jonathan it is celebration time. We will take bramo to the pub. We can do that because it is 1 5 6 in london. Do not miss this, the still lantus ceo at noon eastern time. Thank you for picking bloombergtv. This is bloomberg surveillance. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. From new york city, i am matt miller in for jonathan ferro. We are looking at markets now doing a lot of nothing. In terms of the equity indexes, s p futures down. 1 . Russell 2000 futures gaining. 2 . Oil continues to ride. The countdown to the open everything you need to it started for the start of u. S. Trading. This is bloomberg the open with jonathan ferro