Bloomberg The Open 11/24/2023

Bloomberg The Open 11/24/2023

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From New York City. For our audience worldwide, I'm Lisa Abramowitz in for Jonathan Ferro, taking a look at just a really quiet market post-Thanksgiving after a massive rally. The Countdown to the Open starts right now. Everything you need to get set for the

start of U.S. trading. This is Bloomberg the Open with Jonathan Ferro. Coming up, US markets reopening after the Thanksgiving holiday. Stocks are on track for a fourth consecutive week of gains and retailers are sounding the alarm as Black Friday gets underway. We begin with the big issue, plenty for investors to be thankful for. Investors have have lots to be thankful for.

The rally we've seen in equities, equity rally, massive year end rally rally is certainly very much in force. An economy that's that's looking pretty good globally and risk sentiment that's picking up. We're seeing this kind of soft landing celebration in the market that is very enthused about a soft landing. Inflation coming down, inflation which has come down in some of the heat pool in the labor market. The labor market showing some cracks, but simply normalizing.

The Federal Reserve is done and the Fed on hold. So far, the Fed's making this look as easy as pie. The probability of a soft landing has gone up materially. All the things are moving in the right direction, markets moving in the right direction, but it doesn't mean we should take them for granted. Joining us now to discuss Aberdeen's Luke Moore and George Goncalves of EMU G. There is this question. And George, I want to start with you. Do you buy into this fact that this

rally can continue for a foreseeable future? Look, I think we pulled forward a lot of the year end rally. Everyone's been kind of hoping for a pretty sharp move in November, all together, up 7 to 8%. On the broader indices, we think we pulled the virus before and it's probably time to take a break here. Look, do you agree? I think unless we get any specific news, it's going to be really hard to find a rally through to year end with very quiet markets. That's what it feels like is a very

quiet day. And what we're also seeing, though, is still this push higher, slightly in benchmark yields. There is a question of how far yields can keep going lower given the fact that people are still spending and there is this optimism being expressed in stocks. Jorge, do you think that there is an incoherence recently in the rally in both bonds and stocks that has kind of hit its tipping point? Look, we got down south for 40, and now we're trying to climb back up here and get back to 450 as long as we're within 4.3 and then 4.8. I think that's a good place for equities.

But if we get under four in our fourth quarter for the quarter, then the bond market signaling that it's a slow down. So I think it's fair game for now, but I think we know we have to be careful here. Luke, do you get that same sort of sense that basically between 425 to maybe 475, there is sort of an easy feeling in stocks And based on the fact that bonds are basically sending a Goldilocks signal. Yeah, it feels that way. Doesn't the reflexivity of the markets doing the Fed's job for them? I actually like to see the ten year up at 5% because I think we need to get there at some point next year before rates start coming down and we need to get back to a normal curve.

But yeah, sure, that the short term, you know, we could easily be stuck in that range and in quiet markets. That seems pretty sensible expectations. Luke Why do you think that that's the way that a yield curve is going to normalize with the long end, with yields going higher rather than at the front end yields coming in, especially given that so many people expect rate cuts next year? And I think it's not very dynamic of those rate cuts. We need to two times curve to go back positive. We need a normal curve. We need people to be paid for the risk to get further out in duration, which at the moment you're not. And if you look all the way back through to 1985, we've touched base rates. So in the ten year before, we've come back down the other end again. So I'd like to get there.

I'd like to see that 5%. I can then finally get long the ten year. But right now it just feels better to travel before we get there. George, do you have a similar sort of

sense that there is another leg higher in long term yields? I mean, look, I think we probably seen the highs here. Could we go back up to 5%? It's possible. I mean, we're going to we're going to see the bond market through the auction process, try to kind of extract yield concessions over time. And there's plenty of supply to go go forward. The tricky part is, you know, if long term rates do most of the lifting here, that's going to be inconsistent with equities because, look, if we go back up towards 5%, that's going to are challenging kind of the risk narrative. Again, it's all head spinning and it's a quiet few days for Fed speakers.

Fed speakers, I'll go and have a holiday where they re contemplate how they're going to frame out the year ahead, but not so much in Europe. ECB President Christine Lagarde signaling the end of rate hikes. Given the amount that we are of ammunition that we have used, we can observe very attentively the components of our lives like salaries, like profits, like fiscal, like geopolitical developments, and certainly the way in which our ammunition are impacting economic life. To decide how long we have to stay there and what decisions we need to make up or down. Joining us now is Bloomberg's Alex Faber

from Frankfurt for more. Alex, we've heard this sort of question mark. Is the ECB done? Do you think that's the tone that markets are looking for right now in Europe, or do you think that they're really responding to other impulses like fiscal spending? Well, from from the ECB officials, we hear that it's very likely they are done raising interest rates.

They haven't fully closed the door. We hear, for example, that if there is another energy price shock, that could warrant another interest rate hike. But largely, I think, barring a substantial surprise, there's not going to be any move higher.

That's also what investors seem to be expecting. The question is really moved on to one with a cut. As President Dugard pointed out in the clip we just heard, it's now about observing the incoming data. We had PMI numbers this week that showed

the economy is still contracting, that these things don't seem to be getting worse, but the economy isn't certainly isn't doing better than expected and inflation pressures are still high. That's also why they're not sounding the all clear just yet. So they can afford to be in a sort of wait and see mode for the next couple of meetings at least. Which raises the question of what's in

charge, the fiscal picture or the monetary policy picture, at least in the short term. Alex Faber in Frankfurt, thank you so much. So with us, Luke, Luke Hayek more. And George can call this And Luke, I'm curious from your vantage point how much you're looking at whether the ECB officials are going to raise rates further or whether they're going to cut or how much it has to do with things like what we saw overnight with Germany coming out and again saying that they are not going to try to go back to a net, no new issuance of debt because they want to keep in place some of the programs that grew up in the wake of the pandemic and even before forums, said Kyle, to further interest rate rises. Lisa, I think they're done and Germany needs to do something. They've got structural problems.

The infrastructure in Germany needs a lot of investment going forward that can help to drive growth as well. But you know, you've got to start loosening up some of those fiscal strings and the borrowing powers. They've got a massive I think if Germany did that, it could help Europe. I think they are in a recession right now.

I think we could see cuts quite early from the ECB, maybe as early as April or even May next year, rather than actually waiting until possibly Q3 for the Fed. They they need to start moving and we need to start seeing economic growth in Europe. Shook it up a bit and that's got to start from Germany. George, do you agree with that, that you're going to see pretty significant rate cuts from the ECB? Look, I think if the Fed's going to be coming at some point, ECB has to do it as well. So I do agree there probably a much more precarious situation. And Germany being really the growth driver and lack of growing does require, you know, Germany to lead the charge there and and ECB and have a seat and not their curve to be curves are way too flat rates are just too too punitive there in Europe.

George, do you think that people have gotten a little ahead of themselves when they talk about rate cuts in the US, especially given the fact that today is Black Friday? And all I hear is that people are out there shopping and that yes, we might be going back to 2019 shopping levels, but that still is pretty, pretty sizable. Look, I mean, it's all about the rate of change in the consumption consumptions, not just the fact that everyone's shopping, that that's going to continue even if we were to fall into a minor recession. Right. So I think it's more about just kind of the nuance.

You know, markets move fast, the data moves fast nowadays. You know, as we've discussed in the past with this kind of nonlinear approach to economic analysis, I think we're at the point where things are going to start to speed up very quickly, especially once we get through the sleepy days of the holiday seasons into the start of next year. Where to look up? There's a lot of bills to pay in and people's wages aren't keeping up. And I think it's going to really start

to crack down on consumption and I think eventually that will warrant cuts. Luke, do you think that if the ECB does more aggressively cut rates next year, more aggressively than the US, do you think that will give a disproportionate boost to European assets? It should do and it should help. We can off the euro a little bit, helping our exporters, etcetera. And yeah, I think European equities, if you look at them versus say the US as well. There's value there to be had versus chasing. That's this kind of massive rally that

we've seen in the US. So yeah, I do think it could help right across the board and as I said, it needs to start and maybe as early as April. Wow. Luke Moore, George Goncalves, both of you are sticking with us.

We want to take a look at what's moving on a relatively sleepy day ahead of the opening bell. Here with that is Simone Foxman Simon. Yeah. Lisa the the Thanksgiving hangover very apparent in pre-market trading. A short trading day today. There is one name that is moving quite a bit I robot. This based on a Reuters report that Amazon will get EU antitrust approval for its acquisition of that company, the maker of the Roomba.

Citing unnamed sources. Shares they're up over 30% in the premarket. But our other movers just not that exciting Tesla shares falling slightly. They had been down as much as 1.2% after a report from a local Chinese car review website said Tesla's competitor BYD, will offer steeper price cuts as it tries to boost year end sales. BYD shares had also been down pretty significantly in Hong Kong trading. Finally, we're watching in video. This is its third consecutive day of

losses. If we see this number hold up in the red. Longest losing streak in about a month. This based on another Reuters report. A chip company told customers in China

that it will delay the launch of its new AI chip for the country until the end of the first quarter. Again, citing unnamed sources. US restrictions grappling with. On these semiconductors advanced semiconductors. So we'll see how that plays out in today's trading. Simon, thank you so much. Coming up, the first truce in the Israel-Hamas war. The hope is that pressure will mount. A four day pause will turn into a six,

seven, eight, ten day pause. The latest developments out of the Middle East. That conversation coming up next. Hamas also took hostages in order to constrain and delay an Israeli ground campaign. The hope is that pressure will mount. A four day pause will turn into a six, seven, eight, ten day pause. Pressure will mount for what Hamas really wants, which is an extended and prolonged cease fire. Peace in the Middle East, at least for a

couple of days. A four day cease fire in Gaza taking effect, the first truce since the Israel-Hamas war erupted. Hamas accept it, expected to return 50 of the almost 240 hostages, while the Israelis will release 150 jailed Palestinians and allow more aid into Gaza. Israeli military spokesman making it clear that the humanitarian pause is only temporary, saying, quote, The war is not yet over. Joining us now is someone with incredible insight, Bobby Ghosh of Bloomberg Opinion. Thank you so much for being with us, Bobby.

What is the latest in terms of have people been released? Is there still uncertainty about whether this will actually take place as promised? Well, given that it's the latter, we're dealing with Hamas, which is a terrorist group and not a traditional military force. You can only be absolutely certain when people start crossing the border and are in safe hands of the Israelis on the other side. So it's a little hard to tell. So far, the truce has held and Israel has kept up its end of the bargain or some of it. And Hamas is expected to release ten or 12 hostages today, and they will continue to release a group of hostages for the next today and three more days hereafter. So we're all keeping our fingers crossed. Do you have a sense, Bobby, of what the sentiment is among both Israelis and Palestinians? Right.

I mean, we hear a lot about the leaders. We hear about Hamas and we hear about Benjamin Netanyahu. But is there a shift within the populace about what they want and how they would like to see it achieved? Well, there is a gap between what the Israeli population seems to want and what Netanyahu is saying. It's easier to do to figure out what the Israelis think. It's a free country there. There is there is opinion polling. It's harder to tell what's going on inside Gaza, not least because it's in a state of war right now and people are having their homes bombed out from over their heads.

And so it's a little hard to know what their deepest feelings in Israel. Netanyahu is saying that this is only a pause, and once the party's over, we go back to the war, and the war won't end until we have destroyed Hamas. And there are some officials in the Israeli government that are saying that if necessary, we will occupy Gaza after the fighting is done. Ordinary Israelis, at the polling suggests, do want to see Hamas defeated. Do want to make sure that the events of October seven, the terrorist attacks, are never repeated. But they're not comfortable with the

idea of occupying Gaza because that's been done before and didn't go well. And the Israelis don't want that to happen. At least the majority of Israelis don't seem to want that.

So there's a gap between what their expectations are and what their government is saying. But for the moment, I think Israelis will be just grateful to have those hostages released. Most of the 50 that will be released in this particular truce are Israeli nationals, and the Palestinians in Gaza will be relieved not to have bombs falling all over them for the next four days.

Bobby Ghosh, thank you so much for being with us. And we will continue to follow this story as it evolves and we actually get more information. Still with us, Luke Moore and Jorge Goncalves. And this has been a big hangover that people have been talking about, how this weighs on people sentiment. Luke, do you get the sense that it still is being counted in markets? Because frankly, it seems like it is a massive humanity story and one that is roiling politics and emotions and families less so in markets. Yeah, I think that's right. I mean, we should all be thankful for a

humanitarian pause right here. But the lead up to this and then the attack and what's happened, everything since we were all worried about is getting wider and wider and Ryan getting pulled in directly and having a massive impact on oil. But as per normal, the markets live in one of the fastest news cycles we've ever seen, and we've moved past it in a pure pricing in the risks. However, you know, calm helps. The VIX is down a little bit today. This is all going to play into the narrative through to the end of the year with stronger markets, I think. And if we've had one pause, we can all hope there'll be more to come.

George, you get the sense that that is something that is behind some of the optimism that we've seen in markets. Look, I think that and of course, it's going on in oil. I mean, I'm sure there was a decent amount of risk premium there associated to the conflicts. But if no oil were to get oil almost in the same way you look at the ten year rate oil somewhere between 70 and 80, I guess you can kind of say is in a sweet spot, a Goldilocks environment. But if oil continues to decline, that's

going to be another issue for. One, two, four. Like, do we really have strong growth if oil so weak? You know, that sort of raises this question. And we heard this from the Fed in the minutes that, you know, typically these kinds of geopolitical conflicts are inflationary. Is this time different considering that we do have a backdrop that is weaker and we don't really understand, George, exactly why.

How do you understand that in terms of whether this could be inflationary or whether we're in a just different scenario with really truly weakening global growth? Look, I mean, inflation expectations and overall inflation falls have been relatively low. If you kind of decompose actual rate movements, most of it is real rate. Right. And it has been the case really since

the summer. So, you know, it's not really about the inflation concerns here or link back to this conflict or oil per se. At times it's episodic to help move the markets, but it's really coming down to kind of keep real rates this high and then that factors into the overall score. Luke, do you get the sense that there is

something behind the oil price move lower that is concerning when it comes to growth in a material way that is really divorced from anything else that could be going on as per normal with oil is very difficult to split. So all of the attribution, what causes any rise or fall, I think this one looks to be somewhat related to more supply coming on line right at the point when some of the kind of concerns about geopolitics are easing off a little bit. So I think it may be more from the supply side pushing it down, actually. I think on the inflation side, Lisa,

it's been really interesting that the long term breakevens have not got to anchored from that long term target. The Fed's got of 2%. Yeah, a little bit higher, sure. But nothing like what we've seen inflation actually get to. So it may just be a lot of trust in the Fed has remained in this market which is why we haven't seen things like oil and commodities get completely out of control. Although, look, I got to be honest, I've been really confused about exactly what you're saying. Longer term inflation expectations, a five year, five year forward break, even rates, for example, staying around that 2.27% range. And if you take a look at the inflation

expectations for the University of Michigan sentiment survey, they're increasing and they're continually going beyond the expectation of 2%. There were 3.2% at the most recent read. How do you understand this divergence? I think this is a Wall Street mainstream problem. Wall Street trusts the Fed. Main Street may be not even aware of exactly what the Fed's been there and doing for them. So I think it could just be a perception thing.

It was really interesting the image going higher recently, but I think with oil coming down, gasoline prices coming down may be offset a little bit with a weaker dollar, but it's going to push down inflation more. And I think people's expectations will follow quite naturally from that. George, what do you make of that? I mean, this is normally a survey that really does deal more directly with gasoline prices, and we're seeing gasoline prices fall. We're seeing food prices fall not that significantly, but on the margins. How do you understand why people are seeing inflation going up and staying stickier for for a longer? Look, it could be very well. I mean, number one, I think the U.S.

consumer is sometimes underrated. In fact, actually is pretty sophisticated understanding what's going on when they have to pay at the at the at the at the pump, but they have to pay at the grocery store. So they feel the inflation pressures over time. And it could be the totality of inflation still kind of weighing on the consumer. And also, you know, they had this amount of wage increase while inflation was going up.

Now it's inflation is going down and wages are keeping up. I mean, it could very well be that the consumer expects that their wages are going to fall off as well. So what's your highest conviction bet heading into 2024, George? I mean, look, I think our conviction is probably in more spread product, more so than anything else. I think the curve was steepening. I think eventually Fed does cut rates

and we do think that credit spreads are way too tight. What about you? Look, I am a credit fund manager. I love credit. Investment grade credit is gilt, speculative choice for next year.

But there's going to be times to buy and times not to. And it's not quite at its cheapest. I think I agree with George that right now it looks a little tight. Equities look a little high, yields look

a little low. I would all like that to be the other way round, but I would be getting back into investment grade at credit as my first choice. Wonderful. Thank you both so much for being with us. Happy holidays. Happy Thanksgiving. Luke Maurer George can call us. Have a wonderful weekend.

Coming up, the morning calls. And later, retailers striking a cautious tone heading into the holidays. That conversation still ahead with UBS is Lesley Falconio. We're seeing a quiet day, the day after Thanksgiving. This is Bloomberg.

Time now for our Morning Calls. A look at some of the analysts recommendations on Wall Street this morning. First up, Bank of America cutting its two year price target down to $399, expecting consumers to keep pulling back and big ticket purchases.

Next up, Citigroup raising its Salesforce price target up to $247, seeing an improving backdrop ahead of next week's earnings. And finally, Argus double downgrading Pioneer National to sell from buy the analysts expecting ExxonMobil to be the only takeover candidate. Coming up, Black Friday underway with retailers sounding the alarm.

That conversation coming up next with Leslie Falconio of UBS. This is Countdown to the Open. I'm Lisa Abramowitz, in for Jonathan Ferro. Just moments away from the start of

trading. And as the session grows older, you can see that it really is dragging down, turning slightly negative, but really rangebound. What you can see, though, outside of just the stock space in bonds, you do see a bit of a sell off with yields going higher, which I think is pretty interesting and dictating some of the action. You could see yields at 4.47%, up seven

basis points. The euro just a touch higher versus the dollar and crude lower by 1.3%, perhaps on better than expected data, as well as this concept that maybe we are truly seeing the first step towards some sort of resolution to the conflict in the Middle East. One stock to watch at the open is Nvidia falling for a third consecutive session after closing at a record Monday, extending declines on a Reuters report saying the company is delaying the launch of an advanced A.I.

chip for China customers. Bloomberg's Isabel Lee joining us now with more. Isabel. Hey, Lisa. So this is a significant development because this is one of the most powerful chips that Nvidia is developing for China. So they're developing three chips. And Reuters was first to report this news. Reuters said that it can come until the first quarter of 2024.

And recall that earlier this month Nvidia was saying that it will come as soon as this year. So this is a setback and investors are not liking it. The postponement comes as the US has restricted some import exports of advanced semiconductors to China, and this means firms like in video will not be able to export some of their most in-demand chips to China, which is the world's largest semiconductor market.

So definitely a blow to investors. And if this decline holds, this will be the third straight loss in the quarter for NVIDIA and it's its biggest losing streak in about a month. Lisa Isabel, thank you so much. Turning now to the automakers, Tesla facing a second day of declines under pressure due to ongoing strikes in Sweden and the potential for steeper price cuts at one of its competitors. Bloomberg's Jessica martin has more Jess. Well, taking a look at Tesla, the ninth biggest weighting here in the S&P 500. But if you look at that stock, just

mildly lower here ahead of the opening bell. So this did come as especially when you're looking at pre-market trading already there. But then ahead after the opening bell here, you're looking at this competitor when it comes to BYD's Chinese electric carmaker, saying that the Dynasty series models in an ongoing strike here, when you are looking at what's happening, is definitely also pressuring when you are looking at Tesla here. So last month of course, when you are

thinking about Tesla, of course we did see those price cuts happen for its model three as well as its Y and obviously this push to meet its delivery goals there. But of course when you're thinking about this and especially what could potentially be good for Tesla car buyers when it is in this different price battle may not always be potentially helpful here for shareholders. But again, if you look at that stock here today, up actually 90% there. So still, when you are looking at those Chinese EV makers, actually they were mildly lower in Hong Kong trading. But another stock to keep an eye on, especially in morning trading Lisa.

Jess, thank you so much. We're also watching shares of iRobot, the maker of Roomba, soaring at the opening bell amid reports that Amazon is poised to win unconditional EU antitrust approval, clearing the way for its $1.4 billion acquisition of the company. Joining us for more is Bloomberg's Alex

Salmon Nova. If John were here, he would say, why do we want a Roomba going around tracking all of the data in my home and transmitting it to Alexa and transmitting it to Amazon, nonetheless. Alex, what do we got? Exactly. So investors are apparently really happy about it. Shares of iRobot were up as much as 44% before the open now moving higher again as the stock market opens. This is after reports that Amazon is set

to win unconditional approval from the EU for its acquisition of the company, which is of course the maker of household appliances. Like the popular Roomba vacuum. This deal was announced back in the summer time. Amazon said it would acquire the company

for $1.4 billion to expand its portfolio of Smart devices, which includes the Alexa voice assistant, various smart thermostats, security devices. But the EU had warned Amazon that this deal could reduce competition in the robot vacuum cleaner space and importantly, reinforce Amazon's position as the dominant online marketplace in the US. The company has been under scrutiny, along with other big tech names for their acquisition of smaller rivals. So this would be a big win for Amazon if approved. The initial agreement worked out about $61 a share that was revised down to 51 $75 a share back in the lot in July after Irobot's net debt increased. And you can see iRobot moving higher

today. But of course trading volume is light, so it is accentuating the upside move as well. Alex, thank you. Thank you so much for that. And finally, attention turning to consumers as Black Friday gets underway. This coming after a number of retailers delivered disappointing earnings and tepid outlooks for the holiday season. Joining us for more is Bloomberg Simone

Foxman salmon. Yeah, Lisa, Black Friday just isn't what it used. To be. And that was the message from CEOs this quarter. Macy's CEO Jeff Gennette saying on his earnings call just a few days ago that Black Friday is really focused on the deals prior to Black Friday.

Retailers have been promoting this day and this week since early November. And this strategy allows really budget constrained consumers to kind of spread out their spending over time. Bloomberg intelligence also says expect a day where people are just going to be putting less in their baskets. The biggest discounts, however, are going to be on toys with discounts there up to 35%. These discounts, though, even though

there's this real emphasis on this value oriented consumer, are not expected to be as significant as last year. That said, we're going to see the likes of Lowe's offering enormous discounts on things like big appliances as that spend has really been under pressure. Overall, the National Retail Foundation expects that we'll see holiday sales increase 3 to 4% this year. This is not as big as last year, but it is roughly in line with what we saw pre-pandemic. Again, shares of most retailers this

morning in the green led in part by Costco, but not much movement here today. So the Simone Foxman definitely wraps it up. Well, thank you. UBS Wealth Management's Lesley Falcone unveiling her outlook for the consumer, writing, quote, We expect consumer spending to slow into 2024.

With the savings rate set to rise, consumers will spend more selectively. Lesley, I am so pleased to say. Joining us now with more. Leslie, how important is Black Friday? Are we overstating it at this point, given the fact that we also have Cyber Monday, the Friday before Black Friday, and every day leading up to it online and elsewhere? I definitely think it's an overstatement now versus what it used to be. I mean, a lot of these shopping has been going on for the past month now. It's not just about Friday. And, you know, I do think it was

mentioned before. We are expecting to see some slowing this year versus last. And, you know, versus the 5% growth that we saw last year, we might see around three, 3 to 4% this year because people have other obstacles such as student loan debt. So this is a reason why some people are expecting some sort of slowdown or a gentle kind of Goldilocks softening in the consumer appetite that can lead to a disinflation. I do wonder, though, you know, you said people are going to be spending more selectively on what we have seen services pick up to such a big degree. Are we starting to see that fall off and

people go back to goods? What? Listen, I don't think necessarily they'll go back to goods. I think people will start spending more selectively, particularly when you think about that student loan data, you might not pay as much for that concert ticket as you were, you know, this past year. And I do think that people that consumers are going to start saving a little bit more as we go into 2024, particularly given our view is that, you know, the Fed more than likely will not ease in the first half of the year. And we know that there's a lag for this higher for longer. And I do think that this headwind of higher borrowing costs and just impact on the consumer will steadily increase in 2024 and people just start to be a little bit more selective of how they spend their money. How concerned are you about what Walmart

was talking about that in the past 90 days they've seen a significant drop off in consumer appetite. Does that translate to other types of retailers or is this more specific to exactly what Walmart is dealing with? Well, more what's going to be more the coupon clipping kind of They've seen more of that. I mean, I think that when you look overall, as much as inflation has been going down, the actual price level is still fairly high. So I do think that, you know, you're going to see some headwind going forward in terms of that kind of spending and these kind of deals that you're going to get going forward will also increase. You know, we've had a situation where the consumer has been incredibly resilient and we think that that continues. I mean, household balance sheets we view, is still very strong and will continue to be strong. We just do expect that, you know,

savings rate will probably move higher as some of the stimulus goes by the wayside. You do have some of the things such as this student debt, you know, playing an obstacle in terms of how you spend your money. And we still have an inverted yield curve. So we do anticipate that the consumer might pull back a little bit. I mean, we still expect a soft landing,

but again, savings is probably going to increase over the next year. Okay. So there's a question around savings increasing and savings decreasing rate. So people have been saying, well, people are eating up their bucket of savings from the pandemic, and that's the reason why they're going to slow down. You're spending you're taking the

opposite tact and saying that actually they're going to be more prudent as they try to rebuild. Which is it? Right, Because there are some people who sort of represent Americans as profligate spenders who are just, you know, banking on their credit card and just carrying on with the spent spending? Well, I think you're absolutely right. I mean, credit card debt is, you know, is like a trillion. And we've seen these credit card rates, right, of 21%, which is incredibly high. And we are seeing a rise in

delinquencies. I do think there will be a level of prudence next year in terms of the consumer. Again, I mean, they still they're still very strong. They still have, you know, a strong balance sheets.

But we do think that that saving aspect will probably be a little bit more in tune next year as we do see, you know, growth kind of slow. And again, this impact of higher rates continuing as we believe that they will, particularly during the first half of the year. Start to impede the consumer a bit. Do you buy all of these arguments, taking a look at Thanksgiving dinners and saying, well, actually it's lower price on average than last year? Do you think that that really represents kind of how people are feeling and how they're going to experience this information? I know what I mean, because there's still again, prices are still high. You know, and I think that listen, I think, you know, as much before George mentioned this, when you look at some of these indicators about the Delta and about the change, and that is that is incredibly important. But it is an absolute level. These levels are still very high. And although I don't think it's going to

change someone's spending habit because they're seeing a slight decline right now, because there's other obstacles that they're going to be facing, such as student loans. Leslie, you'll be sticking with us and we are looking forward to that. Coming up, OPEC pushing back a critical meeting clouding the outlook for production. And that conversation coming up next. Right now we see that the market is is trading comfortably in its alluvial volumes. But, you know, spreads have held up in the last few days and we think physical buying is going on in the market.

So the next question, though, is about that January number. So will the demand be there? And is OPEC's happy for the U.S. to fill that access demand and you think the demand can be there, but will they want to hold back with their own customers and allow them to buy American? Nadia Martin Wigan going a spell in capital. Weigh in on the energy markets.

Oil sliding into its third day of declines on Opec+, announcing a delay to their pivot on November meeting, which will now be held online. The groups struggling to strike an agreement on African output quotas for more American nightingale joining us from London. Let's talk first about the Opec+ meeting. Do we have a greater sense of why it's been delayed and why it is remote and what that signals for production? Well, it's not completely clear why it's remote. The cause of the delay, we think, is there's a disagreement with how much they want. The African countries, Angola and Nigeria to pump.

And they're just trying to kind of work out what they should do, what's a reasonable amount. And that's obviously pretty important for the group at large. And if they don't kind of find those agreements, then, you know, that's just going to cause things to drag on.

Lyrica, thank you so much. We're getting some breaking news right now. We appreciate the insight and we will follow up with you. We are getting us PMI as they're just crossing the terminal and they are interesting that they come in below expectations on the manufacturing. So they come in at 49.4 in contraction territory, which is usually below 50 from the expectation of 49.9.

And you could see that services actually comes in better than expected. So this is sort of the the interesting point is you still see expansion in the services sector. 50.8 So the overall still positive, still led by services, even with manufacturing disappointment, all of this kind of pointing to a real kind of churn beneath the demand. S&P futures just lower by about a 10th of a percent. You could see that kind of drag on things.

I imagine that you have a bit of a pop in yields on this, given the fact that people are looking at demand kind of continuing. You are seeing a bit higher ten year yield, 4.4, 7%, basically in line where they were before the two year yield, climbing up, bumping up, approaching that 5% level again, 4.94%. Bloomberg Simone Foxman joining us with

more details on what do you see? Yeah, as you were talking about, lisa, the the real strength here in that services sector number, we had expected that it would stay in expansionary territory and we didn't really expect any major changes in either direction. But we can see just in the last few moments, NASDAQ S&P 500 both turning into the red, whereas Dow Jones still holding up here. But the major moves as we're seeing across the market, really concentrated in that bond space with yields rising. Not too much happening today in any anywhere in the stock market. Somewhat. I love it every every conversation and nothing's really happening. But we're going to tell you kind of what

should be happening today on a day when pretty much no one is in the office. Thank you so much. We really appreciate that Lesley Falconio is back in the office or at least back with us.

Probably not in the office on a day where not that much is happening and just wrap it up the script, as Tom would say, are we seeing basically nobody in the office, everybody just basically punching in to make sure nothing is really exploding and then just moving on? Yeah, it's fairly quiet. I mean, everyone knows that these kinds of days are actually the very the the most liquid days that we do have an early close. So I think that people are watching it. But normally on days like today when the liquidity is not what is pretty prominent, you don't want to trade on these kind of days anyway. So it's fairly it's fairly quiet, which is what we're seeing for sure in the price action as well as just in volumes. But I am wondering, we were just talking about the PMS that came out and it is interesting to show that that is continuing with services expanding more than expected and manufacturing contracting more than expected, kind of goes to this feeling that we might see this trend continue for a longer period of time. Is that sort of being baked into your base case heading into next year? I think that one of the biggest things right now that we are sort of pushing against is the fact that the market has priced in, in the eyes of the Fed and nearly 100 basis points in 2024. And although it's backed off a little

bit from that March probability, which is now only about 15%, the probability of an ease easy march was once 40% after that CPI number. That's really what we're pushing against. I mean, we don't think that it's it's it's the Fed has the ability to sort of weigh the victory of the victory flag. And we do think that that the Fed funds

rate is going to stay higher for longer throughout the first half of the year and most likely start easing in the third quarter. So that part of the market and what the market's pricing in currently we think is a little bit too dovish, particularly in front of that December 13th meeting. So do you get the sense that basically the Fed's going to be on hold for longer than people expect, but then that they're going to cut really rapidly? Or do you think that we have this sort of protracted higher rate environment that's going to become that much more challenging as time goes on? You know, we we we're still in the soft landing cap, so we're not seeing that rapid cut yet. But listen, the fixed income market and

the market as a whole, this is a show me market right now. Right. So as much as the Fed can be vague in terms of wait and see, the fact of the matter is we have to wait and see for the data. But right now, our our expectation that the higher for longer will more than likely stay for the first half of the year because although we think, you know, growth will slow and the payroll will start to loosen, we're not looking for these consecutive negative payroll prints that will force an aggressive easing. So we do think that, you know, in the second half will start to ease, but we think it'll be measurable. We don't think it's going to be this

this catch up because they've waited too long, at least for the data from what we're seeing right now. What do you take in terms of the signal from oil prices and how much they've come in? A lot of people saying this is very. Such a demand story. Do you kind of buy into that or do you think that there's another thing going on? Yeah, I mean, listen, this is oil and this is going to be like the fifth consecutive week of decline. I think the last time we saw this was in December of 21 outlook is for for oil to to to move higher into the end of the year and into next year. I mean, both on the demand side and from the supply side. So we don't think this is going to be something that lasts a long period of time.

But this is but again, you're right, this is the fifth consecutive week potentially that we'll see a decline. I mean, do you think that this has to sort of reconcile itself either with oil prices starting higher or else the bond yields space coming in and going lower with bond prices going up simply because it does suggest something broader? Well, tonight, I think that what we're seeing now in terms of and you pointed this out earlier, I mean, you know, we've we have these break even inflation expectations in the chips market. They're already fairly low. However, as we talked about earlier, that five year, five year inflation expectation is still moving a bit higher. So I think that these these lower, lower oil prices are in terms of the inflation going forward could dampen a little bit.

But for the longer term, we're not quite out of the woods yet in terms of thinking that could be a potential driver to inflation moving slightly higher. Also as well, I mean, when it thinks about the correlation of oil to things such as high yield market, the high yield market in terms of spread is continually compressed. So I think that going going forward, at least, we do expect oil to go into at least the mid nineties by the end of year into 24. Leslie Falcone, thank you so much for being with us. Have a wonderful, wonderful holiday weekend.

Let's take a look at some of the sector price action this morning. We have to find out what Simone Foxman is going to say is actually moving on a day when very little is moving. And I understand that it's about what do you got? Well, I think the only sector that's really moving consistently in any direction is energy, where we're up over 1% in the broader sector. We are seeing some weakness in communication services, information technology. But I think as has been the theme all morning, this is the Thanksgiving hangover. There's not too much going on in any

direction, but we are seeing all 11 sectors up on the week. This is the fourth consecutive weeks of gain, week of gains for the S&P 500. Bank of America was also out talking about some of the biggest inflows into stocks that it's seen in several weeks. So that important is we see some enthusiasm come back as we head to the end of the year. Lisa Simeone, thank you so much. Coming up, the market moving events. They need to be watching. That's next in our trading diary.

This is Bloomberg at the open. I'm Lisa Abramowitz in for Jonathan Ferro. Not a lot going on in these markets today. You can definitely see this sort of

holiday spirit, imbuing markets with a soggy ness and a lack of action. Not so much. When you take a look at the yield, space yields definitely higher as people take a look at possibly more fiscal spending over in Europe, as well as the prospect that maybe people are spending and that things aren't so bad. Time now for the trading diary. What you need to be watching through the rest of the week. After the weekend. It's Cyber Monday. More spending plus will get new US home sales that's been picking back up with Governor Waller and President Goolsbee Wednesday dollar tree earnings fed fed president loretta mester is speaking and we get the beige book thursday we go we get some personal income and spending numbers and finally ism manufacturing on Friday. Which should be interesting, especially

given what we just saw with respect to some of the PMI data coming out showing the manufacturing downturn. I want to take a look at yields and I really do think that this is actually one of the biggest takeaways over the past 24 hours, the fact that Germany wants to extend its ability to spend without having to come up with some net new issuance of debt, they want to keep competing. And you can see that has set the tone throughout the day. Ten year yields now near session highs, 4.4, 7% after better than expected data in the services sector, as well as

what's going on with developed markets continuing to borrow, continuing to spend even into what could be a tricky period. But with a lot of debt and a lot of inflation. This was Countdown to the Open. Thank you for watching on this

Thanksgiving Day. Have a wonderful weekend.

2023-12-04 00:38

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