tv Bloomberg Surveillance Bloomberg November 1, 2021 8:00am-9:00am EDT
♪ >> the market is certainly testing the limits of central banks. >> i'm hearing a lot about fiscal tightening and i'm not sure i buy it. >> the market is being pushed and pulled by what i believe. >> supply chains and unemployment are good problems to have. >> it tells us there is more inflationary pressure. >> this is "bloomberg surveillance." jonathan: new month, old story. for our audience worldwide, live
on tv and radio, alongside lisa abramowicz, i am jonathan ferro. your equity market up 19 on the s&p up for -- 4/10 of 1%. lisa: he pointed to amazon's earnings which are highly disappointed, apple, disappointing. supply chain issues, people look past it. how long can we do that? jonathan: it wasn't just that they were disappointing. there are two hot button issues, supply and labor costs. lisa: the idea that labor costs will get worse and some expect supply chain disruptions to get worse, so how do people look past this to a new era and factor in that rates will remain low forever. jonathan: kailey leinz, central banks. kailey: you have the rba, boe, and the fed coming this week.
the boe could be a live meeting and we could see a rate hike but the fed, hike is not on the table. what language do we get out of chairman powell and does he push back or let this pulling forward of rate hike expectations sit and not push back? jonathan: it comes down to his assessment of inflation and the path forward. once he explains that, we will work out what's next. the taper story and rate guidance, they were trying to say the rate story is distinct and separate from whatever we say about tapering except for market participants -- thank you -- what's next. this coming wednesday, we know the taper story is done. it sounds like it is on autopilot. beyond that, what's next? lisa: let's say, jay powell does not push back. do rates go even higher or do people stay where they are, or do they price in more rate hikes in this cycle given the fact
that the fundamentals are so good at this point? jonathan: if you are not familiar with financial markets or tuned in accidentally, welcome. [laughter] equity futures up 18 on the s&p. up 4/10 of 1%. yields are higher by three basis points. in the fx market, 1.1572. crude, 83.92. a big week for a climate change summit in glasgow, scotland. at the same time, they are leaning on oil producers to pump more oil. lisa: i love this story. oil producers are pushing back saying, i don't think we need it, taking the high road where people who are climate conscience -- conscious are saying, we need oil. jonathan: the irony of the moment is not lost on the president. the president is aware of this
and talked about it in rome. he wants to improve the democracy for global prosperity. this is a fantastic example of the struggle to achieve long-term collective goals that are overwhelmed by short-term political cycles, because that number, 84, threatening to go to 90 and more. price of gas in this country, that is very much at the epicenter of a short-term political cycle. lisa: this is what's going on with the compromises we are hearing that democrats are trying to come to to get something passed. eventually we could get a vote, but how is that price in? jonathan: joining us is lisa hornby. we heard from -- in the past week and he talks about as long as credit holds up, -- are you -- lisa h.: i have been a little bit. you would think some of this
volatility would have filtered into equity and credit and risk markets more broadly, but so far, it's been pretty resilient. for us, the thing we are looking at most closely at least for the u.s. fixed income market, the impact on foreign and overseas demand. that's something we've become very reliant upon over the past year or so with a tremendous amount of yield buying. to the extent we start to see front end yields move higher which impacts the cost of their hedging, that could have some impact on the demand for u.s. credit products. so far, we are not seeing much of a change on that front and we've seen credit spreads be quite resilient. our expectation is that we will get more volatility in the coming months, particularly as we get some of the central bank moves out of the way and we see how markets can actually stand
on their own without the huge liquidity we've had provided over the last 18 months or so. lisa a.: i'm going to live up to my reputation as dr. gloom because i keep thinking about what happens when the fed starts hiking, when we get to the end of the cycle. what does the end of this credit cycle look like? lisa h.: i think the end of this credit cycle probably looks like the end of most, leverage will increase. you start to see some of the same phenomena we have seen in the past. for us, we tend to use spreads as a guide. when spreads get almost insanely tight and i could almost say we are close to that point now -- lisa a.: forgive me for breaking in, but what is the nature of defaults at a time when the federal reserve has gotten a reputation of stepping in? lisa h.: that's a good question. i guess your question is the fed
allowing a credit cycle to exist? frankly, we don't know the answer. i think markets will still behave like it will exist, but what you saw this past crisis and probably what is to come is that those balances low to the absolute low credit spreads and the peak and back become shorter in nature because the markets have a strong central bank response. kailey: i was speaking with saxo bank and they say curves are so behind on inflation they will have to act more quickly on the hiking cycle, that might be shorter and might result in them having to loosen policy because of an overreaction. what's your reaction? lisa h.: i think central banks are always behind markets. you are seeing that today. it is the central banks catching up to what the market has done in terms of pricing in the u.s. i think that's probably spot on.
central banks will respond -- trying to respond on a number of fronts. powell has a difficult message to walk ahead of himself this week. he can't be too benign on inflation or you will have the bond market vigilantes pushing that narrative. at the same time, the market has undergone quite a significant front and repricing -- front end repricing. you don't want to see the market go crazy and powell endorses it. central bankers are in for difficult messaging over the next couple of years, as this inflation narrative is in our view, not quite as transitory as people have made it out to be and that's probably more of a structural trend rather than short-term. jonathan: there must be some week list -- weakness somewhere. italian tends, 1.27. this is a world where central
banks will have limitations on how far they can push the policy rate. does 1.20 seven in italy get it done? do you wait for more? lisa h.: we are not quite there on italy. i will say emerging markets are starting to open up as an opportunity for us. we have seen dramatic underperformance in some of the em names and in our view, there are opportunities. we'd like to get stability in the dollar to give us more confidence and it is taking some of that trade. certainly, there are emerging-market issuers who have underperformed. those who are geared to the u.s. economic recovery, we are more favorable on those and we are taking advantage of opportunities. jonathan: come on when you are buying a little bit more and we can talk to it. take us immediately to the china conversation. we started with amazon and apple , amazon an issue with labor costs. i don't really care if amazon is
finding it costly with demand, not my problem, it is there's. i'd don't see up -- i don't see a problem with demand. with apple, tim cook talk about very robust manned. with china -- demand. with china, you see something different. with china, you see a demand issue. lisa a.: a demand issue as they have a zero covid policy. we saw data points out of china over the weekend. this is a massive story. we saw ongoing weakening and we saw producers pass along price hikes to consumers. we hadn't seen that before. the price index inflation has risen the most since the 1990's. how does that bleed into their economy, the second-biggest in the world? jonathan: em in china is more of an interesting story.
lisa a.: it is interesting, not that i'm going to buy it, but i think people are looking at companies that are being allowed to fail for the first time, which is a new thing. people think this is a good thing and it perhaps means free market. jonathan: kailey leinz? kailey: you see the power crunch in particular is biting and that comes back to the conversation, why cop 26 will be so difficult because china is telling coal producers to produce as much as they can. they are worried about shoring up support for the communist party and less worried about climate change. jonathan: up 17 on the s&p. 4/10 of 1%. apparently, no journalistic integrity when you recommend things to buy. lisa a.: highlighting potential problem spots. jonathan: downside, i get it.
futures up 17. from new york, this is bloomberg. laura: with the first word news, i am laura wright. ceo jes staley is stepping down from barclays amidst an investigation into how he characterized his ties to jeffrey epstein. on friday, staley and the british bank received u.s. regulators' preliminary consideration. they will rip -- replace staley. the u.s. and european union have reached a tariff busting trade agreement to fix the steel and aluminum market to leverage it into a broader global arrangement that will penalize countries who don't meet low carbon targets when producing the metals. tariffs on as much as $10 billion worth of goods. from the world richest person, elon musk tells the united nations if it can prove he can
solve world hunger, he will sell tesla stock. the head of the world food program have called on elon musk and jeff bezos to come up with six billion dollars that could keep $42 million -- 42 million people from dying. president biden in scotland for the start of the climate change summit but without the signed and sealed agreement he was counting on from congress to quiet skeptics. the president has a handshake deal with lawmakers to spend $555 billion fighting global warming. what he is bringing to the summit is a message of, trust us. global news 24 hours a day, on air and bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪
take a lot of dissuading that they need to raise rates earlier and aggressively. the next few months will be tough. jonathan: that was ian shepherdson, chief economist, it tough few months ahead. some people think this labor market is already hot after that data point. lisa: it's not the only one. if we get a disappointment in the number of jobs on friday, how much do people start talking about a tight labor park it that people are not coming back in? jonathan: 450,000 the estimate. price action, up 17, advancing 4/10 of 1%. all-time highs at the close on friday and we add some weight to that rally. going into the rba overnight, the federal reserve on wednesday and the bank of england, we are told it is live on thursday. lisa: why do you think it is
not? jonathan: hugh hill says it is live. when they get this initial rate guidance, they have a healthy degree of skepticism to buy into it. just saying. lisa: the market will not buy into it? jonathan: they will hike. they used to call mark carney, the former governor who was on a few hours ago, the unreliable boyfriend. lisa: i remember that. jonathan: people are still haunted by that. 2014 did this address. he had a speech and talked about interest rates rising in the future, alluded at that point. and then it didn't come, didn't happen, took years. that's the reason why. lisa: you did a great job. jonathan: i asked in a news conference why he was so upsets with that first rate hike and he shut up very quickly. we've made up since.
greg valliere joins us now. on a deal down in washington, you said before, you don't think it can happen anytime soon. you think it's coming soon. what's changed? greg: in a word, "virginia." democrats are worried they will lose in virginia and that shortens the amount of time in which they can get stuff done. i think this has put additional pressure on. a lot of the key issues have finally been resolved. jonathan: let's talk about virginia. a really peculiar moment where one candidate is making this a referendum on the current president and the other is making it a referendum on the foreign president. what's really intriguing to me, watching the news stations, they never talk about who glenn youngkin is. why is that? greg: his initial ads were all about how he played college basketball and his initial ads
were an ordinary guy. these were hundreds of millions of dollars and frankly, i don't know why. maybe because terry mcauliffe is worth a lot of money as well. lisa: when you say there seems to be some progress with the democrats, who is capitulating, the progressives, the moderates? greg: i think the progressives are furious with mansion and synema and they realize they should take something because they could get nothing, and that's changed their whole attitude. lisa: how much is that perhaps what was behind treasury secretary janet yellen conceding what might have been obvious to some people, the democrats might have to go it alone when it comes to raising the debt ceiling. is this because there is enough consensus among democrats to get reconciliation done? greg: i think so, but there's a sleeper here and that sleeper is, it's possible we won't get the debt ceiling in early december.
revenues to treasury have been great. if possible, she might be able to wait until february until we have to a race the debt ceiling -- raise the debt ceiling. in the final analysis, that's correct. kailey: all of this is going on domestically at the same time the president is abroad, left rome and now in glasgow. when he speaks later this morning, is he speaking to russia and china, those who aren't at cap -- cop 26, or is this targeted toward his constituency at home? greg: the letter. he's under -- the latter. he's under a real pressure to come up with a victory. his polling is now in the low 40's so he needs to do something. the pope may have given him a poppel of points, but that's a couple of points, but he needs to do something aimed at a domestic audience.
kailey: the race in virginia, is a loss by terry mcauliffe going to be blamed on president biden only? greg: if it is, i think you can blame crime, the immigration story, inflation, but the sleeper issue may not be appreciated around the country. here, since i get 8 million ads a day for both candidates, the real issue is what teachers should teach kids. should teachers talk about controversial race issues? should teachers talk about other things that perhaps parents don't want their kids to know about? terry mcauliffe has acted in kind of a tone deaf way, arrogant, saying i don't -- i think we should tell teachers what they are teaching our kids. i'm agnostic, but as a political
analyst, this has really hurt terry mcauliffe who didn't get it. jonathan: as a political analyst, this is the issue. we are taking the temperature of how far the democratic party can push things to the left. isn't that why this is such a big test? greg: absolutely. this could be a repudiation to the progressives who have not had a great year. it sends a tremendous message, canary in the coal mine for next fall. i think the republicans will regain the house and have a chance to take the senate as well. jonathan: greg valliere, thank you so much. it is a real temperature test coming up in the next 24 hours, and whether it clicks with the progressives going into the midterms. lisa: or whether it has. if they are capitulating because they don't think they will get anything if they don't tells you a lot about the political temperature. jonathan: greg seems to think they have. lisa: it came down to mansion. jim -- manchin.
he's been driving the numbers. kyrsten sinema setting out her pozo, with -- pozo with respect to taxes -- proposal with respect to taxes. jonathan: the actual president of the united states who is in glasgow, scotland, has just turned up the event for the cop 26 summit, a climate change summit. we will hear from the president of the united states in the 9:00 hour, so 9:00 eastern time, we will get the president of the united states and several other leaders aching statements. president -- making statements. the president's third in-line. lisa: who are they speaking to? statements don't work. we've been doing this for long enough that people want something more concrete. jonathan: do we get more fluff this week?
jonathan: live from new york city on radio, on tv, this is bloomberg surveillance. alongside lisa abramowicz, i'm jonathan ferro. kailey leinz in for tom keene. s&p advancing .4%. all-time highs of the close on friday. the biggest monthly gain going back to november 2020. we are up almost 7% last month alone. unreal. 1.5821 on 10. on two, through 50 basis points. crude $84 a barrel. it is all about one thing this week for the federal reserve. give us a rate guidance. joining us is andrew hallman horst -- andrew hollenhorst.
you had a forecast for rate hikes from the fed to start next year in december. people thought you were hawkish. they are now accusing you of being a dove. andrew: that has been the evolution. when we came into the year with that forecast people asked did you put the long -- the wrong year behind your forecast. we are still in december 2022 even as we see the market start to move ahead. lisa: this is the ultimate win for a strategist. this means you are early and potentially late. what gave you conviction before and what gives you conviction now they will not hike more than just once next year? andrew: i do not know if conviction is the word i can use. the single thing we were looking at is a rapid recovery in demand and what that would mean for inflation and it is the inflation story that matters. that is part of the conviction
because inflation has been a difficult variable for any macroeconomists get right, for any policymaker to get right. it looks like the strong demand was going to be there. that could drive a stronger inflation. we see the market moving the rate hikes earlier, we see calls thinking about the fed hiking earlier, it is about that inflation story. we know it is there in goods. does it become more persistent and does it stay with us and the does that cause the fed to tighten. lisa: let's look forward to friday. if we get a downside surprised. what does that mean in terms of tightness for this labor market? andrew: we were so focused on the headline jobs number because the fed told a substantial further progress in the labor market to get to the taper. we are due to taper now. we think of the fomc meeting we
will have an announcement of the tapering of asset purchases. the focus is no longer so much on the headline number. now the focus is is there a shortage of workers in the labor market? you can have a week reading because there is no demand for jobs. if we get a week reading, it will be driven by the fact there is not the supply of workers behind it. we are looking at data on wages, on participation. kailey: let's focus on participation, which has stayed stubbornly low. is that structural? andrew: it looks like at least a piece of it is structural. where we get a structural element is with those 55 and over, somewhere between 500,000 and one million workers dropped out of the labor force, which are early retirements. you had savings during the pandemic, loss of a job. now that retirement, which was
five years off came early. those workers are probably permanently out. we are watching on a month-to-month basis as the primate workers, you see the prime age workers coming in or going out. there's a view at the fed that enhanced unemployment benefits will expire and schools will reopen and you will have workers coming back at labor force. it is clear in the day that we are not seeing that surge of workers. the question is is there going to be a trickle of workers relieving the worker shortage or is this structural? people have re-examined their lives and made a different life plan and working for some people is not part of that. kailey: you mentioned excess savings during the course of the pandemic that brings me back to the note from mike wilson. his thesis is the bull run inequities cannot last much longer. he points to a payback in demand in a lot of the excess savings
is back to pre-pandemic levels and inflation is starting to bite for lower end consumers and you will see a year-over-year decline in percival disposable income. at what point are you worried about the consumers propensity to spend and be tolerant of the higher prices companies are trying to pass through? andrew: great question. i get worried about it when i think about 2022. early 2022, the pent-up demand, supply that has not satisfied that demand. you look at annualized auto sales, that number should be 16 or 17 million. those people still want to buy cars. it is hard to get too negative on the first half of 2022. when you look at the second half of 2022, that is when we think about how you work through some of the savings that have been pent up and become demand. are you seeing higher prices
outstripping the rises we are seeing in wages? the wages are accelerating but prices are rising rapidly. that means real incomes are declining. that is part of the demand story and part of the inflation story. does that become part of a spiral or does this become something that is negative for demand where prices are moving too much ahead of wages? lisa: this goes to the idea that people in the market tend to be impatient. this idea that once we get a sense of when the fed will hike we look at what is next, how many more times, what will the pace look like come and you take it on from there? andrew hollenhorst, chief u.s. economist of citigroup, what is your view on the path of this rate hiking cycle? the idea that if the fed hikes sooner they cannot go for that long, it will be a shorter cycle. andrew: in terms of where they get to in terms of a terminal rate, now it looks like a
terminal rate will not be that high. if you look at the last hiking cycle we only got real rates up to about 100 basis points, which means the nominal rate should not be going much past 2% to 3% then you think about rates back down. real rates around zero basis points, nominal rates around 2%. the destination is not too high. on the other hand we have a flexible average inflation targeting regime. that means you allow inflation to overshoot before you start raising rates. it means when you start raising rates you should have a lot of confidence about proceeding with rate hikes. even if the destination is not too far i think the fed will be delivered about raising rates. one rate hike every quarter to about four rate hikes year, only getting up to 2% nominal rates. i would not expect one or two rate hikes a year. kailey: on the fiscal policy
side, maybe we could see action on capitol hill this week as it relates to the infrastructure package in the social spending package. both of those are a lot smaller in size and scope than originally intended. when you look at package that is smaller but the pay for side is also more moderate than expected, how does that inform your thesis of what the economy is going to look like over the next five or 10 years? andrew: it is a difficult question. some of the elements of this fiscal package, even if they are initially legislated for one or two years, if that becomes popular, then it may stay part of legislation even beyond when it is meant to expire for a particular fiscal package. when we project these things out, we do not just take current law, we make assumptions about things like the child tax credit being continued. what you are likely to see his
spending that exceeds revenue. there is a lot of questions about the revenue side. it will be spending that is more frontloaded. we will have things like corporate tax, a percent minimum corporate tax, that will extend for 10 years, where is the spending and the child tax credit will be frontloaded for a couple of years. looking at larger deficits. loving and positive fiscal impulse. -- looking at net positive fiscal impulse. that is what the economy has to navigate, coming from direct transfers on the order of trillions of dollars, now we are talking about hundreds of millions. jonathan: you're too dovish. andrew hollenhorst, thank you for joining us. the market goes above and beyond
what you are looking for and then everyone starts calling you dovish because you were hawkish. lisa: i think it is a victory. what it means is you are standing in the right because people cannot get it right. this shows how much the market has moved around a single forecast. jonathan: seeing a lot of houses market to market over the last couple of weeks. kailey: jan hatzius at goldman sachs put out the note saying the fed move in july is just playing catch-up to what the market had already priced in. you're already had the traders in the bond market vigilantes playing this game, now economist are being forced to catch up. jonathan: hard to call it hawkish with the likes of jan hatzius when the market is right on them no money. -- right on the money. later i will be catching up with stuart kaiser. the coverage continues through the week on central bank decisions and this in scotland, the opening session of cop26.
boris johnson delivered an opening statement. then it is onto the president, who is third in line to deliver his statement, sometime around 9:00 we should hear from the president of the united states. my guidance is pretty loose. lisa: i hope something comes of this. the g20 meeting was -- not on the practicalities of enforcement or details. jonathan: boris johnson looking for some details, telling the conference we need to act or it will be too late. we've heard that a lot for a long time. lisa: we have, but where's the urgency? does that count as fluff or action? jonathan: you are our commander in chief and it comes to all things fluff. lisa: i will let you carry that conversation forward. jonathan: up one third of 1% in new york. this is bloomberg. laura: the texas abortion law goes before the u.s. supreme court today.
it is the strictest in the nation and it has largely shut down abortion in the country's second largest state. texas and its allies say a number of legal documents prevent federal judges from blocking the law, even entertaining challenges by doctors and clinics. opponents say the law is unconstitutional. jes staley is out as ceo of barclays in the midst of a british regulatory probe into how he characterized his ties to jeffrey epstein. the bank says it was made aware of the preliminary findings on friday evening and says jes staley plans to contest the findings. he will be replaced by the head of barclays markets division. more than 5 billion people around the world have died from the coronavirus less than debt -- -- less than 2 -- more than 5 million people have died from the coronavirus around the world. the latest deaths came slower than the previous the rate of
deaths have returned to the first year of the pandemic. europe is starred for natural gas again. russian gas is now flowing eastward from germany to poland, reversing the normal direction and algeria has stopped shipments to spain. gas prices in europe rose the most in two weeks after falling 26% last week. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am laura wright. this is bloomberg. ♪
a wage price pushing the broader prices and that sets up a sticky path higher for inflation and the fed will pay close attention to that. lisa: that was michelle meyer, bank of america chief u.s. economist. in united states the focus is on wage pressure, on inflation. how much is it going up in a way that is sustainable? in china the conversation has a cloudier feel. you are seeing price increases and you saw that in the manufacturing side. over the weekend we started to see it pass along to the end consumer. a new phenomenon. joining us, myself and kailey leinz, damian sassower, chief credit strategist at bloomberg intelligence. what did you make of this souring of the chinese data that showed the price increases are getting to the end consumer. damian: you are right.
china is passing through the price increases. we knew ppi was the highest and 26 years but now it is passing through to other sectors that mean cpi will rise and that is not good news for an economy that desperately needs liquidity and policy easing. our inflation needs limited scope of the pboc to cut rates. what is interesting is china's pmi fell while most of the pmi's across asia rose and were stronger over the month of october. australia, india, indonesia, all of stronger pmi. an outlier that china had weakness. lisa: we will get into the idiosyncratic factors of china and how they might be affecting other countries in the region. the idea that if inflationary pressures are so prevalent, that will tie the hands of the people's bank of china, how much they can ease and try to unite the economy. this is the dilemma seen across the emerging markets complex.
how much does that make an issue for an economy that would like to see its growth accelerate a little bit more. damian: certainly a bloomberg we are calling for a triple r cut this month. it is definitely looking bleak and i do not think we will see it. it looks like the pboc would rather resort to liquidity injections than actually cutting the triple r rate. that is becoming the broad consensus, the pboc will not cut rates. speaking about the input costs being passed along downstream, we saw the prophet data, we saw 15% year-over-year increase but all based on metals and mining and those industries booming while the downstream sectors struggled. kailey: does all of this mean china will have to change its covid policy approach? damian: that is a great question. i do not know stop what they are trying to do is ease the power
crisis because it is the electricity shortage that have dampened supply and what have you. they agreed to cap coal prices, and that sent shares of the bigger coal producer is down significantly. the delta variant outbreak is starting to pass. they locked down thousands. that is why we saw the pmi actually rise. kailey: we have to keep in mind this data was influenced by the power crunch china is experiencing and china's response has been to turn back to traditional energy sources and tell producers not to worry about quotas and that comes against the backdrop of cop26 and the pursuit of a world warming less than 1.5 degrees celsius. howdy worry about china's transition to renewable energy and what it means for china prioritizing chinese growth?
damian: the fact that president xi was not at cop26 tells you everything you need to know. china is turning inward to their domestic economy. if that means thereafter to -- if that means they have to produce more call they will do that. what is different is the reliance and europe on russian dirty gas in order to power itself. talk is cheap. lisa: what you do with this? does that mean some of the weakness we have seen in chinese debt has more to go? that the hands of the pboc will be somewhat tied and on an ongoing basis there's not a lot authorities can do? damian: now you're talking my language because we are shifting to a critical month in november. we have a lot more coupon payments due. just this week ever grande is $83 million. next week it is another $150
million. we are starting to get where things can get really ugly really fast. if we come to see anything out of the pboc in terms of policy movements this will be the month to do it. it will be the property sector that forces their hand. lisa: chemchina can stroll -- chemchina control the insight -- can china control the insolvency rate? damian: i did not if control is the right word. they're trying to mitigate the impact on the broader economy. they have done a good job to date. for them to step in, it does not seem like it is on their agenda. creditors in u.s. who owned a lot of those bonds are suffering on the back of that and i do not see any change in the near term. lisa: damian sassower, thank you so much for being with us, especially as people look to the emerging markets complex at a
time of little yield. you do wonder what the potential risk is. this is a new regime in china and i wonder how much people are pricing this in to some of their global growth elements and projections in the near future. kailey: china is a goliath in terms of the global economy. this is the second largest economy in the world. if that story starts to change, how optimistic can you be on the global growth picture, especially in emerging markets where central banks have had to tighten. china is a heavy weight in the emerging-market complex. you have to consider the dynamics. as idiosyncratic as china issues may be, it has ripple effect through the rest of the world. lisa: we're almost through the earnings season. i want to prepare on what the overall reit has been. you think amazon and apple has been the story or you think microsoft and others are the stalwarts? kailey: if you ask the broader
equity market amazon and apple are not the story because this market looked right through that. earnings have been eating to the upside. more than 80% of companies are topping expectations to the tune of 9.6% above expectations. all of the supply-side issues, the supply chain issues that could have eaten into margins is not materializing. we are seeing margins expand. this earnings season has been better and we are coming up the best month for the s&p 500 back to november. lisa: the idea that margins continue to expand is amazing. coming up, we get more of a conversation with respect to the political landscape, especially ahead of the election in virginia tomorrow. the former governor of virginia will be speaking at noon new york time to preview the pivotal race that could give a sense of what we can expect in the midterm elections.
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one third of 1%. "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. jonathan: from new york, we begin with the big issue. nothing seems to stick. >> think about where yields are rising. >> the higher yield story. >> supply chain issues. >> take apple. >> in terms of rising labor costs. >> you get the wage price pushing to broader prices. >> amazon has disappointed. >> it will be a headwind for equities as margins begin to take a hit. >>