guy: friday, 29, september. today we get a bounce as we come to the end of the quarter. on the week, we are still down. announcer: the countdown in europe. this is the european close. guy: stoxx 600 up .6%, down on

the week. today we bounce a little. commerzbank up. puma bouncing on the back of nike. alix: i acknowledge you said nike. nike is up 7%. inventory story. they have to discount less to get inventory off shelves. it is still a topline risk. are you still spending money? it held up in august. loan payments coming due. carnival stock down 5%. they turned a profit last quarter for the first time since '20 but fuel prices put a dampening view on their outlook for the fourth.

that's a trend. s&p up, nothing to see. 10 year yield down by 4. we settle out third-quarter. what kind of volatility will we see when there is uncertainty in the market? guy: topline numbers, some of the indices in europe. in some ways they don't tell the narrative of the whippy action below the surface. huge rotation. stoxx 600 only down 1.2%. goa layer lower and you see a huge move to energy and out of luxury stocks. those names later on. significant rotation within the market. headline level not much different. real movement this quarter, the currency markets.

euro, dollar, pound. the euro-dollar rate below 2%. the range has been in norma's within this quarter -- has been enormous within this quarter. energy has translated. a range of factors have contributed. at the long end of bond markets around the world, this massive bear steepening, totally unexpected, has been the surprise of the last quarter. the u.k. 30 year up by 43 basis points. that has been a phenomenal move. are we done? was that the storm or just the warm up? alix: there is too much uncertainty to answer that. in the u.s., auto strikes, oil,

student payments, and a shutdown. you have problems there. can this be sustained if we wind up with an oil spike between 90 and $100? is there enough gas to support, if it gets cold? let's get to it. it is a q4 storm coming? is the fourth quarter storm coming? guest: the last time i went on this program it was all about inflation. the narrative has shifted. where less worried about a given the ecb data and the data from the u.s. and it feels like maybe the concern has shifted to consumer spending being less

strong than expected. in the u.s. you also have concerns over the government shutdown and the strikes. putting that together could mean the fed doesn't need to raise rates to tampa inflation but it could mean concerns are shifting to more signs of an economic slowdown. guy: the growth narrative seems to have caught people by surprise, in terms of the fear. are you battening down the hatches? heather: there are concerns. european stocks going into q4. there's been a shift into energy and offensives which signals caution. what is the oil rally going to have? does that going to re-stoke inflation? is that going to wait on corporate profits? carnival saw the man come back but they see higher fuel prices.

higher gas prices are possible, that will weigh on the consumer going into q4. yields are going to stay elevated. while the fed may not raise rates, it will stay higher for longer. we are seeing elevated rates play out across the board. that is one reason why data sectors like luxury and tech may continue to lag in europe. alix: are we going to see more volatility, switching the concerns and yields stay higher? heather: elevated vol is definite. we've seen that pickup. some of that is more volatility in the bond market, going into stocks. earnings season coming up is going to be a differentiator between winners and losers. earnings estimates improved a

little in the u.s., in europe, expectations are low. with carnival today, there's disappointment. investors are going to be looking on edge for any cracks in this soft landing narrative we had seen in q3. the soft landing will be one of the narratives in q4. guy: the growth story, the fear shifting to a slowdown. face-off landing may not happen. in europe, potentially the u.s., we have growth slowing but inflation staying elevated and central banks forced to keep rates high. has the bond market adjusted? who has adjusted to the narrative? which other assets have yet to adjust? the storm could hit differently.

justina: the past couple weeks, some real weakness is coming through in terms of big u.s. tech stocks. they've been resilient so far this year because of the ai boom. people thinking profits can grow more than the discount rate is rising. we start to see the shift. if that continues, we could see more of a catch up. tech investors waking up to the reality, maybe those profits are not as resilient, and at the same time discount rates have risen a lot, which they haven't really taken into account. alix: the difference between stocks and bonds and how the spread makes bonds cheaper in the u.s. than u.s. equities. the spread isn't that dramatic in europe, which makes both a tough buy. what are you hearing?

catch down potential? are they fairly valued compared to bonds? heather: european equities have stayed reasonably valued. they haven't had the ai premium priced into them. they are still relatively cheap compared to the u.s. earnings a relatively low. with europe, what happens with the macro backdrop will be key. in september, the german dax was the worst performing of the major benchmarks. that's a cyclical index tied to industrials. autos have hit china. you saw a robust performance for the ftse 100 in the u.k. which has exposure to oil and mining. you might see investors become

differentiated when looking at specific regional plays going into q4 as we sort through implications arising yields, oil, etc. guy: we haven't seen a widening on the credit front. i'm looking for the cracks. his credit one of them -- is credit one of them? what happens on the credit front? what happens to the economy that slows down? do we see a cycle emerging yet to be priced? justina: that's been a weird one. what investors are watching for our signs of corporate health interior rating. even the borrowing costs in terms of bond yields have risen, that doesn't always filter through to interest rate payments. so far we've seen resilient u.s.

economy. investors are looking at default rates, profitability and whether investors will fight harder to service debt costs. alix: i think we are scratching our heads for a bit. it's going to be hard, the next few weeks. appreciate the time. coming up, is a q4 storm coming? christian nolting joins next. this is bloomberg. ♪

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guy:ann speaking to us earlier. alix is probably trying to buy wellies. alix: did they show me? i definitely was. [laughter] guy: don't worry. we will talk fashion later on. how should you get home fashionably is the story she is trying to figure out right now. christian, the end of q3. it's been bumpy. what happens? christian: if you look at different asset classes, i would call volatility the weather in markets. on the bond aside, it is stormy. this year was better but quite stormy. on equities, volatility is still low.

not the nicest quarter. if we move some volatility down in the bond market, that is to be expected. alix: what is going to move it down? christian: what could cause forecast to change in the market, the government shutdown could be some. since 1981, there are 14. they have caused volatility in the market but not forever. 30 days was the longest, if i'm not wrong. growth, oil price, it's coming back a little. we think it could stay higher. the inflation discussion and sticky core inflation. guy: what do you think about the german 10-year? we've approached 3%.

q4, should we expect higher, long-duration yields? how much further could we go? jamie dimon is talking about 7%. we are certainly talking 5%. how will other assets react? christian: i would agree with jamie dimon, the world is not prepared for 7%. 10 year treasuries, we have seen 80 basis points. can they move another 40? yes. that's not such different weather than we had. that would not be our forecast for 12 months. we see lower growth, headline inflation coming down. core inflation is sticky. that can cause volatility on the bond market. i wouldn't be surprised if we see that in the next three

months. alix: equity market, what kind of volatility with that cause? christian: the last week, he saw that. the u.s. 450, equity markets started to react. today, it came down in the market reacted. seen in europe. these levels for the 10 years and 290 for the 10 year bunds, the market is getting nervous. guy: if i think a storm is coming, do i sit in cash and keep safe? is that the right trade? christian: i wouldn't say so. if you see a storm coming which lasts one year, which is quite unlikely, then you can do that, but otherwise you should stay invested and get more defensive.

if there is more volatility, rather than buying opportunity to look out for more sunshine, even if we get a recession in the u.s., it won't be a long one. downside is the opportunity. alix: interesting. the european equity market, the downside is priced in. it has to be really bad. the u.s. has held up but it has to wind up rolling over. you don't necessarily see that? christian: if you look at europe, valuation is so cheap compared to u.s. it's the cheapest in 35 years. being cheap is not a trigger. it needs a trigger. if there is more value for europe, there are better numbers from china. it is very cyclical. it's a different set up of the index. if you need to see more flows into europe, that may take more

time. the sentiment is changing slowly. guy: what could be the catalyst for europe? stabilization in the bond market? a signal from the ecb it will start cutting rates? a return of economic growth in china? what catalysts are you looking for potentially over the next three months to drag europe out of this difficult place? christian: it is global trade to come back. there is focus on china. the german index having not the best september, which is related to china. sentiment is not positive. if we see simulations, that would be positive. europe is export oriented as well. that could will be. it is not going to be easy. no substantial upsides.

such change in sentiment takes some time to change this. china could help. investors would also look to europe from a valuation perspective as interesting. alix: good to see you. thank you. president biden is delivering remarks for the outgoing chiefs of staff. he's also giving remarks on the passing of dianne feinstein. >> mark milley. combat infantryman, parachutist, green beret, war hero, served a total of five years in war zones, panama, haiti, bosnia,

iraq. a chest full of metals to show for it. a leader who once ran across a bridge. this is bloomberg. ♪

guy: european equity markets now heading to the close. broadly across europe, the situation in germany. what's going on with the uaw strikes in the u.s.? fascinating developments in europe as well. vw scrapping a plan for a 2 billion euro ev plant in germany. i am confused on a daily basis about the energy transition. it's proving to be more difficult than anticipated. it doesn't work without

significant government subsidies. vw speaks to that. it's hard to make money. it's going to take longer. it's going to be more expensive. the initial enthusiasm is beginning to fade rapidly. alix: they are opting to make this ev model at the existing plant. i can't tell if this is, let's just build it more smartly and cheaply, instead of building a new plant? or is there something more dramatic? carmakers in the u.s., $12 billion of subsidies to build ev plants. you are going to spend money. governments have to spend. many say you need sticks. i get that. initially, you can't. you need the carrots. guy: you do.

that is the lesson out of the u.s. will the debt be worth it for the wider economy? that's a challenge we don't yet understand. maybe that's what's happening in the bond market. what we are clearly learning is europe is struggling to navigate this. we thought europe would be a leader in this space. it is in many ways but you have to put money where your mouth is to deliver. that is where the challenges. -- challenge is now. vw is fascinating. it's mainly a corporate buyer being challenged now. alix: which is odd. at the same time, europe is fighting china, saying we don't want you to dump your cheap ev's in our market. on the flipside, isn't the

answer that if you want to compete, you have to make it easy for companies to make affordable ev's? this does not tell us that is the priority. i'm with you. i find it confusing. talking to companies in general, they are doing business in the u.s.. guy: the mixed messages out of europe are fascinating. there isn't a consistent and clear message. politicians say there is. look on the ground, it is clear there isn't. it looks more confusing. the quarter we just had in europe. indices in europe flat. a story of rotation this month. better and worse performing stocks. rolls-royce right up there. up 50%. hallstead down.

that is the payment company, down. there's been real rotation within the market. we will deal with that in more detail. this is bloomberg. ♪ only the new sleep number smart beds let you both sleep at your ideal level of comfort. your sleep number setting. and now, all of our new next gen smart beds have temperature benefits. save $400 on the new sleep number c4 smart bed. now only $1,499. sleep next level. shop now only at sleep number you're probably not easily persuaded to switch mobile providers for your business.

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guy: wrapping up the session, but week, the month, the quarter. let's figure out today. most of this week, downward trajectory for european equities. friday, nice bounce. that does away with some damage done. on a weekly basis, we are slightly negative. nothing to write home about. the ftse 100 up .3%. the dax and cac up a little.

the disinflationary trends in europe are picking up. a benign bond environment, which is positive for european equities. most of the week has been uber ugly. down throughout the week, monday through thursday, cramming lower. today, higher. held, kind of rolling over as the afternoon progressed. still just in positive territory. flat on the month and quarter. the real story is below the surface, a rotation into energy, out of luxury. some numbers, these are intraday numbers. i was hoping for monthly

numbers. the 600, the euro-dollar, all of these flat today but huge turbulence last month. stocks on the day, interesting narratives. commerzbank handing money to shareholders, up by 10%. puma has done well but this is all nike. what happens to the u.s. consumer going forward is a difficult call right now. puma doing well out of germany, the ripple effects of nike. lvmh doing well today. we will talk about why, coming up. the week ahead, entering q4 with a lot to think about. golden week kicking off in china. that's important.

the conservative party conference this weekend into monday, great coverage coming for you monday with jeremy hunter. we look forward. what is the conservative party going to say about economic plans? today we got data suggesting u.k. economy is not as weak as anticipated. coming out of the pandemic, the u.k. is in front of france and germany. the european political community summit taking place. interesting story developing their with regards to spending plans. the opec interim meeting. oil front and center. china could set the town next week. luxury stocks and investors paying attention. alix: in theory, golden week

could be a big deal for luxury stocks. terrible quarter. some say it is time to buy, like ashley wallace, bank of america. they just had upgrade on the sector. bad news is already priced. walk us through? ashley: morning. if you look at underlying momentum in the luxury goods sector through the cycle it has grown 9% over the long-term history however since the pandemic we've seen growth accelerate to 11%. q3, you are seeing normalization in demand, being led by the euro consumer. we expect that will translate into a slowing growth momentum entering early '24. we didn't upgrade the sector this week. we cut numbers and moved more

neutral on the space overall. seven rating changes, many of the big moves were lower. guy: is the bad news in? do you feel comfortable? that there were no more surprises? is there a risk? ashley: with luxury, stocks have benefited from the story. the upgrade story feels off the table now. it's become a valuation sector. valuation multiples today, we think this pullback will be about opportunity for investors. you may need patience. there is no quality catalyst in the near term. guy: define near-term. ashley: next six months. extrapolate the underlying momentum we are expecting this

quarter, it means growth will continue to slow into the first quarter of '24. it is not until then we are likely to see revenue growth within the sector. that's important. the fear investors have about the sector is they are not comfortable earnings expectations for '24 are correct at this point. there are concerns we will see further downgrades. that is why we have not had investors step in. look at history, these pullbacks have been great buying opportunities for luxury. alix: the big catalyst for the first half was china reopening. that disappointed everybody. if data stabilizes, do you expect investors to be as enthusiastic? a buyers beware mentality? ashley: for q3 reporting, there

will be a little buyers beware, to be honest. look at the nationalities, where we see the normalization starting to play out, it's in the american consumer. when it comes to luxury, the american consumer pete in the first quarter of '22. there is evidence the european consumer shopping for luxury peaked one year later. we anticipate we are getting closer to peak consumption for the japanese local customer as well. '24, normalization in demand from the americans, europeans and the japanese, we are extremely reliant on the chinese consumer for support, for the sector in terms of revenue growth next year. we expect 70% incremental revenues and luxury to come from chinese consumers in '24. guy: you just laid it out.

how much more downside could there be in the first three groups? the savings rate has held relatively well. the stock market is a source of strength. it's done relatively well. if we were to see financial assets, what's the correlation? ashley: in the u.s. it is high. the rest of the world, not so much. with the u.s. consumer, we saw this extremely strong rebound in consumption post-pandemic for seven quarters, every single quarter you saw this acceleration until the peak. since q1 '22, you've now had six quarters of normalization. post-covid compound growth rate of american luxury demand is now

almost equivalent to pre-pandemic growth. all the outside consumption has been given back. the thing that's important is going into next year, we are probably facing seven quarters of normalization in demand from the european locals and the japanese consumer. in order to get there, it's most likely the european consumer needs to turn negative. guy: they will shout in my ear and tell me not to ask. we've got 10 years of excess to unwind. ashley: 10 years doesn't seem to be the right timeframe. if we look at the long-term history of growth rate in the sector, we are currently running at 11. 200 basis points above trend doesn't seem like that far ahead. there's been more pricing going

into the sector the last couple years, which supported that higher growth story. it is clear we are seeing normalization coming through. i don't know if there is 10 years to unwind. it doesn't seem like that within models we run but we think there is a normalization trend coming through and that will mean next year, most likely you will have below trend growth for the sector with a trough as low as 3% for the first quarter, which is a growth rate we have not seen and luxury for many many years. guy: that feels different. that's a different ballpark. fantastic to see you. thanks for stopping by. ashley wallace, bank of america, global research. the quarters over. the final numbers on the screen. not sure you're getting the true

story for the index levels. the story this quarter has been one of rotation. the rotation has been significant, sometimes brutal. we will talk more about it in q4. coming up next, time is running out to avoid a shutdown. the head of the washington policy unit joins us next to talk about it. this is bloomberg. ♪

guy: coming up monday, jamie dimon joining for an interview. 10:00 a.m. new york time. the countdown is on for leaders in washington. the u.s. government will

shutdown on october 1, 12:01 1 am. kim wallace joining now. it seems inevitable we will see a shutdown. when does this become an event the market needs to pay attention to? kim: the first trigger will be when/if downgrade, that is certainly in the offing. absent that, by thursday-friday next week, i'd be surprise if markets don't see some resolution. we have a dynamic in place where politics are driving the market outlook. by that time, the end of next week, market signaling will drive the d.c. outlook and we

will have a switch. i doubt they make it until the end of next week. i wouldn't be surprised if they find their way out of this mess sometime monday. alix: how? kim: it is binary. speaker mccarthy, representative matt gaetz have chosen to put their personal animus on display. the speaker's office is at risk no matter what he does. if he allows a shutdown and does not take up legislation or takes up a house bill doomed in the senate and the white house, but particularly if he picks up the bill we believe passes the senate tomorrow, picks it up sunday and attempts to avoid a shutdown, that is not going to change. his speakership is at risk every day and has been since january. there were threats against him

after the debt ceiling deal. this time, they will probably push the point. from the speaker's standpoint, he doesn't have much of a choice. he still has matt gaetz coming after his seat. guy: you're talking about this being short-lived. why is the freedom caucus going to vote for a deal they don't want to see and they have made it clear they don't appear to be interested in any deal at this time that doesn't have significant spending implications? kim: the last point drives the answer. freedom caucus is not interested in legislating. they are interested in '24 politics and broader questions of where the republican party is headed. the speaker at some point has to decide whether he wants those sideshows interrupt legislating for the country.

it's no more complicated than that. there's not anything he can do to put legislation on the house floor the freedom caucus would support and has a chance of becoming law. alix: what gives you confidence you feel like something will move monday? will he get ousted? will that move the needle? kim: i believe he brings something to the floor, gets bipartisan support, it passes and is enacted and the question of what happens to the speaker's seat comes to the floor. he has a choice. legislate and try to avoid risks, economic, political, personal, a government shuttered for many days, or, keep government open, continue to negotiate fy24, as they did on the debt deal and find out.

alix: thank you very much. carnival cruise stocks hitting choppy waters, even after beating estimates in q3, impacts to royal caribbean and they returned a profit for the first time since 2020. guest: the challenge here is higher fuel costs, currency charges. that, according to the ceo, going to ramp up 20%. that's where we saw the outlook cut. record revenues in the third quarter. it is strong. the challenge remains going forward. one thing executives were talking about was demand. they don't see any signs of that slowing. i don't see signs of onboard spending slowing. you buy your tickets, months later, onboard spending may be

more reflective of your current situation but we can see higher fuel costs really playing into the bottom line. guy: is the takeaway for the rest of the travel industry, fuel costs will be the dominant thing? u.s. airlines downgrading expectations. i was talking to european airlines the other day. they are hedged. it gives them a competitive advantage on the north atlantic. are we going to see u.s. companies under pressure because they don't hedge the same way? simone: we already see travel stocks broadly in the u.s. under pressure. there's this talk about spending on experiences. we heard that from carnival today. when you look at where the shares are overall for the industry, that's not the full story. there are higher costs in general. it is not just fuel. higher cost for pilots.

we saw the association approve the $10.2 billion deal. seeing 40% increase in pay raises over the course of the deal. all these airlines are having to grapple with this. we continue to see this tight labor market. everyone is spending for talent as well. there are suddenly a lot of costs. there's a lot of ways. as we see this post-pandemic trend normalized, companies have to grapple with this. alix: the u.s. is weighing a record $1 billion loan for lithium america. we talked about putting carrots into the energy transition. that is a lot of carrots. on the other hand, it is rough going in new york city. a news conference happening between the governor and mayor in new york.

the mayor declared a state of emergency after the flooding. eight inches of rain. this does not show you what is happening in different parts of the city, in particular brooklyn. the governors saying the priority is making sure the subway and rail systems are safe. if you travel by car, you do so at your own peril. this is bloomberg. ♪ thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh

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alix: stocks holding green, last day of the third quarter. abigail: at session lows. a fourth-down week for the s&p in a row.

three down weeks in march. the nasdaq down. russell 2000 hitting volatility this last day of the quarter. most on the quarter, this is incredible. 10 year yield. 4.56, the 72 basis point back up with many significant people saying 5% seems likely. jamie dimon talking about 7% fed funds rate could support higher rates. stocks elsewhere, the transports, the russell 2000 is well below the moving average. stoxx, nowhere to escape, except for energy, which we are not showing. let's have fun. extreme chart. not as extreme as it could be.

this is the financial crisis. this is the rally out. this could be a double top, which is what happened in '08. one thing that makes a compelling is the second peak is lower than the first. on the first, the buyers took it higher. the second, they almost got there but they don't feel good about it. there is the peak of the financial crisis. we are kind of extreme. q4 storm, could be setting up maybe. guy: i agree, that second peak, fascinating. thanks. that wraps things up. you good to go? alix: i don't know. we really don't know what to do. i mean everyone who works in the studio, how to make it home. the storm is going to keep going until tomorrow. this is crazy.

guy: good news is, she bought a pair of boots. she can walk. multitask. this is bloomberg. ♪

from the heart of where innovation, money and power collide. this is bloomberg technology with caroline hyde and ed ludlow. caroline: i am at bloomberg world headquarters in new york. ed: and i'm in san francisco happy friday. caroline: we will dive deeper into google's antitrust trial. ed: how wild