The analysis with the pmi chair. Welcome to bloomberg markets. What have you got . We were expecting 53. 5. This is where the interest lies. It sticks at 50 eight point nine. That is inflation within services, which is interesting. It is the new orders component that is really where the action is. It is the is the summer boom finally over . Quest you have yields down by about five basis points, so no dramatic movement. Is it weaker news is good news . Quest you have to break it down and figure out what to focus on. It is a really solid number, but we have had this really strong summer and now we may be starting to see it fading a little bit. It is the analysis. How should we be reading this data . Looking at the report, we had a slight pullback. This sector still looks strong. It was driven mostly by Retail Industry in september, into august. Now we are looking at this last quarter. Still on track for finishing up the year pretty strong. Why . Quest you touched on it earlier. People were spending money on experiences and now we are starting to see a shift into more purchases for the holidays. Employment looks good. Even with a slight pullback, they are indicating that things are boding well for the sector. What about the availability of labor right now . What are they telling you about the strength of the labor market . It continues to be a mixed bag, but it is still very competitive. Certain industries have pulled back. Overall, it is still a tight labor market. Is this where we stay . Is it incumbent on the manufacturing number and Services Stay sticky right here . I think we will see incremental growth from the service sector. I would like to see manufacturing continue to rise across the board. What comprises this sector, i think we will see this as the pivotal month. If you are trying to discern whether or not the disinflationary trend with other data is going to continue, i we seeing this immaculate slowdown . What would you say to the people that believe that we are in a soft landing scenario . Is this consistent with a soft landing . Right now it is. Were are seeing high fuel costs , especially with the overreliance on trucking. That is a big factor and it affects the petroleumbased products. There are still availability issues. Why havent the strakes impacted this survey . You had screenwriters, actors, healthcare workers. The industry has been impacted. You have to look at this composition of all these industries. It is a small percentage in the lower percentile range, compared to the big contributor. Amazing. We appreciate it. You are seeing yields paring some of their losses here. Coming up, it is our question of the day. What are you feeling right now . And how do you invest . The ceo of rock creek joins us next. This is bloomberg. Fresh, warm hot dogs when im not selling hot dogs, i invest in a fund that advances innovations like robotics. Fresh, warm hot dogs, straight out of my torso one for you, one for you. Oh, youre a messy one. Cool, right . So cool. Anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq100 innovations. Hot dogs fresh, warm hot dogs before investing carefully read and consider Fund Investment objectives, risks, charges, expenses and more in prospectus at invesco. Com. Everyone is concerned about catching a falling knife. We have seen this precipitous rise in yields. Bond volatility. You want to be a little bit cautious. Christ who would have been more surprised if we had not gotten back up. There is a collapse of this narrative. It is hard to know where we go from here. Quest you have to see something that evidence is a material slowdown in the economy. Quest he started to see the yields come down. Watch very closely for the payrolls because that could be the source of down died surprise. It will turn the tide, for sure. Discussing the threat around rising yield. It brings to question, what are you feeling . Fear or greed . A Global Investment firm. It is so wonderful to see you and get your perspective. It is great to see you, alex. I think we are moving closer to neutral. No matter what numbers were coming out, as Interest Rates were going up so fast, equity markets were holding up. Everyone was wondering, at what point they would hold up. Eventually, Interest Rates have caught up. Where we are now is closer to neutral. What is really interesting is the emphasis for investors who have certain you have suddenly moved. Everyone is getting a new tutorial on bond markets. How many lessons do you think they still have to learn . What else do we need to learn in this narrative . What do you think is driving this yield growth . What is going on is huge amounts of debt issued by everybody. We also know that a lot more debt will have to continue. We know some nonus investors in our bond market have slowed down the purchase of bonds. At the same time, the political news with the Government Shutdown are not really helping markets. They are creating more uncertainty for investors. It is pushing them into the bonds. How do you deal with all of this . The lesson has always been to be diversified. 70 things could happen between now and then. Inflation numbers are getting much more moderate. It is happening over the next few months. If they do not increase rate, possibly not in december, a lot of what is said into the market is the change in expectation, that the fed would have 1, 2 or three reductions in rates next year they can change very fast. You want to be diversified. Quest people have tried to figure out whether they are going to get a decent yield off of that story. How do you invest in things like utilities and climate Transformation Technology . They are offering you 40 . Youre getting some really good yields. Why would i want to put money into Climate Change . Quest to visit you want to put money into Climate Change is what we are seeing every day. Whether it is a flood, a fire or whatever is going on, pushing people to look at alternatives. The big push of the infrastructure money that is coming in from the government and the ira is starting to be felt and probably more money will be pushed into the markets next year. The momentum will be there. You are seeing habits changing, whether it is for utilities or investing in new parts of the software to be able to take on so their energy versus coal and oil. The cost of capital is going up. Quest cost of capital going up effects oil and gas as well. They have to make huge investments. It is not a question of one investment and you only look at investment needed on the renewable side. We would need investments on the traditional side. The question is on the Renewable Energy side, there might be smaller investments allowing to diversify much faster. The ceo of rock creek. Thank you very much, indeed. Talking of weaken structuring restructuring. A deal that will take a private. It was not what we expected. The president and ceo joining us, next. Lets talk about what is happening in the airline sector. The shares are taking a little bit of a head. Announcing details of financial restructuring. Bringing on board investors. Shareholders are being wiped out here. When we have the details of the Restructuring Plan they were going to put forward, anticipating that it will be led by apollo. We probably see the Danish Government being involved. We ended up with ben smith leading the charge. Why did you decide to go down this route . How did this come about . The answer is quite simple. What matters is, the highest and the best. You have to get a deal to closure. What we have done is run a very extensive, very deep process over the last few months. The outcome, as you said, a strong consortium. Plus, a consortium from denmark. Quest but does ben smith bring to you . We all know him. He is an expert in restructuring. Does he bring that skill set that you are going to continue to do . I think it is something far more vital. It is really very strong and markets. We have access to really good airports as well. What we lack is part of the globalization footprint. We have not been able to tap into those. One of the real things for us is very exciting. Lets take this sepbystep. We are not talking about controlling stakes, but definitely for us, one of the big benefits would be, Bigger Network and globalization impact. My understanding is that air france has the option further down the road to take a greater stake, if it wanted to. How are you going to work im assuming the exit is coming from start alliance. Is that what is going to happen . Does that happen when air france takes control . He talked about the global footprint. If i am a sarlacc customer, what is going to happen with the points i built up with you . How is this going to work . Lets take this stepbystep. Nothing will change overnight. We are a proud founder of the star alliance. We have personal relationships. We will honor everything that we stand for with our customers and for our customers. There will be a path that will provide full clarity. Secondly, we announced the winning bid. But we need to get to an Investment Agreement. We need to file it with the u. S. Court and that will take a number of weeks. We need to sit down and see the individual lines and what those steps are. After this long process, there is a bit that we have right now and we are excited to take it forward. A broader lens here. You have been through a lot in the last few years. You are finally emerging from bankruptcy. And meanwhile, rates are going bananas. Everyone is worried about defaults, etc. How do you see this evolving over the next few years . What do you expect to see in the next few . This industry, i still think that is something coming our way for those of us who have not fully restructured. I still think that we did some of it a little too late. But i still see a lot of debt and i still see a challenging environment on the whole. I do not think we have seen the end of covid for our industry or even the broader ecosystem. I do think we have not seen the end of restructuring in that sense. I think you get the point. Again, we are really not starting to turn the corner because restructuring started maybe a bit too late. Yesterdays announcement announcing the transaction and really finding those investors and stability is fantastic news for us. Quest what do you see about Business Travel coming back and in terms of actual demand . Are we going to see summer vacations in norway . Quest we do see all of the above, almost. People have prioritized travel. It has been somewhat extraordinary, if i may. People are prioritizing that demand is healthy. It has changed. It will make its way back to 100. But you do see premium being very healthy. We have seen that Search Engines and our own traffic, that there was a remarkable pickup from south to north, which is if you look at it from a historical perspective, it is rather unusual, but this summer, there was definitely more going up north. We will see the same thing for winter seasons. Quest very quickly. 30 seconds left. Do you think that interest in you means that they are not interested in the other . Quest that is a good question. We are happy with where we stand right now. We are working together to make sure that we get to that final stage. We need to bring that Investment Agreement to a close. I think that we have waited for it for a long time, but it seems to be taking off right now. Quest thank you very much. This is bloomberg. Thank you very much. This is bloomberg. Curated by joanna gaines. The power goes out and we still have wifi to do our homework. And thats a good thing . Great in my book who are you . No power . No problem. Introducing stormready wifi. Now you can stay reliably connected through Power Outages with unlimited cellular data and up to 4 hours of battery backup to keep you online. Only from xfinity. Home of the xfinity 10g network. Alix about one hour into the u. S. Trading session. Edp showed jobs growth was slowing. Abigail doolittle is tracking the moves for us. Its a little conflicted. Abigail on the day we have the s p 500 moving between small gains and losses. You can see clearly on the week especially yesterday. The s p 500 headed to its worst today since march 7 closing off of those lows. It puts the s p 500 on the year. Which means superlatives of september and the Third Quarter are falling right into october. A relatively more flat service. These are two of the stocks, its not clear why tesla is up or amazon up 1. 3 but heavy to the s p 500 helping out. The downside though this is a surprise. Oil is gone from a peak last week, wti crude, its a risk asset. Over the long run if it continues. Putting all of this together, this is a chart, this is the uptrend. You can see these moot these climbing. We have clearly snapped below the consolidation and yesterday we were about 20 points away from that 200 day moving average, the rsi is in oversold territory until he series of highs, and we see more selling. The russell 2000 well above its 200 day moving average. Both indexes down on the year. Seems only a matter of time before the nasdaq follow suit and the longterm buyers move away for the near term. Guy we will watch with interest to see how that develops. Lets return to our question of the day. How are you feeling, whats going on . Is an overriding emotion fear or greed. Its ask that question two richard clarida, former Federal Reserve vice chair. Great to see you. How are you feeling . Whats the overriding emotion right now . Richard let me talk about the market. There is no element of fear and always there is greed. Its important thinking about the selloff there are four potential factors. There is the fed, the macro data , there is fiscal potentially and technicals. Most of this since the fed has really not been on fed news. Its been a reflection of concerns about fiscal, higher term premium and fiscal dysfunction on washington never ceases to disappoint so i think theres a lot going on. Alix does it mean a higher neutral rate and the echoes of that . Richard it could. At pimco we tried to distinguish between a neutral bond yield on the 10 year and the neutral fed funds rate. We will be in a world of steeper yield curves but theres no doubt we really do not have a consistent fiscal policy in the u. S. We will probably in a world of steeper curves for sure. Guy the neutral rate always interesting to see it with hindsight. What we can observe right now is a very fast move. Do you think the fed will be comfortable of the speed of the move we see in the market . Richard so far, fed officials have had a chance and not really taken the opportunity to push back against this. My own sense is to the extent this move does reflect higher bond yields because of so much treasury issuance, it is not something the fed would want to lean against. It does some of the feds job for it. If moves get extreme or persistent it could get the fed engaged. Alix alan from Deutsche Bank saying the reason for 75 pips in the 10 year was the tightening for the fed. What looks unruly . What would worry rich if you were still at the fed . Richard good question. What i be looking at is the extent to which the selloff reflects a big move up in inflation expectations. The powell fed wants to anchor inflation expectations. So far most of the move has been in real rates. If i were still back at the Martin Building i would be looking to see the feds credibility is still in place which currently it is. Guy the fed would like to maintain its credibility and if things get disorderly maybe it would have the opportunity to step in. Any clarity on what the current strike price on the fed is before things get to disorderly . Richard thats a tricky concept in general of the fed put. What i think we do know is the fed understands the liquidity of the treasury market is essential to achieving its mission and certainly my time at the fed we had disruptions for example in the markets in 2019. There can be sufficient or significant disruptions from the fed. We saw exactly a year ago. I dont have a particular level that i would mention right now. Alix do you think the bond market is functioning well . We talk about liquidity risks, all of that stuff. Is the bond market giving us a real read or thar are there distortions . What do we do with that . Richard i do think there are markets technicals at play here, what i mean by markets technicals, tendencies for prices to move or overshoot overshoot in terms of news. Just intraday if you look at your bloomberg screen you will see yield on the 10 year treasury moved up about 15 basis points and then moved down roughly that amount on the adp data. Those are big moves in response to one report. Thats telling me there is a technical element here. Guy youve also alluded to the fact the fed is comfortable with what it saying, to a certain extent this is doing the job the fed may need to do further down the road. Do you believe the fed has further to go. Is it still how high did they go or is it still or now how long do they stay there. Its that kind of are we at the top of the matterhorn or the top of table mountain. If you were to pick a mountain, where were we . Richard if you were to ask me a month ago and i think i was on air at that time, i was in the camp going into the september meeting that we would likely get one more hike in this cycle if really just for precautionary reasons and certainly the dots at the september meeting had 12 of the 19 participates indicating one more hike. Given as i said the bond market can do some of the feds job for it. If even some of this recent increase were to stick i think the fed could well be done. Alix if the fed is done, thank you for breaking news with us. If it is done, what about 2024 . It looked like the dots were looking at two cuts. Do you see that being real . Richard the thing about Market Pricing is it is reflecting a weighted probability of a lot of scenarios. Two cuts looks about right to me, but i think there is certainly a chance we do not get any cuts next year or conversely if inflation falls more rapidly than i or the fed expect, they could cut more. The way to look at those numbers as if they are average across the range of outcomes but that does not look unrealistic to me. Back in may when the markets were pricing in six cuts including starting this year i thought that was out of line with fed reality. Guy when we get into a rate cutti