Bloomberg Surveillance TV: September 22nd, 2026

Jonathan Ferro (0:11)

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferro along with Lisa Abramowicz and Annmarie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9 a.m. Eastern.

Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always on the Bloomberg Terminal and the Bloomberg Business App. We begin this hour with stock stalling following the best day in more than six weeks. Geoff Yu of BNY joins us now for more. Geoff, good morning.

Geoffrey Yu (0:42)

Good morning.

Jonathan Ferro (0:43)

We've got two different dimensions to this equity market story. We've got the AI trade one, got the energy piece of the story too. Can we start with the latter? We'll turn to the former later. Energy, how much two way risk is there going into the diplomatic effort this week?

Geoffrey Yu (0:56)

I think the mood music is, let's just say, positive risk. We're heading to the downside.

If there can be some conversations on the sidelines, I think markets welcome that. You mentioned earlier, there's some discipline emerging amongst central banks and hopefully governments. I think that's the missing piece. Now, let's not forget fiscal impulse and the contribution to demand as well. So if we can, especially for Europe, if we can have, let's say Brent at about 100, that will do these to be a lot of good. So I think there are more than two parties involved here. And often wonder, you bring in China into the equation here. Can you imagine if China is growing very strongly right now with high energy demand, where would global oil prices be? So I think that's one area where soft Chinese demand is sort of helping the global economy in this respect, but even domestic prices moving up as well. So I think they need a conversation there too.

Jonathan Ferro (1:43)

It could have been a whole lot worse without the Chinese on the growth side, but also on the purchasing side for oil as well. That's been a major feature. Absent, up until recently, crude prices could have been way, way higher than they were a few months ago.

SPEAKER_3 (1:56)

Absolutely. It was just softer buying in terms of the imports that China was willing to go to the global market for, and that's really put a lid on some of these prices. You mentioned the ECB. How difficult is the rest of the year going to be for them? Because Philip Blaine is saying that the geopolitical outlook is making it incredibly tougher for them to fight inflation.

Geoffrey Yu (2:17)

It really is tough, but I think the market is all over Europe, just the ECB. I'm looking at pricing in Sweden, for example. They're deciding this week.

It's just so aggressive in terms of rates, whereas inflation expectations are much more manageable. But Lagarde said rates are not set basically based on energy prices. Markets are moving in that direction. As if energy prices come down, then maybe rate pricing has to come down as well. So you can't have it both ways. But I do think there is some scope for some positive surprises.

Jonathan Ferro (2:44)

Well, Geoff, let's get into the scope for positive surprises. Let's take the yield curve right now, 2s out to 30s. The 2-year at 472 is still comfortably above the policy rate at the moment, Geoff. Do you see some scope for disappointment here?

Geoffrey Yu (2:56)

So I think overall, when it comes to policy expectations, you need to anchor inflation expectations. At the end of the day, yes, the Fed has a dual mandate, whereas BCB is a bit more dogmatic in terms of sticking to inflation. But as you said earlier, that discipline, I think when markets realize there is discipline coming through from central banks, then where the central banks lead, the rest will follow, especially when you get unanimous decisions, as we've been seeing on both sides of the Atlantic right now. I think that's really, really essential. And then you communicate accordingly. Everyone, I think, is going on a meeting by meeting basis, and markets need to get into that discipline right now. So that's why I said earlier, don't price in, let's say, three hikes, four hikes, over the next six months or so. That is far too aggressive. Get the next meeting right first. If that discipline comes through, then I think we can create a, yes, high risk premium, but a better risk appetite and then let equities do their own thing.

Jonathan Ferro (3:48)

Before we get to the equity story, tactically, is there a compelling argument to go out the curve in treasuries?