5 Things You Need to Know to Start Your Day

Good morning. The fallout from Powell’s warning on rate hikes spreads to Asia and Europe, Biden faces growing challenges in swing states and [View in browser]( [Bloomberg]( Good morning. The fallout from Powell’s warning on rate hikes spreads to Asia and Europe, Biden faces growing challenges in swing states and Israel pauses to let civilians escape northern Gaza. Plus, the UK narrowly avoids the risk of an imminent recession for now. Here’s what’s moving markets. — [Sofia Horta e Costa]( Fed fallout Stocks are falling Friday in Asia and Europe after Federal Reserve Chair Jerome Powell’s warning that the central bank wouldn’t hesitate to raise interest rates if needed to [slow inflation further](. The Fed also [said Thursday]( that it’s keeping close tabs on potential losses at banks stemming from commercial real estate and elevated interest rates — laying out the concerns in its semiannual report on supervision. Despite the areas of concern, the Fed said that overall the banking system remains sound and most lenders are well capitalized. Separately, the Bank of England said more than 50 of the UK’s largest banks and asset managers will be tested against a [hypothetical shock]( worse than last year’s gilt market spiral. Participants have been supplied with details of a severe, but plausible, stress scenario. Swing states There’s speculation that Democratic stalwart Senator Joe Manchin, who said Thursday he won’t seek reelection next year in Republican-leaning West Virginia, could emerge as a third-party candidate in the [2024 Presidential elections](. A Manchin candidacy could capitalize on the growing number of “double haters” — voters who are dissatisfied with both President Joe Biden and former President Donald Trump — which now stands at 19% of the electorate in swing states. A Bloomberg News/Morning Consult [poll]( showed swing-state voters see US-Mexico border security as a greater priority than the foreign policy crises that are increasingly dominating Biden’s attention. Swing-state voters also said they prefer Biden’s likely rival Trump on the [key foreign-policy issues](. Israel latest Israel says it’s providing “quick humanitarian windows” to allow people to flee northern Gaza while the military fights Hamas, as well as [tactical and localized]( pauses for aid. The Israeli military estimates that as many as 100,000 people have fled northern Gaza in the last few days, taking the total tally to between 850,000 and 900,000 out of the more than a million people who lived in northern Gaza at the outbreak of the war. A UN official, who said that hundreds of trucks are needed daily to send essential supplies including fuel into Gaza, said only 65 trucks carrying aid entered from Egypt on Nov. 9. The Palestine Authority radio reported dozens were killed and wounded from an Israeli strike on a hospital in Gaza, which Israel says is close to Hamas’s [main military headquarters](. Futures flat S&P 500 futures are trading flat after the index’s drop yesterday, which halted its eight-day winning streak — the longest in two years. The dollar is also little changed while Treasury yields are marginally higher across the curve. There was a brief glitch in the updating of FTSE Russell indexes overnight in the UK, Italy and South Africa, [which was fixed]( after about 38 minutes. Digital advertising firm Trade Desk [slumped as much]( as 31% in out-of-hours trading in New York after issuing a weak sales guidance, which it blamed on broader economic pressures. And watch casino stocks after their shares had a[terrible day]( in Hong Kong. Coming up… On the data front, the University of Michigan releases its preliminary consumer sentiment index for November, while there are inflation numbers due out of Brazil and a September industrial production report expected from Mexico. Dallas Fed President Lorie Logan speaks at the European Central Bank's conference on money markets, while Atlanta Fed President Raphael Bostic attends the Mobile Chamber of Commerce about economic mobility. San Francisco Fed President Mary Daly is also scheduled to speak later on CNBC. What we’ve been reading This is what’s caught our eye over the past 24 hours. - The UK economy has staved off [the threat of recession]( for now. - The US unit of ICBC was[forced to clear]( Treasury trades via a USB stick. - Diageo is seeing [materially weaker booze]( sales in Latin America. - SoftBank’s Vision Fund [lost $1.7 billion](through the end of September. - The US’s top general doubts China plans to try to [take Taiwan by force](. - A Chinese AI startup [stockpiled Nvidia chips]( before US restrictions. - [What to watch]( as the US hosts APEC for the first time in 12 years. - Flights connecting the US, Europe and Asia are [getting hours longer](. - The new Call of Duty video game is facing a [spate of bad reviews](. Sign up to new [Business of Sports Newsletter](, bringing you the scoops where power and sport collide, from secret F1 investors, how NBA players spend $200 million, and crumbling soccer clubs. And finally, here's what Kristine’s interested in this morning This week felt like a case of deja vu all over again. A market primed for rate cuts, followed by a [reminder]( from Federal Reserve Chair Jerome Powell that borrowing costs could actually rise further (delivered at an event that featured [surprise protesters](, no less), and [bond yields jumping to 5%]( in response -- all this reads like the script of a movie we've all seen before. It's puzzling to see traders betting [seventh time's the charm]( when it comes to the Fed pivoting from rate hikes to cuts, given that officials have repeatedly said their fight against inflation -- which remains at an above-target rate of 3.7% -- is far from over. There's an element of wishful thinking to this dynamic. Bond investors are sitting on what could well be a historic third-straight year of losses with just over 30 trading days left in 2023, so it's understandable there's a strong inclination to grab hold of any narrative involving lower rates, however misguided. But in the real economy, where consumers are thinking about their mortgage rates, credit card bills and retirement plans, there's no room for such wishful thinking. At the World Strategic Forum in Miami this week, I spoke with CEOs and government leaders about how to navigate a new economy and they told me that it all starts with accepting the reality of higher inflation and rates. The question is, how do we cope with it? Doris Meister, Chairman and CEO of Wilmington Trust, which manages $176 billion of assets, told me her firm is advising clients to plan ahead: "I find people want to know the truth and they are much happier if you break the bad news. And sort of say, ok this is a factor, we have to plan for it -- let's plan for it." Meanwhile, Thomas Warsop, president and CEO of payments company ACI Worldwide, says that the current environment is forcing firms like his to choose between investments more carefully: All of our sons and daughters have grown up in a world where they didn't have to choose. They had what they needed, it was really cheap to borrow money to buy something if you couldn't really afford it -- that's not true anymore. It's not going to be true, so you're going to have to make choices. Same is true for a public company CEO like me. Used to be, borrowing money cost 1.8%, 2.2%. Now it's 8% and now it's different. I have to decide -- do we make that acquisition? Do I invest in our current infrastructure? Do we buy a company? Now, we think even harder about doing that and make sure it's the right choice. Either way, while traders are locked in a game of tug-of-war with the Fed when it comes to rates and inflation, households and businesses are seemingly ready to move on. [Click here]( to watch the full discussion. [Kristine Aquino]( is managing editor for Bloomberg Markets Today. Follow her on X at [@krisaqnews](. Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. 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