♪ >> the fed is not laid out a strategy in a way that is clear. that leaves the markets to overlay their own interpretation. >> everywhere i looked that sense of optimism is definitely what has been priced in. >> i think we've priced in fed rate cuts. i think the jury is still out on that. >> there really on risks on both sides of the fed mandate. >> there stayed out there if you put it altogether. i think you can create a pretty clean picture for yourself. announcer: this is "bloomberg surveillance." jonathan: live from new york city for the audience worldwide, this is bloomberg surveillance

alongside lisa abramowicz, together with annmarie hordern. your equity market on the s&p 500 just about unchanged on a five-day winning streak on the s&p, extending the longest winning streak of the year so far. look out below for tesla. the outlook, what is outlook for tesla in 2024? lisa: it's dreadful. the fact that elon musk talks about not really running a car company but owning a tech company also tells you everything you need to know. it's not very fun to own a car company, it's very fun to own a big tech company. jonathan: dazed and confused going into the earnings call and coming out the other side. rbc seeing the outlook was vague. for 2020 four, investors and analysts are very much on their own, in the dark at the moment. lisa: the big concern is we have an e.v. glut right now so if elon musk is not cutting, where

if they're going to be demand? had to bring down the prices in order to maintain this competitiveness. why we go out to buy a tesla? >> if i were a shareholder and the ceo of the company said i'm not looking for additional economics, i just want to be an effective steward of a very powerful technology, when you feel comforted? i don't care what your returns are, care about some highfalutin concept of technology. that's where we are at. jonathan: united states or china? >> china. jonathan: do you want to buy manufacturer that is in the race to bring down prices against the chinese maker of ev's? that for me sounds pretty difficult. >> which is why it was notable that he praised chinese carmakers. he basically said if there are not trade barriers established, they will demolish most of the car companies. > he's using the same language that byd's founders used last year.

everyone in the commodities space has been talking about this. china is going to leave because they have access to the raw materials that build these batteries. at some point china can say we are no longer exporting these commodities, buy the car. jonathan: uaw comes to a big agreement with the manufacturers in america. and all of a sudden you get this bidding war for talent at tesla has to start thinking about offering high wages as well. for me that complicates the effort even more. it gets even harder for elon musk and tesla. >> which is the reason why you see those stocks in freefall. seth goldstein came out and said that tesla is signaling the days of 50 or even 30%-or the percent growth are over. the question is, is there growth that there is -- when there is not enough automation to overcome some of that higher labor cost you are talking about? jonathan: don't miss that

conversation. federal reserve decision about a week away. european central bank news conference later on this morning. the to do list for christine lagarde in today's news conference. never mind the economy, never mind inflation, never mind interest rates. let's talk about the central bank and also the political questions after the political statements of the leader herself. >> it's a related question. how much does christine lagarde address the fact that you badmouth donald trump and talked about the need for the european union to respond to that while also assuring up some competence internally? also, how much does she push back against the davos news conferences that she held, basically saying that she is expecting a summer rate cut? >> she told francine lacqua that summer is going to be likely. you're talking about the path of potential rate cuts in europe and what she might say about the u.s. president, she said it all.

i'm not really sure what this news conference is going to be about. jonathan: christine lagarde volume three a little bit later on this morning. let's get you to price action on the equities. five-day winning streak on the s&p. yields are lower by a couple of basis points. lisa, you want to talk auctions? sloppy one yesterday. lisa: basically it came in and sold at a higher yield and it was trading before the auction happened. auctions matter because not only was this a sloppy auction but it determined the sort of risk off field --feel and the rest of the complex of equities. jonathan: i'm looking for tk to watch for this incorrectly. lisa: exactly. jonathan: he's not coming to correct is anytime soon. the u.s. equity market rally,

tesla's disappointing quarter and brooke sutherland of bluebird opinion on the latest blow to boeing. we begin with a top story, the u.s. equity rally continues. cio of citi global wealth something optimistic in his latest outlook writing open we expect rolling recessions to end in 2024 is earning growth accelerates. labor market that outperformed, but corporate profits are set to recover. morning, david. >> good morning. jonathan: where are you looking for that recovery for corporate profits? >> very much are of the opinion that all of the s&p sectors will become profitable in 2024, whereas about half of the war in 2023. on the one hand you could have labor growth slowing and productivity rising. also if you take a look at the market last, most of the companies were winding down in tory -- inventory which will collectively allow profits to

rise. tech is dominating, beginning to lean into the cyclical parts of the market. >> absolutely. this value in health care, value in consumer cyclicals. but the store is the difference in value between large-cap tech and low and medium size. you can buy small to medium-size at 50.5 times earnings at a time their earnings are going to tolerate in part because of ai and art because we are coming out of a relatively difficult three-year period. >> does it concern you have sensitive some of the smaller stocks have been to bond yields? >> this is what is creating the buying opportunity. we have and enormous amount of cash sitting on the sidelines. you don't want to pick your

perfect market time, because there isn't one. you are sort of in the year of these peak rates at the moment. people still worry about inflation and there's just not a lot of data to support the idea that there is any. i think we are at a point now where we are expecting the broader market to really do well and that is just ahead of us. it's a good time for portfolios. >> i was speaking with joe davis yesterday of vanguard and he was saying the same if you really believe in ai, why wouldn't you buy all the other stocks and industries that will benefit anymore significant way? that said, aren't the big tech names kind of price to perfection at this point? >> think about it, they had down earnings in '22 of almost 25%, and the big tech earnings up next year. this year they are going to be of 25% more.

so they are priced fully. but what is not priced fully is the impact of ai and the increased productivity of the people who use their software. it will affect places like citi as well. just the banking sector alone will become more productive. that's simply not priced into the market, and that is not what i am facing our base rate on. i think that is a plus for everything. jonathan: let's go through these numbers together. they put a price on the grounding of the 737 nack's and 150 million dollars negative impact from the grounding. new outlook, three dollars to five dollars. the lower end of the range must -- much below the estimate this morning. >> shares not moving that much. the fact that they've got to quantify the grounding

highlights the ongoing discussion that we heard from the executive branch. loose screws, we don't know what the path is to bring them on, and the 737 max 9 no longer being manufactured with the time being. jonathan: all inspections will look by february 2. that includes the gradual return of the 737 9 max fleet through early february. we are going to get a lot of airlines this morning. >> not as affected by this, but definitely the lower-priced airlines. there's this question arent deals and what the deal environment is going to be. there is this concern about some kind of merger within the airline space. jetblue and what that is going to be moving forward. that was stymied by the courts. how much is the deal environment going to be affected by the political backdrop and the fact that certain deal that might make sense to the airlines are

not coming to the core system? jonathan: david, can we talk about consolidation? are we going to put some deals on ice until we get some clarity of what washington, d.c. looks like? >> i think this is going to get interesting deal year. the latency of what is going on, you had such quiet markets for a long time. some deals are going to be easy and require very little screwed, very much unlike the jetblue-spirit transaction which got put on ice. but in general, we ch biotech transactions this year already, and we are seeing a bunch of ipos being planned. i think there's going to be a general pickup regardless what happens in the sea. >> i was reading a note of bank of america and she was talking about how this is a time for idiosyncratic risk more than almost any other. how do you plan for that? either industries, places you

are looking for that idiosyncratic risk in any way? >> has become sooner than session on the people who are doing the stockpicking is looking at the ability for management to actually execute their business plan in this environment, the able to embed ai, increase margins, watch expenses and convince you that they can exit. that is becoming a huge differential and how equities of christ and i think that is also ahead of us. it is a time we talk about idiosyncratic risk, but also the benefits of real ability to execute strategy. jonathan: good to catch up. just to get you up to speed on some of the price action, just a touch positive in the premarket. tesla down hard for most of this morning. but still you an update on stories elsewhere this morning >> boeing is facing more setbacks as the faa freezes production of the 737 max. regulators say they won't agree to any request for production expansion until quality-control issues are resolved.

the move is expected impact the bottom line. ceo david calhoun is relying on the 737 as a cash cow. calhoun told senators yesterday the safety issues can be resolved in a "matter of days and weeks, not months." tesla under pressure after reporting slowing sales growth and elon musk's pitch to investors nothing to be working. he suggested the discipline and result are temporary, propping plans to manufacture the next generation vehicle starting next year, but investors are skeptical. noting tesla's handful of price decreases last year eating into profits rather than boosting sales. fast food chain in and out is closing its first location in the 75 year history. the company will close its only restaurant in oakland, california in march after a wave of car break-ins, eft's and robberies. chief operating officer says that although the company has taken repeated steps to create safer conditions, customer and

associates are regularly victimized. and that is your bloomberg brief. jonathan: thank you come appreciate it. one, best fast food on the planet. no debate, no discussion. how sad is that? >> is the best food because you are eating in your car. >> i go inside. and janet yellen i think would agree with you because rumor at apex, she stopped there before going to green. >> i don't think i've ever eaten in n out. >> every single time, i'm very polite to the driver, ask for a favor, can we just stop by? every single time. up next on the program, leaving analysts in the dark. >> that will be challenging, but i'm confident that once it is going, it will be the main

technology that exists anywhere in the world. jonathan: good morning, you are watching "bloomberg surveillance." get help reaching your goals with j.p. morgan wealth plan, a digital money coach in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside - and the other goals along the way. wealth plan can help get you there. ♪ j.p. morgan wealth management.

♪ jonathan: live from new york city, equities just about unchanged. front yield lower by two basis points. under surveillance, tesla leaving analysts in the dark. >> tesla is between two major growth waves. we are focused on making sure our next major growth wave is also driving other projects. that will be challenging, but i am confident that once it is growing, it will be about in the

manufacturing technology that exists anywhere in the world. jonathan: tesla missing estimates, warning of notably lower growth, choosing not to offer full-year targets, a rare move by the ev maker. writing "we were dead wrong expecting musk and team to step up like adults in the room and give a strategic and financial overview. instead, we got a high level tesla long-term view with another train wreck of a conference call." stan ives not holding back, he joins us around the table. you sound disappointed. >> this was an important call where musk and the rest of the team needed to step up and give some guidance in terms of what is happening on pricing, the margin pressure, strategically. and look, i think train wreck would probably be soft because this is one with a long-term story is happen in the near term and they needed to navigate and communicate. they didn't do that. you will see a lot of pressure on the stock. jonathan: stockist lower by something with 7%.

have you changed your call? >> we are still bullish but from a fair value perspective, probably lower threes. from a base perspective because numbers are going to come down, the biggest issue here is that by not getting goalposts now, that there is are going to run with it, and the bears won last night. the long-term story is intact and turns of fsd, in terms of if you're a believer in ev, which we are, a trillion dollar market cap i do believe is on the horizon, but in the near-term, this is one where it is a glass half-empty relative to how they talked about it. this was sort of a 101 how to not do a conference call. dark out i want to understand with the threshold is for you to say to sell. we have elon musk with a train wreck of a conference call, not the adult in the room. he wants 25%, he is going to leave and develop some sort of

robotics company. if he gets 25%, would you sell? >> first of all, i view it as sort of impossible. it is not going to be a dual class situation. plus, he had 20% ownership before buying twitter. so part of that in terms of that, the build will have some sort of package right now. but i think if he gets more boating control, that is something that is going to ruffle feathers, but also the problem is that the planes crashing in the near-term, you're talking about salted or unsalted predators. that is the biggest problem relative to what is happening in tesla, is that investors want to have some guidance give me some financial parameters, and you didn't get it. and obviously we are huge, firm believers, and that's the frustration. >> as a firm believer, what does it do to you that he basically said i don't care if this company makes money?

he said i'm not looking for additional economics. i just want to be an effective steward of very powerful technology. does that bother you? >> in some ways, the economist is going to be superpowerful. there's definitely a lot of unintended consequence here. i could argue the value going forward from ai is much more than the ev and the actual value today of tesla. but for elon musk right now to kind of exert that, the last thing as a bykk you want to -- bull you want to hear and it does sort of put gasoline on the fire a little. it goes back to needing an adult in the room last night and instead it felt more preschool conference call. >> is that just the cost of investing in a business with some of what elon musk at the helm? >> yes and no. you understand you take the good with the bad. but now at this point, this is a

huge. -- huge. -- huge period to walk investors through. it is long-term, but we remain on the other site. but in the near term, the bears win, and it is hard to defend that is why you are going to see pressure on the stock today with 2024 being a tough year in terms of margins. >> elon musk also said last night that china will pretty much demolish most other car companies in the world. how are you looking at the space overall? he's basically setting up tesla to be taken over. >> i think it is for the tesla and the chinese players. the price where that is happening, it is a game of thrones price were happening in beijing. i think that with the right strategic move in 2023. 2024, you can't continue down that path. at one point you got a hold

serve and for now, do you continue to cut prices? we were dead wrong going into that conference call, that was the wrong call. now it is defending in terms of the long-term story. jonathan: i'm just listening to this and everything seems to be going in the wrong direction. you got costs going up, prices going down because they are in a price war with chinese manufacturers and the man holding up. another warning in the last week from the likes of ford on what is happening in the space. >> it is really not an attractive sector because it is stuck in this political situation for you have this overarching idea where if you take a look at the chinese stock performance, which is down at five year lows, 50% of what it was at that time, they are not about making profits. this is a market share war. you have a profit-making company against china and the situation

where they have control over a lot of the inputs. it's a tough place to be. >> so david, this is a car company to you, not a tech company. >> it is a car company now but when you are valuing it today. lisa: that's exactly my point. i would address this to you, that it seems like right now anything with tech at the highlight seems to be going far and away, and everything else is left behind. doesn't that feel dissident at a certain point if this technology is supposed to affect everything else? doesn't it seem like this is too overpriced and this is to underpriced? >> we think tech stocks are up another 30% this year. for tesla, the ai story will be there. but in the near term, you have to start cutting prices, because then you give away margins and if tom ford start selling sunglasses for $100 at cvs, and that is the fundament the problem here that is happening with tesla.

jonathan: david, do you want to jump in? >> no, i like that one. i'm going down to the local corner. >> i don't think you've articulated well, i'm sorry. what would change if you win this name? >> if we started to feel that the man was really falling off, not growing when he percent, and you felt like it was more of a circus show rather than this more being a that communication, that is where we would have to seriously assess. >> good to see you, just fantastic to get your reaction to that. tesla down by something like 7%. painting a pretty ugly picture not just for tesla. tesla, people are still buying that vehicle. i'm talking about what is happening elsewhere. the likes of ford and gm really struggling.

think of the other manufacturers in this space trying to ramp up production and catch up. >> this is without the import from china. what happens is the chinese manufacturers can sell their electric vehicles in the u.s. at much lower price points. the people who want the transition to a greener future, but love that business, not so much. jonathan: coming up, federal regulators ramping up pressure on boeing. we will catch up with brooke sutherland in just a moment. that stock is down by something like 3% in early trading. equities more broadly positive by 0.1%. live from new york city this morning, good morning. the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

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♪ jonathan: good morning. equities on the s&p 500 on a five-day winning streak looking to make it a six. messy five year option future yesterday. supply still matters. >> to me, this is what i'm watching. auctions don't matter until they do, and yesterday they did. not only a selloff in the bond market by selloff and everything other than tech stocks, and that tells you this much is the essay

we moved on from the dead and the rates market, there is still the tail wag the dog. jonathan: takei sent me a message and said he's going to join us next week for the fed special. look out for that. about a week away. in the market right now, elsewhere in foreign exchange, the euro looks like this against the dollar, just about positive. positive by 0.04%. the latest ecb rate decision, europe's central bank expected to keep rates on hold for a third consecutive meeting. investors will be looking for clues of president lagarde's comments 30 minutes later. many expect the ecb could be the first major central bank to cut rates since the global hiking cycle began. when you speak to people about the ecb, they are still penciling in the middle of the year. if you go on recent guidance, it doesn't scream q1 or maybe even q2. it might be further out. >> let right now and april the

market is pricing in a 64% chance of ecb rate cut, so here is the issue. how much is she going to push back, and will the market belief or? right now it is her job to push back against a market that has already gotten ahead of itself with easing financial conditions. where is the credibility, the? people ultimately looking at the data. >> she really has to stick to the summer because she already said that. she put a line in the sand, she has this indication of intent for the summer. i imagine that is what she's going to stay with unless she wants to act like tavis didn't happen. -- davos didn't happen. >> the question about the politics and her weighing in are not just an election, but the u.s. election taking place outside of europe, it is still kind of shocking. >> it is also shocking because she worked with the former president. when she was head of the imf, she had some good relationships with donald trump, his family members. but now she is saying, weighing

in on the former president if he was to take back the white house, the last comment was that europe needs to go on the attack. that was what we heard from lagarde in other ways, we heard that from the german finance minister, emmanuel macron. europe is having a moment where they are looking inwards in this mirror and really a reckoning of how they need to shore up their economy. jonathan: check out tesla, shares sliding this morning. elon musk looking to convince investors a new wave of growth is still ahead. missing earnings estimates and warning expansion will be "notably lower." muska placing his bets on the new, low-cost carbon tag posted $25,000 by the end of 2025. that stock is down by 8%. lisa: it's not very fun to be a car company, it's very fun to be a tech company. he's trying to switch gears to get that is have bleak things look.

it is hard to know how he's going to bring things around unless he becomes more of the tech side and less of the car side because right now the car side is really pressured by china and uncertainty about policy. >> you got a cost issue in the united states right now, talking about the majors for gm, stellantis. two views. ultimately, terrible earnings call, but still bullish. he's talking about the sector being almost on investable right now because of the challenges coming from both directions. >> and maybe that will change. maybe in 10 years when all of the ai and machine learning can sort of automatically create things, maybe we will have a different conversation but right now, he's not alone. so at one point is tesla valued as a car company and not as a tech company? right now it is not being valued as a car company. >> want to finish on boeing facing a setback from federal regulators.

the faa freezing production increases for its best-selling jet and that grounding. however, the regulators approving a new inspection procedure in the jet on it have to resume flight. ceo dave calhoun will address investors on the earnings call next wednesday. he facing questions not just from washington, d.c., but from investors. >> so he's going to have an earnings call, but also hearing in congress because of what is going on. i find it and the confusing the faa is doing two things at once. it is one step forward in terms of safety, they are making sure the max production increases are to be halted, but at the same time, they are allowing the airlines to inspect these aircrafts and get them back in the sky. >> i hate the story, i really do. and i'll tell you, because i don't want to be scared of flying. i want to just get in, don't think about it, it goes up, it comes down. how many times have we gotten a

plane crashes and then we have to go on as media representatives and say but it is really safe? jonathan: well we don't have to do that, because it's not. >> it is just such a frustration, i don't want to think about a lack of safety in the air. i would like them to fix it. jonathan: you're going to talk about airlines right now, better than estimated earnings. $150 million negative impact from the grounding. the faa halting production of the company's most important model and laying out inspection procedures. the ceo dave calhoun on capitol hill yesterday looking to ease concerns. >> we fly safe planes. we don't put airplanes in the air that we don't have 100% confident i'm here today in the spirit of transparency to share everything i can with our capitol hill interests, and answer all their questions because they have a lot of them. jonathan: brooke sutherland joins us now. that headline, we fly safe planes. does the writer later agreed?

>> -- regulator agree? >> i feel like if you have to say we fly safe planes, you've lost control of the narrative. the faa is not messing around. this is very serious to talk about pausing a production ramp. this is key to the going financial outlook, the company to ramp up production and continue delivering these jets. it still has a large number of them sitting in inventory and because of a lack of deliveries to china, some positive news on that front. but if it can't ramp up production, it can't meet that airline travel demand, and that is a big deal for this company. beyond that, the faa is auditing its production lines, looking into all of its quality control procedures. i just think when you start digging around in boeing, given all the challenges that we've seen so far, the faa is looking

for problems, the odds are that they might find one, create a risk this is sort of a prolonged overhang. >> piecuch a very basic question. we have any sense of what went wrong over the past five years that created some of these issues? >> i think it's possible that it goes back much longer than five years. this has been sort of a building issue. whether you want to go back to the late 1990's like scott kirby did with the merger with douglas, whether you want to go back to 2001 with the decision to move the headquarters away from the seattle area actively cap produced 737 line to chicago and then they have since moved it again to arlington, virginia which is closer to the defense business but of course even from seattle, or if you want to go just into the way that it handled the max crisis and sort of the reputational damage that has followed. i do not feel like we see that moment of deep-rooted cultural reckoning that should have happened to following after those crashes.

it certainly should have happened before we got to this point. >> how much deeper can this inquiry go? yesterday, secretary buttigieg said everything is on the table. and almost felt like a threat. >> you do have to think of every sigel aspect of the business is being fair game at this point. everybody is frustrated. the faa, the transportation secretary, the airline customers, certainly. every aspect of boeing is going to be under a microscope and that is why i say that when you start in looking for problems, just given the sheer volume of manufacturing issues that we had at boeing, i just think there's a lot of risk for this company. the primary purpose of boeing, why it exists on the commercial side is to produce and deliver airplanes and it has not been able to do so on a consistent basis. >> it is also a huge part of the defense space, and security unit. that part of boeing is incredibly important for the

industrial complex. what does this mean for boeing vs. airbus? >> i think that is why everybody wants this. boeing is a storied company but it is a huge part of the economy. like you said, it is a national champion and that is why everybody wants boeing to figure this out. to lisa's point earlier, the airlines want boeing to figure this out. the flying public wants to get back to not having to worry about whether or not a piece of an airplane is going to blow off mid i. everybody is incentivized to get to the bottom of the issue, but i think you can't do that unless boeing really reckons with how we got to this point and starts with sort of a top to bottom overhaul of every aspect of its culture. quality control processes, safety standards, rooting at defects. everything needs to be under a microscope. not just from the outside, but from the inside. jonathan: this conversation is absolutely shocking, things you never want to say. we make safe planes.

it looks like a first look on the top and bottom line. we can get to the price action in just a moment. stop down by about 2.6%. the estimate is 12. lisa: it's found thing around. first it was positive, then it was lower. basically triple expectations. passenger revenue, just a slight beat, but there really is a question here about whether they've turned a page on some of the issues that they had with some of their systems and lack of technological adaptation that we were seeing with respect to systems with the breakdowns. have they really moved past a time when it is incredible challenging for some of the low-cost airlines? jonathan: southwest has again had to trim growth plans on the quarter. brooke has told us a few times that fares are actually coming down.

things look great at the start of last summer. where are they now? >> you had a situation where demand was so strong that the airlines chased after that. but then they overdid it. it's not the demand that travel has fallen off a cliff or the consumer is cracking or whatever that narrative might be, but there's just too much capacity right now in the domestic market, and that's why you're seeing that pressure. and the reason that is problematic is because the airline cost have also gone up in a significant way. we were talking about boeing, you also have the rtx recall of their engines that affects a huge swath of the airbus fleet. that all means higher maintenance expenses the airlines. they are also dealing with higher fuel costs in some cases, certain higher labor costs, and

that all leads to a squeeze on the probability front. jonathan: appreciate the reaction as well. southwest in the premarket just slightly negative. >> but they did talk about the rising costs that you were mentioning, rising labor and maintenance expenses throughout the quarter. just want to point this out, the carrier's pilots just had this new contract that had a pay raise of 50% over the next five years. this is really what we were looking for last year, and that is likely going to be the story here. when do some of these wage increases pressure margins in a significant way? >> at this point they are negotiating the flight attendants. if you're any flight attendant union and looking at what the pilots got, you think you have a pretty strong hand to play. jonathan: this is all great when prices are going up and airfares are climbing that is not where we are at right now. it is a massive change from where we were 12, 18 months ago.

equity futures on the s&p 500 totally unchanged. let's get you an update on stories elsewhere. here is your bloomberg brief. >> former treasury secretary robert rubin warns the u.s. is in a terrible place with regard to its federal deficits. >> i think the risks are enormous. some of them are materializing already like higher interest rate. others have materialized yet, but i think they are out there. >> rubin is calling for tax increases to address the deterioration. >> bonuses also to get hit. compensation is crumbling as firms seek to cut expenses amid one of the worst droughts ever seen you by rising political tensions and a crackdown on private enterprise in china. british billionaire joe lewis has pled guilty to passing

inside corporate information to his private pilot and girlfriend. he pleaded guilty to three counts of securities fraud at a hearing in federal court in manhattan wednesday. you will be sentenced in march. and that is your bloomberg brief. >> thank you, appreciate the update. up next, the ecb decides. >> whatever we do now is going to have an impact in a few months, and sometimes a year or two. >> looking ahead to the european central bank decision later on this morning, it coming up next. live from new york city, good morning. j.p. morgan wealth management knows it's easy to get lost in investment research. get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments. so great getting to know you, let's take a look

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jonathan: good morning to you all, equity futures on the s&p 500 just a touch firmer, up by 0.05%. another all-time high to close yesterday.

five days of gains on the s&p 500, earnings looking better than good for netflix. not so much for tesla overnight, that stock is negative. yields are a little bit lower, down two basis points. this morning, the ecb decides. >> what many people don't understand is that monetary policy works with a lag. whatever we do now is going to have an impact in a few months, and sometimes a year or two. and we have to take that an account to decide what we do, how long we hold, and what decision we make in due course. jonathan: that ecb decision throughout eight: 15 eastern time this morning with market expecting rates to say on hold for a third straight meeting. expecting christine lagarde to push back our near term rate cut calls. a focus of the on the words relating to interest rate reductions in the press conference. we forecast a rate cut at every meeting this year from june. now the total 125 basis points

this year. >> i'm going to call the kicker, we are not going to get anything today. a whole lot of word analysis because they are not going to cut rates, they are not going to raise them. everyone is parsing through it they expect from christine lagarde and mark mccormick, this team basically echoing what bloomberg economics is saying, that nothing is going to happen today and the press statement should be exactly the same, but president lagarde might want to push back a little bit based on the fact that she seemed in dovish of the dabbles meeting. that seems to be the theme. what damage did she do at that meeting and how much does she have to undo at this one with the little tweaks around the edges, a little smoke signals? jonathan: we can talk about boeing instead if you want. >> i know, i'm grumpy. jonathan: discussing not boeing, but the ecb. what are you expecting from christine lagarde in this news conference? >> i think as you've already described, we are not expecting any policy change and that is

very much in the market already, so it will be looking ahead, when are they going to start the rate easing cycle, how far does she reiterate what she said at davos? it wasn't just lagarde who is talking about summer rate cuts. we had a number of ecb policymakers also talking about the summer as being the point at which it might be the right time to start the using cycle. the same story applies, as has done in previous meetings. the jobs market is strong, unemployment is low, wage growth is running or percent-6%, and not conducive with inflation being a target. they will want to see how wage settlement negotiations go over the next few weeks and months, and they are more likely to have a better idea in the second quarter about whether inflation sustainably is on the trajectory to 2%, or whether in fact this services inflation which is

still stuck at 4%, whether that is likely to stay high on the basis of high wage growth. >> that all sounds very appropriate and nice conversation point for christine lagarde today and probably not what anyone is going to be listening for because they are going to be listening for what she has marketed gotten ahead of themselves and what she has to say about donald trump? from your perspective, how much are those going to be the key points in a press conference about where we are with wages, where we are with elation, all of that nice stuff is basically going to be forgotten. >> it has been said before, i think she will want to reiterated. she certainly going to push back against market expectations which have two rate cut broadly. for the second quarter, although the expectations for the current quarter have largely faded away. so there will be pushback. on a trump, she's just not going to make any comment on the politics. even though she may be pressed on that, even though everybody

will be waiting to hear, that is not likely to happen. she will be asked about the euro as well and again, there is a standard response to that. i'm afraid it is going to be the boring old economics and boring old data dependency and just perhaps more and more granular detail about what it is specifically they will be waiting for, especially on the wage front. >> you might have noticed lisa's not excited about this one bit. did they do something to your cornflakes in davos? >> to me, it is all economics. she can say whatever she wants but people are just looking for these key issues and then they want to see projections and the things that have come out. otherwise, what could she say? basically whether she's going to slip up and say some thing political or some thing that pushes back against the markets. >> sara, can we talk about how tight financial conditions are? we all know that the bank lending channel is far more significant in your relative to the united states.

here in the united states, markets are looking easy. equities at all-time high, spreads are tight, a lot of issuance coming to the credit market again. just how tight our financial conditions in europe? >> they are tight, and we have that bank lending survey that demonstrated that that was still very much the case and has been the case for some time. what lagarde has said previously, it takes a while before the full impact of policy tightening takes effect, that is very much being demonstrated in the lending data. if i could just note one other issue that may come up, which of course is what is happening to supply chains, in the middle east, that is definitely going to be a question. how far does it affect europe, think of the impact on your which so far has benefited from falling goods inflation year on year for quite a long time, how far is the jump in freight costs and disruption to supply chains going to feed through to inflation? we already saw that impact that

sentiment broadly is weak. how did they balance the lack of confidence in the economy, what the surveys are saying about the risk of the economy essentially dragging along a recession versus the inflation impact of the supply disruptions? >> in amongst all those risks, also the fact that the data this morning out of germany again is as confident, is a rough start to 2024, the most important economy in the euro zone. at some point, they potentially change the timeline because of what is going on in the german powerhouse? >> i mean, they will look across the board what is happening to all economies, and germany has taken more of a hit in the sense that it is used to. we are seeing germany again

skirting recession and high risk of tipping down into negative two or three quarters according to the data that we have this morning. that is not by itself going to influence the timing of the rate cut, but clearly to the extent that the whole region is struggling and to the extent, importantly, that the labor market starts to show signs of distress as well, then that will be the point at which policy using looks more likely -- policy easing looks more likely. tom: have we got a promo somewhere to bring up on the screen? a: 15 eastern time, the ecb decides 30 minutes later. we will have a news conference with christine lagarde. i'm told it is going to be absolutely gripping, gripping. >> it might be really gripping, but i'm just saying any time or the economic data is inconclusive and people keep repeating the same thing over and over, people are looking for slip-ups.

>> i think this issue is likely to be boring. the politics, the fact that we've gotten ecb president within to weigh in on the politics not in europe but abroad. later, europe needs to go on the attack because we are worried about trump. i imagine they're going to ask the simple question, is it appropriate for a central banker to weigh in? >> it's around three in the next couple of hours. the ceo of pgt partners, the brilliant liz ann sonders.

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>> we are at the beginning of heading back towards normal and what normal will be. >> i think we are in the camp that says we are on a declining trend of inflation. >> it's possible inflation comes down and we don't go into a recession. it never has been likely. >> things can change and move quickly. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: live from new york city this morning, good morning.

this is bloomberg surveillance. alongside lisa abramowicz with annmarie hordern, the equity market s&p 500 just about positive by zero point 1% following a five-day winning streak on the s&p. the longest of the year so far. tesla and boeing for just a moment. trying to promote this. the ecb decision coming up in about an hour and 15 minutes. about to fall off her chair and excitement. >> they are not get a move and not indicate that much. as you pointed out, the press conference as you get the politics to she say something wrong. basically people are looking for slip-ups. things are on hold and people -- we won't know until we know exactly what the path is. >> she's been criticized in the central bank by the staffers about maybe not being the greatest leader, the greatest boss. in the governing council they

believe she's a consensus builder. philip lane her chief economist said you have to wait until june to get a feel for what's going on. hasn't he just told us he's not willing to do anything until the middle of this year? >> 64% chance being priced into the market of an ecb rate cut in april. not necessarily buying what they are selling. sarah outlined this in a big way. i'm curious to hear what she says about the red sea. in the u.s. people are saying it's not going to necessarily chat up prices. in europe it's a different story because that's the major supply chain channel. that could be interesting. annmarie: a lot of those goods are destined for europe and they are adding a ton of fuel money and time to go around africa. what we've seen is the u.s. department of transportations have told vessels to avoid the red sea and the gulf of aden. you are going to see this play into the supply chain at some point. >> i think lisa got it done

there. i'm looking forward to it. 30 minutes later you will get a news conference. we will try to forget that. let's look at tesla in the premarket. we've heard from the south side they've called the outlook vague , left in the dark on their own for the next 12 months trying to figure out what earnings will look like. >> the fact that dan ives, the key goal in technology saying it was a preschool press conference that he did not get it done. basically was not adult is sort of an understatement giving you a sense of where we are. the fact we are talking about a company he does not want to run. jonathan: the stock is down by 8% in the premarket. let's touch base on that. the s&p 500 just about positive 0.1%. yields are lower by a basis point or two. you've talked about this twice. lisa: the five-year auction was

so exciting. it was not good. today we have a 1:00 p.m. auction and at a certain point you have to wonder everyone talks about deficits and the political backdrop when does it start to matter. people say will be next year and the year after. we get a sloppy auction. at what point does that story have some legs? jonathan: more of that coming up later. over the next hour, the chairman and ceo of pgt partners joins us. sheila of jeffries on airlines earnings. and alaska air as well. southwest positive now by 1.6%. we catch up with the senior white house advisor on record crude production. 13 million is the number we will mention a few times with that right there. annmarie: it's a record yet the biden administration does not like to talk about it. it's a secret no one wants to

talk about on washington but it's also part of why going into an election year you have gasoline under three dollars a gallon. >> he will be talking about it. let's begin with the talk -- top story. gdp, core pce and jobless claims. investors will be for more clues on the rate cut timeline. bank of america and goldman expected in march. the city and morgan stanley have them waiting until june. the ceo of pgt partners joins us around the table. the investment banking recession is at closing, is it ending? >> it's beginning to warm but it will take a long time. we have had the punch bowl, we've had incredibly easy money conditions, zero interest rates. we have taken the punch bowl away and markets have not adjusted. jonathan: do a couple of rate cuts make an impact? paul: the reality is rates right

now are coming down. the only question is when and i do believe it will be pushed out further and until we start to see actual rate cuts, i think it will be difficult to really get the financial markets and, day marketplace. >> you said the punch bowl has been taken away but it takes time for it to adjust. the long and variable lags we've debated. do you think that there is a mountain of reckoning in valuations that has yet to take place in your space in private equity and some of the deal space? paul: if you look back you have a global m&a market that's 4.5 trillion. year-in and year-out. all of a sudden covid market shrivels up. the fed comes in, rates go to zero.

6 trillion. now the punch bowl is taken away , 11 rate hikes, 3 trillion. so we have gone from 4.5 to six to three another question is how do we get this marketplace started again. when you think about it, a lot of that is private equity involvement has dried up. when you look at how active private equity has been and how much they've hit the sidelines, that i think is what people don't really appreciate and until private equity gets more formulated, until they are prepared to sell a lot of the assets that they have, until they are prepared to recycle that capital and make new investments i think you will have this stock environment. lisa: essentially it's a price issue? they don't want to lose money. how much will they have to to get this market moving? paul: they are exquisite at

controlling. they have long runs and that's why i think this will be a very slow build back up. when you think about that large of constituency being that active in the mn day marketplace and now all of a sudden they are controlling their exits and they are pushing them back and they are not returning capital to investors, and all of a sudden the capital that's being called is greater than the capital being distributed, so there's very little in terms of monetization's. the credit markets have constrained dividend recapitalizations on private equity assets as far as monetizing, so we will work our way out of this so when you ask about the recession it's been an m&a recession, investment banking recession. i think many of the conditions are in place to start that

recovery, but it's not going to pop back up. it's not can it do so immediately but we are starting to get there. >> you mentioned mn day so let's talk about that. if i'm a company right now my waiting to see what happens with the politics before i do a big deal and a big acquisition. >> the political environment we are in, that's going to dramatically increase the volatility in the marketplace. i do not think that is appreciated to the full extent as we get further into the year and closer to the election, my sense is you will see the pause button hit on a lot of transactions. so in a way we may see the catalyst in the ipo market where companies want to come to market early and not wait. i think you're likely to see more m&a activity in the first half of the year, people are likely to hit the sidelines later and then once the election is over and we understand the

direction going forward i think you will have a pretty robust network. annmarie: we see the way the biden administration biden administration thinks of antitrust laws. hasn't that just said to the m&a market weight until 2025 and see if the political market changes. paul: the reality is relatively few transactions get caught up in the regulatory -- but it has a chilling effect on those and we tend to focus too often on the deals that get reviewed, the deals that get blocked and we don't focus at all on the deals we never saw. they never get to market because of a fear of an elongated process. and in a world where it's incredibly complicated where valuations are moving to be on the sidelines for 12 to 15, 18 months, that's an opportunity cost that's paused a lot of companies -- because a lot of

companies to say i'm just going to wait for another day. lisa: how many rate cuts are necessary before this gets moving? making people really go crazy or is it two? paul: the first critical inflection point was when we stop the hikes and it's not a coincidence that the depth of the market was when we were still hiking and it started to see a small rebound when it was clear that we it hit stasis. i think the next leg of the recovery is when you actually start to see cuts. i don't know if it is one or two but you just need to see some conviction that we've crested and we are on our way down and i think at that point in time things open up significantly, it's easier to get that spread narrowed, i think people have more conviction after leaning into assets they will end up with good deals and people are

more comfortable starting the processes because they know there is some momentum and tailwind behind. right now to boxers are sort of circling. jonathan: how important are the energy deals of the last few months just to get that process moving. paul: that was a very large component,, day has been this large energy deals and we've got all the shale producers. there's excess capacity and there needs to be consolidation into rationalization. you've seen some of it. i think you've seen the biggest of it but you will see consolidation in the space but there is no doubt those were two of the few mega deals that we've seen in recent times. >> we expect to see a lot more. >> i start with places where it's cash buyers, so that leads you to health care, that leaves you -- leads you to energy and consumer, that leads you to attack. what's happened also is with

these seized up credit markets there are a lot of companies where in order to take them you have a change of control and you have to refinance the entire thing. when you have a debt stack you are not sure you can refinance, all of a sudden it's more and more difficult. so cash buyers, strong balance sheets also be the industries. >> we are going to talk about this in the next segment. your thinking big egos and media. lisa: is applicant by netflix. jonathan: good to have you with us. sticking with us to talk about this more. let's give you an update on stories elsewhere. dani: tesla shares are falling despite elon musk talking up a growth wave in the form of a low cost car next year. the comments, on the heels of a disappointing earnings report. the ev maker missed estimates and a notably lower expansion.

sky dance media's david ellison has made a preliminary offer to buy national amusements. that's a holding company of the redstone's family. they control 77% to paramount voting stock. ellison has held discussion with the paramount chair on the terms of a possible deal. phone prices and new york's ham -- home prices in new york's hamptons are soaring. the median price of 1.3 $5 million in the last quarter. of 45% jump from the same quarter the year prior. more than doubled pre-pandemic levels. that's your bloomberg's brief. jonathan: looking for a broadening out in the opening rally. >> is this good to be led by tech? more and more we are starting to see beginning last year with the fed pivot playing for potential broadening out of that rally. >> live from new york city this morning, good morning.

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>> new york city stocks are positive by a most 0.1% on the s&p 500. yields are lower by a single basis point. your 10 year. under surveillance this morning looking for a broadening out in the equity round. >> is this going to be a rally led by tech. we are starting to see beginning november of last year with the fed pivot. a potential broadening out of that rally. russell down 20% from its peak. that's kind of where the potential patch up is and that's were seeing the most elevated demand. >> stocks hitting all-time highs. further gains are possible if

market breath firms up. there is no hard and fast rule stating that cash must be put into the equity market for investors or might be looking for stable streams of income, several pockets of the fixed income market look attractive. liz ann sonders joins us now. let's get into it. two points whether cash will move and the potential breath in this rally. what are we learning from the earnings season so far? >> the typical metric that gets focused on the beat rate, 80% it's been trending down but that still above recent averages as well as long-term averages. i think the focus is on things like net profit margin overall looking to be down in the 10% and change for more than 12% in the third quarter. is been some hope that pickup was a beginning of a trend which does not seem to be the case. estimates came down quite a bit since october for q4 but they've

also come down for all four quarters in 2024 and with the forward earnings easing you've got a bump up in the multiple. so i think there's a little bit of a multiple problem. although absent the magnificent seven, the s&p is only 17 times earnings so that's where the valuation bias on the upside has come from. >> basically saying big tech is overvalued? >> if you look at the factor level and you look at the magnificent seven for the most part they do check the box on things like interest coverage and strong free cash flow. you are seeing a broadening out even there as of two days ago looking at the rankings you still had nvidia as the number two best performer year-to-date. you had to go down to the 500th ranking to incorporate all seven of the magnificent seven with tesla bringing up the rear. you may not be seeing the broadening out if you just look at tech as a traditional sector

but if you look at the dispersion that's happening in the magnificent seven it tells you that something is brewing and there is money looking for opportunities outside of that small subset. lisa: i'm struck by the fact you think there opportunities in fixed income as opposed to the stocks that are pretty extensive -- expensive. a lot of credit in particular if you look at the spread compression and how much people have baked in a soft landing. liz ann: you know kathy jones well. if fixed income guru. i think there are opportunities not necessarily in to things like high yield, i think there's probably a decent amount of risk there. that something kathy has been talking and writing about but still opportunities in higher quality investment grade not to mention the yield pickup you can get in treasuries. one of the interesting analyses that's been occurring is around the money flows that could go

from money markets into equities and i'm not sure that that is giving sort of fully understood. you have $6 trillion in money markets and that scene is potential fuel but i think that's probably fairly sticky money not to mention that although that is a record in level terms as a percentage of overall stock market capitalization it's actually on the low end of the historic spectrum. you have these pockets of money you have to consider that sort of cash oriented money that might actually be sticky money but wants to take advantage of some opportunities in fixed income and then sort of your equity bucket. i don't know if we should be blending that. >> you have a pretty original take with what's happening on small caps. there's this proposal of some big tariffs just around the corner in our future. do you think they will start to have an impact on small caps. liz ann: the day the trump campaign officials were floating that out as a possibility, you

did see a lift and small caps. maybe that wasn't the sole reason. it also had to do with expectations around fed policy and short-term moves up and down that you get in yields but when you are in an election year we don't put a lot of weight on just the election or looking at averages of performance. you do tend to see trading movements at the sector level certainly, things like defense or health care but i think in this case any discussion about tariffs even small caps have much more of a domestic focus, that could be a short-term needle mover. i would suggest trading around some short-term trends as it relates to prospective policy, certainly not this early in an election year. lisa: i'm curious paul if you heard from the management teams of a lot of companies that they

are gaining out what the balance sheets look like depending on which policies and tariffs get implemented. paul: it's a real issue in this election will introduce an extraordinary amount of volatility into the market when you think about the last two elections decided by literally tens of thousands of votes. i am assuming that this election will be razor thin as well and to have two competing policy platforms where they will be uncertainty as to which direction we are headed, what the fiscal monetary, what the economic overlay will be the approach to china, tariffs, protectionism, that introduces volatility. you layer onto that where there's an increased risk of some foreign testing of the united states, some incident which creates geopolitical risk, you add on to the fact it makes

the central bankers less likely to take rates down, wanting to be seen as apolitical. you add into that the risk of a disputed or contested election and i think we are headed for meaningful uptick in volatility and when i talk to clients, they sort of understand that. they are prepared for it but it's not really front and center and i think that worry is where we will climb. >> i think people just want to ignore it. it is still early enough in the year where they can get away with it. you mention it's a little bit too early. what would you expect to develop in the second half of all of that in mind. >> i do agree there's going to be some volatility but as it relates to policy proposals it's not only things like how razor thin the election might turn out to be but of course with the makeup of congress is and whether there is a majority and

how to or wide that is it's ultimately the deciding factor in terms of what policy proposals can be put forth. i think there's a likelihood of a pickup in volatility may be a shift from volatility on the fixed income side of things last year to a bit more on the equity side. volatility is so low that to some degree it's a simple reversion of the mean. you can only go so much lower before the turn back up in volatility. the higher backdrop in terms of macro conditions including inflation in the market should be part of the assumption as we continue this year. >> appreciate the catch up. >> lori talking about the election staring at the sun. everyone wants to ignore it. they know they can. they cannot the moment for the next two or three months. >> do you just buy sort of protection against volatility. how do you understand when in

the past elections the first reaction has always been wrong in markets. how do you prepare this. that lack of certainty is a reason people aren't directly addressing it. annmarie: we continuously discuss this 10% tariff wall trump has in through the press reports have said potentially looking into as a plan. we asked gary cohn who worked for him and he pretty much shrugged it off we don't know if that will be happening. jonathan: will there be a gary cohn in the white house. that's good to be the interesting part of this. equity futures in the s&p 500 just about positive. live from new york city this morning, good morning. ♪ i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first. godaddy.

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jonathan: five days of gains on the s&p 500. equity futures on the s&p look like this. positive by 0.07%. the russell small caps continue to bounce by a quarter of 1%. into the bond market, a two-year, 10 year, 30 year. yields are a little bit lower by a single basis point. on the 10 year and foreign exchange to finish off the euro the ecb decision 45 minutes away. so excited. the euro right now just south of 109. totally unchanged. >> mi not speaking for you as well?

>> just enjoy winding you up. lisa: it's good to be awful until she speaks. jonathan: i don't know if i will call it awful. lisa: it's good to be what you expect until she speaks. jonathan: a crucial win for joe biden's reelection bid. the president securing the endorsement of the united auto workers a major boost for biden given the unions influence in the battleground state of michigan. >> this choice is clear. joe biden bet on the american worker while donald trump blamed the american worker. >> let me just say i am honored to have your back and for you to have mine. that's the deal. jonathan: biden begin the first modern president to visit the picket line during the uaw strike against detroit's big three. it's not just that they put support behind biden that's clear and obvious opposition against trump trade >> this was

bound to happen for biden. we cannot explain to our viewers how important this is not so much the uaw backing but biden needs to get the rank-and-file. michigan is critically important. remember trump hillary clinton in michigan by 10,704 votes. that's why this is so important. he has to get out beyond the top brass to the rank-and-file. >> it's a messy moment. the uber driver was talking about groceries and how expensive things have gotten at how frustrated he was in worried about cost of living. how do you measure the dissatisfaction with the need to increase real wages which has happened to some degree but is now actually pressuring the margins of so many companies. it's a tricky economic moment. when it comes to messaging it's more complicated because which constituents are you speaking to. this does not play in politics. jonathan: do you sense the power

is shifting and it's moving away from capital to later. is this just a moment in time the last 12 months that big uaw agreement is this a real regime change? >> i think it's a moment in time. >> why is that? >> i think covid was an extraordinary point where all of a sudden you snap back hiring through the move trying to get workers back to factories getting workers back to the office, shortages, disruptions, like but i think we are sort of getting back to a more normal world. the reality is with ai and where we have longer-term i think that's going to really start to change the equation and you will end up with dislocations in the labor force but we haven't really contemplated for. lisa: which industries are you expecting this dislocation at a time we see this restructuring as a response.

paul: i think it will be everywhere and we don't fully appreciate how profound it's going to be. but i think it's something that we will have to confirm on so many levels from a societal perspective. but what i think about from our firm's perspective and i look at how much value has moved into a handful of companies, we are talking trillions of dollars. that's not all going to be limited. this can be creative destruction, there's going to be significant pain felt as the balance of power shifts if you just look at what big tech was able to do to disrupt the advertising market and then you start to think about this exponentially as it plays out it is profound. >> have you thought through the political ramifications of that. it's called happy valley for a reason. some of the talk around ai and this idea it would complement jobs and i'm not convinced.

i'm sitting here waiting to be convinced. there is a feeling and fear that ai can do to services what globalization did to manufacturing. just huge job displacement and massive issues for decades. >> part of it is we are in the early stages of imagining where this can go but if you look at the curve and the rapidity of the process and the speed at which this happens it's sort of doesn't appear and then it's in your rearview mirror gaining on you. you are transformed and i think that is where we are headed. i do not know whether it is five or 10 years but at some point it will be profound and that's why i think that plus the unique moment of the covid era i think move the balance of power back. i think we are probably getting to a different equilibrium. >> tesla shares in the premarket

we are negative by seven or 8% through most of this morning down by around about 8% right now in the premarket with the ev maker warning of notably lower expansion this year and opting not to publish the target. elon musk tried to convince investors to look past that. talking up a cheaper model of the car. let's keep it brief. no one is buying that this morning. >> is this a car company? people are worried it might just be a car company and it raises this issue are car companies tricky to invest in at a time when that transformation is happening in real-time time with electric vehicles, with some of the demand and that to me is one of the big questions for ford and gm but also for tesla. jonathan: streaming service peacock picking up 2.8 million new subscribers of this broadcast. according to research. the match between kansas city

and miami was the first playoff match to be broadcast exclusively on the streaming network. saying it was the biggest livestream event in u.s. history. if you signed up do you stay signed up after all is said and done. >> you don't mean to, you start to watch the game which i signed up once with paramount because john is like you have to watch this it's incredible and it's worth the subscription fee. i'm still signed up because you forget and you move on with your day. it bodes well for the streaming services but also i imagine some of these eyeballs were not just nfl fans. paul: i think the fact the nfl was prepared to take an important playoff game and put it exclusively on streaming and deal with all of the backlash because it was universally accessible, that's profound. i think you will see more and more content move directly to streaming and once you get that flywheel going you don't turn back.

this is the technology, this is where you are headed and right now you have a proliferation of streaming platforms you've got selected content in different places but at some point this is going to be much more comprehensive service offerings and this will be where consumers go first. >> who are the big winners and who are the big losers? >> it next ordinary winner in all of this. apple is a winner in all of this. i think youtube has the opportunity as well, amazon. that's where a lot of this has gone and the question is what's minimum sufficient scale to plan this and if your traditional meeting and have legacy assets, can you afford to make the pivot, do you have the staying power and do you want to go head-to-head. >> it's their kodak moment. they have to work it out. do they sit there and get killed or make the move.

that's what it feels like to me. lisa: are we talking about disney, -- jonathan: i'm thing of the guys with the big linear networks. who were nervous about making that move. we come out with cnn plus. does it work out so they are stuck with where they are. as many of these people still are. >> is a youtube. there is a sort of question of what is the model of information in this transformative kodak moment. let's turn to boeing at emi. catching up with the latest on the southwest reported earnings on a halt to 737 max reduction plans. we are seeing a $150 million negative impact, the company ceo saying we rain steadfast in our commitment to safety in the midst of a challenging start to 2024. the equity research managing director at jefferies joins us now for more. last time you and i caught up

you are optimistic dare i say constructive on the prospect of this plane getting up into the sky. what's changed in the last few weeks? >> thanks so much. i'm still optimistic that the faa is warranting the return to service with the max 9s. and they are getting what would be back up in the air. potentially on sunday. but the faa put out a notice uiring more thorough infection -- inspection for ongoing production. that's what's really changed here. they are taking more of a stance putting out a warning to boeing and investors this morning are wondering not so much about the max 9s given its only 2% of the backdrop it really what happens here for the max 8 production and the max seven certification that's coming up at the end of this year. >> when do you know we've hit the bottom for boeing? >> the way i think about it is

boeing lost about 20 billion of market cap in the last 20 days and so the markets actually been realistic in taking out a 6% rate slow yield about a billion to a billion and a half of free cash flow. that's probably what we will see in terms of what boeing reports in terms of how they will guide and what they will say max production. the long story on why they are so bullish is really a pricing element not only is the biggest driver of this story, 60 to 70% driver of the story but also the 787 as well. better pricing on aircraft that are delivered in 2026 and beyond. but of course when you have alaska out there as well as united, negatively talking about the net -- max 10 and publicly negotiating contracts it does -- it put some pressure on boeing there. >> do you see ryanair canceling these contracts anytime soon.

>> to be frank, no. but especially given southwest in ryanair's dedication to boeing and their single fleet optimizes their structure, the next 10 is very important. it represents 25% or so of the skyline going forward. once it certified in a full grant to 2026. second it's really important to u.s. carriers. the max 10 sees about 10% more passengers than a max 8. so it really helps drive the updating theme that united next has at the analyst event in 2021. the only would he grow the best market is to carry more passengers or to open up a new route. that's really what investors are looking at. jonathan: we've got to leave it there. appreciate the update. up next on the program. u.s. crude output at all-time highs. lisa: the u.s. pumping more than

13 million barrels of oil per day. do think it's a policy failure or success. >> it's a policy necessity. >> we talk about next on this program for the reaction from the white house just around the corner. j.p. morgan wealth management knows it's easy to get lost in investment research. get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments. so great getting to know you, let's take a look at your new investment plan. ok, great! this should have you moving in the right direction. thanks jen. get ongoing advice; and manage your investments in the chase mobile app.

jonathan: good morning. equities just about positive on the s&p 500. u.s. crude output at all-time highs. >> the u.s. pumping more than 13 million barrels of oil per day. do you think that's a policy failure or success? >> it's a policy necessity because you obviously cannot shut down the economies of the world and be ridiculous and some say oh we don't -- you are going to affect demand without affecting supply at the same time. you've got to have a broad

approach. that's what the administration is trying to do. jonathan: u.s. oil production at record highs more than what was produced during the trump administration, amh we are through 13 million barrels a day. >> a record for any country in the world. this is a little known secret in washington dc. william denning writing in a bloomberg opinion piece said whether you prefer fossil fuels are clean energy there is much to like with where the u.s. stands today. climate deniers will not like the new music regardless of record oil and gas output but the bigger issue could be with the left with his own party for whom the above energy is a copout rather than a practical means of maintaining momentum. >> cannot wait to talk about this. the senior advisor to the president for energy, good morning to you. is there something you are proud of 13 million barrels a day. is that a good thing. >> the overall energy record that the biden administration

has had over the last three years and that's coming in the president made it clear i am going to be the most pro-climate change action green administration we've ever had. he's worked really hard with congress to pass an important legislation reduction act. the chips act and the bipartisan infrastructure act all with major investments in clean energy. it's an energy transition and what we have to be able to do is to basic things at the same time which he believes the united states can do and that is to accelerate the transition and use government purchasing power investmentes to bring about that acceleration in the energy transition while at the same time making sure we control and manage a strong economy in the united states for american consumers and around the world. i believe we've done that quite successfully and have allowed gasoline prices to come down which has helped food prices dipped down because we are a

farm to truck to table and we've also at the same time been able to accelerate the transition so we've done that and i bringing the energy -- our energy policy there under control and managing it well it also helped bring overall inflation down and supporting a very strong economy we have today. >> we also had russia still shipping energy, we have iran, putting out this month more than 800,000 barrels most of that going to china and venezuela oil hitting the market. at what point is the u.s. doing -- allowing lower gasoline prices at the effect of allowing adversaries to make money off of it. >> we are not, to take off what you just elicited grade when russia invaded ukraine we had a clear policy that we wanted to allow the russian crude to continue on the market because taking it off the market would

actually punish european consumers not russian consumers. we launch the price cap in order to make sure that what matters most is how much revenue it gets, not much -- not how much oil is sold. it worked well at the beginning and had a bit of a resurgence of low prices for having to adjust to it as we do with sanctions. we brought it down again. we have exactly what we wanted, of the russian oil on the market will lower revenues. in venezuela has been almost no increasing an oil production out of venezuela. there's been some changing going to china to elsewhere. it's been the same at a fairly low level. annmarie: will the u.s. start to enforce sanctions on iranian oil? amos: if we were to do that iran today would be back to where they were before sanctions which is at about 2.5 million to 3 million barrels a day.

they have enormous amount of reserves at resources. the reason they are not doing that is because of sanctions. sometimes we are able to bring down their exports to one million or 1.1 million. sometimes it goes to 1.4, so those are a bit seasonal. but by and large they are under extreme sanctions. they are not able to develop that sector even though the one of the largest reserves in the world. i think we are doing pretty well with that making sure the adversaries know that if their actions -- go ahead. lisa: i'm struck by this idea we talk about opec-plus and how it's losing this relevancy because of how much oil the u.s. is pumping and there's this question they are concerned about the plus and then beyond which is the u.s.. there's a concern about how the u.s. has the moral high ground both with energy policy, with saudi arabia, with riyadh as well as to help negotiate some

of the very difficult situations right now in the region given the fact that the u.s. is kind of eating their lunch a little bit. >> i will tell you. i do not subscribe to the is opec-plus relevant or not because some years i'm told the united states is not relevant. i'm told opec has lost the relevancy. let's say they produce an enormous amount of oil because of their collusion with each other. they have some impact on prices. that's not what is important. what's important is where i started and that's the ultimate policy is i have to have enough oil on the market as long as i have the demand there. and to make sure that the economy works. so my relationship with countries like saudi arabia and the uae or other producers is to say you are producing oil prayed let's work together to invest on the other site, that's what we told the crown prince of saudi arabia we are working together on investing -- there's more

investment in renewable energy in saudi arabia and the uae than many other countries around the world. that's why we want the cooperation of the future of oil producers is how do we move to the next level. reducing emissions while we are still producing and to use the revenues that they are getting from oil and gas and invested into ev's and renewable energy and critical supply chains and to make sure that the energy future that we have clean energy future does not have the same geopolitical risks but we have had for one million years in the oil and gas side. that's a huge risk right now that's -- people talk too much about you oil and gas side and not how much work we have to do and are doing to reduce the geopolitical risk that the united states will face and others in the clean energy future and that's the real work. >> do you think we are trying to move too fast. >> on the contrary we have to continue to work as fast as

possible. it doesn't mean everything goes up all the time. we have certain things that will sell very fast. you have to take a bit of a break and on the plateau. a bit of a reality check for hurts. the cost of carriers just through the roof. ford f1 50 not exactly exploding right now. you see example after example of them -- in america that feels like we are trying to move too quickly. >> i think what you saw with the legislation the president pushed through was to do exactly to address that problem. we have grown in the new car sales of electric vehicles dramatically over the last couple of years. sometimes double. we've accelerated beyond expectations. that comes with the fact you have to accelerate the infrastructure needs to be there to support it. how money charging stations, people and multiple polls will say one of the things that worries them is the charging

stations will they have enough. that's what they are supposed to do is to be able to invest and make sure we have deployed the charging station. >> the range anxiety is a misinformation campaign. what's that about? >> you would have to ask him what he meant. i think people want to be able to have an affordable car that they can manage their day-to-day lives with. and most people do not go 200 miles in a 24 hour period. they drive a lot less, they go to work, they take the kids to school, they maybe go out downtown. so the needing 400 miles on one charge i think is not what's holding people back. they don't expect that on anything else. we do have to have the comfort and convenience that goes with knowing the peace of mind knowing that if i go on the road i will know what to do with my car if i run into a longer trip than expected.

those of the issues we need to work on. instead of going into these extremes of ev's that don't work or ev's that are working we have to look at what's stopping people from buying them and how do we address that issue. that's what president biden has been doing trying to avoid the hyperbole and going to water the solutions. if we want to be the leader in the auto sector for the 21st century we have to invest now. we have to make the investments so that we are the sector lead. they want to compete in the sector and they are investing enormous amounts of money. people always say what we are doing is not fair because it's not free-market. the energy sector there is no free market. host of the energy sector is controlled by governments around the world and we need to put in american dollars not to replace the private sector but to incentivize the direction of travel so that we can accelerate

this energy transition because if we don't we will fall behind, not only will we send to our children and grandchildren on climate change but we will actually do a disservice to the american economic security. the private sector is not to make these investments because if they are not 20% or 18%, but we need to do is to have that incentive both on the tech side, credits, other incentives and the actual spending so that the private sector makes those investments. we've seen it work in the chips act where that's not only the economic security it's a national security concern we are not making the chips for the future that we are trying to create. we lead the world in technology and have to have the infrastructure and the inputs into that. >> good to see you. thank you sir. paul taubman, thank you for being with us for the last 60 minutes. coming up for the next hour the

ecb rate decision up next. ♪

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>> we are just at the very beginning of heading back towards normal and what normal will be. >> mindfully -- my feeling is inflation still comes down. >> it is possible that inflation

just comes down. we don't go into a recession. it's never been likely. >> things can try to move around quickly. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> the anticipation is off the charts. the ecb decision just around the corner. good morning, good morning for our audience worldwide. this is bloomberg surveillance alongside lisa abramowicz prayed i'm jonathan ferro. your equity market unchanged on the s&p 500. five days of gains on the s&p for long time highs. tesla negative after a dreadful hour. down by 8% or 9%. that's one to watch. the ecb 14 minutes away. lisa: they are going to hold. it isn't necessarily going to be what gets a lot of people's attention. christine lagarde takes the helm and then maybe walking back that

the market is expecting pricing at 64% chance of april rate cut. will she talk about trump. >> talking about the magic soft landing. growth is still good. inflation is slowing down. could we say the same thing about europe. the data has been dreadful. >> they are saying look at the data because at this point the central bankers can say what they want but they are kind of caught in what davis was talking about which is essentially leaning into some sort of soft landing. the more the market moves away from them and get further away from the goal. >> the german finance minister said we are tired men. we need a good night sleep and a good cup of coffee. this is what christian was saying and he's talking about structural reforms. the big takeaway before going into davos when christine lagarde spoke to france was the fact europe has a reckoning of looking within itself to shore up their own growth models and

not be so concerned about the u.s. election and who's can it take over the white house. >> the euro totally unchanged. 30 minutes after that you have the news conference with christine lagarde. coming up this hour amanda of black rock ecb rate decision. deutsche bank reacting to u.s. gdp and inflation data. jobless claims around the corner. president lagarde of the ecb, that news conference at 8:45 eastern time. counting down to the ecb rate decision. amanda writing this. president lagarde has cited upcoming data as key as we've outlined previously the reason for eventual rate cuts is much more important than the timing. proactive cuts to calibrate real interest rates are a more supportive outcome for risk assets. i'm so with you so thanks for being with us. metal rate cuts, a lot of the rate cuts that you're looking for. >> for the fed we are expecting

this is a supportive outcome for risk assets. rate cuts to calibrate a real inflation adjustment as inflation declines want to make sure the real rate doesn't become more restrictive. it's a much bigger backdrop and they are the president lagarde speech from davos actually showed us there still being patient and they are balancing the risks to growth alongside the risks they want to avoid in a situation where they are cutting prematurely and inflation rate accelerates and they need to hike again. i think there are different catalysts in terms of why they are cutting the markets very focused on the timing. lisa: i don't want to be too snarky about this meeting. it simply because i don't really get the sense the central bankers in europe have the front seat here. i feel like it's the economic data people are watching and they are calibrating around that and they are not buying what the central bankers are selling.

how much is that the case and how much are you leaning against the enthusiasm you've seen in the periphery and other areas in europe? >> the folks that have the front seat are the corporate's in many instances. we saw that during the supply chain disruption in the pandemic where for example the semiconductor shortage was expected to ease quickly but if you look at what those companies were saying in terms of those using semiconductors there's a much different story. we are pushing back against the markets pricing and this is true in the u.s. and europe for swift immediate rate cuts starting in the first quarter. our base case in the u.s. is for rate cut in the second half of 2024. we've acknowledged the risk could be earlier. the wage data will be important so i think president lagarde will wait for that in terms of the april and may colors to see is inflation sustainably had towards their medium-term target. the more important factor we are watching now is how the patient

-- how patient will central bank speed to get inflation to target. if we are at 2.5, how forceful will they be to get to 2% medium-term. that's where the balance of risks might be shifting is we know rate hikes are ugly we know rate cuts will happen eventually rate how patient will they be to get inflation back to target. the growth inflation mix in europe is much more challenging so much more challenging on the manufacturing side environment in europe where as in the u.s. you have a much more supportive growth backdrop and thanks to elevated job vacancies the unemployment rate has remained stable in the u.s. because job openings in the market, people are not necessarily losing their jobs to a large degree. the labor market has been rebalancing thanks to that unique post-pandemic situation

not so much in the euro area. >> financing in europe is different to financing in america. we talked about with standard chartered. the bank lending channel is vital for europe. in markets in america it feels like financial conditions are loosening, do you see the same thing in europe? how different are those things? >> the bank lending survey did show a moderation of the tightening so we are seeing tight credit conditions but it's not getting worse. in the european corporate markets we are seeing signaling similar to what we are seeing in the u.s. meaning very strong new issue activity and a lot of oversubscription on books, deals are trading well on the break. i would say the tone is probably more strong in the u.s. but it is good enough in europe that corporate's have been able to do the refinancing activity they need. the bank lending conditions are tight but they are not getting worse. even beyond that the market

functioning on the corporate side is quite solid and strong. jonathan: blooming credit supply, can you walk us through the quality of the stuff that's come to market. is this catch up for last year. >> in our first-quarter outlook which seems like a lifetime ago in november we had wrote that one of the key risks was that most of the active supply activity in 2023 was by high quality high-yield issuers. that has changed in recent weeks and we've seen multiple triple c rated firms successfully tap the capital markets which i think is a really positive sign in terms of market appetite to refinance these companies. those outcomes will remain idiosyncratic for sure. i do think that's a really positive signal. we are seeing similar borrower friendly market conditions in the leverage loan market and amid the extend activity, i think on net it actually is

supportive for credit quality and allowing these firms to refinance and get ahead of the maturity. >> how much is this a u.s. story and how much is this a global story. going to commercial markets. and how much is that something you can play into versus the u.s. is strong. >> as i mentioned the growth inflation in the u.s. is in a better position than valuations in europe on the credit market are actually more attractive than the u.s. market. not to a large degree but you are getting compensated for that risk. one of the interesting things from my perspective is this significant demand for corporate credit to start the year. we are asking where is this coming from. is this the money market activity everyone is talking about? it is from a wide variety of investor types, insurance, pensions, asset managers. some folks are rotating out of short-term cash products.

some are rotating out of other asset classes and some are bringing their allocations back to neutral where they may have been underweight. there is a broad-based appetite to lock in all in yields mainly taking the view we are seeing peak rates not peak policy rates. >> super busy start to 2024. amanda will be sticking with us let's get you an update on stories elsewhere. here's your bloomberg brief with dani burger. dani: alaska air expecting slower growth after a challenging start to the year. the airline says the financial hit will be $150 million from the mid air accident the grounded boeing aircraft. alaska's fourth-quarter earnings beat the streets estimate. tesla shares are extending their slump. elon musk convincing investors to -- the ev maker just narrowly missed estimates in want of a lower volume growth compared to last year. tesla has been cutting prices in the u.s. and china to boost sales which eat into profits.

for has unveiled a battery electric version of its best-selling the can suv in singapore. ed ludlow spoke to the new america ceo. >> with the launch of the electric vehicle we are pretty much not able to cope with the demand and definitely the first year. i think there's a lot of demand, people are waiting for a product like this this comes at a stage where the mccann in the market right now with the combustion engine has its most successful year in its history as of last year. >> that's your bloomberg brief. >> let's pick up on that story for a moment. national champions this will be a big deal in the next 12 months. if these car companies cannot compete with the low cost providers, low price automakers out of china this conversation president trump is having about higher tariffs if he gets another term comes back into

power will be an even bigger conversation. i think the pressure won't just be on him it will be on biden as well. if gm, ford and still land is cannot compete how do you think that's going to work out after the deal they signed with uaw in the last 12 months. >> do they get of the ev business altogether or on the flipside do you end up with the political pressure to lean into the green story and embrace the cheap vehicles from china to then wipe out the entire industry in the united states. >> putting up the barriers you can hear more and more calls to put up the walls. up next we talk about europe. the ecb rate decision is coming up next. good morning. equities just about unchanged on the s&p. the euro stronger. ♪

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jonathan: the ecb decision 25 seconds away. just about unchanged on the nasdaq positive by 0.1%. in the bond market two-year, 10 year. yields on the 10 year lower by two basis points. and to finish on foreign exchange the euro against the dollar shaping up as follows. the euro at about 109. the ecb decision just seconds away. you get the decision, a statement, bunch of headlines. 30 minutes later year from christine lagarde. unchanged on the main refinancing rate. the facility unchanged as well, the depot rate 4% unchanged as anticipated. to determine to ensure inflation

returns to 2% in a timely manner. no change to a whole lot from the ecb. >> a stunning decision to do nothing which is largely as expected. a rate level to make a substantial contribution to reaching 2% keeping the language you saw sufficiently restrictive thrown in there for good measure. they will stay there as long as they have to. we get all of the key hallmark words that are coming out. underlying inflation is continued so maybe we are getting just a touch of that dovishness that the markets can cling onto and price in. >> also the first couple of paragraphs from the ecb statement. the governing council decided to keep the three key interest rates unchanged. it's previously assessed medium-term inflation outlook aside from an energy related upward base effect on headline inflation the declining trend in underlying inflation has continued in the past interest rate increases keeping

transmitted into financing conditions. they go on to say tight financing conditions are dumping demand and this is having to push down inflation. the governing council is determined to ensure inflation returns to its 2% medium-term target in a timely manner. the governing council considers the key ecb interest rates are at levels that maintain for a sufficiently long duration but link a substantial contribution to this goal. the future decisions will ensure the policy rates will be set at sufficiently restrictive levels for as long as necessary. maria tadeo in frankfurt has read the rest of that particular statement prayed you can catch up with her now. what's your take on this? >> as you say it's unchanged. we are expecting this is the third time european central bank has kept rates on hold. they want to milk this idea of higher for longer as they possibly can.

it is interesting when you look at the statement and i agree a lot of this we heard already similar language to previous meetings but they say the transmission is working and it's forcefully being transmitted into the economy. they concede something we know by looking at the data at this point that some of the underlying inflation dynamics point to declining inflation. having said that if this was a statement in which you were hoping for clues about the future path for rates, you got none of that. the focus is fully on the press conference. do we get a christine lagarde who repeats. this is a summer situation when it comes to a potential cut and do we get that kind of repeated pushback that this is not a q1 situation and markets should wade just wait like the central bank wants them to. all the way to potentially june. >> i would love you to weigh in on the financial conditions part. they did highlight forcefully transmitting policy here in the

u.s. financial conditions have eased in about two years on the heels of some comments from jay powell. how much is this of concern to the ecb officials you speak to. the markets getting ahead of the ecb will make it that much more difficult for the ecb to cut rates on the timeframe they might want to. >> the fact that they get this in the statement reflects we had that survey two days ago so they basically say with the survey said which is tighter financing conditions but beyond that for them the press conference will be successful. if they manage to align their language with the market pricing. you did hear from the ecb and not just but a huge number of members of the governing council in force before the quiet period telling the market the more you force us into a cut the more we will delay it. we are not in a rush so you see

this dynamic between the two of them. i think they will say it was successful. if they manage to narrow the gap. the language will be interesting to see what she says is this is a central bank that's not in a rush and does not want to be rushed. they do worry about a policy mistake in terms of if they go too fast that would undo the work they've done in the past two years including the social and political ramifications when it comes to inflation. in germany there is a strike over pay and wage which is something that they will factor. the wage and potential tensions in the red sea. that something they would monitor in the months to come. >> much bigger impact on the europeans then stateside. i'm with you, we've got to wait for the blame of the ecb to talk about the same thing. middle of the year where you get your hands around that data working out what they need to do. get into the news conference, i

want to hear about the politics. we've heard two or three times over the last week, politics here in america. are you expecting the same thing in this news conference? >> look, you know very well there is a survey that leaked from the european central bank of the zeitgeist on the euro tower today and why. some of the criticism reflected is perhaps this is a central banker that it times talks too much and wades into topics not related to monetary policy. this is a central banker who has waded into the politics. she said the best attack would be a defense of the european economy and of course it's a very different type of central banker. mario draghi never wade into the politics. again this is what she feels is her strategy. she talks maybe some would say too much.

you see when you elect christine lagarde you know what you are getting. perhaps not an economist but good on the politics and consensus building. inside the european central bank for some may be talkative lately. >> maria tadeo at bloomberg on the latest out of frame -- frankfurt, germany. maria being diplomatic. there was a pause before saying that. jonathan: in the fx market your almost totally unchanged. amanda around the table with us. we just have to wait. amanda: three things stand out. one is consistent with the fed's positioning, the ecb doesn't want to cut prematurely and be in a position where they need to restart a rate hiking cycle. i think today's decision and lack of activity confirms that. but two things i will be watching for the press conference is is there a catalyst in terms of growth

deterioration that would cause them to consider cutting sooner rather than later and second is how long does as long as necessary mean. she was referenced with the medium term often. how patient will they be in getting inflation down to the 2% target. just how forceful will they be if that progress is slow. it's also a question we have for the fed. lisa: how do you judge financial conditions. we are jay powell not addressing this at all. is it becoming more problematic for the fed that things have gotten as accommodative as they have. is the ecb to complacent. >> financial conditions or translations of monetary policy. if they are easing it makes that more diluted we are focused on capital markets functioning, do corporate have access, are the low-quality borrowers in the

high-yield market able to refinance their debt. that's true in the public markets, private markets as well. that's really what we are focusing on to the extent financial conditions are so easy that they spur inflation and i would say a significant rally in risk assets which can impede progress. i think financial conditions are important for the transmission of monetary policy. if it's as simple we like where financial conditions are and want to keep them for a longer so we can be comfortable that we cut and not have to restart a hiking cycle thing that's a bit of a different story. perhaps the hard work has been done. it was november of 2022 we had our last 75 basis point rate hike. we would imagine that would've transmitted by now but we will see. jonathan: you've got the nominal rate up here. inflation rate starts to come down and then real rate increases. how do you manage around that? how do you communicate around

that. i will read this from the ecb, future decisions will ensure as policy rate is set, you can cut and stay sufficiently restrictive can you? >> you can and that's what the fed has said. the issue or the complication with passive tightening is a requires an assumption on the neutral rate. we do not always know what that is in real time. central bankers have said as much. i think if we are seeing clear sustained progress on lower inflation it would make sense you would want to bring the nominal rate down in tandem to keep the restrictive rate somewhat in a range. i think there's a lot left up to uncertainty. this is an unprecedented economy and we have to manage a bunch of different factors. jonathan: got to get a market call from you. amanda: we like high-yield prayed i would say it's been a game changer to me that the lower quality of the high-yield market has been able to successfully refinance.

it removes a negative tail risk we were focused on. if we are comfortable there is somewhat of a soft landing and capital markets actually like moving down. it does not mean chase triple c's but i do like the high yields. >> appreciate the clarification at the end. the second guest this week who likes some credit risk here. >> basically this idea the lower rated companies can borrow is a game changer. >> up next on the program tons of economic data from new york city. this is bloomberg. ♪

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jonathan: lisa wants to get new plans for the studio. you can purchase that. equity futures on the s&p 500, totally unchanged. we look like this. we have gone absolutely nowhere. that is the equity market story. let's talk about bonds. on a two year we are down about a basis point. have heard from the ecb moments ago, no real change there. let's get that data with mike mckee. mike: we have to look at gdp first, because that is what

everybody has been watching. up by 3.3%, a significantly higher number than anticipated. the consensus was for 2%, so the number for the annual rate is going to be very high. consumption comes in at 2.8%. that is higher than anticipated, lower than in the third quarter, but still fairly strong. we saw that number previewed in the retail sales report we got a couple of days ago. the price index, 1.5%. on a quarterly basis, the fed has done its job, with the number that really counts is going to come tomorrow when we get the december number. core pce, 2% on a quarterly basis. so, definitely a drop in inflation in the fourth quarter. other numbers that really matter, jobless claims popped back up. they were 187 in the initial

parental last time, but now they are 214. the number we got last week was probably seasonally affected, and that is what we said at the time, and it was not worth paying attention to. 214 is still very low. continuing claims, one male and 833,000. that is up from the prior week. those are delayed a week. finally, durable goods orders flat on the month. they were expected to be at 1.5%. they were at five point 4% in november. that has been revised to 5.5%. take out transportation and it was up just half percent last month, so a lot of that is going to be going -- boeing numbers. the most important number for economist and a lot of people on wall street, a very strong capital goods orders number in comparison to what was forecast. .3% gain, but that is down from a 1% gain in november.

so the end of december at the end of the fourth quarter, this -- businesses still spending money, but one of the questions about gdp, i'm sure the markets have probably moved on this. jonathan: we have a small move. mike: let's see what spending was in the fourth quarter. jonathan: just a little bit of good news. we are up by .25 percent on the s&p 500. there is your move on the roster, though, the small caps up by worthen 1%. in the bond market the yields were higher, now they are lower. initially when the data dropped it was yields up, dollars stronger. we have reversed that. you can take a look at the euro against the dollar. you can see in the fx market. i think we can call that 1.09 going into the ecb. lisa: this is messy data.

this is the narrow path we were hearing about from andrew hallman orders, that it looks right now like this: pathway where you have disinflation at the same time as stronger than expected growth. the one hang up as initial jobless claims taking -- taking -- ticking up. does it seem like this is a moment in time, or a trajectory into the immaculate disinflation that this market is leveraged off of? mike: kind of a combination of both. our guest and i were talking about, this is a moment in time. we are seeing what we anticipated and what the fed was hoping to see, which is not immaculate disinflation, but coming down without a major impact on the overall economy. that never happens. usually they tighten and the economy slows significantly. it has slowed, but it is not dropping off a cliff as people anticipated.

but here's something interesting. i was looking at the business spending month -- business spending number. it is 1.9%, which is not great. this is largely this point, the consumer played a role in this. he was the non-inflation-adjusted number. nominal gdp, 4.8%. it was 8.3% in the third quarter. that is not only a reflection of the fact that the economy slowed some, but there you get the inflation numbers that came down so significantly are taking away from nominal gdp, and that really stands out as something that has changed in the economy if this continues. jonathan: thanks for the breakdown. matthew luzzetti with us around the table, chief u.s. economist of deutsche bank. good morning to you. that is a lot of data. what you want to begin? matthew: the number one thing for the market is inflation. for the fed they are focused on

inflation, adding 2% was expected. tomorrow we expect a 15 basis point print for pce. year-over-year to come down. for the markets still does this inflationary trend is the number one story. we look at the details, and we will have to come through the details, consumer spending was close to our expectations but gdp was stronger. it does look like inventory has added a decent amount to that print. i think if you go back to when the fed started raising rates, if chair powell would have been told gdp growth would be close to 3% in 2023, core pce inflation would be below 3% and the unemployment rate would be below 4%, it is basically the best outcome. lisa: do you buy that this can last or is this a moment in time where things get overheated with growth continuing to come in better than expected, or things start to weaken with jobless claims picking up? matthew: we have been worried

about the weakening story. we have been having this mild recession, and it is still our baseline part of the view. i think there is improving prospects for a soft landing. yes, you are seeing some tight credit conditions, etc., but at the same time i think you have some virtuous dynamics. mortgage rates have come down. mortgage purchase applications are picking up. financial conditions have eased. that doesn't support forward-looking growth momentum. i am not as worried about that spilling into upside inflation risks. maybe there are risks coming from supply chain disruptions, but we expect inflation to decelerate over the next year. it is a big part of the deceleration we anticipate, so this the lock scenario of growth being stronger and more resilient, inflation still coming down, that prospect i think has improved materially. >> growth overall is higher than it was in 2022, yet the fed was on this accelerated rate hike.

is this as good as it gets for the timelines? i'm always looking at the timeline to the u.s. election. matthew: i think the unemployment rate might move higher from here. we do have it rising into the middle of the year. we will have to see how that pay cash that plays out. if layoffs pick up that is a material negative. at the same time there are those improved dynamics we have in play. he for the market will be, what does it mean for fed rate cuts? how much do they cut? this data does not support the notion that the fed cuts as early as march, but inflation is coming down quick enough to the idea that they should be cutting rates by the middle of the year. i think that will help to add to rates coming down, helping to ease financial conditions. lisa: can you elaborate on that? right now to year yields are lower after this. why do you think that this data precludes cutting in march if you continue cc if you continue to see disinflation? matthew: this does not put clued

-- not preclude the fed from cutting in march. what we get on the inflation data over the next two months is important. i expect an uptick in core pce data. if you get that plus upward revisions it creates uncertainty about how much disinflation we are seeing. there is this very substantial disinflation or process in place. it is just a question of whether or not you get an uptick that makes the fed more cautious. jonathan: i mentioned a phrase, passive timing. i wanted to talk to about it. you have been focused on it. is that something the fed starts to talk about in a news conference next week? matthew: i think they have to. chair powell indicated they started that discussion about rate cuts at the december meeting. very clearly that discussion will pick up at the january meeting, or officials will outline how they are thinking about rate cuts. most officials their story is, soft landing, inflation is

coming down quickly, and if they don't cut rates that the real rate rises in risk over tightening. jonathan: can the entertain that without engineering a biggie easing of financial conditions? matthew: the market is pricing in cuts already, so this is embedded in market pricing. i think governor waller was indicating the december dot plot was a good guide. i think they can entertain that and still keep financial conditions in check. jonathan: appreciate the update. matthew luzzetti of deutsche bank. equities right now higher by .3%. that's get you the morning brief. you can do that with dani burger. dani: the faa has put a halt to expansion plans for the boeing 737 max. it is a blow to the company's minors. the faa had just announced a path for return to service following a new procedure for inspections.

united and alaska airlines could start using max 9s as this weekend. hopes for an ipo from shein. investors are hoping to share -- sell shares at a 30% discount. general atlantic copresident told me the company still has a path to public markets. >> shein is a fantastically-performing business. he to grow fast. we think it will be a very successful offering. dani: shares were reportedly offered last year with valuations ranging from 45 to $55 billion. elon musk has told investors he needs a bigger stake in the company. elon musk owns about 13% of tesla, but is asking for 25% for more control and to fend off activist investors. elon musk proposed dual class shares, and warned he could take

a i and robotic products elsewhere. tesla is trading lower this morning after missing fourth-quarter earnings and disappointing guidance. that is your bloomberg brief. jonathan: thank you. what did dan ives call that earnings call? lisa: a train wreck. then he opted to a plane crash. jonathan: something like that. it was pretty brutal. lisa: frankly, he has good company. a lot of people are down on the fact that he basically said he wants to run a tech company, not a car company. but you make cars. jonathan: down in the premarket. should i whisper equities? i feel like the president. equity futures on the s&p 500 higher by .25%. in the bond market we look like this. shaping up as follows. your 10 year right now, yields lower by four basis points. on a two year, we are down a single basis point. and a quick shot of the euro for you.

1.08 point -- 1.0892 against the dollar. coming up, it is christine lagarde's news conference. from new york city this morning, good morning. this is bloomberg. ♪ old school hard work meets bold new thinking. ( ♪♪ ) partnering to unlock new ideas, to create new legacies, to transform a company, industry, economy, generation. because grit and vision working in lockstep puts you on the path to your full potential. old school grit. new world ideas. morgan stanley.

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of people would have laughed at us. lisa: they did. they said the soft landing was a pipe dream. that we were going to get some sort of recession. now we are looking at this goldilocks scenario. the question is, how long can inflation keep coming in like this? is this something comps get more difficult with going forward, or something we are looking at, which is supply chains normalizing? look at 1.5% gdp price index, it is pretty notable. jonathan: let's set the compare and contrast. set the scene for christine lagarde, who has just walked into the room to start a news conference. europe cannot say the same thing about growth. they cannot say the same thing about growth. we are talking about this soft landing in america we are already talking about recessions taking place across the eurozone. and not just in the traditional weak spots. we are talking about germany. lisa: we are also talking about

the potential for supply chain disruptions with the red sea. they have a much more difficult situation, and yet to meet one of the key questions is, or did they signal that when they are facing inflation that is bad inflation? it is not necessarily from growth. it is from some of these other inequalities they are seeing. this is a jonathan: bigger problem for the euro. let's show the room. esteem lagarde just about to get introduced. you get these long, introductory remarks. it is not like the federal reserve, chairman powell walks in and begins. you do with the real -- you do with the european white. long introductions for who they are and what they are going to say. you have to challenge the growth. arguably they have had a recession in certain parts of europe. the ecb leader herself introduced into the conversation that i imagine is going to come up. lisa: and sowing strife within her organization.

it is going to be curious what she has to say, especially with so many eyeballs on her today. jonathan: here is the ecb president, christine lagarde. president lagarde: the president, vice president, and i welcome you to our first press conference in 2024. the governing council today decided to keep the three key ecb interest rates unchanged. the incoming information as broadly confirmed our previous assessment of medium-term inflation outlook. aside from an energy-related upward base effect on headline inflation, the declining trend in underlying inflation has continued, and our past interest rate increases keep being transmitted forcefully into financing conditions. tight financing conditions are dampening demand, and this is helping to push down inflation. we are determined to ensure that

inflation returns to our 2% medium-term target in a timely manner. based on our current assessment we consider that the key ecb interest rates are at level that maintained for a sufficiently long duration will make a substantial contribution to this goal. our future decisions will ensure that our policy rates will be set at sufficiently-restrictive levels for as long as necessary. we will continue to follow a data-dependent approach to determining appropriate level and duration of restriction. in particular, our interest rate decisions will be based on our assessment of the inflation outlook, in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. the decisions taken today are

set out in a press release that is available on our website. i will now outline in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions. looking at the economic activity, the euro area economy is likely to have stagnated in the final quarter of 2023. the incoming data continue to signal weakness in the near term, however, some of forward-looking survey indicators point to a pickup in growth further ahead. the labor market has remained robust. the unemployment rate at 6.4% in november has fallen back to its lowest level since the start of the euro, and more workers have entered the labor force. at the same time, demand for

labor is slowing, with fewer vacancies being advertised. governments should continue to roll back energy-related support measures to avoid driving up medium-term inflation pressures. fiscal and structural policies should be designed to make our economy or productive and competitive, as well as to gradually bring down high public debt ratios. structural reforms and investments to enhance the euro area's supply capacity, which would be supported by the full implementation of the next generation eu program, can help reduce price pressure in the medium-term while supporting the green and digital transitions. following the recent council agreement on the reform of the eu's economic governance framework, the legislative

process should be concluded swiftly so that the new rules can be implemented without delay. moreover, it is imperative that progress toward capital markets union and the completion of banking union be accelerated. turning now to inflation, inflation rose to 2.9% in december, as some of the past fiscal measures to cushion the impact of high energy prices dropped out of the annual inflation rate, although the rebound was weaker than expected. aside from this base effect, the overall trend of declining inflation continued. food price inflation dropped to 6.1% in december. inflation, excluding energy and food come also declined again to 3.4% due to a fall in goods

inflation to 2.5%. services inflation was stable at 4%. inflation is expected to ease further over the course of this year as the effects of past energy shocks, supply bottlenecks, and the post-pandemic reopening of the economy fade, and tighter monetary policy continues to weigh on demand. almost all measures of underlying inflation declined further in december. the elevated rates of wage increases and falling labor productivity are keeping domestic price pressures hide, although these two have started to ease. at the same time, lower unit profits have started to moderate the inflationary effect of rising unit labor costs.

measures of shorter-term inflation expectations have come down markedly, while those of longer-term inflation expectations, mostly stand around 2%. looking now at the risk assessment, the risks to economic growth remain tilted to the downside. growth could be lower if the effects of monetary policy turn out stronger than expected. a weaker world economy or a further slowdown in global trade would also way on euro area growth. russia's unjustified war against ukraine and the tragic conflict in the middle east are key sources of geopolitical risks. this may result in firms and households becoming less confident about the future in global trade being disrupted. growth could be higher, if rising real incomes mean

spending increases by more than anticipated, or if the world economy grows more strongly than expected. upside risks to inflation include the heightened geopolitical tensions, especially in the middle east, which could push energy prices and freight costs higher in the near term, and hamper global trade. inflation could also turn out higher than anticipated, if wages increase by more than expected, or profit margins proof more resilient. by contrast, inflation may surprise on the downside of policy dampens demand by more than expected or if the economic environment in the rest of the world worsens unexpectedly. moreover, inflation could decline more quickly in the near

term if energy prices evolve in line with the recent downward shift in market expectations of the future path for oil and gas prices. looking at financial monetary conditions now, market interest rates have moved broadly sideways since our last meeting. our restrictive monetary policy continues to transmit strongly into broader financing conditions. lending rates on business loans declined slightly to 5.2 percent in november, while mortgage rates increased further, to 4%. high borrowing rates with the associated cutbacks in investment plans and house purchases led to a further drop in credit demand in the fourth quarter as reported in our latest vanke lending survey. while the tightening of credit standards for loans to firms and

households moderated, they remained tight, with banks concerned about the risks faced by their customers. against this background credit dynamics have improved somewhat, but overall remain weak. loans to firms stagnated in november, compared with a year earlier, after contracting in october. as the monthly flow of short-term loans rebounded. loans to households grew at a subdued annual rate of 0.5%. so, to conclude, the governing council today decided to keep the three key ecb interest rates unchanged. you're determined to ensure that inflation returns to our 2% medium-term target in a timely manner. based on our current assessment we considered that the key ecb interest rates are at levels

that maintain for sufficiently long duration will make a substantial contribution to this goal. our future decisions will ensure that our policy rates will be set at sufficiently restrictive levels for as long as necessary. we will continue to follow a data-dependent approach to determining the appropriate level -- and duration of restrictions. in any case, we stand ready to adjust all of our instruments within our mandate to ensure that inflation returns to our medium-term target and to preserve the smooth functioning of monetary policy transmission. we are now ready to take your questions. >> thank you, president lagarde. the first question goes to bloomberg. mark, please. >> yes, thanks a lot for taking my questions. the first one is on interest rates. last week you said that you

considered it likely that interest rates will be cut in the summer after some of your colleagues already had given similar guidance. did you discuss the possible timing of an interest rate cut at today's meeting? and also in light of the weak economic data we got from germany this meeting? if not, if you did not discuss it, would you stand by your remark from davos? is it likely we will get a cut in summer? does that mean from your point of view march and april are off the table? the second one is on geopolitical risks, and in particular the red sea shipping turmoil. you recently mentioned a possible comeback of supply bottlenecks as a key risk factor for inflation. you also mentioned it today and your colleague even warned that rate cuts in 2024 cannot be taken for granted because of these risks. even the most recent developments, the ongoing tensions in the region, has the governing council become even more concerned about it? and how would you react if risks materialize?

for example, if inflation picks up up -- picks up again? thank you. president lagarde: thank you very much for your series of questions. first of all, the consensus around the table of the governing council was that it was premature to discuss rate cuts. and in addition to that, i typically stand by my comments, so the comments i made to your television channel, bloomberg, i certainly stand by them. i'm not sure i would exactly characterize them as you have, but i stand by what i have said, not what other have commented i have said. one other thing, which was very much the consensus around the table, was that we had to continue to be data-dependent.