>> this is a very strong report, a strong labor market. the fed doesn't have to normalize policy as quick. >> there is no data that says we are heading toward a cliff or we will have a sudden shift in growth. >> some signs of softening. >> this means it is off the table. it means you are more likely to get the three cuts the fed has signaled. >> whether it is march or may or june, but is only expect the first cut. >> this is bloomberg surveillance, with jonathan ferro, lisa abramowicz and annmarie hordern.

jonathan: good morning. this is bloomberg surveillance alongside lisa abramowicz together with annmarie hordern, i am jonathan ferro. starting monday, still talking about friday. bramo, 353,000 reasons to talk about friday. chairman powell's comments over the weekend, that data friday turns the volume up a little bit more. lisa: especially because of the commentary same the data may have underestimated the re-acceleration of the u.s. economy. we saw a whole host of others, this is incredibly bullish and the question is how much does the fed have to walk back some of the rate cutting expectations? jonathan: stocks had a great session on friday. i wonder how much that bucket -- market cap move just kind of flattened the stock market story

a little bit. it is good news? lisa: no. 73% of the russell 2000 was lower. if you take a look at the gauge of the real economy, it is not reflecting that $197 billion increase in meta-we saw on friday. there is an existential question, we saw the biggest jump into your yields going back to march. -- jump in to your yields going back to march. -- two year yields going back to march. jonathan: this is the story over and china. u.s. equity markets, all-time highs, china whipsawed again. goldman sachs writing this, the most regally asked questions among local investors in china include implications for china should donald trump become the next u.s. president. this is becoming a big deal. lisa: it is and he is -- annmarie: it is and he is

keeping chinese investors up at night. the former president was asked about it this weekend on fox news, about this 60% blanket tariff on chinese imports. it was written up in the washington post and he said no, it is going to be more than 60% as a potential policy. lisa: you got plunge protection patrol coming out in full force. you have the potential for 60% tariffs being thrown out. the whole relationship is messy. jonathan: china coming out and saying they will do stuff and telling us what -- without telling us what that stuff is. they don't want people talking about a stock market that is struggling. lisa: they've got a long way to go because the struggle has been real. they haven't seen any real returns since 2015. how much can they support that? how much is that due to the u.s.-chinese relationship? jonathan: what does the plunge protection team actually achieve? they address the symptoms.

we are talking about that illness any a lot worse. lisa: just to put some numbers on this. $7 trillion has been erased from the value of equities in china and hong kong since 2021. is this because of the response to the pandemic or because households are not spending? yes is the answer. how did they grapple with this? for now, plunge protection patrol. jonathan: chinese equities at multiyear lows. your equity market, s&p 500 futures pulling back by 0.2 percent. yields are higher on a 10 year. the fx market, a touch of dollar strength and the euro weaker. lisa: we will be talking about how the u.s. has led the economic outlook and at what point is good news good news? can the fed cut rates truly is much as people previously

expected? maybe the ecb truly will cut first. jonathan: coming up, no conversations about the g10. rbc capital market -- a blot jobs report. lori calvo sena saying -- lori calvasina saying this, i sightly better inflation outlook has caused our valuation model to get a little bit more constructive. it implies that the s&p 500 could move to 5500 at year-end 2024. could we start on friday and ask you, does that jobs report derail this soft landing story? lori: thank you for having me. i don't get the rails anything at all. give our rates team a lot of credit. they've been looking for the fed

to start cutting in june because they simply didn't think that the data was going to cooperate before then. we didn't that we were going to see any kind of big erosion and the underlying u.s. economy and they've always thought this would be about adjustment cuts. from our perspective, things are playing out as the rates team had anticipated. lisa: meanwhile, over the weekend, evercore ssi came out and said sticky inflation, extended valuations from these levels point to weak forward returns. why do you disagree? lori: we look at valuation very differently. but a lot of my peers do is they say here is what the multiple is, the long-term averages. and they make some assumption about where it should be and if it is too high or too low. we built a different model over go back to the 1960's and look at average adjusted data and we

ate take into account of the -- with fed funds and with gdp. when you take into consensus assumptions about where all of those macro variables are headed, it is basically telling us we can spot a trailing pe around the end of this year and if you marry that with my earnings number, at points you to something very robust at the end of the year. we've used this model for about a year and a half or longer. last year was the first year we did use it for the full year and it was consistently pointing us to a 22 times trailing pe at the end of the year and s&p that could end the year at 4800. i didn't listen to that model enough, but it was telling us to challenge the assumptions of where people think pe should be and the higher multiple as possible given the improvement of the economy, given the big moderation in inflation and interest rates aren't able to

offset that big moderation we are seeing. lisa: how distorted are the models based on the magnificent four or just meta? lori: the impact of those big names matter but what i love about our model as it captures the 1970's when it went through the nifty 50 period. we also have the 2000 period baked in as well. we are stretched in terms of the concentration but that is when we think -- that is what we think is one of the benefits of the market, -- of the model, taking in these prior periods when you had less concentration. we really need to be looking at multiple cycles toast -- to figure out what rules of thumb we should be looking for. i strongly believe we are in the early post-covid era of investing and we don't know what these new rules of thumb are. you can look at history and a lot of different cycles to understand what those rules might be. jonathan: i'm so pleased that lisa brought up meta. the biggest increase, single day

increase in market cap ever in the history of u.s. markets. almost $200 billion. what is your take away from headlines like that? lori: i think it has been an interesting reporting season. i can't talk about any name in particular but one of the things we have seen coming into this reporting season is that if you look at former -- forward-looking growth expectations for the top seven names in the market, the earnings growth advantage of those top seven relative to the mustached the rest of the market is expected to endure but also expected to shrink. i'm not sure what investors are going to pay more attention to, the dominance or the fact the dominant are becoming less dominant. we have seen things go back and forth in terms of the top seven names over the last week. i think it still is tbd. a lot of work suggesting this market is ready to rotate and wants to rotate. we need more excitement about

the underlying economic environment to kind of boost the earnings growth expectations of the names outside the top seven. jonathan: friday should contribute to that. you can do sectors. what are the sector preferences now? lori: we are leaning into things like financials. we like energy, health care, utilities. we have said that on the big growth sectors, we don't want to go underweight. technology, consumer discretionary as well. i would tell you that communication services are where some of these big names are sitting, making a much stronger valuation case. we are still neutral but the valuation works, just not flagging is positive. lisa: how can you get bullish on energy at a time where it seems like u.s. supply is completely overwhelmed, political risk and prices have dropped even with the hangup of what is going on in the red sea? lori: i would tell you it is a close call. our analysts are still highly

bullish. we like the valuation dynamics and i look at it as a bit of a hedge in my portfolio. a lot of the areas we are looking at are things like financials which should benefit if we continue to see consumer confidence recover. energy is an area that does not do well when that happens. it is also an area that doesn't do as well when interest rates are rising or would interest rates are falling. we view it as kind of a hedge on the idea that inflation is moderating, interest rates are going to give us a little bit of relief. we think any call on the market these days has about a 60% conviction level and would like to have these areas that are counter consensus on the macro narrative in the back pocket of our portfolio. jonathan: lori calvasina of rbc. low conviction calls at the moment. let's sit on crude for a moment. brent crude down 0.5%. down 0.6% on wti. we had strikes on friday.

amh, we had the retaliation we were waiting for an brent crude is down. annmarie: when i see this geopolitical environment and see that brent and wti are lower, you have to think, how much lower would crude actually be if there wasn't geopolitical tension right now in the middle east? how low could these prices have been? some of that risk is priced in. jonathan: what is your read on this? is this market just drawing a conclusion that the white house doesn't want broader conflict? annmarie: i think there are two things. united states does not want to next look -- an escalation of broader conflict. they are trying to degrade the iranian proxies' abilities. 14 point 2 million barrels a day the united states has. this is a record any country has ever set. china is still getting oil and gas from russia. russia is still on the market. iran is still exporting. venezuela has some crude on the

market. there are adversaries against the united states who have crude on the market on top of the fact that the u.s. is the whale in the u.s. crude market. the white house just doesn't want to talk about it. lisa: i wonder if people just aren't paying attention because it is the would've maker trade. any time someone tries to bet on oil, it has failed. at a certain point there are a couple models that if this did erupt and iranian oil was taken off the market, prices will go to $90 a barrel. jonathan: i think you're right. 71.81 on wti. >> former president donald trump says he might impose a flat tariff on chinese goods of more than 60% if elected. an increasingly hawkish tone against the top supplier of goods to the u.s.. from projected criticism that actions would start a trade war. the u.s. has been china's biggest export market for more

than 20 years including over $500 billion in exports in 2022. boeing is lower in premarket trading after the aircraft maker found they -- found more problems. they will require repairs and about 50 undelivered jets, and may delay plane deliveries in the near term. the defect follows a string of manufacturing lapses, prompting the faa to step up scrutiny of the company. canada extended their ban on foreign homebuyers for another two years with a measure now set to expire in 2027. the real estate market has started heating up recently as it becomes clear the bank of canada may be in a position to cut interest rates later this year. the national home price average in canada has jumped 36% in the past five years. that is your bloomberg brief. jonathan: you know this. the housing market in canada is like a microwave.

the heat turns up so quickly. just the talk of reducing interest rates. lisa: this comes at a time when that is a much more interest-rate vulnerable sector than in the united states. we have not resolved the small banking or commercial real estate. we have not resolved if this is a housing market on tender hooks and if more volume could cause prices to go down. jonathan: up next on this program, the white house promising more strikes in the middle east. >> the president has been very clear from the beginning, that when american forces are attacked, we will respond. it began with strikes on friday night. jonathan: good morning. ♪

♪ (captivating music) ♪ (♪♪) the first law of thermodynamics states that energy cannot be created or destroyed. (♪♪) but it can be passed on to the next generation. (♪♪)

jonathan: live from new york city. kind of weird, the yields are up on chairman powell, up six basis points on a 10 year, up more on the two year. as we set the top of the program, maybe the jobs number friday turns the volume up a little bit more. lisa: there was a school of thought that he made a mistake in the press conference and just said it is not likely. the fact that he thought it through and really put out there why march is not likely, it sort of codified and made it seem like it was not an accident and very deliberate that he said that. jonathan: jobs on friday screamed march is not likely. lisa: the data definitely seems to confirm but we have a slew of fed speak this week. jonathan: we will go through the speakers later. the white house promising more

strikes in the middle east. >> the president has been very clear from the beginning, which is when american forces are attacked, we will respond all stop it began with the strikes on friday night but that is not the end of it. the president is determined to respond forcefully to attacks on our people. the president also is not looking for a wider war in the middle east. jonathan: the white house promising they will take just enough action against iran to send a forceful message while avoiding a wider war. officials framing the strikes as a necessary and inevitable response to the killing of three u.s. soldiers in a drone strike and jordan a week ago. joining us now is norman roule, advisor for the transit national threat -- great to catch up with you. let's start with the strikes that started on friday evening. but at the latest strikes were she -- what have the latest strikes achieved the previous strikes did not? norman: these strikes destroyed a series of command and control

intelligent centers that were important to the militants targeting u.s. forces. they destroyed a large amount of stockpiles of missiles, rockets and killed a small number of mid-level and low level militant officials. they demonstrated the accuracy and sophistication and skill of u.s. long-range air assets which in itself is a message to iran. annmarie: weekend we also heard from -- annmarie: over the weekend we also heard from jake sullivan almost talking about different strategies. he said this will not be the end of our response and there will be more steps in a sustained way but in the same breath he said i would not describe it as an open ended military campaign. what is the strategy? norman: the strategy appears to be we respond to the actions and capacity of our adversaries. you will see a heavy intelligence driven program. in yemen we are now striking missiles on the ground and

drones on the ground as they prepare to take off. i would expect to see something similar in syria and western iraq. proxies will hold back in the near term because they don't really know what the u.s. is going to do but as they ramp up their attacks and as evidence appears, you will see the u.s. respond to protect its forces. . annmarie: is this degrading, deterring or defense when it comes to the u.s. response on iranian proxies? norman: primarily it is defense, aimed at degrading but we should be clear, we are not touching equities, assets or personnel that are significant to the seniormost leadership in iran or the proxy world. there are reports that a number of afghan militants were killed in syria. but the loss of these individuals is not going to shape iran or proxy regional strategies. they will wait and see where we

go and we will wait and see where they go. lisa: how vulnerable are u.s. troops right now stationed in iraq and syria and frankly, the middle east? norman: we've demonstrated over the past couple of years that the u.s. has an extraordinary sophisticated capacity to defend its personnel from missile, drone and rocket attacks we are seeing from yemen and iran and elsewhere. but mistakes happen. a missile will get through. this is a very high threat environment. we should not downplay that, but we do have considerable defensive capacity and we have seen this displayed over and over again. the problem is defense is not deterrence, it just tells your adversary to keep trying until they get one through. lisa: what is the effective policy to try and end the attacks, try to end some of the 160 plus attacks on the american bases in the region? norman: for the houthi's, we have to destroy as much as possible, there missile and

drone capacity on the ground. that would prevent attacks to shipping. we also have to make sure they never build the capacity to touch the underground see cables -- sea cables that handle most of the traffic on the internet between europe and asia. in the north, our air force will be working to identify and degrade capacity as it appears to be a threat. i don't see this moving to a u.s.-iran confrontation but as iranian actors return to the area, it is not inconceivable that iranians will be killed in the u.s. -- in the u.s. responses. jonathan: wall street surprised by how calm things have been in the commodity markets. where does saudi arabia fit into the current tension? norman: we have a vast amount of energy in the market being rerouted.

saudi arabia also has its east-west pipeline to deliver a fair amount of oil. you have a rather robust trucking industry that is able to take commodities that are dropped off in the emirates and ship them northwest up through jordan and the mediterranean. you're watching the importance of geography and you are also watching why eventually, relations with israel are going to be so important for the kingdom because that geography provides you with an alternative land group to get around red sea introductions. if i had a big worry in the world, it is the internet being cut in the red sea but steps are being done to protect that but more importantly, we are going to see continued disruption and slowness with some of the commodity and energy shipments through the area. annmarie: what kind of campaign response could we see specifically with secretary blinken in the region? norman: the secretary is going

to aim for several things, first for continued humanitarian chip that's an expanding those into gaza. he's going to look for anything that could be done to increase the likelihood of hostage releases in a cease fire. that would satisfy our requirements, arab demands and give israel its people who are being taken hostage. at the same time we don't have a lot of progress in terms of what do you do with hamas? they refuse to leave and they want to stay in charge. imagine a two state solution where hamas runs the palestinian state. imagine what that would mean for security. you would have a failed state in that area. this is all being worked through, it is a very complicated series of conversations and this is going to take a lot longer than many people believe. jonathan: i've got so many questions after this conversation. norman roule, former senior u.s. intelligence official.

lisa, i know where you want to go. lisa: where did this come from? we haven't been talking about this but the internet lines might be cut between asia and europe? it just shows all the things that we haven't even thought about in this conflict and how crucial this one area is to trade and international relations. jonathan: how many months is it now? three? lisa: maybe this is what people are factoring in. jonathan: crude lower this morning. coming up this morning, the chief economist of oecd. this is bloomberg. ♪

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jonathan: live from new york city, equity features negative on the s&p 500, on the nasdaq too. on the nasdaq we are down by 0.1%, coming off the back of four weeks of gains. all-time high at the close on friday. in the bond market, yields higher. the two year up by two basis points. really weird week last week in the bond market. the reason i say that is if you go to wednesday's price action, you'll notice the yields move lower even though chairman powell pushed back and it was not just about the fed and data last week, it was about vanke tension.

lisa: people -- about bank tension. lisa: people thought it would cost some sort of shift. jay powell pushed back against that. this is one of the less talked about aspects of his speech or his discussion on 60 minutes. he basically said is not as a systemic issue -- said it is not a systemic issue. jonathan: we can move onto the next asset class, foreign exchange. highly intuitive stuff, yields are up. right now, euro-dollar, 107.56. -- 1.0756. an interview on 60 minutes with cbs, powell reiterated his -- reiterated that march is unlikely, saying the danger is moving too soon and the really good readings we have had for the last six months somehow turn

out not to be a true indicator of where inflation is heading. we talked about this wednesday, the discomfort around this story. lisa: especially given that they got it wrong when it came to the surge in inflation. the data has been almost too good. we heard this over the weekend. peter scheer at academy securities put it this way. this is the first time in months i felt the need to step back and see if i am not giving the economy enough credit. he is not alone. how do you factor in the fact that the citi u.s. economic surprise index is the highest it's ever been? jonathan: a simply stunning jobs report, the bank of america blowout report, so much for the soft landing. i thought of hsbc and i went back to this note in early january, the biggest risk is not from a's sudden deterioration but another repricing in rates

-- is not from a sudden deterioration but another repricing in rates. lisa: we have to wonder if it can be everything other than meta. jonathan: look towards small caps. is good news truly going to be good news if it leads to that repricing we saw? lisa: the answer was no. you can't argue with that with 73% of the russell 2000, 73% of those names were lower. jonathan: let's head to washington. senators releasing a bipartisan deal to impose new immigration restrictions and unlocked billions of dollars in ukraine aid. with the bill set for a vote on wednesday, it is expected to face bigger hurdles in the house where many republicans oppose it. is it truly dead on arrival? annmarie: it remains to be seen because there are going to be republicans who look at this and say we've been discussing immigration policy and provisions for decades and finally there is an encompassing bill? this bill has something in it

for everyone. $60 billion for ukraine, $20 billion for the border. that is $6 billion more than biden asked for and then $10 billion for israel. the issue is it is an election year. not just that you have policy issues some republicans don't want to vote on. they don't think it goes hard enough on the border. you have the former president breathing down their neck, not to give joe biden a win. jonathan: this is what people hate about politics. is this that on arrival because of substance policy to your point or dead on arrival because they want to preserve the issue for the former president to run on? lisa: how do you parse the two? you have people who are disagreeing, you've got civil war within the gop and the democrats who think it is too hard. you look at this and think what is the path to getting it done? mike johnson who people are questioning whether he can remain in that position as house speaker at a time when he is trying to wrangle cats. annmarie: he is wrinkling cats when it comes to the house gop

caucus. we also have to remember they are putting their own bill in the floor this week for a clean israel deal. there is going to be a lot of twisting and tangling going on in congress. jonathan: let's get to caterpillar earnings. just now. we will run it through the topline and bottom-line. there is an upside to price for you. revenue coming in basically in-line. lisa: this goes to the question of what is going to go to what? the service sector, as a going to come down to manufacturing or when you factoring going up to services? caterpillar, the bellwether on farm equipment and construction, really highlights just how much we are seeing a resurgence in some of these industries. jonathan: we will try and come back to the and the next hour or so. let's get straight to it. in new jersey,, winning the rights to host the fifa world

cup final in 2026, beating bids from dallas and los angeles. 140 matches in the metlife stadium final with the tournament, the first to feature 48 teams. dallas and los angeles will host semifinals. we are all excited for this around the table. there was some controversy about it being referred to as new york. lisa: it is the greater new york area. if you're trying to attract an international audience, no offense to anyone from new jersey. annmarie: but. jonathan: here we go. annmarie: do you want to go visit new jersey for the fifa world cup final or new york city? they will say new york city. i am requesting july 20 off. lisa: how much are these tickets going to be? jonathan: how any people watched the super bowl on tv? more than 110 million? 1.5 billion for the world cup final return 22.

-- for 2022. new york is expensive to watch a sport. i cannot imagine how much it will cost to watch the world cup final. lisa: a member of a household asked for it as a graduation present and i shut that down. annmarie: it is the greater new york area. jonathan: i kind counts as new york. i think fifa can't refer to it as the metlife stadium. it has to be the new york-new jersey stadium. governor murphy will be happy because he was the ambassador to germany all of those years ago. i think they are a genuine football fan. lisa: i love how you know all politicians' sports teams. jonathan: if that is not right governor, please correct me and we will correct it on air. the oecd projecting growth down from 3.1% last year, writing recent indicators point to some

moderation of growth with the effects of tighter financial conditions continuing to appear in credit and housing markets and global trade remaining subdued. alongside us is clare lombardelli, chief economist at the oecd. thanks for being with us. what is holding us back? wheit is it asia or europe? what is it right now? clare: we are seeing a mixed picture around the world. the european economy is up -- is a bit weaker because of the tightening monetary conditions we are seeing, in particular weighing on activity. also as you say, china, we protect growth of just under 5%. that is relatively high compared to some advanced countries but it is less than some people hoped for. it is less than we are seeing from china in the past. in contrast we have got a stronger picture in the u.s., u.s. data has been looking

better. showing some strong growth. lisa: how much are the red sea issues -- we've been talking about it all morning -- how much of it is weighing on the global outlook? do you think markets are underpricing how significant that could be? clare: we are not seeing and have a big impact in the global outlook at the moment. we have seen a rise in shipping costs but we are not seeing it feeding energy prices and the less shipping causes are maintained at high levels, we don't expect it to have a big impact on inflation. for our central scenarios, we don't anticipate a larger impact but it is certainly a risk i want to keep ane y -- an eye on. annmarie: how much are you seeing this divergence between europe stagflation and u.s. exceptionalism? clare: we are seeing a

difference in outlook as you say, so the growth position in europe is weaker. we have seen stronger growth in the u.s.. a much bigger hit on inflation because of their exposure through the energy price. the growth outlook is a bit weaker. including because of an aging workforce in the area as well, compared to the u.s.. jonathan: you might expect some conversation on the side of the world about the election taking place at the end of the year. some conversation about former president donald trump's plans if he secures the white house. there was discussion of a blanket 60% tariff on chinese imports. have you wondered what that would do to inflation in america ? what is the experience of 2018 when we start it ramp up tariffs -- started to ramp up tariffs?

clare: we have not modeled any particular area in the space but we do look at detailed data on trade and what we have seen, it is a concerning trend for the global economy, a reduction in the trade integration. for a long period we saw trade increasing, we saw integration of global value chains, not delivering wider choices to consumers. we have seen that trend reversed for a whole range of reasons. that comes at a cost in terms of productivity and pricing for people. we would like to see trade continuing, increased trade on a world's based first system. annmarie: -- lisa: how do you model out forecasts depending on who is in power? how much are you trying to get your head around what the potential downside would be to global trade, given one scenario

versus another? are you making those models? clare: what we do is we take current plans and current administration plans for when we are constructing our forecasts around the world and we base them on those expectations. jonathan: we appreciate the clarity. it is good to hear from you. clare lombardelli of the oecd. annmarie, i don't see how you could have an outlook for 2025 right now on inflation, on growth, without the clarity of what policy is going to look like in the white house. if we are seriously having a conversation between maintaining the current stance on china, which is tariffs but not increasing, that is option one. option two, going forward with a blanket 60% plus tariff on chinese imports. you will have a radically different outlook on both growth and inflation. annmarie: and not just 60% blanket tariffs on china.

also a potential 10% tariff wall, invisible wall as they describe it, of all imports into the united states. that is very different than what we would see with another biden administration. jonathan: every outlook needs that asterisk. it needs that caveat. these are our basic assumptions, continuation of what we have seen coming out of the white house because when you start pulling -- putting in different alternatives, you get a very different outlook. lisa: what did lori say earlier? every outlook needs to have a 16% conviction rate? models showing the differential, are people starting to draw those up? how much are the tariffs -- are they just being used now as leverage? when he goes to the table as he likes to say, he likes to have leverage and we have seen him use tariffs as leverage in the past. jonathan: some of the moves we

have seen in china, plenty of reasons for those moves but some of those moves have been pretty wild. lisa: a lot of this has to do with u.s. businesses withdrawing a lot of activity, trying to move where the manufacturing happens. this will only accelerate it. if you are a business try to come up with the plan, regardless of what actually ends up getting past, how do you have any conviction to go invest in china, given this uncertainty with the political sphere? jonathan: in some cases you just have to wait. that is the latest. more in a moment. let's get you an update. here is your bloomberg brief with yahaira jacquez. yahaira: vladimir putin is expected to visit turkey next week. his first trip to a nato member country since he ordered the invasion of ukraine two years ago. meetings with turkish president erdogan are expected to focus on energy cooperation and security in syria. the war in ukraine will likely also be on the agenda. putin's trips abroad have been

limited, due to the risk of arrest for international war crimes. kkr's co-ceo and -- were elected sunday as the university continues to face intense criticism from alumni, lawmakers and faculty. harvard's interim president said quote, they share a commitment to academic freedom, inclusion and the student -- and the pursuit of excellence in harvard's mission of teaching and research. taylor swift broke another record, winning album of the year for the fourth time at the grammys. swift had previously been tied with frank sinatra, paul simon and stevie wonder for the most wins in the category. the grammys also were a big night for female acts, who swept all four of the top prizes. that is your bloomberg brief. jonathan: yahaira, thank you. up next, the senate bipartisan bill unveiled. >> i am really proud and pleased

to announce that democrats and republicans in the senate have come to an agreement on a bipartisan supplemental bill. jonathan: is that agreement dead on arrival? that question gets answered up next. ♪

jonathan: equities this morning, slightly softer. bond yields higher on the 10 year, up six basis points. almost 4.4% on the two year. under surveillance this morning, the senate bipartisan bill unveiled. >> i am really proud and pleased to announce the democrats and republicans in the senate have come to an agreement on a bipartisan supplemental bill tonight. ukraine would be run over by putin if we don't get aid in

this bill. israel needs to defend itself against hamas with the aid in this bill. we fix the border problem in this bill. jonathan: do we? that is the question. after months of closed-door negotiations, the senate unveiling a $118 billion bipartisan deal to secure the u.s.-mexico border. the built out a by president biden and senators on both sides of the aisle, facing major opposition from republicans in the house, where it is headed this week. annmarie: how speaker mike johnson says it is dead on arrival. he took a twitter last and said this is -- this bill is asked -- this bill is worse than we expected and will not come close to ending the order crisis. if this bill reaches the house, it'll be dead on arrival. jonathan: the founder of pangaea policy joins us with more. is it truly dead on arrival? >> not at all. not even a little bit. not even mostly dead.

my favorite movie, the princes by would say. -- the princess bride would say. they are saying it is that on arrival because they prefer their own bill. what will end up happening is if the senate can pass its own bill and i don't want to go against lori or lisa, but i would say 60% they do that. and then they end up in conference aimed a house could make its case that what it wants is better than what the senate already has. the momentum here is much towards a strong bill, certainly biden wants that and republicans want it. as annmarie pointed out, this is their big chance. it is more likely than not that this ends up happening. annmarie: do you think house republicans will capitulate to

the former president who doesn't want to see a deal in this election year? terry: i think trump is far less important in this sense than people give credit for. i was look at motivations. i think the motivations here are for biden and republicans alike, very strong. the fundamental motivation of a republican member of congress or any member of congress is to get reelected. secondly, they are most interested in maintaining or flipping to a majority. after that, we will start talking about the president. if they can end up with a bill that from a house perspective, that is a little bit stronger than the senate bill, they can take credit for making it so. they will do that in a heartbeat. annmarie: probably savor for them to get it done sooner rather than later given the fact of the election is in november. what is the timeline you see for the supplemental? terry: work expands to fill the time. these folks have already shown a

great deal of flexibility in that. look at how long it has taken them to not come up with a final spending bill, at least four or five months now. i think this probably goes until mid-march, and then they probably wrap up a lot of the stuff that seems to be the window they think is the one they want. i will take them at their word. lisa: if trump for him at lee opposes this and he is leading in the polls, how much does that curtail its possibility of getting past? terry: i don't think a lot, frankly because what will end up happening is the trump rhetoric and the house republican and conservative republican reality of wanting a bill that is stronger than what the senate's already proposed and making bite inside that -- biden sign that

is a very important matter for them and something they want. that is something trump frankly will be interested in taking credit for. in the end, those interests dovetail. i would look for biden and centrist democrats to try and shut down the left on this, which they have not done yet. lisa: what do you think of mike johnson's possibility as staying speaker through this election cycle? terry: i think johnson probably does not end up staying. the reason for that is firstly, republicans can ill afford another circus, even after all this. they hold more confidence with the public than biden on issues like the economy, immigration. i think they want to do that. secondly, i've always looked at the cat herding as getting

something on the board of his strong indefensible in which johnson can then use to say ok, let's -- we've gotten our big win, let's wrap up spending with some modest haircuts. call it a day on that. they will grumble but they will go forward. lisa: yusor the conversation by saying speaker johnson is calling this dead on arrival because it is not the hr2 that house remote -- house republicans want. what are they want to see two people to sign their name on this bill? terry: ideally, one obvious thing, they want hr2. it is the house's job to get out and go too far with the idea. the senate rains things back in, and conference. outside of that, the thing i

would look at the most is the idea that the border is still somehow porous in some way. the idea that the border can be shut down for a period of time while things get together i think is very important to them. that is something that i heard senator sinema talk about yesterday. they will certainly want to sure that up before they finalize anything. jonathan: 45 seconds left. the super bowl. massive television audience. why would the president turned down a pre-super bowl interview? terry: that's a good question. not one that i can answer. it is something that has become a standard appearance and one in which the absence, frankly is in

expendable and an x bookable -- frankly is inexplicable. jonathan: coming out the back of a jobs report which saw more than 300,000 jobs, two years of unappointed below 4%. mr. president, how are you preparing for the game? you can literally say anything you want and squeezing whatever you want to say about the labor market. annmarie: 115 million viewers were watching the super bowl last year and that's without taylor swift. when i asked the campaign over the we can, they said it is early in the cycle, it is political exhaustion. they have until next week. jonathan: they don't know how many eyes are on the screen, making chili and putting beer in the cooler. coming up next, sallie krawcheck

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>> the next seven has been the job. >> looking at the magnificent seven, they are in a different stratosphere. >> and we look at the magnificent oven -- >> that will be losers and winners, so make sure that you know what you are buying. >> this is bloomberg surveillance. jonathan: kicking off the

trading week with all-time highs. live from new york city, good morning. alongside lisa abramowicz along with anne-marie. pulling back on the s&p 500. in -- we need to talk about the federal reserve. i think we have to begin with meta-. almost 200 billion dollars, just amazing. lisa: it raises the question, is this strength or fragility free market that has hinged on a small codger? it is in its own stratosphere

but there is a question of is there a lot of rates 70? they are really not hanging in there and really showing losses. jonathan: how close are we to things changing? that was not a one off in terms of an upside surprise. >> i saw a note saying that this gave people more conviction of the landing. and then you had other people saying it made look at -- and make things look worse. stearic kaiser saying, pop quiz, what do you think it will be? you get all sorts of views.

jonathan: how much conviction do you have? annmarie: this bill that we have been hearing about for months, 118 billion on the top line. 20 billion for the border. terry haynes says it is dead on arrival but if they are going to go to conference and hammer it out, potentially there is something that can get hammered out. jonathan: is it dead on arrival because it does not go far enough because the former wants to run on the issue? annmarie: the closer to november, trump will be breathing down. handling immigration at the border greater than 30 points.

this is a huge election issue. jonathan: look out for that conversation later. equity futures pulling back a little bit. treasury yields lower and trade are up. clearly i with yields higher by seven basis points. lisa: it showed that they had a late the approach. if he was not talking about a cut before that, then you have a question of what would his response to concerns that they are a little bit wrong? jonathan: the euro negative 0.3%. coming up this hour, if you have

not done any research, the fed path forward. alexander on another fear of a banking crisis. here we go again, maybe. sending equities to fresh record highs. thinking that stocks have more room to run. the s&p 500 price target of 5400 by year-end. just eight stocks account for one fourth of the s&p 500's capitalization. our forecasts assume that it will continue to late the profit margin and valuation. ed, let's get straight to it. great catch up. what has the contribution been to earnings last quarter over

the last year? ed: it accounted for something like 27%. 18% of the forward revenues earnings. something in the neighborhood of 10% of revenues, so they are big. jonathan: is there any reason to believe that this broadens out soon? ed: there are a lot of reasons to believe. the s&p 400 and 600 arson make 14 50. the s&p 500 in the making cap eight are close to 30.

lisa: increasing the forecast on the s&p 500. you have more conviction your calls if you have a higher target? >> we may get there sooner. i was thinking 4600 by the years and we got there by july of last year. it is extremely powerful to the upside. lisa: have you any your forecasts? >> i do not think i have to. i think i am no an outlier. but it certainly signals that i remain bullish through next year. jonathan: some people just naturally gravitate toward -- towards pessimism, but people

are asking this question. why don't you believe that numbers like friday derailed the hopes of a soft landing? ed: the productivity during the last three quarters of last year were extraordinarily strong. i think we are in the early stages of a productivity boom. that was a strong employment number, that people ignored the fact that the weekly average was down 0.6%. when you add in that wages were 0.6, wages and salaries be on course during last month. the number was not as strong as people thought.

lisa cleanly questioning how they would up some of that strength. i'm curious about interest rates 70. some people talked about how that would reduce pools if they stayed high. in some cases, they are accelerating. at what point does that challenge valuation? ed: i have been looking at the history and valuation multiple. they should be inversely related to interest rate and ration. i think but it turns out to be is that when interest rates go up, it increases the chance of recession. that is valuation multiples get crushed. it is rising interest rates causing recession. that is not happen -- happening this time. clearly, the fed has tight

monetary policy. but they have also normalized. the economy can handle it and that is great for earnings. it is early cycle, but it is moving pretty quick. in the -- jonathan: you data agrees with you. i see we growth and hours were -- in hours worked. unit labor costs are under control. i you making a productivity call? ed: that has been my calls since the beginning of the decade. i was talking about the roaring 20's as a possible scenario.

even a repeat of the 1990's, but i give a probability to this being roaring 20's with a big comeback. it increased 2.7% year over year last year. the increase in productivity is to percent. -- 2%. it is highly correlated with the cpi. things are going really well for the economy. jonathan: going very well for you. we appreciate the update. 6000 year end. lisa: he is also talking about mega cap eight. if it comes to pass, it will account for the overall leading

of the index. that i think is a controversial thesis but something that people are considering. jonathan: it has been absolutely phenomenal. let's get you an update on stories elsewhere. >> former president donald trump says he is looking at imposing a flat tariff on chinese goods, if elected. an increasingly hawkish tone. the u.s. has been china's biggest export market for more than 20 years. first quarter sales missed expectations as growth accelerated. same-store sales rose during

that period, the lowest rate since 2020. mcdonald's became a target for boycott after the war broke out over its perceived stance on the conflict and its status as one of the most recognized american brand. fans in hong kong express disappointment after lionel messi was left on the bench after a friendly win over a, -- over a hong kong team. lionel messi has a hamstring strain, so he did not play, leaving fans upset. jonathan: if he is injured, it is understandable. but can you imagine paying big time for those ticket? do you think we will get that from the super bowl? annmarie: hong kong officials. the government asked to see him.

it was not just the fans. lisa: i think it will generate a lot of economic. jonathan: powell throwing cold water on a march rate cut. >> i think it is not likely that this committee will reach that level of confidence in time for the march meeting in weeks. jonathan: that is coming up, next. good morning. ♪ how am i going to find a doctor when i'm hallucinating? what do you think, fever monster? what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options.

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jonathan: a little bit softer on

the s&p. yields are higher. the dollar is stronger. under surveillance this morning, powell throwing cold water on a march rate cut. >> i think it is not likely that this committee will reach that level of confidence in time for the march meeting in seven weeks. they believe it will be appropriate for us to cut the federal funds rate this year. we want to see more of the data along those lines. it just needs to be good, so we expect to see that. jonathan: is not enough for you? joining us around the table, a

digital advisor joins us now. let's get into your personal view first. sallie: it is investing through women. yes, i am personally bullish, but i thought watching jerome powell estimate, it is hard not to watch and say i have confidence in him. but do not fight the fed. took on the pandemic and won. tightened last year or two years ago in the market when down. do not fight the fed.

i am personally feeling bullish. lisa: is there a similar bullishness with some of the asset allocations you have currently? sallie: we look at long-term returns that we are expecting and they are terrific. they tend to go up about 10% a year. it compounds. it is hard not to be bullish over the long term. they are investing, often for impact. the great thing about these women is that they also stay the course. they do not freak out when markets are tough and they really stay the course. as a result, women outperformed

then when they invest, and that is true at the professional level and individual level. lisa: before we get to the long-term view, as someone who has been powerful and a number of banks, and wondering how concerned you are about credit creation. yes, rates will come down, but there is a question with certain strength. how much some of these firms can keep lending. does that keep you up at night at all? sallie: was it the shoe that dropped, the impact of rising interest rates that has been felt? or is that the beginning of a longer-term issue? i feel that the jury is still out on that.

but every day that passes that this -- that something does not happen has an impact. lisa: what are you watching with respect to withdrawing some of the capital? sallie: we invest for the longer-term, so we look at what to be view the longer returns as being as opposed to what will happen this day, that day or next year? annmarie: what sectors are you most excited about? sallie: all of them. what these economies have shown is that they tend towards growth. we have a diversified portfolio that has access to all of them.

what we are seeing that might be more different is that they tend to be looking for impact and they understand that we are all impact investors and every dollar that we invest or spend -- if we are going to talk about if we are going into a recession , it will be the women who keep a cell, but the dollar has meaning and impact. they are looking to not give up a financial return at all annmarie: what do you define impact as? sallie: whether it is lending or investing -- what is it being invested in? is it being investigated for environmental reasons? whether i want to be out of companies that will suffer from global warming or i want to be

in companies that have a positive role in fighting global warming. but i -- i investing? lisa: we are headed into what some people would call the political silly season. impact investing has been highly politicized. how is that playing out in terms of what counts as impact and how you define some of these things. sallie: there are people in new hampshire trying to make certain investing illegal. i am not supposed to take governance into account when i am making an investment. i'm not supposed to take diversity of a leadership into account.

there are very few things that you can say, this correlates to a great leadership team. i'm not supposed to take that into account, so we are headed into a funky moment but as money goes more towards women, because women want to invest more, it can be a fundamental shift and change. lisa: have you had a shift in political lines? >> we hear it from others. but for us, the majority of our clients are women and are not hearing backlash. i do not want to give up the financial return for the impact. jonathan: sticking with us. it looks like this on s&p 500.

treasury yields are higher. 4.08%. avp of the message. taking on extra power after the payroll stories on friday. lisa: some people have used it as a response. he was -- it was a pretty wide-ranging conversation that he said was not sustainable. he was very political without being political. a sense of discussion. but he did not do that. jonathan: coming up a moment. the fed's rate cut path from here. it feels like we got a dose of ice cold water.

based on what we have heard so far, all three looking for march rate cut pushing back. lisa quan in 18% of a march rate cut in case something happens in terms of negative data. it is going down, as we speak. donovan: on friday we were talking about what it would take and i wonder now what it would take to get the rate hike going again. more to come from new york city this morning. good morning. equity futures a little bit softer. ♪

jonathan: the equity market playing back a little bit on the s&p 500, down a touch after four weeks of gains on s&p. lisa: narrow leadership with one name, meta-. at a certain point, we have to look at the broadening out, or can it be sustainable for the longer-term? >> not so good.

lisa: when does it change? i do not know. they should check with lori. jonathan: she is one of the best. yields up by seven basis points. 10 year north of 4%. 4.08% on a 10 year. if you push it through a foreign exchange, the dollar is stronger . the euro is 157.87. lisa: what we are talking about is ongoing divergence but now there is a real question of cutting meat. we were discounting that before. jonathan: it does not look like jobs data.

the strikes targeting 13 locations. it was the biggest garage. what is different about these attacks? annmarie: there are more of them and they are trying to degrade. in one way, he said there will be a sustained response, but at the same time, it will not be in open ended campaign. the white house is trying to walk the line but they want to respond but do not want the conflict to spread. jonathan climbed wti and recruit this morning.

annmarie: i wonder where oil prices would be. you know some investors are pricing and risk, given how important that area is. jonathan climbed this has been going on for more than three months. lisa: not to quote you, but to quote you -- how many stories that we been reading about about how opec-plus is supplying more oil than previously thought? it is a supply driven story. i wonder how much it is people not betting on something that has played out. annmarie: saudi arabia is at nine. the market knows. they are not like some countries where it takes a while to ramp up.

they can do it pretty quickly. jonathan: unveiling and aid package without any support for ukraine. they need to get aid to israel quickly. the senate however reaching a 180 billion dollars a person on ukraine. are they expecting to vote on their bill next week? annmarie: i think a lot of this is not go through as is. the freedom caucus comes out and says it is not paid for. more encompassing, look at what the senate is doing. a 60% chance for this brought also -- broader supplemental going through. he says that current bill is

dead on arrival because they want to flex. but at some point this will go down to a conference and there is potential. the politics make it more complicated. jonathan: the company announcing it found norma's weeks. the latest in a string of lapses including a panel blowout on an alaska airlines. faa administrator michael whitaker is scheduled to testify tomorrow. the more information you get, the more disturbing it becomes. lisa quan we do not want to hear about holes being drilled. you get on the plane and you go.

shares are down 20%. it is brutal and it has not been good previous years. jonathan: pricing in five rate cut. the cautious outlook. still a first rate cut. 150 basis points of cuts for the year. we question the magnitude of cuts priced in. good morning. but a blowout report on friday. what did that change for you, if anything at all? >> not a whole lot. what i am looking at is the initial jobless claims rising ever so slightly. the far right are a lot more important than what happened last year. 250 jobs on average last year

but the question is about what comes in the data that is coming forth. jonathan: how controversial is that the client at the moment? >> you have to look at the data in aggregate the claims data tends to be a leading indicator. the focus would shift from employment figures to the claims figures, going forward. lisa quan how much did you pay attention to powell last night? >> he did not say anything new that we did not already know. it looks like he is leaning towards a june rate cut. but the economy has been extraordinarily strong. there is really no rush for the fed to come in and cut rate soon but the risks, especially late

in the cycle are always biased towards cutting rates sooner rather than later. the focus will be on what is next shoe that will drop? they are locked and loaded to cut rates, if needed. lisa: you have one person saying that you are early cycle and the other thing that you are late cycle. which is it? >> there are no clear signs that a recession is. we are not seeing the kinds of circumstances that you generally see for a rate cut, but things could change very soon. we could potentially see the fed coming in and cutting rates,

even to orchestrate a soft landing. it is not an environment where they will not cut rates, it is a question of 92. maybe they do not deliver 150 basis points of cut. an environment where they cut a few times but not really a full-fledged rate cut cycle is an underpriced risk. lisa quan there is a question about the longer-term outlook. how much i you starting to bake that into your expectations for the long-term? >> yields for longer-term are not so much led by our views on inflation but mostly by the supply and demand outlook. that is where i think it gets interesting because once we get past the middle of the year, if

the fed does cut rates, i think there is a potential for the yield curve to steepen and to start experiencing a little bit of pressure. there is more issuance to come down. there is not much willingness on either party to reduce the amount of deficit reduction or spending cuts, so in that circumstance, i see that the supply will continue to weigh on the treasury yield. lisa: i'm curious as to how you are factoring that into some of your calls. how does that change the balance? sallie: we believe in diversification, regardless of if there is inflation. the equities do well when you have inflation. we are looking out to investing

for our clients 20 to 30 years, getting then to where they need to be on retirement so that we feel good about it. lisa quan is it going to be inflation or risk premium with the deficit? sallie: inflation is not down to 2% yet, but it is on its way and that can be a call where we can look at this from next year and say that it was transitory, wasn't it? i do not know how you feel, but i feel like the fed has been doing a terrific job navigating through this. >> now it is times a pullback on accommodation. jonathan quan should that be on

our radar or can we did count that? >> i think we should not pay nearly as much attention, but i'm always looking the next shoe to drop this late in the cycle. it is one of the metrics that we look at. the sooner the fed moves rates lower, the better for bank portfolios because of unrealized losses. sallie: they did drop the ball for a period of time. it now feels like it is in the background, and that was scary for a second, but they admitted to dropping the ball. we can take some comfort that they are all over the banks but the things that you do not love are the words bank and their market.

it is not when rates are high getting from the weights to highly that have killed them. jonathan: brilliant. annmarie: everyone who does this is a brilliant guest. jonathan quan the brilliant -- jonathan: the brilliant sallie and brilliant subadra. >> the company announced plans to lay off much of their workforce. sales and profits have declined. softening demand out of asia. they cut it approach for the year ahead. shares for caterpillar on the rise after reporting that helped

the company post profit and some of the estimate. chipotle is getting ready for its so-called burrito season. they will hire 19,000 new workers in anticipation of a rise in burrito sales. jonathan: up next on the program, regional banks in the spotlight. >> i think there are smaller regional banks that are under reserved, so this is not the first piece of bad news that we could get on the regional banking sector. jonathan quan you are watching bloomberg tv. -- jonathan: ytng

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jonathan: equities are negative. yields higher by eight basis points. under surveillance this morning, regional banks are back in the spotlight. website think that there are smaller regional banks that are under reserved. this is not the first piece of bad news. i think you have to be cognizant of those risks. it is just a question of the broader spillovers in the economy that we think will be manageable. jonathan: reporting a loss. alexander yocum writing this.

it was relatively unique, but we expect a regional group to feel the fallout of the tough quarter. alexander joins us for more. let's build from there. what kind of issues has this bank faced? >> i want to set the stage first. it was definitely the deposit story. are they leaving the bank? we think that this year will be the year of credit quality. the top 10 it is much less than that.

they are also far less reserved. by less than the typical bank. i'm sure they would have argued that this was because the credit quality was better but that we saw the credit quality getting worse. in terms of capital levels, they at least for the lowest capital in the portfolio. the credit quality got worse. jonathan: we spoke to a couple ceos, our book is ok but do not know about anybody else. are some regions than others? >> they only had two loans go

bad. all of a sudden, you can start freaking out that maybe it was just a one-off, but it was not. there will probably be pressure to raise reserves, just in case something happens. we basically had no charge-offs. that is throughout the pandemic. everything was fine and then one quarter was bad. even banks that are in better markets, even those that we feel might pay some pressure. lisa climbed jay powell came out and said there are banks that have concentrated exposures that are challenged. we are working with them. we are trying to figure out expected losses.

how do you think they are working with these banks right now? even multi family doubled their reserves and a quarter. if you are doubling the reserves, you are either pressured to do that or you feel like they could be potential losses down the road. lisa: is this really going to be 50? >> we analyze the top 30 big. it is generally better capitalize and better reserved and generally has more exposure. we expected to be below 100 million in aspects.

they had the banks that are closest. how would they fair? they have issues. they were going to get acquired. they could face increased scrutiny. lisa: there is questions about a systemic risk or the local economy. and then there is the issue of valuation. do you think they have accounted for the weakness that you see? >> generally speaking, they are depressed. they will probably be a good buy. the banks that see unexpected

losses, there will be issues there. but others have high capital levels. there is a dichotomy there. -- jonathan: does this hinder their ability? is that happening? >> unfortunately, it is. they are talking about cutting loan exposure. that includes my cv. we would not be surprised if they went negative in terms of growth rate. it does hinder that. if you are asked to increase capital, it is a difficult time to be increasing. jonathan: can they be self-fulfilling? the economy starts to roll over and hurt valuations.

people acquire new property and then you start to get prices hit again. >> it can be with a different type of company. if the price falls, that is usually a good buying opportunity. with the banks, it is all about the trusts. i would agree. jonathan: thank you. lisa, go. lisa: it is shocking that people are not working on it. i think that is an open question. if you think about the financing, maybe it explains.

annmarie: 1.2 trillion is tied up. jonathan: and if they say it is not our problem, it is there's -- you hear that on repeat. lisa: jay powell really address this. they are working with them. how are they working with them? are they overseeing? how do you adjust? jonathan: many would say it was not oversight. annmarie: they are coming in and saying, be asked them to get water down. jonathan: the regional banks pulling back on lending and tightening standards. the fed has to stay on hold for longer. asking a question after the

report came out. the more it becomes delayed, the harder it becomes to land safely. no recession in the next year. lisa: that is still the underlying question. shadow bankers can come to the equation and think about some of the auto loans and others. it will not be a complete removal of credit altogether. jonathan: all of that in a whole lot more income and the equity market pulling back just a touch. yields are a lot higher on the 10 year. from new york city this morning, good morning.

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>> this is a very strong report, strong labor market. the fed doesn't have to normalize policy as quick. >> there is no data there that

says we are heading to a cliff, we will have a sudden shift in growth. >> very gradual signs of softening. >> this means marches off the table. this also means we are more likely to get the three cuts that the fed has signaled. >> whether it is march or may or june it is in that timeframe that we expect that first cut. >> this is "bloomberg surveillance" with jonathan ferro, lisa, and annmarie hordern. jonathan: your equity market on the s&p, negative by 0.1%. 90 minutes away from the opening bell. the quiet period is over for the federal reserve, fed speak is already started. neel kashkari in an online essay, policy is not too tight. based on payrolls on friday, policy is not too tight. lisa: basically saying the

neutral rate may have increased, one of the key questions of whether we are running at a new normal that is hotter, one where we have enough momentum to keep growing at this pace even with 5% rates. it's possible the policy stance signals that the rate has increased. it will still be a matter of increasing the data to get the right mix of one to cut rates. jonathan: at the moment, the federal reserve has this risk friendly start. if the economy is doing well, we don't have to hike more. if it starts to underperform, we can cut. just how far back to be pushback that first cut? lisa: i would guess pretty far. if you take jay powell at his word, he is concerned about inflation running hotter than they previously thought. a lot of people looking at the forward-looking claims, things of that nature, which show a different picture.

jonathan: then you get closer to the election. talking about 50 basis points of cuts from the fed. not at the next meeting, the one after that, but the whole year. he talked about the election being a key date on this calendar. if you get a change from president biden to president trump, and president trump goes in talking about 60% tariffs on china, whether you have to recalibrate your outlook for inflation. annmarie: you absolutely have to recalibrate not only the 60% blanket tariff on china goods it also this tariff wall that this administration is potentially talking about of all imported goods. what does that mean for consumer prices? they will skyrocket. jonathan: you cannot separate this conversation from the chinese market. you are seeing wild swings in chinese equities. no doubt that is a big issue for anyone investing their. lisa: it is not because people

are gaming out what 6% tariffs would do. how do you have any conviction of business plans in china? how do you have any kind of investment plan in chinese equities? we hear again and again, guest after guest, is this what gets put in place or just the suggestion of volatility and policy? annmarie: leverage of becoming a president potentially. but goldman sachs is saying that what trump is talking about is starting to on their clients. they are putting out notes saying they are nervous about what this means. jonathan: chinese equities, multiyear lows, he was, all-time highs. down 0.1% on the s&p. yields higher by nine basis points. 41136 on the 10-year. lisa: jay powell taking march

kind of off the table. even before getting the data on friday. that is telling on where the bias is. jonathan: coming up this hour, here is the lineup. savita subramanian bank of america weighing in. henrietta treyz on veda partners on the biden-trump rematch. and frances donald on the fed's cold feet rate cut. savita subramanian, head of u.s. equity strategy at bofa saying this. the idiosyncratic versus macro risk is high. this reductive moniker obscures the companies are behaving very differently from one another. euphoria is evident for the magnificent seven but nothing else. savino joins us at the table. thanks for being with us. how different is the performance now in the seven stocks? savita: it's interesting because even though we think about the

market being one direction, seven company leading the charge, the stocks themselves are asking differently. if you measure idiosyncratic risk as a nonspecific risk, we have seen an increase in stock specific risk. what this means in english is that you can make more money picking stocks than just buying the index outright. that has been our call for a while. what has been unnerving about the last few months, we have not necessarily seen a broadening pattern emerge in the market, still seeing leadership decisively in this cohort. look at what happened after earnings for these companies. these stocks are priced for perfection. everybody owns them, they are pretty expensive. maybe not as expensive as prior tech bubble levels but they are relatively healthy in terms of the evaluations. what happens from here is a broadening to other areas of the market that are not as

necessarily risky as we think. jonathan: we think price to perfection and then running another 20% in a day. just wondering what to take away from fridays price action. savita: initiating a dividend. a big growth company initiating a dividend. that's a really important signal. our call is that we are at a point where the next leg higher in equities is likely to be retirees maybe moving out of cash, back into riskier source of yield. of course, this was predicated on the idea that the fed would start cutting interest rates, which is a bigger question today when that happens. how much, how soon. but the idea of this wall of cash sitting there in money market, short duration bonds earning 5%, if that start to come down or you see equity yields come up, as we are in certain parts of the market,

that could be the value proposition for equities. it is like tina 2.0. lisa: that happens when rates start getting cut and the economy starts chugging along. how much does it shift your thesis if the rate cuts don't happen as soon or as deeply as the markets are currently expecting? savita: i think this is a slow evolution. i guess you don't have to wait for the fed to actually cut interest rates to think about equity yield. think about what's happening right now. the reason the fed might not cut is because of an inflation surprise. how do you want to protect against inflation? equity income is the best way to protect a retiree's assets from inflation as well as offering income. that becomes the name of the game again. if you think about a couple years ago where we had rampant inflation, the fed was hiking rates, equity income did well.

hi dividend yielding stocks was one of the best places to be in the 2023 market. or the 2022 bear market. lisa: why isn't it working? i am looking at the magnificent 7, 8, and you are right, it is diversification. basically just meta and nvidia this year. how much do you question the thesis if it is not borne out now? savita: typically if you think about a big growth company initiating a dividend, a tech company initiating a dividend, that would be anathema. but investors want to see that. they want to see companies with discipline, returning cash. they want to see them give back a little bit of money. jonathan: you were overweight financials, still overweight the banks. what do you like about that sector? savita: there is still this

underappreciated aspect with art cap next that has yet to be recognized by the market. when you look at the underlying earnings trends of large regulated companies, they are actually relatively healthy. these are well-capitalized companies, dividend preservation is not at risk like some of these regionals. the regulatory environment is likely to flatline from here, not get any worse, at least for the big guys. that's a positive. if you think about inflation protected yield, i think about financials. jonathan: the emphasis was on the big guys. what is going on with the smaller guys? savita: i think it is too soon, if we are not in the all clear, i think you want to stick with larger, well-capitalized financial companies. i personally worry a little bit about small caps. we are bullish on small caps with a very big caveat that

there are still a lot of smaller companies that are, like banks, real estate, a lot more risk around the fact that the fed moved from zero to five. a lot of that attrition and pain is smaller in the smaller benchmark rather than the larger benchmark. lisa: energy. is it still a hedge against inflation or does it hold a host of other risks? savita: it is an interesting sector. from nervous perspective, my sense is a lot of those risks are priced in at this point. these companies are no longer just extracting oil from the ground at the least provocation of price hikes in connection. supply will be constrained, which means earnings will be less volatile. i think this is a sector that plays a role in getting to that zero if we ever do.

it is also a source i really healthy yield. and the companies have told us they are laser focused on preserving cash return rather than production targets. i think that is the big seachange in the energy sector. these companies now have discipline. very different prior to 2017. jonathan: 72 on wti. so vito will be sticking with us i'm pleased to say. let's talk about u.s. policy in the mix. he is your bloomberg green with uehara? has. yahaira: china trying to fight a deepening stop trading plunge. the country is trying to stabilize markets after shares sent to a five-year low in trading on friday, with the csi 300 down for percent since the start of last week. boeing lower in premarket trading after the aircraft maker says it found more issues with

holes drilled in the fuselage of its 737 max jets. the latest problem originated with a supplier. it will require repairs on about 50 jets and may delay plane deliveries in the near-term. the defect follows a string of manufacturing problems at boeing, prompting the faa to step up scrutiny of the company. mcdonald's fourth-quarter sales missed estimates as growth slowed, or in part by the war in the middle east. same-store sales rose 3% in the period, marking the slowest rate since 2020. mcdonald became a target for boycotts after the war between israel and hamas broke out after his perceived stance on the conflict as well as its status as one of the most recognized american brands. jonathan: 215 billion u.s. dollars, market cap as of friday. the more i think about it, the more nuts it is. lisa: $50 billion set aside for

additional dividends in one day. jonathan: important stuff. equity futures more broadly down 0.1% on the s&p. up next, president biden eating the campaign trail. >> this is not just a campaign, this is more of a mission. we cannot, cannot lose this campaign for the good of the country. i mean that from the bottom of my heart. jonathan: that is coming up next on the program. live from new york, this is bloomberg. ♪.

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jonathan: a little more than one hour away from the opening bill, monday morning. equity futures on the s&p 500 negative by 0.1%. do i seem over it already? is that why we are laughing? lisa: it is monday again.

here we are. jonathan: president biden hitting the campaign trail. pres. biden: the kind that we are running against, he is not for anything, he is against everything. it is even worse in terms of his behavior than the last time in 2020. this is not just a campaign, this is more of a mission. we cannot, cannot, cannot lose the campaign for the good of the country. and i mean that from the bottom of my heart. jonathan: biden feels the same way, here we go again. a recent poll showing donald trump trailing. henrietta treyz says that president can make a comeback. biden's low standing will rise as democrats and independent leaning democrats will acknowledge that he will be the nominee. voter sentiment will improve which will provide a double benefit or biden as the incumbent president.

henrietta joins us now for more. fantastic to catch up with you as always. you have biden winning the white house, gop winning the senate. the swing state polling that we did at bloomberg last week, and the presence behind trump in all seven key swing states. can you go through more detail what turned that around as be go deeper into 24? henrietta: thank you so much for having me. the first thing i point out to investors, as we talked a couple weeks back, you want to skate to where the puck is going with polling data. that data was phenomenally informative and that you are seeing voters, off the bench and pick a candidate. what we have noticed between republicans and democrats, there are far more undecided independence and democrats than republicans. and some of the polls, 8% of the democratic party undecided.

in december, 30% were still unclear about which candidate they will pick. in america can we don't change our opinion that often, we just don't come home to our party nominee until we have to, particularly this year. it is not predictive before super tuesday. on super tuesday, it starts to get about a third more predictive, and that increases by a third again in june, july, and then in october. what you saw from the democratic party over the weekend was a substantial ad buy which lends credence to my thesis. they will be a tremendous amount of campaigning to get those final swing voters in the october period, which is when they bought i want to say about $200 million worth of ads in the swing states. polling suggests there is a tremendous amount of, not

apprehension, but unwillingness to say that biden is our candidate. we have the conflicting data set of south carolina yesterday which went 96% for biden. there is no lack of clarity there. that is a resounding victory, as his competitors pointed out themselves. i think the polling is showing us there is a segment of the population that is larger for democrats and independents that is undecided, and most of the room to gain stand with biden. republicans are clear that they are voting for trump. annmarie: a lot of the polling shows that this is also a rematch that americans don't want to see. what do you think about these third-party candidates? where does he draw from, trump voters or biden voters? henrietta: some of that you'll see from the age demographics, white versus black versus other minorities make up.

those voters are also trying to send a message which is very much akin to what we saw with bernie sanders. not at the two of them are similar candidates, but there is a whole duck boat -- vote saying i want to push the direction. joe biden has tacked more toward the middle recently. there was profound resentment with things like the bipartisan infrastructure act. you had a standoff between progressives and the establishment of the democratic party. i see a tremendous amount of corollary between the 2020 election and this one. in fact, if you layer on top of that, any amalgamation of data from the last six month of polling, you will see that same skew of voters who was hoping for someone else are saying they would go with rfk, marion will

listen, other candidates, and then they realize we are a two party system, and there is no chance that a unicorn comes into the race. a lot of the polling suggests that's possible, that's fine. usually that starts to diminish on super tuesday, which is march 5. annmarie: our polling shows that as the economy is getting better, immigration becomes an issue. you know that the senate released the text of the supplemental. do you think there is a chance that this deal will be reached? terry haynes putting it at 60% probability. i would love to know your percentage. henrietta: with all do respect, i think 60% is inordinately high. you can get piecemeal buckets on spending in ukraine and israel, as we have the continuing resolutions and the risk for government shutdown the next three months, but there is a

term of the summit of disconnect on the street about this bill and also the tax bill. that is a $78 billion tax package that i think has a lot of political similarities to the border in ukraine aid package. it is something that is absolutely a win for all members of congress. the reality is, i don't think you will see either of those bills -- definitely not the tax bill. it is just a huge political boon for the incumbent on both of these. that is why trump has come out against it. republican members in the house are lambasting it even before they see the text. there is misinformation out there. i don't see this bill passing the house. jonathan: we spend so much time talking about these things that never get done. every sickle time. henrietta treyz of veda partners. lisa: to that point, how do you strip out the noise?

sabina, i want your thoughts on that. what do you pay attention to that is actually market moving versus what we always get? savita: what is interesting, if you look at the data, there is one unequivocal statement i can make with total confidence. nobody is betting on a cyclical recovery when it comes to professional investors. when you look at the average hedge fund, mutual fund, even the average investor, we don't own energy or financials or high beta. the exposure is at almost the lowest level since we have seen since the financial crisis. despite the fact that the economy seems to be running maybe two hot, there is no bid on that theory. jonathan: i remember all of our conversations, you said the biggest risk was upside risks to equities.

let's put price target to one side. what is the biggest risk for 24? savita: the biggest risk to the s&p 500 in the near term is upside. our target of 5000 is probably too low in the near term. the reason we are not as optimistic on stocks today is that we have seen this percolating positive sentiment especially around the magnificent seven, the area of abject euphoria. that area of the market is at risk but i do see this lack of real conviction in stocks outperforming bonds. i think cash, stocks, then bonds. that is a lot of you want to have. jonathan: great to see you as always. savita subramanian of bank of america. this from goldman moments ago. we published our first forecast back to may after chair powell set a march base cut is not the case. we see a risk that it could come

later after the 60 minutes interview. lisa: the fact that jay powell was not talking about march, said it was not likely before seeing the jobs report. it was not just an accidental slip in response to a reporter. this was a deliberate point of view. jonathan: coming up, that discussion. frances donald from manulife on my it may be too early for the fed to cut rates. about one hour away from the opening bell. equities on the s&p 500 slightly negative.

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jonathan: 60 minutes away from the opening bell. equities pulling back on the s&p 500, down a quarter percent. amazing to think about the week that we did get even after the biggest one-day drop going back to september. equities are doing ok. lisa: we have to keep emphasizing, the earnings of meta-, amazon really highlighted how the big tech names have driven this through the cash they generate. jonathan: quite a selloff in the treasury market. 10-year yield up by almost 10 basis points. 4.11. on the two-year, 4.43.

i mentioned that goldman sachs note. after chairman powell, they push that out to me. after the 60 minutes interview, the risk is now pushed out even further. you have breeds some liked into this conversation earlier. the importance of that. why would it so important to you and to others? lisa: there was speculation he was throwing out march as an off-the-cuff way to reporters, not our base case for it to be march. almost like and bubbled out. the fact that he laid out the case, why he is not interested in cutting rates in march and this 60 minutes interview that was taped before we got the friday data, to me, was a game changer. their bias is toward waiting to make sure they have the accurate data. annmarie: he doubled down on not

cutting in march before the u.s. jobs data. what if he had said that and this was taped saturday morning? jonathan: i believe mike mckee is catching up with mr. goolsby from chicago, so look out for that this morning. chinese stocks seeing another volatile session as investors hope for a stabilization of the equity market. the securities regulators said it would take steps to prevent risk without providing many details. margin calls and forced liquidations are emerging as the key risks for investors in china. they are putting to do more to support stocks without telling us what they will do to support stocks. at the same time, we have these veils from former president trump, if he gets back, he will slap china with a 60% import tariff. lisa: how do they revive

confidence at a time when international investors are reflecting the policy uncertainty? whether or not he gets 60 percent tears put in place, either way this will be a political football. this will be ramping up. if you are a ceo, are you going to be like, i'm going to expand my manufacturing there, when you are not getting confidence from the communist party, not from the u.s. administration that there is any policy certainty. jonathan: if you talked about this in 2018, how the democratic president would have handled this differently. i remember people saying this is not the right thing to do. here we are with the same tariff s today. president biden has stuck with them. there was talk at some point that maybe he would take back the tariffs, but he has not done so. annmarie: you had the administration trying to pull every single lever. biden said that we would look at every single tool in the toolbox.

at the end of the day, it felt like treasury secretary yellen lost that argument and jake sullivan won. it became more of a national security concern, political concern, less of a treasury concern. jonathan: i am taking us into speculation here. as you get deeper into election season and armor president trump beats on this harder, where does president biden go? does he have to lean into the same conversation? annmarie: i'm not sure that you will see the biden camp lean into 60% blanket tariffs on china. according to the tax foundation, this would amount to an $80 billion tax increase on $380 billion worth of imports. take some of that, model it out. what kind of tax increase are we seeing? to your point, the biden campaign saying, all of the economists are saying this is just a tax on american consumers

but they kept them in place. jonathan: iranian backed who the rebels vowing to strike back after the weekend. it was the biggest barrage since the original allied attacks on january 11. based on what we heard from jake sullivan, there could be more to come. annmarie: we need to remember there are two different tracks here. the u.s. wants to respond for those three american service members killed in jordan, and also the houthis that are causing chaos in the red sea. i was struck this week and about how much the administration is tied to walking this line. it would be a sustained response yet not an open-ended military campaign. jonathan: where is saudi in all of this? in 2019, houthi militants took out a chunk of production by causing chaos in that region.

saudi arabia is sitting back as this is playing out between u.s. and u.k. allied forces. where is the kingdom? annmarie: they've been trying to hold onto this very fractious peace agreement in yemen. it is easier for them to let the u.s. and the united kingdom take on this role of going after houthi militants. jonathan: crude is down on the session which is unbelievable again. down a third of 1%. brent crude, 72.26. lisa: which is why nobody wants to bed on geopolitics. if that is your knee-jerk reaction on oil, widow maker. jonathan: let's finish this story. lisa and i were talking about it briefly. jay powell saying the federal reserve will look for more information to confirm that inflation is heading back to 2%. in an interview, paddle reiterating that a march cut is not likely.

the danger of moving too soon is that the job is not quite done and a really good readings we've had for the last six months somehow turned out not to be a true indicator of where inflation is heading. he seemed uncomfortable to commit to this idea that we are going back to 2%. for good reason. then you get friday's payroll report with that wage growth and he doubles down on the comments again. lisa: people were saying that his bias is to cut rates sooner, most try to job on the market into thinking they have a hawkish tone when they are actually incredibly dovish. there was that suspicion underpinning his comments, that he was trying to soothe the markets. this basically said, no, he actually meant it. this morning, neel kashkari talking about a higher neutral rate. jonathan: neel kashkari is not willing to cut interest rates anytime soon. have you noticed that chairman powell says nearly all members want to cut interest rates this

year? there was someone on the committee that he thinks is not a part of that club. lisa: you think it is neel kashkari? let's move into the realm of speculation. jonathan: that would be one of the candidates based on what we heard. governor bowman another one. lisa: i think neel kashkari like to be a contrarian, which i appreciate. he is the person who always leans the other way. jonathan: frances donald does not think that the fed will cut rates in march or may. and we have to reevaluate the embedded soft landing narrative in markets. you don't get to have your cake and eat it, too. frances, we have a lot to catch up on. chairman powell's 60 minutes, the presser, payrolls, what is the base case now? frances: we have been june for a while.

that may surprise some because we have recession in our outlook, think that they will have to cut more than what is priced, but the data will not turn in a meaningful way for the june meeting. that is the earliest they can go. the balance of risks for us is later but faster. depending on what kind of investor you are, there might be a trade in the near term, you could get more concern in the near term or play the curve, but it is later and probably more and faster. lisa: does that mean that the soft landing thesis is more or less likely? frances: the soft landing thesis is what is currently embedded in markets. you have to pick the balance of risks. that is the game as an asset manager. is it for a better economic environment than what is currently priced or worse? i challenge is, if you stick to the data, the data is not pointing up. there is some improvement in manufacturing activity but it is

two years from the first rate hike to the impact on the economy, and we are just now on that precipice. when you lose conviction on the precipice of when you would see the market reaction or the economic reaction, i get a little worried about that. this is where some of the fed's willingness to weight will come from. if interest rates impact your economy -- and maybe they don't. maybe the sensitivity is far less in the u.s. it will be in the next three to six months. if the relationship is broken, we have to throw out the textbooks entirely, leading indicators will not work. we will know in the next three to six months. it is harder to reverse a rate cut and go faster. they don't even need to cut on a schedule. they can do it anytime they want. we have to be mindful of the balance of risks for them and economy. lisa: i am wondering, you said we would know in the next three to six months.

what are you watching to see whether your thesis still holds water? frances: the big challenge last year, manufacturing data fell into recession. we have seen some of the worst numbers in modern history but we did not see them bleed into services. one of the challenges we are dealing with is disaggregating those sectors, manufacturing and services, and not believing that one would bleed into the other. the key component for the u.s. outlook going into 24 is due services decline? that will lean on jobs. that is why friday's jobs market number, not a problem because it was strong, but we know it was heavily distorted by seasonal factors. we know wages were up because hours worked were down. we still have to disaggregate that. it was not a clean signal up or down, and that makes visibility difficult in this environment. it is not the time to have high

conviction views, not for myself, not for the fed. jonathan: you opened the door, i will walk through it. how believable was that unbelievable data for you and the team on friday? frances: we have a rule on our team, one data point does not a trend make. we are also believers and having dashboards come indicators. bloomberg has a lot of great ones. the big problem with friday's number is it was inconsistent with a lot of other job market data. hiring is actually down in the jolt survey. what about the employment cost index? that is a boring index that markets don't usually respond to but we know the fed cares about. it says wages are decelerating in a healthy manner. when we put together this mosaic of jobs data, it is not consistent with ronnie's report, but 2023, i got burned talking

through a lot of the reasons why the strong data was distorted. dismissing a number out right because we know there is seasonality, you don't need to throw the entire thing out, look for the trend within it. right now, the fed will look at that and say march is out. i don't think they have enough data that is supportive of cuts until later this year. lisa: the lack of conviction has been a theme. something you said reflected in a lot of notes. how much has your conviction level gone down? we question whether the models are accurate. some are saying conviction at 60% rate for everything she says. what about you? frances: that is accurate. i would say that these cases for our team carry about 30% to 40% probability. how could you have a less than 50% probability for a base case? we see such a wide range of potential outcomes, fat tails in that distribution. we have a higher probability of

a financial accident and we have had in past years. not very high but it takes away from the base case. where we feel more confident is where the u.s. enters a so-called recession, it will come out faster because the fed has pulled out those additional rate hikes. even though we are debating march, june, july, for most institutional investors, retail investors, that is semantics. what matters is there are no more rate hikes and the direction will be lower. it will be a very tactical trade with those with tactical dynamic portfolios. the key messages that rate hikes are done. that we have extraordinarily conviction in. yes, high conviction in those, growth is slowing, inflation has peaked, interest rates are going down. some of the technical details around it, though conviction. the date it is just not doing what it used to do and we have to admit that.

jonathan: great to hear from you, frances donald. what she said might sound a bit controversial, so let's frame it. the data has been in conflict for quite a while. when you get a blowup report like that when you get on friday, it sounds controversial to say it is unbelievable. but what you soil and claims is different. what we have seen in the labor market has pointed in different directions as well. let's take manufacturing. that picked up all of a sudden after being in contraction for two years. lisa: stripping aside the other indicators, people are saying the seasonals gets messy, there is reason to question whether this is a valid representation of a labor market really heating up. that said, a lot of people are having questions. when you discount something out right, you can get into trouble. jonathan: that report on friday spooking a lot of people,

looking for things to carry on on the headline number. let's get you a recap. here is your bloomberg report yahaira jacquez. yahaira: former president trump says he plans to slap a six to percent tariff on chinese goods if elected. trump rejected criticism that actions would start a trade war. the u.s. has been china's biggest export market for over 20 years including over 500 $40 billion in exports in 2022. mcdonald's fourth-quarter sales missed estimates as growth slowed hurt in part by the war in the middle east. same-store sales rose 3.4%, marking the slowest rate since 2020. revenue also fell short. mcdonald became a target for boycotts after the war broke out after it's perceived a stance on the conflict as well as its status as one of the most recognized american brands. lee you know messy disappointed

hong kong fans after he stayed on the bench the entire time during inter-miami's win over a hong kong team. tickets sold out in over one hour with the argentinian the star attraction, but messi sat out due to a hamstring strain. the government said it was disappointed with the organizer of the match. jonathan: i was disappointed, too. i guess there was a promise that he would play, but he was injured. what are you going to do? annmarie: tickets are pretty expensive. i don't know, i want to see messi play. jonathan: if you go to a circus. lisa: is that how we are going to describe this? i am offended. jonathan: season-ticket holders demanded a refund. i believe the fan group said that you shouldn't pay to attend the circus if the animals are not attending. something like that. lisa: is that offensive?

jonathan: sure, but they are paying fans. lisa: you can do a meet and greet after. jonathan: i am being told to move on. red sea tensions weighing on the industry. >> we are really focused on keeping our mariners, people safe, protecting our assets. jonathan: that is coming up next on the program. live from new york, this is bloomberg. ♪

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jonathan: live from new york city, down a quarter percent on the s&p 500. crude unchanged. 72.28. red sea tensions weighing on the energy industry. >> we are adapting to the

circumstances, really focused on keeping our mariners, people safe, and protecting our assets, and doing everything from going around the keep to swaps. we are making sure that we honor our commitment to our customer during this difficult period. jonathan: audio surging over the weekend after u.s. and u.k. forces launched attacks against iranian-backed houthis. chair powell reiterated that a march cut is unlikely. nadia martin wiggen joins us now. crude unchanged on the session. earlier this morning it was lower on brent and wti. why isn't this tension over the last three months plus resulting in higher prices? nadia: although the market is looking more dangerous in terms of physical flows, what we saw last week, when this cease-fire

was potentially announced in gaza, the market just traded down and has not recovered. the market view had been that geopolitical pressure and difficulties in the middle east were not priced in, but we had the selloff and have not recovered as geopolitical tensions go higher. in the crude market now we see there is no geopolitical tension priced in but the market is scared. what if we get a cease fire instead of continued escalating tensions? it is a wait and see situation. lisa: is it priced in or not? if you have geopolitical priced in, what with the price be if there was not that geopolitical hangover, as annmarie has been talking about, a correct question, and on the flipside wherewith things go if things are ratcheted up? nadia: on the products side when we look particularly at gas oil, heating oil, they are really strong.

that is where we have the geopolitical risk priced in. it is difficult to use the red sea now. normally it is refined products in the dissolute space flowing through the red sea up to europe at a time when we are seeing refinery maintenance across the atlantic basin. we cannot have the u.s. and europe just produce more distal it. that part is priced in. the crew decide, i would argue it is not priced in at all because we have traded down to a very comfortable level. what is interesting in terms of the timing, a couple weeks ago, it looks like we were having strengthening refining margins, concern about the middle east. crude was looking like it was ready to stage a rally. on the wti side we could not break above 77.40 and stay there. we could not do the lower 80's for brent either.

that is where we had the straight down. annmarie: i want to ask about these stories coming out of saudi aramco, one, that they are abandoning their plans of 13 million barrels a day for capacity, and also that they may be reviving the share sale. is it your sense that saudi arabia is trying to go after funds? nadia: i think it's actually two different questions because it is strange timing. banks are putting out, by stepping back on this major investment plan, aramco could be saving $5 billion in capex. as an estimate, maybe that is a serious number, maybe not. it is an issue to issue more shares when you don't know the expectations, which will be announced when they do their earnings. it's a little bit strange in terms of the timing. on the other hand, 13.5 million barrels a day is a nonstory right now.

we see saudi arabia is planning to transition, the seasonal side in august, that is almost one million barrels a day of internal demand that they use for crude. they could make that available for exports. that could be a one million barrels per day trade-off. in addition, we see the u.s. apply chain is growing from strength to strength. expectations are already starting to grow higher in terms of what the u.s. shale space and in general can produce this year. there has been talked about flat production over the year but we see upside to that driven by what is happening in the permian, what chevron and exxon are talking about in earnings, and we also see some additional production coming from the gulf of mexico which has been historically difficult for agencies to forecast accurately. jonathan: nadia martin wiggen, thank you.

crude this morning, 72.36, basically unchanged. if you go back to the day before the terrorist attacks on israel, we are done by 12.6% on crude which is amazing. annmarie: it doesn't make sense. there are more hostilities but the price continues to go lower. if there were not any hostilities, would be be lower? the world is flush right now with crude. the united states, russia, iran. saudi arabia is pumping 9 million barrels a day. they have the capacity to go to 12. lisa: remember we were talking about a slowdown in china as one of the reasons? jonathan: that continues. counter you down to the opening bell. 34 minutes away. coming up tomorrow, larry adam, daniel morris, debbie

cunningham, and the eli lilly ceo. from new york city, this is bloomberg. ♪

jonathan: from new york city for our viewers worldwide, i am manus cranny. as the bond bears are reawakened, when will it challenge the equity market narrative? countdown to the open begins right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg the open with jonathan ferro. ♪ manus: coming up on the show, fed chair powell reiterates his cautious stance ona