>> i think we have another troubling inflation report that stomach, and march. >> enough people are out there that in creates inflationary pressure. >> we are out of the world where inflation stays in that 2% lane. >> it's currently underappreciated. >> inflation is still slowing and probably more than the consensus thanks. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> good morning for our audience worldwide this is bloomberg surveillance alongside lisa abramowicz with annmarie hordern.

the s&p 500 negative by 0.1%. 16 positive weeks out of 18 for the first time since 1971. a long run to friday. we have a double dose of chairman powell, state of the union from the president and a payroll support. lisa: which is the most important aspect for these because it's a blockbuster week across the monetary policy and economic activity. ultimately it has to come down to the jobs report, ultimately it's can it come down to whether the economy continues to grow at the case people expect. >> weather february confirms january. if it does we had a big repricing, what is that mean for the fed and this market? >> the market pricing out only a 25 basis point rate cut or less than that by june for the first

time since october. we have not seen this type of lack of rate cuts being priced in since going back to late last year. markets aren't really alarmed about that. maybe people think they are just pushing it back. they are not deferring them indefinitely. jonathan: we begin another week at record highs this monday morning. we are looking ahead to thursday night. the president, the political spin, needs to find a new way to connect with this electric. -- electorate. >> over the weekend there was a number of poles, new york times one show a majority of his own voters from 2020 are starting to get concerned about his age. we know he will talk with his legislative wins, inflation reduction act. abortion, all these things. it's good to be how he says it. potentially any discussion, does he, office someone who is strong

and can take down donald trump. >> i think that's the most important one. whether the president can get through a 60 minute address, that's how low the bar seems to be in some corners of washington. >> if you start fading out towards the end that's good be pretty brutal. people are looking for strength, for resilience, some sort of cohesion in the messaging not just what they're trying to cater to one group and everyone trying to placate. to me the wall street journal had a poll that indicated people feel better about the economy. not that much but on the margins shifting a little bit. annmarie: they're not always giving credit to the current president. in all the polls over the weekend, a recent poll in the swing state they show the trump is leading him. jonathan: i'm looking for a sneak peak the payrolls report. lisa: you think he's can release it? >> i'm just saying i would like

a sneak peek at the payrolls report for friday. >> if you want to just say dust jonathan: i'm pretty sure the president is still in bed. macy's right now getting a big offer. the brocade going up to $24 up from 21. 33% premium to the closing price. this stock is up in the premarket. lisa: macy's did not like the first offer. will you reconsider. they want the real estate, the retail business. how will they extract value from a company that just came out and talked about some of the macy's chains but also scaling up some higher costs. >> the stock is up. let's start the bond market with some price action for you. negative by 0.1 percent pulling back just a touch. yields are higher by a couple basis points. >> let's go over how big of a

week this is. on tuesday we get super tuesday. 15 states and one territory do vote. we get may be the sendoff or a trump versus biden rematch. on wednesday we get the job openings. we know you guys again to be really interested in the questions some of the punditry we get. on thursday we get another testifying from jay powell in front of the senate banking committee. again nonfarm payrolls to me arguably the most important after that state of the union because it will come down to whether people feel there is some sort of energy behind this market. jonathan: the estimate creeping higher over last week. something like 200 k. here's the next hour or so on the program. boosting s&p 500 targets, terry haines of pangaea policy and by the state of the union address later this week.

boeing looks to buy its most important parts provider. we begin with our top story prayed all-time highs driving some big revisions on wall street. the latest raising the target to 5400 from 5000 prayed lori saying there's more room to run. saying we are still constructive on the stock market with a price target of 5150. our most constructive model has been pointing to 54 and 5500 prayed good morning to you. let's get straight into the reasons to be bullish right now. >> the big one from our valuation model which is saying if inflation continues to moderate with interest rate relief the multiple can be higher than many assume. that's been a controversial discussion we had prayed the other model that starting to shift is her economic model. 0% to 2% is a weak range in terms of gdp for the stock market.

if you look on bloomberg and where the consensus is an moved up from 1.6% to 2% now. the economic excitement is another reason to get excited about stocks. jonathan: i imagine the pushback you get is because people who, on the program who have upgraded stocks are bullish on the earnings prayed they often talk about bigger multiples. where does that come from? >> i was building a new valuation model and had clients who said to me if inflation is ask and interest rates are why, i have a model that shows this. it's more of a compass than a gps but you can argue for multiples in the low 20's. people thought that was interesting and eventually they said what happens if you fix gdp assumptions. we found if you look post-covid, gdp is having a positive correlation with pe multiples.

our model goes back to the 60's but there have been certain decades where that did exist. we think the things that are driving pes are changing and it's a different dynamic than what we saw. a lot of people are looking at post gse rules of the road and that's outdated to be honest prayed >> the four most dangerous words in finance over the weekend saying this time it's different and people who are worried about some sort of bubble in the magnificent seven are getting ahead of themselves. there is more room to run. do you agree this time is different prayed that the gains for the first time since 1971 is not a warning flag but a sign to keep going. >> i've looked at this concentration every which way i can. if you look at concentration spikes in the market. the representation the biggest five or 10 stocks doesn't give you a signal about anything prayed it tells you people are about to be or have been noticed. i don't think it's telling us

anything prayed that nervousness is still out there in the market. if you look from a pe perspective the top 10 or the top five stocks are getting to levels that have marked peaks in the recent past. the rest of the market has room to run. one of the things that will fuel rotation back to everything else is this idea gdp expectations improve which narrow the earnings advantage of those big names. their time may be running out but it doesn't mean they can. lisa: bank of america upgrading the forecast to 5400 talking about a 5% upward gain from here. you have a 5150 target for the s&p on year end. do you have a range that looks at 54 5500 prayed why have you not upgraded just yet? >> we thought this market needed to see a bit of a pullback. if you look at the data, it's really quite concerning. the net pulls are hovering

between one and two standard deviations and typically you get a flat market when that's happening. 6.5% gains over the next 12. it's not a sort of panic signal but it's a caution signal. cftc is more concerned. the feud -- it's as crowded as it's ever been. on the broader u.s. equity markets you look at the buy side in aggregate we are above the highs we have seen pre-covid, above the highs in 2018 and well above the highs in 2021 through 2022. i do think we will see volatility in this market. i think we will be higher by the end of the year. 5% pullbacks? >> i keep getting asked how big will this be and it can be more than 10 because more than 10, we are in the middle of ratcheting up expectations they are looking

at that 5% to 10% range. everybody wants the dip and when i show them the work they are sympathetic to the idea may be markets got ahead of itself but when that happens the dips tend to be shallow. >> i was struck by credit card spending data in the month of february. people keep talking about how we will get a deceleration prayed the indicators don't seem to suggest that. how do the people who you speak to clients feel about this? >> back in august we were in the middle of starting to see interest rates move up. there were a lot of doubts over the fed. that's not the case now. now it is the u.s. economy is so hot we will never see cuts. the emphasis is on the economy is so hot and there's a begrudging acceptance, i saw this in the u.s. last week that this economy is not nearly as fragile as people think.

this is something we tend to see postcrisis. we saw it where there was constant fear of dipping into a recession. i've been starting to describe this as investment community ptsd. there's a lot of sympathy for that. a lot of people who have been around remember that and want to pointed out. >> what you think bill likes saying potentially no rates -- rate cuts this year. >> i did have a few meetings before it was put out. i've heard this in a few corners. the team was never in the march camp. they've been making that call since last summer and we push them on this late last week they said we do think these cuts were about preventing the downturn not sort of arresting one in the middle of it happening. so they think the fed will try to come out and sort of defend the employment side of the

mandate and keep the economy from going to a bad place. i think that is right. they have talked about adjustment cuts. that's been their view for a long time and they are sticking with that. >> about one hour and 30 minutes now on this program breaking down that big call. good to see you. let's get you an update on stories elsewhere this morning. here's your bloomberg brief. dani: china's dust won't hold press briefings after the end of the national people's congress. it scraps one of the events were a top leader interacts with the public prayed congressional leaders have availed agreed detail through september 30 prayed the package includes provisions to prevent oil sales from the u.s. strategic reserve to china and to track foreign

purchases of u.s. farmland. it sidesteps lingering disputes over funding for defense, homeland security and social programs prayed space x launch the falcon 9 rocket from the kennedy space center in florida on sunday. on board there were three nasa astronauts, a russian cosmonaut heading to the international space station. the spacecraft is set to dock early tuesday morning eastern time. that's your bloomberg brief. >> a massive week on capitol hill and nikki haley refusing to back down. >> you signed a pledge to support the eventual nominee. do you still feel bound by that pledge? >> i will make the decision i want to make but that's not something i'm thinking about. >> live from new york city this morning, good morning. ♪

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>> stocks on the s&p 500 a little bit softer on the s&p. yields a touch higher. under surveillance this morning a massive week on capitol hill with nikki haley refusing to back down. >> you signed a pledge to support the eventual nominee.

do you still feel bound by that pledge? >> at the time of the debate we had to take it too would you support the nominee in order to get on the debate stage you said yes. the rnc is now not the same. >> i think i will make what decision i want to make but that's not something i'm thinking about. >> voters heading to the polls for super tuesday on the hill -- we get jay powell on the hill wednesday. joining us to discuss is terry haines. thursday evening, 8:30 when we hear from the president who does he need to speak to in this economy and this country? >> he needs to speak to everyone of course but fundamentally he needs to speak to people who are unconvinced he is up to the job and people who are unconvinced he has done a good job. those of the people he needs to focus on.

he needs to treat this thing as it -- not only as a de facto campaign speech but to show he's on top of the game and issues. >> the washington post has an opinion piece that says keep the state of the union shorter. he needs to become like truman in terms of sticking to congress and blaming congress but saying he spoke for 73 minutes last year. it is far less important for biden to be comprehensive than it is to be compelling. does he need to keep this short so we can keep up his stamina for the speech? >> he needs to be focused fundamentally prayed there is that stamina component but i think it's fundamental politically and to markets. the strength of -- and the certainty of the u.s. government underpins markets that we haven't thought about in quite some time. the laundry list approach of this speech which reads -- reached its apogee during the

bill clinton days has never really gone away. but it absolutely needs to go. what voters need to hear, what citizens need to hear is something shorter, punchier and more focused on what the speech is supposed to be. the state of the union and a little bit less about whatever the laundry list of the government is supposed to be. >> we had a lot of polls over the weekend, dismal figures for the sitting president. should the democrats start to be more worried than they already are? >> the new york times leading with saying it's time for bedwetting, you know where the political center is on a lot of this stuff. i think biden's people will do what they did in 2020 which is to get out the vote and not take any of those votes for granted.

i don't agree that it is time for panic. my view on this for quite some time now has been you see weakness in trump and a third party challenge that has not gelled yet. trumps weakness comes down to his base is still there but it is by no means everything. what he needs is party unifier which he won't get an independents. there's very much a path still here for the president if he wants to take it and again not take any of those votes for granted. >> what do you make of kamala harris taking a hard line on israel and hamas. the new role she's going to try to take up? >> i said for quite a while now that i think people ignore vice president harris at their peril. she is very unpopular generally speaking.

her gaffes are well-known in the political class but at the same time but she has constituency and there are places in the biden constituency that she can speak to and be very effective in one place there frankly is in a situation like israel gaza where the biden people are trying to speak to the palestinian community in the united states and abroad. so her being out there on that stage has the possibility of being very effective for the administration. jonathan: she is young, very young compared to the president. a lot of runway for her career. how does she avoid becoming the next mike pence with no political future if the president does not win this election? >> what she needs to do firstly of the president does not win she needs to be seen as an effective partner in the election effort. she needs to be seen as someone

who did not contribute to that election defeat assuming that's where we are. and thirdly she is still well thought of by the progressive wing of the party, that's where the energy is and the money is and she continues desk and continue to be a player there. an effective campaign performance can go a long way there. >> kicking off the week with terry haines on the week ahead in washington dc. lori, i've quoted you about a million times and it's regarding politics were talking to clients seems to be like staring at the sun. has it gotten better? lori: a little bit better. my colleague put it this way, she said there was a begrudging willingness to look at this issue more. i think that is right and i would still say investors are moving pretty hard and it's pretty painful.

we will see what it's like later this week but after iowa and new hampshire, of those were the questions i was dealing with. one investor put it saying i got burned and -- by trump and 2016 so i have to look at this now. i don't think u.s.-based investors are doing a lot now. i'm getting requests for what is the historical playbook around elections, small caps are coming up a lot right now. in 2016 there were a trump trade on the trade war so whether you think we will have sort of a republican administration that really cuts taxes, or we have a more isolationist foreign policy, both of those seem like buy america trades. to be honest there's not a lot to do right now because is nothing but breadcrumbs to analyze. >> you said they might be more interested in the state of the union in terms of market moving.

how so? lori: i think it's more hope i will have something other than breadcrumbs to analyze at the end of the week. i feel like i've been educating a lot of european and canadian investors on social issues which is interesting and matters to the turnout who will ultimately win but there's not a lot to invest around that. i'm hoping the job will be easier by the end of the week. jonathan: whether the trump trade is different this time around. how different it might be. >> frankly there isn't that much room given how deep the deficit is and how much pushback we've heard. >> last summer around it was tax cuts and then tariffs. if you like this time around it might be tariffs up front. >> that will have a different effect when he talks about a 60% tariff on china or keeping things in america. you wonder if he will be that

much more so given it would be his last term. jonathan: it's going to get better. lori, more hope for me than conviction. equity futures negative by 0.2%. coming up next, sheila of jeffries on the bid for spirit aerosystems. that conversation just around the corner. a double dose of chairman powell and a big payrolls report on friday. this is bloomberg. ♪

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jonathan: two days of gains. two week winning streak as we kick off pulling back just a touch. .1%. 15 all-time highs this year already on the s&p 500. tons of upgrades. the two year yield falling back for four consecutive days in the monday. a little bit higher this morning by a couple of basis points. think about where we were a week ago. we closed at 470 for the first time this year. we are back down to 450 a week later. >> when you look under the hood on friday people were saying not

as weak as they seem. even after the hot cpi and ppi and the hot labor market report, this is what people cling to because they want the soft landing. jonathan: let's push that through foreign exchange. last week as well on the japanese yen, of the first week of yen strength so far this year. it was marginal but it was there off the back of some action sometime soon. >> given the fact it was some discussion that hinted some sense they are getting closer to their 2% target i have to say japan is fascinating because people talk about the flood of cash into their equity markets and how much of this is simply they have been going nowhere since 1989 until now. waking up from the slumber. >> i think it's important just to finish on the euro. i know this is not exactly valued but is it strange that this is thursday?

sort of a two week gap between them and the federal reserve which just feels a bit off. >> you think it should be the day after? back to back. under surveillance this morning. vice president, harris calling -- vice president kamala harris calling for a cease-fire between israel and hamas. israel not expected to send representation. a member of the country's war cabinet will visit with harris at the white house after news of u.s. and jordanian forces have started operations to airdrop aid into gaza. we are trying to figure out if this is a natural evolution for the progress in the administration's position or if it's her distance between herself and the president. annmarie: i think it is the administration trying to put distance between themselves and netanyahu and trying to branch it up pressure.

we know israel decided not to send a delegation. over the weekend official said there is something on the table if hamas agrees to send back the hostages. benny gantz is going to be in washington. israel he media, local media is talking about how to netanyahu is feeling about this. he said just remember there's one prime minister in israel. >> lisa mentioned japan. the equity rally gaining some big-time momentum over in japan. foreign investors bringing funds back to the market after posting net outflows. bloomberg reporting the government is on the verge of calling the end to deflation. some big changes over there. expectations from the boj won't hike rates. the next decision is march 19. you can draw it all the way back to the late 1980's. that was the last time we threatened to go through 40 k

today. here's the take away ultimately. that for the buying equities there, that there is evidence you can just look for them. you'll find them in japan. >> now we are catching up and people are saying flood the markets, get back in. is this observe riproaring surge that people will try to sell out of or is this re-embracing japan is a global market saying we are finally seeing growth again, seeing cross-border investment unlike what we've seen before. how many are hinged to this lack of deflation suddenly. but also the u.s. government and the u.s. economy. jonathan: a policy decades in the making. that stock market year-to-date up 20% on the nikkei to 25. it is absolutely amazing. it's her into the premarket.

investors raising their bid for macy's. arc house management offering 14% more increased to $24 per share. a premium to their closing price on friday. a restructuring plan which would close a third of u.s. locations, that stock is up by a little more than 16%. just how defensive was that to close their stores and focus elsewhere. was that about getting up better offer. sing we can do this ourselves. >> this is the litmus test we are about to get given the fact they rejected the first offer saying it lacked compelling value. this is the key question. was it the plan or just dollars and cents? jonathan: premium to friday's close. lisa: compelling in terms of vision? what are they looking for. is this a question of not going

private or not being owned by private asset managers or is this something that has to be hard-core cash? they did make some pretty big moves that seems to suggest they recognized the concern. jonathan: macy's is up by 16%. confirming it is in talks to buy spirit aerosystems. the power supply are the center of issues affecting the 737 max jet saying we believe the reintegration of boeing at spirit aerosystems manufacturing operations would further strengthen aviation safety and improve quality and serve the interests of our customers and shareholders. sheila let's talk about the potential of this. can you talk us through the history of that division and why this might be the best move for both companies? >> boeing went through a period where it outsourced. technically in a great world spirit to make a 10% operating

margin and boeing can do 20% and we would all be happy shareholders. spirit is struggling, losing money. it's hemorrhaging cash and trading on a cash yield versus 7% historically. clearly investors don't believe the cash flow. refinancing that it was able to do and is the new ceo off the board who was a boeing 30 year veteran. spirit is trying to fix itself up but folks do not believe it will stop losing cash. they are saying i'm losing market cap because of the issues. i think it's up for debate was the best solution for boeing to they put two board seats in and manage it from afar. boeing has had its own supply chain issues not only do to spirit but mostly due to spirit. lisa: do we know what went wrong

to begin with? was it spirit aerosystems or a boeing problem? sheila: there's been a lot of issues. we look at the 787 that was a boeing and spirit issue. we did not have those deliveries for two years. spirit has been the cause of the recent hiccup sprayed it is such a big deal because the max is about 60% of the free cash flow so when you are stuck at a rate of 21 but you're supposed to be at 40 a month, what is the cause of that issue? it seems the engine manufacturers and the metal folks are out of it. they have had employees take up and their increasing capacities. so it all comes back to spirit and what's the best way to fix it. the boeing veteran has been there since october so it's only been four months. >> the regulators are coming in saying we don't understand what your plan is and they say there

seems to be some really problematic cultural issues and lack of certain clear signals of how to have safety controls. what are they thinking given the fact this is the only game in town for the united states? sheila: regulators take almost a regulatory view and that is it. they are not going to manage who is managing these companies, they just want -- reading what they put out they want to sort of check the box and say there are safety protocols to the extent they can boeing is not a nationalized company they can go in and sit there forever as they have been scrutinizing the max line. regulators have a hard line. how involved you get in the supply chain. perhaps that's resulting in the latest move is maybe we need to be completely involved and taken in. >> do you foresee any hurdles when it comes to regulation? >> one of the hurdles is airbus.

spirit manufactures about 20% of its out but -- output to airbus sprayed its diversified over the decade as it's needed of the soup -- cash. obviously airbus is not to let boeing take that in-house. at what price given is losing about 200 million free cash flow annually, but i don't know about the regulatory hurdle in terms of what it means for in housing. it means boeing has more control over the supply chain and other regulatory bodies ok with that? jonathan: if this was any other industry with only two major competitors do you think the other was just sitting there, how does airbus take advantage of the situation. sheila: it really has taken advantage. it's particularly done well because we don't have a max 10 certified. the max 10 is 10% more capacity and that's why airlines like

united are focused on. you look at that on friday or thursday, they are cutting their aircraft intake by 50% this year and that's one of the largest carriers in the world. that means there's a shortage clearly so airbus has taken a share. 60% but it cannot go beyond that. on the wide-body market, boeing is still doing well. the 787 is the dominant aircraft. jonathan: how easy is it to do that? sheila: that's the play even in a global duopoly where both are successful pricing should be up because airlines are telling you ryanair cut their schedule and raised airfares by 10%. airlines are telling you we need these planes. assuming boeing and airbus are healthy players. jonathan: really want to catch up with michael o'leary, a ton of questions for the ryanair

boss. when matt incident in the last two or three months violated their deferred prosecution agreement with the government and whether they could face criminal liability, what you tell clients about that at the moment, from the professionals, experts you speak to. sheila: i cannot opine on that but it is boeing manufacturing aircraft. i don't know where the criminal element comes into that. we could regulate banks, aircraft manufacturers. at what point do we go too far. >> sheila with the latest on boeing. lisa: ryanair is going to buy some of those jets. they are going to have lower cost airlines saying if you want to sell your discounted boeing planes, we are your guys and others forced to pay premium for airbus.

>> looking forward to that. coming to an airline near you. equity futures on the s&p. let's give an update on stories elsewhere. here's your bloomberg brief with dani burger. >> santander air said to have cut about 320 u.s. jobs. employees in retail operations across u.s. branches were recently let go. they told bloomberg gets updated its staffing model and is investing in additional capabilities. shares in macy's are higher after a boost of the takeover bid. it is now $24 a share from 21. it's also 33% p -- premium. they rejected a bid in january and unveiled a restructuring plan with a close one third of the macy's locations. california and parts of the u.s.

west coast are set to face more dangerous wind gusts. days of winter weather have blanketed the area. the deadly conditions force road closures between california and nevada. amtrak canceled trains across the region. that's your bloomberg brief. >> up next the ecb preparing to cut. >> i think june will be a massive month for markets. they are probably all going to cut rates. jonathan: that conversation is coming up next. this is bloomberg. ♪

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jonathan: stocks negative we are down on the s&p 500. in the bond market yields higher. quick check of the euro. positive by .2%.

the ecb preparing to cut. >> it's possible we are just adjusting here to a slightly higher inflation environment. we are just having a little bit of a problem here. just understanding what's the normal rate, where will inflation set up just to balance the economy. i think the bank of england, the fed and ecb will cut rates and it's a question of how far they go. >> investors betting on june for an ecb rate cut. it's the first of decisions before the boj, boe and fed in the coming weeks. we don't see the first ecb meeting before june which was the september mean -- maybe the first rate cut. the risk of a technical cut this month. before we get into that, let's

talk about the risk of the ecb cut being pushed out even further out to say september. what's behind that? >> they told us they are watching the labor market dynamics and we know parts of europe that there are still labor shortages related to the aging demographic. it's not something which can be cured simply. we can pick any of those economies. we could throw japan into this equation. you look at the service sector we know labor is the largest part for the bills of most of those service sector companies and labor shortages suggest the service sector inflation will be sticky. that's what we've been told and the ecb has been very straightforward and that's the risk there that they may delay in till september. lisa: he thinks the meeting

should have been held with the fed's meeting and i'm curious about that in terms of are they dependent on the fed and the fact it's getting pushed out further for the u.s. and so it gives the freedom to the ecb to push it out further as well. jane: there is justification for that. we only need to look at the exchange rate to get that justification. whoever goes first and more aggressively could see the exchange rate dropping and given we are still in an inflationary environment, in most countries in the g10, they don't necessarily want that so it could be that we see that continued resilience of the u.s. economy it may be that the fed could wait until after the u.s. presidential election because the timing of that, some of

their chances for them to go. that would certainly impact other central banks because of the impact or potential impact on the exchange rate. lisa: how are you watching jay powell's testimony to the house and senate later this week given we heard a slightly different tone than some of the other fed members. but the economic data has dripped on markets more this rhetoric. jane: i think it will be the day trade for the next couple of months that will feed everybody's outlook including chair powell. the data on friday of course is going to be really important, of the next months worth cpi ppi data is going to form the opinion of whether or not they can go in june or not. they argued lester the first move for the fed would be june. that appeared very hawkish compared with the market was

thinking. no longer the case but if this data continues to be sticky there is a possibility that they could certainly delay until later in the year and that is something which the market is going to be looking for. annmarie: our survey shows lowering interest rates too soon would be worse than reducing it too late. do you see the same justification for the fed? >> no policymaker wants to be hit with the policy mistake. right now the risk is they could make a mistake and cut too soon and inflation could remain far stickier for longer. we know that's a risk already and we talked about wage inflation being sticky. we get a trump president, what if he announces this tariff he's been talking about. that's good to be something for next year but certainly if that were to happen and the fed has

cut too much or too soon. they will still be the ones in the spotlight having to explain those. i think for most of the g10 they would probably like to hold on longer and then maybe cut a bit more aggressively and go quickly. >> can we talk about the japanese yen? yen strength of the first time last year. -- this year. we've got the japanese government considering ending calling this whole regime deflationary. how close are we to an interest rate hike from the boj. jane: the -- we are close. it's probably good to be very little. we are knocking to get progressive quarterly moves. just not going to get progressive quarterly moves --

we are not going to get progressive quarterly moves. in japan that got the worst demographics with anywhere else. companies are desperately trying to invest to replace labor. there isn't much ability -- availability of labor. it could mean gdp for the fourth quarter is revised up which would mean demand did not fall into technical recession at the end of last year after all. certainly looking through the speeches of the bank of japan officials, they are telling us they have made preparations for a move in interest rates. if it's not much i think april is. >> if we had a list of worries if one of us had a list of potential tail risks things could go wrong this year last year it would've been the bank of japan hiking rates suddenly,

the ecb cuts rates more aggressively from the federal reserve. all of these potential tail risks. right now what do you think is the biggest central bank driven risk to markets? jane: that inflation remained stickier. from an economic sense it comes back to the labor market. of course we could throw in geopolitics to that. you've got the red sea for instance. we have not had the ecb make a reference to that. the possibility of tariffs adding to inflation. it is still the risk that we've got to complete -- a completely different environment where inflation has to be a lot stickier than we were accustomed to in the financial crisis years. i think we should look at the swiss franc. there is a chance by march they could be more hawkish. so keep an eye on the swiss

bank. jonathan: we. every morning. >> jobs report, check out the swiss. great note this morning, the dollar is relying on u.s. exceptionalism, big week for economic data. lisa: the front runner of adp on wednesday and then we get the jobs number on friday. how much do we get those concerns about the overheating economy that accelerates if we get a hot labor market. that has to be one of the biggest risk to markets right now. jonathan: meet an estimate in our survey, these numbers can change. 200,000 was the median estimate the moment. the previous number was a monster 353,000. our survey indicating that was 3.7%.

laser focused on wage growth. lisa: there are two schools of thought here. there are people saying we are getting growth but it is just deflationary growth it's a perfect sort of it was all just transitory. you have people saying when you get growth like this is unsustainable without some sort of inflation. jonathan: are you struggling to put things on your list of worries. lisa: kind of. it was extreme moves by the fed, the bank of japan. they seemed pretty happy to let things go. the question of accelerating one way or another. jonathan: up next on the program, catching up with him. torsten with a big call saying no rate cuts in 2024. we will catch up with some of bloomberg's best. that and a whole lot more. live from new york city, the second hour of bloomberg

surveillance up next. ♪

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>> the longer rates stay elevated the more likely it is we have some type of financial accident. >> the risk is the fed goes last rather than more. >> we are seeing no urgency on the economic side. >> we still have four rate cuts. >> i am not at zero cuts. >> this is bloomberg surveillance with jonathan

ferro, lisa abramowicz, and in report turn. jonathan: live this hour, torsten slok of apollo on why he thinks he will get no interest rate cuts in 2024. can you cut interest rates when stocks are at all-time highs? lisa: can you cut interest rates when you have a fully employed america. can you cut rates where you have a feeling this economy is not slowing down. it is a question not just for chair powell but also the state of the union. monster week on capitol hill over the next few days. annmarie: we will get jay powell in front of the house, super tuesday tomorrow. not so super tuesday. it is all but done. the biggest will be the state of the union. in terms of bidens performance, poll after poll says he is losing voters in terms of how

they feel about him, the one seagate in 2020. for me it is less what he says but how he says it. the washington post says keep the state of the union shorter. jonathan: unemployment at 4% for more than two years based on the data friday and somehow he cannot connect with the electorate. somehow the electorate thinks the economy is doing poorly. lisa: this electorate has a lot of issues. you cannot speak of the electorate as a monolith. you have people grappling with prices much higher than a couple years ago. you talk about the buildup, the residual kinds of inflation. there are social issues. there is a feeling of which political party you belong to. there's a feeling of which media you are tucked into. these are things you are real. jonathan: if you are hooked into bloomberg we can talk about all-time highs without the politics. in the last week, ubs, goldman,

piper, barclays. ahead full of upgrades. savita 5000 out of 5400. lisa: this sounds bullish when you talk about the upgrade. it is only a 5% gain from where we are. she is talking about the likelihood of a pullback. it is basically coming to the market and saying it does not look completely unsustainable because big tech is delivering the goods, delivering the earnings. we cannot bet against them. jonathan: equity futures lower. down .15% on the s&p. in the bond market, yields higher two basis points. big our coming up. -- big hour coming up. looking ahead to the china

national people's congress and torsten slok on his call for no fed rate cuts. we begin with our top story, wall street strategist racing to upgrade targets. "equity valuations are high and some correction may occur, especially for growth slow weakens earnings growth. a soft landing is best for equity markets as a growth slowdown lifts equity valuations." he is with us for much of the next hour around the table. good morning. i was reading through some of your work and it did not seem like you are worried about too much in this economy. >> i am less worried than in the past. a year ago people were worried about the hard landing and they started talking about the soft landing. now people talk about the soft landing. there is a serious possibility of what people refer to as a no landing that growth remains

above potential and the scenario risky for the market is a no landing. markets are pricing in six or eight cuts. now the fed is telling us only three cuts. what if growth is well above potential? last year revisions of expectations by the fed led to 10% correction of equities. that is potentially paradoxical. good news already growth may be bad news for the market if that implies the fed will not cut as much and as soon as people expect. jonathan: so you think the biggest risk is upside risk? nouriel: right now, yes because data are in q4 suggest growth is well above potential. lisa: just to put another

headline, even nouriel roubini is optimistic. people are looking for reasons to gut check a runaway record rally we have never seen in this kind of environment. the checks are not coming. does that give you pause or is this a new paradigm with artificial intelligence and the idea productivity, you are buying it. nouriel: several things. the last couple of years inflation fell without growth slowing down sharply. in my view it is not because of what the fed does. there were three negative aggregates and they were reversed. the impact of covid on labor supply and production goods and services, the impact of the russian invasion of ukraine on commodity prices, and the zero covid policy of china. these were supply shops. these went away.

that explains why there is still high growth and lower inflation. we got lucky. on top of these positive supply shocks we have a fourth one that is much bigger. that is the ai revolution. over the next decade it will increase productivity growth and potential growth and economic welfare and reduce the cost of production. that is what the market is reacting to. lisa: when we look at this period from a historical perspective will we say the helicopter money worked? that is what allowed the u.s. to work -- to act in a different manner than the rest of the world? nouriel: i am not sure, because during covid was a temporary shop that lasted a few months and the policy side was going back to qe. the resulting inflation we saw in 2021 was driven by a policy mistake. we did too much on the monetary

side and the fiscal side and now we are reversing some of it. annmarie: you are sounding so optimism yet germany, japan, u.k., you just view this global growth based on u.s. exceptionalism? nouriel: there is an element of u.s. exceptionalism. i wrote yesterday about artificial intelligence versus human stupidity. on one side would be the best of all times, technology may increase growth, but it is more of a u.s. phenomenon because most of these innovations are in the u.s. rather than the rest of the world. on the other side, i point out there are lots of policy mistakes and negative stagflation shocks where there is deglobalization and protectionism and global rivalries that will fragment the world economy, there is climate change, high private and public debt, sources of inflation.

we have two forces, one is positive and will lead to higher growth and lower inflation. the other is stagflation. the question over the next few years is which will dominate. jonathan: assessments of each region. u.s. resilient, europe flirting with stagflation, china declining. how concerned are you with the direction of europe and china? nouriel: i am more concerned about china than europe. europe has been in stagnation for the last few quarters, the same with united kingdom. given the shock that came from russia-ukraine there could have been a real hard landing instead of flat economic activity. the other problem is aging, lack of technological innovation and things that are more structural. china is a more serious story because chinese potential growth used to be 10%, then went to 5%.

most people now estimate potential growth for china will be between 2% to 3%. it is a story not just of aging. it is a story of geopolitical stuff. a story of less growth because their protections all over the world. consumer and business sentiment is in a funk because of policies of xi jinping. consumption is low as a share of gdp. people have to say for old age and retirement. there are structural reasons why growth in china it will be 2% or 3% and that is a real shift for the global economy. lisa: is that it disinflation or a shock or an inflationary shock? nouriel: is inflationary for china. it is also disinflationary for the world in two ways.

in one way china is dumping on the global market excess capacity. and then the chinese currency weakening. finally, china is growing last. demand for commodities is lower. part of inflation for the last few years has been commodities. over all slowing down in china is deflationary for the global economy. jonathan: does that risk a more assertive foreign policy out of the ccp? nouriel: i am not sure. they have a very aggressive foreign-policy but they realized it is policy that does not make them friends around europe and around the world. they have to worry about economic growth. they are very insecure. the reaction to the taiwanese election has been moderate. they could have been much more aggressive. they think escalating with the u.s. is not good for them and good with their relation with

europe and they are taking a more cautious approach and starting to worry about the stock market and probably after the xi jinping-biden meeting there has the beginning of something of a thaw. i do not think there is a strategic change. probably for the next 12 to 24 months the relations will not escalate in a negative direction. annmarie: could we see any more stimulus coming out of the chinese government? nouriel: some people suggest they should. they should have much more monetary and fiscal stimulus. xi jinping is resisting it, in part because there is already too much debt and deficit and doubling down on credit fueled fixed investment will be dangerous. even the chinese realize the slowdown of growth is structural and noncyclical. if you do more monetary and fiscal stimulus, then you're

creating more debt and leveraging more financial. there will be some stimulus. without that stimulus the target of 5% is not going to be achieved. potential growth in china is less than 4%. there is some stimulus because without it growth becomes on the three handle. not as much stimulus to get you 5%. jonathan: more on china little bit later. we will continue this conversation. i'm getting over it that maybe the biggest risk is upside risk. lisa: i want to know the last time he was this optimistic. nouriel: upside for growth but downside for the stock market if that happens. jonathan: here is your bloomberg brief with dani burger. dani: nikki haley won her first republican primary with 62% of the vote in d.c. the win brings her total convention delegates to much

lower than trump. he is likely to pick up many more on super tuesday tomorrow. amazon's whole foods is planning a new small format store for big cities for quick trips. the stores will be between 7000 and 13,000 square feet. amazon signed five leases in new york city for the concept. the first what is slated to open by the fall on the upper eastside. apple has been hit with a $2 billion fine by the eu over the app store rules. the eu says apple abused its dominant position for the distribution of music streaming apps. it is the eu's first fine against apple and follows a complaint from spotify. apple rejected the ruling. that is your bloomberg brief. jonathan: not a great couple of days for apple. it dropped from the conviction

list on goldman to close out last week. beginning this week a move from evercore's tactical outperform list. a massive week on capitol hill punctuated by president biden's state of the union address. >> he needs to speak to people who are unconvinced he is up to the job and people who are unconvinced he has done a good job. jonathan: that conversation is up next. live from new york city, good morning. welcome to ameriprise. i'm sam morrison. my brother max recommended you. so, my best friend sophie says you've been a huge help. at ameriprise financial, more than 9 out of 10 of our clients are likely to recommend us. our neighbors, the garcía's, love working with you. because the advice we give is personalized, -hey, john reese, jr. -how's your father doing? to help reach your goals with confidence.

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jonathan: another record high on friday, kicking things off this monday. negative on the s&p. yields higher two basis points. under surveillance this morning, a massive week on capitol hill punctuated by president biden's state of the union address. >> he needs to speak to people who are unconvinced he is up to the job and people unconvinced he has done a good job. those are the people he needs to focus on. he needs to treat this thing not only as a defective campaign speech, but to show he is on top of the game and on top of the issues. jonathan: president biden's state of the union address on thursday capping up a visit a week on capitol hill.

voters in 16 states heading to the polls on super tuesday and jay powell giving his testimony to congress on wednesday and thursday. bloomberg's michael chapa joins us. what is top of the pile? michael: we take it one day at a time. we are thinking it one day at a time. the state of the union will offer a moment for joe biden to make his argument to one of the biggest national audiences he would hope to get and that is in his state of the union address. ahead of that we will see a few other things that will bear watching. on tuesday we have the super tuesday primaries in 15 states and american samoa. what we are looking for is not the surprise factor. we know donald trump is the odds on favorite to win. we are looking for what will nikki haley do when it comes to an end on super tuesday when the

polls close? what we are looking for her to do is likely dropout. she has said she will stay in the race through super tuesday. afterwards the math is not in her favor. annmarie: when it comes to the state of the union, what does biden need to say about the economy? a poll saying 31% of voters say the economy is not gotten better but they are not giving biden the credit. how does he hammer this message? michael: that will be one of the biggest jobs he has thursday night, to reinforce that the tide is turning economically. we have seen the pace of inflation slow significantly. hiring is continuing. we are not seeing any signs of the soft landing people have been talking about. instead the economy has kept going and going. that is a good news case he can present to the public. the challenge the president faces is many voters, including

those surveyed in the seven swing states we polled, find he may be too old for the job. concerns about his age come up again and again. it is not just what he says about the economy and the state of the nation and about his priority, it is how he says it. annmarie: he needs to be compelling is what the washington post says. you mentioned benny gantz meeting with the vice president. how important is it to the cease-fire with gaza before his address thursday? michael: it would be a huge boost to his argument in the u.s.. the clock is ticking given the desperate situation on the ground in gaza where hunger and health conditions are so dire. we saw the u.s. dropping air supplies over the weekend in a signal of how desperate things are and how significant the situation is.

for biden to be able to say we have a deal, we'll be able to get medicine and food into the territory for at least six weeks and hopefully reach a longer-term agreement. the time pressure is also with ramadan coming up, that begins march 10. politically at home, biden is under pressure from democrats to do something to stop the violence and stop the bloodshed. jonathan: big time. appreciate the update. michael sheppard in washington, d.c.. with us around the table is nouriel roubini. you have said the biggest election year in history. is that purely about the numbers are the significance of the vote that takes place this year? nouriel: it is not just the numbers. i would say of all of the elections the most important ones is the one in the united states, the one that could give us more policy surprises.

european parliamentary election will probably vote towards populists on the right. all of these elections, 4 billion people. the one with that will have an international impact is the u.s. election. lisa: give a sense of what that impact would look like depending on who wins in the united states? nouriel: geopolitically many people worry the policies of trump, foreign policy would be very different than biden. i do not think so because democrats and republicans remain tough on china. on the issue of the middle east trump, like biden, realized eventually normalization within israel and the arab states implies a two state solution. when he was in power he was in favor of it. he will play hardball with europeans on ukraine but i do not think he will give up to ukraine and give it to the russians because he wants to be

tough on china. there will be frictions. i do not worry so much about foreign policy, i worry about thomistic policy. on economic policy, that is a bigger risk. trump has said he will impose a 10% tariff on all imports from everywhere around the world. today the average tariff in the u.s. is 2%. in the case of china it could in -- he could increase tariffs to 30% or 40% so you will have a trade war not just with china but also your friends and allies. economically that is a big risk for growth, for inflation. it is something i think people have not yet priced in. secondly while there are large fiscal deficits, republican essentially said he wants to renew completely the tax cuts passed during his first administration, as opposed to just letting them expire.

he said he does not want to touch entitlement, you will have another big fiscal deficit. the market started to worry about fiscal deficits. the combination of those things can be bad for the economy and the market. the stock market is falling, inflation is rising. annmarie: when it comes to the tariffs you said no one is pricing them in. when would they have to start thinking about that? nouriel: they do not know yet whether he will win or not. the polls say he is ahead by the economy is doing quite well. biden has an issue of messaging. strong growth, job creation, stock market all-time highs. i think some of the paul's are also biased bipartisanship. if you're republican you do not like biden and you are cranky. there is this bias. i would say for now we do not know who will win.

if he is going to win he has to pass actions. some may require legislation. people are not yet concentrating. he is saying it. the biggest risk if he is elected is a trade war and unsustainable fiscal deficits. jonathan: people are just not ready to talk about it yet. nouriel roubini with us for the next 30 minutes. coming up later, torsten slok of apollo on the big call for 2024. he is looking for no rate cuts this year. china breaking 30 years of tradition at the national people's congress. that conversation is up next. ♪

jonathan: 16 weeks out of the last 18 on the s&p 500 positive. that is longest run since 1971. if we make it 17 out of 19 this week it will be the first time since 1964. this rally has been phenomenal. equity futures pulling back. down .1%. positive on the nasdaq 0.05%. more all-time highs on friday to kick off with the same thing this monday morning.

lisa: 15 record highs in 2024. when you get a rally like this you get pessimists saying it is unsustainable. instead you're getting upgrades. people saying we're not seeing a lot of holes to the thesis. jonathan: david coston at goldman saying it is different this time. lisa: this is the most dangerous four words in finance, a lot of people say that, he is not alone. the drivers of this have the earnings, have the promise come and have the transformation of the economy a lot of people are looking for. jonathan: these are the new price targets. goldman at 5200. ubs 5400. bank of america's abita several mommy and -- bank of america at the very top of the pile. 75% upside from here. we are chasing this market as it

keeps climbing. lisa: people realizing there is more under the hood. here are the key questions we are talking about. lori calvasina has not upgraded. it is the economy, it is whether we are accelerating or decelerating. we have got it wrong again and again. a slowdown has not transpired. let's turn to the bond market. it is only the start of march. the two year this time last week closed at 4.70 on the two year. it felt all the weight -- it fell all the way back down to 4.55. the low of the year was 4.1, the high was 4.7. only a week ago. we are back down to about 4.55. lisa: i am old enough to remember when we are pricing in six rate cuts for this year. now we are pricing in far fewer.

what if torsten slok is right? what if the fed does not cut rates at all? is that bearish for stocks or bullish? i do not know the answer to that. jonathan: you think it would be bullish for the dollar. we will get an ecb meeting on thursday which does not feel quite right that that is happening so early in the month. under surveillance, a busy week of eco-data and fed speak. jay powell giving his annual testimony on capitol hill. in europe in ecb rate decision on thursday. christine lagarde widely expected to keep rates on hold. on friday, payrolls friday. nouriel roubini, great to stay with us so long. i want your view on the torsten slok call and apollo. the no rate cut call. how realistic do you think that is is. no cuts in 2024? nouriel: no cuts may not be

realistic. the possibility the fed will cut rates later in less than three times is a meaningful possibility. growth is well above potential. the atlanta fed forecast for first quarter is 3%. the economy might keep growing. that may imply inflation will remain sticky. that is the biggest potential market surprise. last year when people had to revise their expectation about fed cuts you had a 10% correction. this year, in spite of the fit signaling we will not cut, the market has gone up. suppose inflation remain sticky. then people say it will not be three, it will be zero. on that, in spite of stronger growth, the impact of higher rates for longer will be negative. it will be a correction.

lisa: i am trying to wrap my head around and optimistic nouriel roubini. this is as optimistic as i've ever seen you. are you saying the worst case scenario is the economy runs too hot and potentially with harder than expected inflation it would cause fed policy to go longer than previously expected, which will cause a slight downdraft, but nothing to write home about. is this the worst case scenario? nouriel: for the markets, yes. for the markets i would say soft landing. what can read to a correction? more than a bumpy landing. it will be no landing. that is for the u.s.. the rest of the world is mediocre. many emerging markets are fragile. japan is rallying in the stock market but the economy is just ok. the rest of the world to celebrate. jonathan: lisa has a list of

things story about and was hoping you would give us some help. lisa: this is not helpful. i do not have anything extra. nouriel: i wrote an entire book titled mega threats rise said for the decade there'll be lots of stuff that can go wrong. there will be serious stagflation forces in the global economy. in the short-term the u.s. economy is doing well. the technology story is right. weather will be artificial intelligence as opposed to human stupidity, there are plenty of wrong policies. there are lots of headwinds in terms of stagflation shocks to the world over the next decade. jonathan: let's talk about something that could go right in d.c. lawmakers reaching a deal to avoid an imminent shutdown. house and senate leaders will vote on the matter. the deal leading part of the government facing a march 23 shutdown. that deal will be tougher to

negotiate given ongoing disputes over the u.s.-mexico border. annmarie: they have avoided the first deadline for a government shutdown, almost. they will likely not shut down a conservative demands. there's nothing in here that is offensive to a moderate or even some on the hard right or hard left from voting for this. the issue will be when they try to hammer out this defense deal and funding homeland security. they want the senate to take up their bill to impeach ollie entre mayorkas. -- to impeach mayorkas. jonathan: non-essential unveil its economic to the people's congress -- china set to unveil its economic to the people's congress. the nation grapples with inflation, mounting debt, and a flight of foreign capital.

economist expecting policy to stay growth friendly but not expecting a bazooka type stir mills -- a bazooka type stimulus. edna curran binds us. how big of a change is this? >> the centerpiece piece of the npc every year was a question by the press to put questions to china's top leader and for the rest of the world to hear from their own mouth what the outlook for china is. this year the press conference has been canceled. the chinese government has made clear they will run this press conference during the remainder of the current government term. you have to say from the outside looking in, that is a curious step. you could say a retrograde step for a government under a lot of scrutiny from overseas investors. there is a domestic angle as well. some china watchers making the

point it is another example of the premier losing his status and all of the power going to xi jinping. no press conference from the premier this year. it does leave a hole in china's economic calendar. annmarie: the past few months we thaw -- the past few months we saw china go through the shortest term for a defense minister, for a foreign minister. any updates on these political position? enda: we know some have been shuffled out of their positions by now. we will get more detail this week. on the chinese side the officials say it is not unusual for people to move in and out of government roles. that happens in our their governments around the world. -- that habits and governments around the world. you had defense minister and -- both having high position on the global stage until they were

both nowhere to be seen. this speaks to the black box element when it comes to looking at china. a lot of investors and outsiders wondering about what direction the government is taking. a lot of focus on the transparency of the government, whether it is economic data or whether it comes to personal movements. that is why this week is so important. we get the roadmap for the economy. we get details on the personnel moves, which would be very close . jonathan: look on of growth and we expect from china this year? enda: expect to come in around 5%. that will be hard. look for commentary around high-quality growth. that will be the key. technology, innovation, industrial policy, those are the key sectors. jonathan: thank you. now the final word from nouriel roubini. if growth in china drops to 2%

or 3%, how will we know? are they going to tell us? nouriel: probably they will massage the data as they always do. there are indicators that cannot be manipulated? i would look at their pmi's. pmi's are falling below 50% and implies the economy is slowing down if not started to contract. there are ways to gauge what the economy is doing. some numbers like youth unemployment are bad, they do not report it. or when the economy is that you do not have the premier in a press conference. it is fitting because china is becoming more and more on investable because there is no data, there is no transparency, and are leaving further. they shoot themselves in the foot thinking it will help them, it does not help them. lisa: we have data in the form

of oil prices that have all been much lower than people expected? nouriel: they have, but some are driven by demand factors other than by supply. in the case of energy prices, there has been a significant increase in productive capacity even of fossil fuels in the united states. i would say that historically movements of energy prices or commodities are reflecting what is happening to global growth of chinese. there's also a meaningful shift in supply. people of said there'll be a green revolution -- some of these are coming. it is supplied tribbett as opposed to demand driven. jonathan: not to disappoint bramo, this book, "mega

threats." can you tell us the number one threat that has not been talked about enough since you published the book? nouriel: i would say people are still underestimating the impact over time of global rivalries on the global economy. so far the impact has been modest. i see a world in which the conflicts between a number of powers in china, russia, iran, north korea, the u.s. and the west will become a colder war. we have two hot wars. one it russia-ukraine, the other israel hamas which is a proxy for israel and iran. in the cold war between the u.s. and china may not escalate but over the medium term i think the cold war will get colder. there is a risk the conflict on taiwan will come to something of a boil because xi jinping wants to pass into history as the man

who reunited with taiwan. markets have been calm because the risks of not been materializing with the economic threat has been modest, but over the next few years geopolitical things will get worse. jonathan: it is good to see you. the brilliant nouriel roubini. let's get you an update on stories elsewhere with your bloomberg brief. here is dani burger. dani: boeing confirmed it is in talks to buy former divisions air systems. the talk supplier is at the center of issues affecting the 737 max yet. boeing saying we believe the integration of boeing in spirit would further strengthen aviation safety, improve quality come and serve the interest of our customers and shareholders. shares of macy's, investors boosted it to over bid for the retailer. they increase their offer 14%. is now $24 per share. there is a 33% premium to the

close on friday. macy's rejected the bid in january, instead revealing a restructuring plan where it will close locations. california and parts of the u.s. west coast are said to face more dangerous wind gusts in deep snow to start the week. after days of winter weather blanketed the area with eight feet of snow. the conditions forest road closures between california and nevada and canceled trains across the region. jonathan: up next, making the case for no rate cuts. >> very reasonable case for zero cuts. the fed doing a dovish pivot to 3.7% unemployment with gdp continuing to be strong is remarkable. jonathan: torsten slok of apollo says no rate cuts in 2024. that conversation is up next. ♪

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jonathan: equities pulling back on the s&p. making the pace for no rate cuts. >> there is a case for zero rate cuts. you're seeing nominal wage gains higher and higher. the concurrence of that where you have a fed pivoting into 3.7% unemployment with gdp continuing to be strong is remarkable. jonathan: investors looking to jay powell testimony on capitol hill for more clues on the fed path forward as rate cut expectations are pushed back to summer will torsten slok writing "the reality is the u.s. economy is not slowing down in the fed pivot has provided a strong tail went to growth since december.

as a result the fed will not cut rates this year and rates will stay higher for longer." since lock is with us around the table in new york. good morning to you. big change. let's talk about what binder pins it. you put out -- what underpins it. torsten: the change we have had in financial conditions is dramatic. the stock market hitting all-time highs. credit spreads tightening. january and february so the biggest credit issuance going back -- you have ipo picking up, m&a activity picking up. the tail wind coming from is your financial conditions, it is not surprising the employment report in january was strong, it is not surprising inflation started to pick up. this is a true tailwind. jonathan: if we begin to believe you, doesn't it make rate cuts

more likely? torsten: we need financial conditions to tighten. given that is not happening you are seeing more signs of easing. as a second issue, seeing term inflation expectations and breakevens continue to march higher and higher. how can the fed cut with inflation expectations are continuing to march higher. it is a challenge for the fed when you both have a tailwind as a result of your own actions. the market housing inflation expectations are drifting higher. lisa: you think this means, given the fact you are seeing two year inflation expectations surging to such a degree, does this mean the fed rate policy is not restrictive and not causing disinflationary impulse? torsten: that opens the question of where are we relative to the long run rate. what is most important about this discussion is their transmission mechanism of monetary policy is sitting very unevenly.

it is hitting companies with high leverage. households with a lot of leverage. that is why those entities that have a lot of rent leverage that are very vulnerable to interest rates are seeing the negative impact. at the macrolevel, you see this in the employment report, you see this in jobless claims. the tail wind easing so much continues to be strong. lisa: you had a chart over the weekend i thought was fascinating about why this economy has been so rate insensitive. vertically u.s. companies sing the larger companies have fixed rate debt, they termed out there debt and this is the key reason fit hikes are having more limited impact on the economy. if that is the case, could you see a scenario or even if the fed keeps rates at 5.5%, you do not see equity markets go down. they keep rallying when it comes to large caps. torsten: we have a situation where as you know, 90% of

household debt is fixed rate. when it comes to corporate it is more complicated. there russell 2000 companies floating rates. it does mean there are companies , those with low coverage ratios. venture capital tech growth come in particular venture capital where you buy companies that have no earnings. they will struggle of the cost of capital stays high. the transmission mechanism is working. it is only working on a certain segment. those firms in those entities that have high levels of debt. jonathan: let's go back to our month's scene. i get email from you. "from no landing to hard landing." the hard landing call from a year ago. what happened, and wise the economy turning young out to be so difficult to read? why do we flit from one

narrative to another? torsten: last year everyone expecting a recession. this year everyone expecting six or seven cuts. the economy continues to be stronger. when we had march, the banking sector was rescued much faster than anyone expected and that meant the impact on the economy turned out to be small. given this was done in a way where the fed managed to keep this contained, it turned out to be more light. at the same time the ai story rolling over over last several quarters continuously giving a huge tailwind come all this argues for the fed looking at that and saying ai in high productivity will be less inflation. on top of that we will have still strong growth. jonathan: a year ago the ai story felt more like a market story that an economic one. how quickly has it become an economic story? torsten: we are seeing some

signs of productivity growing. all of the gains is in financial markets. that is why the wealth effect on households and retail for holding a lot of magnificent seven stocks, they have been magnificent. you're seeing the wealth effect and financial conditions being easy, has been healthy for growth, not only for consumption but also for capx. the ai story has sucked a lot of oxygen out of the room and this continues to be a very important tailwind. lisa: how long can we keep this to virgins going or will the large caps continue to do find and we have the small caps that are going bankrupt, that are struggling? at what point does that become untenable and there has to be a resolution? torsten: this is important because you are seeing the same thing for consumers. households wound fixed income. this a more cash flows. households that have more debt,

households that do not own fixed income or more challenged in this environment. it is both when it comes to the household sector and also to firms that those who are more vulnerable to interest rate sting higher for longer come this will continue. this its growth, tech, some parts of health care. firms that have a lot of debt and a low coverage ratio and no earnings, they are going to be challenged now the interest rates will be sting higher for longer. jonathan: a new base case. the base case is no transfer 2024. how many january like data points during need to see before i get a new email that says something like there is another rate hike coming? torsten: this is an important date because this is the pain trade. no one is prepared for more rate hikes. in your world the tifs market is saying inflation is a problem but futures are saying rate cuts are coming. that is inconsistent. you cannot have it.

i would say the next data point -- obviously jay powell and wednesday -- then we have our friday payrolls which says 200,000 jobs in february. we are simply not slowing down. where is the slow down we had expected for so long, including myself. the fed said we expect a recession in the forecast. if we were wrong in waiting for gadot for so long, maybe gadot not arrive connect quarter either. jonathan: thoughtful piece. torsten slok of apollo. coming up will catch up with darrell cronk of wells fargo, seth carpenter of morgan stanley and a lot more. from new york city, this is bloomberg. ♪

>> i think we have the troubling inflation report that will come in march. >> enough people out there are spending that it creates inflationary pressure for everyone. >> we are out of the world where

inflation stays in the 2% lane. >> the target is currently underappreciated by the markets. >> inflation is still slowing i think it's probably slowing more than the consensus thanks. >> this is bloomberg surveillance. jonathan: live from new york city this morning, good morning, good morning. surveillance begins right now with an optimistic bunch. torsten slok saying things are so good the fed won't cut in 2024. sticky inflation may be in issue. nouriel rabin he saying the biggest risk for this economy in the near term is upside risk. that's not typically the thing you would expect him to tell us. lisa: he didn't add to my list of worries. if anything, there is no pessimism anywhere and it seems like everybody feels the upside is the only case that can exist. the fact that even if we have

his worst-case scenario, up to -- upsize wrist to growth, the downside for stocks would be a mild correction. this is from a bear on wall street. jonathan: jay powell will give us an assessment a little later. they say he is in no hurry. citigroup says the fed needs more data. what kind of chairman powell will be coming up on capitol hill this week? annmarie: if you believe pressure, he will face serious democratic pushback including elizabeth warren. they were concerned what this means for lower end consumers and people dealing with higher housing costs and higher rents. he will get a ton of pushback from democratic lawmakers if he says we are waiting for the data in they say the data is showing we should be cutting. jonathan: you talk to the desert talk about the labor market and 200 and 80,000 is what's

predicted for friday. lisa: if anyone says you need to cut right now, they are looking at a different indicator than a lot of people are in this market. who do these rates hurt the most? how does the compositional aspect of keeping rates for longer shape the big stocks but when it comes to the political scenario and how people are invested. jonathan: if you are a borrower, not such a great scenario. lisa: people can't afford to spend 10% on a vehicle that also is much higher than it has been in the past. jonathan: counting delinquencies as well, equity markets on the s&p 500 are pulling back by 0.2%. the bond market has yields higher by almost three basis

points. coming up this hour, darrell kroc of wells fargo and and ed mills and seth carpenter fang in -- weighing in on the fed's road ahead. stocks are setting a record high friday ahead of a monster week on wall street. there is a jobs report in a double dose from chairman powell. some think investors need to take a step back. darrell joins us for more. we're are we lightening up? >> i think you can lighten up your equity exposure overall. i would take it first from the small caps which is a relative underperformer but you have to lighten up.

if you've enjoyed 24% return over the last four months, that is impressive and you would be wise to take a little profit there. call that wisdom saved bull markets die in euphoria to the point there is no downside. we are starting to approach a little bit of euphoria here. i think you have to set that context correctly. jonathan: let's get into euphoria. bank of america has gone to 5400. she says any signs of euphoria are secular so we are talking about nvidia and outside of that, what would you describe is euphoria? >> you are seeing it technology and seeing it in consumer discretionary and seeing it in communication services. for markets to really make that next leg higher, you have to have breadth widen outcome of

narrow markets die painful deaths. 2023 was the narrowest market since 2007. if you look at other narrow markets, 2021-2022, big negative returns what happened in 1999 and 2000. narrow markets don't sustain the leadership. you need breadth to widen out in earnings to participate in better fourth-quarter numbers. if companies come even large-cap companies, if their wages are growing 6% but their topline like we so the total sales number grow at three, i cannot have my business -- biggest expense line is a company ceo growing at 45% might topline growing at three without starting to lay people off. lisa: you can't talk about 2007

and these other times without giving some sort of scope of what you are expecting. is lightening up because you see a rotation in leadership or some serious downside ahead? >> if you take forward multiples at 22 times, you are in the 90-90 for percentile of the last 30 years of historical multiples of evaluations. we spin the clock forward above 90%, your average annual return is 0%. i think you can probably crest here is earnings catch up. you pull prices forward and prices re-said earnings have to catch up. they have to catch up. the consensus is still at 243 for earnings estimates and will probably finish the year at

maybe 222. that's a big jump. it has to deliver. the micro has to deliver. lisa: how much are you counting on the fed to cut rates by three or four times this year to keep things on an even keel? not necessarily going gang buses but not declining materially. >> i tend to agree with where the consensus is starting to go to. i think the fed will have a hard time cutting rates. what people forget is we know we've had good taste disinflation. the goods sector has come down hard. services which is 70% of the u.s. economy, the inflation rate is 5%. is that close to where the fed wanted to be? that is way too high and coupled with wage inflation and you couple that with probably losing the tailwind of goods deflation.

i think inflation does stay higher. if you look at the bond market, i was trying to find appeared of time where the 10 year treasury was increased and went 34 basis points. the 10 year treasury was increasing three months before the fed cut interest rates and i couldn't find one. rates are still climbing higher. if the fed is going to deliver on this timeframe, they should be thinking about it coming back down. lisa: do you agree there's a real chance the fed is not going to cut rates this year at all and markets can still stay on an even keel? >> i think the fed desperately wants to cut rates. i don't know whether the data will allow them to as many times. i think we will have to look at our own estimates. if we don't get to rate cuts, yes, i think markets have to reprice from here. i think the consensus is still

too strong that rate cuts come in without that tailwind come i think you will have a hard time with equities being at fair valuations. jonathan: we have gone from 6-7 back down to three rate cuts. we done it painlessly. how have we done that? >> you are papering over -- the great lesson we learned year over the last couple of years is the amount of fiscal stimulus when you look at 9% of the gdp has papered through a lot of what's happened. i think you're going to start seeing markets pay attention if you come down below three rate cuts. some of the narrative you're getting today continues in that direction. maybe one or two rate cuts or zero rate cuts, i think markets

will pay attention to that. jonathan: we repriced on the two-year and we priced in seven cuts and maybe three right now in the equity market had a rally. without it doubt, consensus would've been we cannot do that without this equity markets selling off. lisa: part of the reason why is all the biggest companies have termed out their debt, have fixed rate debt, they locked in lower rates, they are not that sensitive to higher rates anyway. they are making their earnings continue to rise in the heels the strength of this not allowing the fed to cut rates as quickly as it likes. jonathan: you are not exactly screaming go to cash. what do you like right now? >> that's the theme of widening the breadth out. materials and energy on value opportunities and then we still like industrials and health care which have been really strong relative outperformer's of late.

i think you can end with that. two lisa's point, i think the great question we have to ask is if 5.5 percent fed funds slows nothing, it didn't slow business, didn't slow the consumer, it hasn't slowed government spending, white cut at all? what's the thesis to cut if i .5% really doesn't become friction in the economy? jonathan: it's good to see you. torsten slok said it's not an environment for the fed to cut interest rates. there may be a little space to push back.

they want to cut interest rates but they look pretty hesitant based on the communication we've had. lisa: that's the reason white's now plausible they will not be able to cut rates at all this year. if the data continues at this level, how can they answer the bastion that was just -- how can answer the question that was just asked. jonathan: two days of powell testimony coming up on capitol hill later this week. equity futures on the s&p are negative by 0.1. let's get an update on other stories. dani?: boeing has confirmed it some talks to make spirit part of the company again. the suppliers are impacting the 737 max jet. boeing said we believe the reintegration of boeing and spirit air systems manufacturing operations would strengthen aviation safety improve -- and improve quality and serve our customers and shareholders. amazon's whole food grocery chain is planning small format

stores for big cities. the stores will be between 7-14 thousand square feet mliv above a bar or meat counters. they have signed five leases in new york city for the concept the first one is slated to open on the upper east side by the fall. dune 2 has taken the top box office but over the weekend. it's the largest since the taylor swift film. some fans packed theaters for imix trainings. that's your bloomberg brief. jonathan: thank you. i watcheddube and i left - --dune 1 and i left before it ended. i have to see if i can catch up. lisa: that means you enjoyed it. jonathan: they were big worms underneath the desert. lisa: i haven't seen it.

jonathan: it doesn't strike me as a hero type character. he should be like a high school dude in mean girls. lisa: have you seen martha? jonathan: not yet. coming up, critical we can capitol hill. >> i believe president biden has a sense of urgency and we are seeing the campaign that will go all out on the ground and knows what we had to do to get the job done. jonathan: that conversation is next, live from new york, this is bloomberg. ♪

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jonathan: so much dune 2 feedback, some of you are very passionate about this. equity futures in the s&p 500 are negative by 1% -- by .1%. lisa: what kind of feedback did you get? jonathan: apparently i'm jealous of chamalett. a critical week on capitol hill. >> i believe that president

biden is getting on the case. i've traveled with them and their starting to put the resources we need to see into michigan. we are seeing a campaign that posts super tuesday. he will go all in on the ground and knows what we have to do to get the job done. jonathan: the latest super tuesday kicking up a big political week with voters and 16 states heading to the polls. jay powell will have his semiannual today congressional testimony and biden rounding out the week with his state of the union address thursday evening. we've heard the president talk about strictflation.

do you expect to hear that thursday evening? >> i have not had a single client or conversation about that in the conversations. i think it is part of what he would consider some of the pocketbook issues. he certainly has made a big deal about the junk feed agenda. we should get something later this week and credit card late fees but he's trying to take what is sometimes esoteric in d.c. and connected to the voter. shrinkflation is an attempt to say is not the policies of d.c. leading to grocery bills being higher and your product being smaller. they are trying to shifted toward corporations. i don't think a lot of voters are giving them the benefit of the doubt on that but that's the political attempt here. annmarie: if you look at the polling, you are seeing that the

electorate is slightly more optimistic about the economy. they still give him poor mark so what does he need to say thursday that makes the electorate feel good that he can deliver a strong economy with another four years? >> we often talk about the -- is the economy stupid? that was the campaign feet in 1992 and how bill clinton was able to connect on that. the other part of that was he felt your pain. i think what is missing out of the biden campaign so far is that connection that they understand and really are moving policy toward understanding that. it's not just a conversation about look at how rate disinflation has been. when average americans go into the supermarket, they are seeing smaller products, more expensive bills. we might have inflation it's gone from 9% down to 3% but groceries over the last several years are still up 25%.

we are not hitting deflation so it's a hard thing to do. in the polling data, we've seen this election is been a referendum biden and he needs to turn that around and he has to make it a referendum on donald trump. also what he would do better over the next four years. it's a question of whether he can do that. annmarie: the wall street journal this morning says there is panic within democrats and they say they are counting on a boffo state of the union address and donald trump's well-known pension for self-destruction. they say the pressure will rise for the president to yield to a younger nominee. is this just fantasyland on wall street? >> every time i have a conversation at the institutional investor conference about the election, the first thing they ask is is there going to be a switch on the democratic side but on the republican side. what we consistently tell folks

is the most likely outcome for this election is trump versus biden. when we look at super tuesday we look at what nikki haley said yesterday on the sunday morning shows where she was not willing to say she was going to endorse trump, we are getting the question -- are we going to see a third-party run? is there something about this campaign we don't know yet that will disrupted? there is a possibility of an open convention or a change at the convention but i think it's undemocratic to change that late in the year. it's also a very risky strategy so it has to be really bad in june or july for them to switch this out at the convention. lisa: the fact that everyone is asking you this that people don't leave we are getting this rematch but it appears were getting it. does that mean people are not accurately pricing the way they will the possibility of another trump-biden run? >> you are right and they are not looking at what happens after the election. we put out records when it talks

about the most likely scenario is arguably a republican sweep in the second most likely scenario is a democratic sweep. we are giving it about a 60% -- 65% odds there will be a sweep in the election and when you look at his suite, that's budget reconciliation were come all the major pieces of legislation that have occurred in this country in the last 20 years is to reconciliation. we have huge issues on the tax cuts, on obamacare subsidies, will the filibuster remain? they are not fully convinced its trump versus biden and they are staying on the fact we could have a sweep of either parties and if it was democrats, you had joe manchin and kyrsten sinema, you would have 50 real democrats in terms of what they are willing to vote for. huge market implications of that came to pass. annmarie: when it comes to super tuesday, some of the primaries are close and some are open.

we know trump will win but in terms of the data, what can you tell us about his electability in november? >> the last time we chatted about this, you talked about if you had biden getting the numbers donald trump had in some of these election contests so far, there would be alarm bells in the democratic party. we will be watching how much of a ceiling there is for donald trump. the best he's done in a big primary so far is 60%. we will look at the data to see if there are certain republicans showing up and telling exit pollsters that if it comes to november, they are not showing up again or they are not going to vote for president trump. the size and the scope of the victories are going to be really important to give is that sense of the strength or weakness of president trump going into the november election. jonathan: thank you very much, e d mil there. ls we need to get up to speed on

the weekend, the ecb is kicking things off this month on thursday. coming up, morgan stanley weighing in on the road ahead and talk about data dependency and how they are dependent on different data points in different ways from the ecb to the federal reserve over the next month. lisa: don't you love data dependency? jonathan: i talk about it the time. it's crucial for central bankers. lisa: how much are you going to respond? right now, it show me the money and show me the disinflation, otherwise we will be cautious. jonathan: we will break it down next, live from new york city, this is bloomberg. ♪

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we are unchanged on the nasdaq. the two year is a lower 4.1 percent and a higher 4.1% of and and we are higher this morning. we are going into a monster week for economic data. lisa: a lot of people say it hinges on the labor market at least for the united states. do you see a fully employed america that has wages that are increasing and continually keeping pace with an inflation rate above 2%? jonathan: i see in america where it difficult to make a deal happen. jetblue announces termination of its merger packed with spirit. hardly surprising when you see how difficult it is to make a deal happen. annmarie: when it comes to the s tc ftc and doj, they say it will be monopoly. to your point, this is not a surprise but it is confirmed.

jetblue says they will terminate this merger packed with spirit. jonathan: jetblue is up by 5% and we can talk about three potential deals. kroger and albertsons is one, another one is capital one and discover but if we can make this happen, what will happen to the other two? lisa: we heard this idea of big banks and small tanks being able to make transactions at a time when people say we need consolidation among the regionals. this will be one of the key questions with the administration shift. how different would an administration under trump versus biden be when it comes to antitrust? annmarie: it's hard to say when you have j.d. vance saying that one of the most effective members of the biden administration is the ftc. they say google should be broken up and josh holly agreeing with senator warren and when it comes to capital one and discover. when you look at some facets of the republican party, they may

actually be in line from what we are current -- seeing from this current ftc and doj. lisa: we haven't necessarily seen spirit share start to trade again since the halt. people were hoping for some sort of reprieve after a pretty poor performance. jonathan: jetblue announcing the termination of the merger packed. opec-plus extending its supply cutbacks to mid year in an attempt to shore up prices and avert a global surplus. a cut of about 2 million barrels per day will remain in place until june. the opec extension was widely expected but gives room to run. apple supplies -- oil supplies are at about $80 and we look at crude at $83.38.

annmarie: i think oh put a serious floor on prices and we have seen the cartel ratcheting back supplies. they are dealing with slower demand in china an ample supply from the united states. the story gets more interesting later in the year. saudi arabia has a much higher oil price can you have a country like the uae sitting on 1.5 million barrels of idle capacity. they spent all this money to try to get more production and they are being told they can't use it. jonathan: good news for the present that crude is lower and good news that gasoline is lower and not higher. we have a different conversation going into thursday evening. lisa: one of the key questions is opec plus seating to the united's -- ceding to the united states? he could be sending that message. annmarie: i heard donald trump

talking about drill baby drill. we need to remind the former president we are north of 13 million barrels per day. to record for any country ever but it's one this administration doesn't want to lean into. jonathan: we don't need to remind him but the current president does. lisa: it speaks to different constituencies. ultimately, the u.s. is the swing producer. the fact that opec plus will keep the cuts as the u.s. tries to take share. jonathan: the union address is thursday evening around 8 p.m. eastern time. oil and crude and gasoline prices will probably not be discussed that much. white house aides says he will promote his agenda. biden has been advancing the idea of raising the corporate tax rate from 21%-20 8% as well as a capital gains tax.

what about capital gains? they can make it happen this time around. annmarie: it's going after certain constituents within your party. this is an administration that when it had control of the house and the senate could enclose that could close the carried interest loophole but they are talking about raising corporate tax rates. i don't see it happening. it couldn't happen when the democrats had control. jonathan: thursday evening will be a big evening for the president also for wall street including a double dose of chairman powell, central bank rate decision and a key dish and key u.s. data. we will get the jolts number as powell begins his to date annuals -- semiannual testifying before congress. we will also get an ecb rate decision friday in the u.s. federal payrolls report. you framed it perfectly in your most recent note, the fed versus

the ecb. can you walk us through the difference on being data-dependent in europe or the united states? >> right now, it's a bit more difficult for chair powell. in the euro area, president lagarde and her colleagues are looking at inflation. is inflation coming down fast enough? ? they've got week row in the german economy especially manufacturing is already in recession. if we look at what's going on in the u.s., you mentioned some of the comments by nouriel roubini. i saw a headline saying he used the phrase is the risk of a note landing scenario and growth staying high? that's the tricky part for the fed. they have to worry about nonfarm payrolls which is coming up. we -- we see a bit of a step back but nothing particularly week so we are at about 200,000 for the month, 160 or my private

payrolls. it's slowing down but not collapsing. the fed really wants to see both inflation continue to come down and growth softening up a bit because they don't want an economy that will leave inflation six months from now, year from now above 2.5%. jonathan: i'm heard you heard to rsten slok who we talk to early this morning. he says maybe you get no cuts in 2024. what would you need to see in the data for that to become your base case? >> that's a great thought exercise. i'm deeply skeptical that's where we end up. i think you need to see the real side of the economy continued to roll. 300,000 nonfarm payrolls but continuing through the first half of the year into the second half area you also need to see

inflation not coming down. there's been lots of discussion and new data about population migration so maybe we could have stronger job growth and with inflation coming down, that is the trick for the fed. they have to look at both inflation where it is now and where it's going and the real side of the economy at the same time. i think you have to see substantial outperformance from people from both of those variables in the economy. lisa: one of the main reasons why slok revised his views because of financial questions and their easing especially corporate bond sales and ipo's and deals that are trying to get through. how much have you seen that is materially shifting higher? what is your outlook for inflation and growth in the u.s.? >> i think the tricky thing with financial conditions is which particular corner of the world are you looking and what is your starting point for the comparison? if you look from october when

the 10 year rate was near its peak through january we had this substantial rally, it's easy to make that narrow case that things are easier. if we take the corporate bond issuance that's been going on, any refunding or refinancing the corporations or doing from three or four years ago, they are refinancing into higher rates than what they had been paying. it's a bit of a double edged sword. if we look at banks even though short-term interest rates, the fed policy rate is not change since july. the share of deposits that are retail and low-cost deposits has been going down. the share of wholesale funding for banks where they have to go in the market and pay market rates has been going up. even with the fed policy rate staying constant, the cost of lending has been going up over time since the fed stopped acting interest rates. i don't think it's easy to say

across the economy everything is so much easier and it should support the economy. lisa: there is this idea that keeping rates at 5.5% is hurting small businesses, households thickly lower income households, groups that are more highly levered and don't necessarily have their assets in savings. how much is that weighing on the fed? even if it's not cramping the big copies and you see stock valuations rise, there is serious harmful effects on a swath of less opulent areas. >> i think it's impossible to get away from the idea that monetary policy which is a blunt tool has a differential effect across different folks across the economy. way back when i was a professor, i wrote a paper on the differential effects of monetary policy across the economy. i think that's very real. the type of crimping you're talking about is unfortunately

exactly what you expect. monetary policy is blunt. it's fed raising the cost of our wing. it's not necessarily the people who are affected more. they will be the ones who will have more borrowing needs and others. those who have less alternatives in terms of how to get around the higher cost of living. that point is exactly right but it's also very much the wave monetary policy has always worked. it is potentially a bug and a feature about monetary policy and how it works. jonathan: i want to inject some politics. shrinkflation price gouging, is this a political argument or strong economic one? >> i think this is a real challenge. this is where i am constantly reminded as an egg headed economist, i'm not a real person. i talked to my family and friends who have nothing to do

with the macro seen and i say inflation has come down. their reaction is, i am paying more than i was two years ago for just about everything. how can you say inflation has come down? the answer is there is a difference between the price level in the rate of change in the price level but in terms of politics which is where you started, perception is reality. i think part of the reason why we are seeing the polling numbers so negative on the economy is the fact that the price level itself is so much higher than it was a little while ago. jonathan: the perfect answer, thank you so much. good to see you. how many conversations have you had with family members like that? lisa: everyone is trying to explain inflation. the inflation rate is coming down but did you see my rent? jonathan: what was it for years ago before the pandemic? lisa: it's a matter of time. jonathan: that's the challenge for the present on thursday

evening to connect with those people. let's get you an update on stories elsewhere. dani: shares of jetblue arising after the company announced the termination of its merger pact with spirit. the two airlines have been valued at $3.8 billion. the department of juice this -- the department of justice sued to stop this merger. the ceo of jetblue said we believe this merger was worth pursuing because it would've unleashed a national low-fare. apple has been hit with a $2 billion fine by the european union over its app store rules. they say apple abused its dominant market position for the dominance of using streaming apps, preventing users from being informed of cheaper deals. >> apples rules resulted in withholding key information on prices and features of services from consumers. as such, they are neither

necessary nor proportionate for the provision of the app store on apple devices. dani: it's the first find against apple by the eu. apple has rejected a ruling plenty regulators failed to uncover credible evidence of consumer harm. nvidia has launched another milestone. is now the world are biggest company. the rally drove its valuation past $2 trillion for the first time. there friday close put it third on the list behind microsoft and apple. nvidia shares have risen more than 66% this year. that's your bloomberg brief. jonathan: thank you. message from a bloomberg subscriber -- with ruby need turning around, now i'm worried. lisa: you see? that's what you will get. i also got a message saying the opposite. you are worried there are not enough people worried? jonathan: if you missed it

earlier, nouriel roubini said the biggest risk was upside risk. up next, macy's gets a better offer. >> we are very hopeful we can increase our offer we get access to the limited diligence we need and for that reason, we made the west. the response was unfortunately from the company that it was premature to begin negotiating. jonathan: that conversation is up next, live from new york city and the opening bell is 45 minutes away. futures are slightly negative down by two -- 0.2%. ♪

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points. macy's is getting a better offer this morning. >> we are hopeful we can increase our offer if we get access to that relatively limited diligence we need. we made the request. the response was unfortunately from the company that it was premature to even begin negotiating. we have expressed that to macy's. we walked from through our capitalization and i'm hopeful -- and they told us over the past several weeks they had no additional questions and with respect to our financing. jonathan: that's the latest on the bid being raised for macy's. macy's still reviewing the offer after a restructuring plan which would close one third of u.s. locations. forrester research joins us now for more. let me ask you bluntly, does this get the deal done?

>> i think it depends. there is still a lot of unknowns. macy's doesn't have the answers they had asked for before and how the financing was going to happen and it sounds like the buyers don't necessarily have all the details from due diligence they had asked for either. there are a lot of things that are still in the air. the numbers seem to look attractive but whether or not they can actually make it happen in this high interest rate environment remains to be seen. jonathan: let's say they can, do have an understanding of what would happen to the scum? >> typically when there is an acquisition of this sort, usually the assets are harvested and there is essentially baseload decline in the retailer. the biggest assets is the real estate properties. what will happen with herald square and other assets they may have that are physical

brick-and-mortar stores. that's really the question. i think they will probably try to persuade the shareholders of a slightly different story that they will preserve jobs and they will preserve the locations that they will stay open. i think it is hard to envision that they will be able to turn the department store sector in general or the apparel sector to have a major turnaround that would reverse the fortunes of macy's anytime soon. i unfortunately do think this is probably headed into the direction of may the outcomes of some of the other private equity retail acquisitions that happened over the years. lisa: it's really about the real estate. what has gone so wrong at macy's? is it an environment issue that the department stores -- store is having a hard time or a hard

time or macy's specific issue? shares dropped 10% this year and a whole lot the year before. >> a lot of it is the macro economic factors. the entire department store sector has been under pressure pretty much since 9/11. it peaked around 2001 and has been on a downward trajectory since then. a lot of it is due to competition. it's everything from companies like amazon that have been there space and the mass merchants that have encroach the apparel category more and more. it's specialty retailers like sephora. increasingly, it is new chinese upstarts that are eating into these sales. has macy's executed badly? i think they have done pretty well given the circumstances. they leaned heavily into sectors like private label, apparel and other merchandise with small

format stores. they have leaned into luxury with -- like bloomingdale's which is relatively resilient. the truth is, is not enough. the macy's flagship brand which had been a series of a lot of departments or acquisitions over time has been really challenged. this is one of the top -- apparel is one of the toughest sectors and retail. department stores are really challenged even within the apparel sector. lisa: if this transaction goes through, will it be broken off and sold off of the real estate and left is a vestige? >> or it could go into bankruptcy. there are any number of scenarios. you see this in the office supply sector. you see this like what happened with toys "r" us. private equity and acquisitions of this sort just, i've seen

very few great outcomes for retailers and that's why i am a little skeptical for the future of macy's, skeptical about their future. that said, i don't necessarily see a path for them to get back to stock price of $70 either. given that outcome, this may, from a maximum shareholder value standpoint, an investment they've gotten this moment in time. i think one consideration is commercial real estate in new york may not be at a premium. one of the biggest assets of macy's is that harold squared store which is an entire city block. the big question is, in a better environment, could it have -- credit unlock more value for the retailer? annmarie: if this deal happens, would they go through with

closing one third of those shops? with a lean more toward luxury retail? >> they already announced separately from this deal, 150 store closings. i don't think anything will change or reverse that. sounds like they were underperforming stores that barely generated any revenue for the brand altogether. in terms of bloomingdale's solving the problems, the issue is that while there is high margins and very strong from a consumer loyalty standpoint, it's a small format store and it will only generate so much in revenue. it will never offset the revenue that a larger format department store can generate. they would have to open a lot of blue mirror -- mark arrays 20 --

blue -- blue mercury's to challenge macy's. the challenges that those brands are opening their own stores and you are sort of catching a lot of newer brands on the rise and that's tough. jonathan: we appreciate your time today. macy's in the premarket now, positive by 14%. still below the offer price of 24. we are trading about 20.6 in the premarket. lisa: this maybe offers more shareholder value. what's the threshold it has for why the deal didn't get done the first time? jonathan: we will find out hopefully a little bit later. coming up tomorrow, bnp paribas, blackrock and new york life investments, a lot to talk about. we will pick up on that conversation.

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>> good morning. we have a new narrative of no landing. what does that mean to the rates market and equities? we discuss over the next 60 minutes. a dip at the open. we are counting down. >> everything you need to get start for the set -- get set for the start of u.s. trading this is bloomberg: the open with jonathan ferro. manus: