>> perhaps inflation may remain high and much stickier. >> we will be in this choppiness for a while. >> i think the fed can debt -- can get down to 2%. they not gain gained confidence or lost confidence. >> if they want to be sure they will be successful getting inflation down to 2%. >> we are not through the teeth of this inflationary challenge. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: how is it friday already? let's get you to the weekend.

good morning, good morning. this is "bloomberg surveillance." your equity market of the s&p positive .5%. upside surprise on cpi, upside surprise on ppi arguably pushing back rate calls even more. bank of america talking about goldy shops saying we have gone from goldilocks to stagflation. lisa: right now it is hard to see stagflation priced in. we have gotten two straight hot inflation reads at the same time retail sales are causing concern it may be the consumer getting too stretched. jonathan: it has been weird when you think about the equity market reaction. we were down about one third of 1% on the s&p 500 yesterday on hot ppi. even that we have had the reaction in bond yields up

equities have been pretty steady. lisa: ultimately if the fed cuts rates more because of this idea of stagflation, the idea of weaker growth, that will be positive for equities. a resilient economy will be positive for equities. if it is stagflation shock that will be a massive problem. a lot of people are not counting on that. when i bring that up they are like stop it, get off the catastrophic thought process, and they might be right. jonathan: we have talked about inflation, let's talk about the stag. retail sales weak for a second consecutive month. bank of america said if you are worried about a re-acceleration worry no more. the strength of the consumer is fading. look at that data specifically it looks like it is. annmarie: walgreens and walmart said consumers are becoming more

choiceful. our bloomberg intelligence parsing through the data saying consumers are running out of spending runways as they exhaust their savings and remain cautious about borrowing. if the consumer is starting to feel that that is why i am looking forward to the university of michigan sentiment today. last month the preliminary reading and the final reading were different. you saw the sentiment have a little bit more meh when it comes to what is going on in the global economy. we know gasoline prices were going up. you are see cracks in where the consumer is looking for relief. jonathan: we will get into that a little bit later this morning. got to talk about japan. maybe the biggest data point this week was outside united states. wage negotiations, pay deals north of 5%. we have been waiting for the federation of unions to get together and tell us what those

wage deals would look like this time around. they are higher than they were 12 months ago. lisa: almost double what they were. that is the increase in prices they negotiated versus 3.8% last year. i really enjoyed your special. you highlighted what is at stake. is there a risk the bank of japan does not act and that could cause a massive devaluation of the japanese yen. jonathan: jonathan: will be putting that out on youtube. subscription only. it is very expensive. people will mail in asking. there is no special. it did not happen. yields are lower by a single basis point. the euro a little stronger. 1.0 899. yesterday we saw the dollar stronger against everything in g10.

lisa: i was blown away by the flows. we saw the highest flows into equities back to 2021. the flows are going to the u.s. across the board. this is the point that everyone is buying the u.s. exceptionalism story. everyone is plowing their cash into the united states because where else will you go? it is heads they win and tails you lose and that is what everyone is buying into so the dollar will feel that just a touch. jonathan: dxy unchanged. coming up, and hot inflation print pressure stocks and bonds. greg valliere on chuck schumer's scathing comments on the israeli government and growing expectations on the boj to hike rates next week. another hotter than expected inflation print pushing down rate cuts.

"for those of us who begin our careers when 10-year treasury yield, corporate yields, and mortgage rates were at double-digit levels, the phrase none for me, thanks, comes readily to mind should the fed cut rates too early. " do you smell the scent of stagflation? >> i think it is a little too early to call that. a couple of hot numbers in terms of hotter than expected inflation in the process of a fed funds hike cycle that has been remarkably sensitive to its effects on the economy just tells us this is part of the bumping this you have coming out of where we have been going into a sustainable economic recovery at moderate pace with what is the equivalent of full employment, 3% to 4% employment. lisa: there is one take away.

it is that all the hopes and dreams seem to die when we have rate hikes delayed or deferred or put off indefinitely. that has been the take away. when people worried about rate cuts you saw the people rate underperform dramatically on the s&p 500. do you take away something about that in terms of how vulnerable that trade is? john: too short a period to take away and think this vulnerability that does not exist, it certainly does exist, but at the same time we are headed in the right direction and it is just extraordinary times when it comes to -- s&p 500 earnings -- up 4%.

with that, four sectors double digits for earnings growth and not all tech. things are good. it is just they are not as great as people would like to see. we are in the car but are we there yet? lisa: you are waiting for there to happen and not the stagflation to happen. what is the line between the two? our minds have to go to the stagflation point given we saw inflation hotter than expected and retail sales lighter than expected. when do we get a definitive read on which it is? is it the strength or is it the slow down? john: it probably comes from a combination of both. it is the combination of the resilience with the slowing. the fed has not been on holiday, it has been bringing down the rate of inflation. inflation is an insidious thing.

the other thing we are waiting to see, and it is beginning to happen in food. we have seen it in some respects in clothing. it is competition. when you go into inflation those who experience high input costs eat the inflation and do not pass it on. then when everyone knows inflation has reared its ugly head they pass it on. then once the fed does what it is supposed to do, then those that originally ate the inflation then hold on passing it on for a bit longer so they can make up for the losses at the beginning of the cycle. then somebody says i think i can sacrifice my unit price and maybe make it up in volume. that is what we are waiting to see. right now i think it is a good thing that the consumer shows

they are beginning to think that genuinely inflation will be here for longer. it may be. at the same time, the direction of the growth of inflation is on the way down and that is where we see the opportunity remains in the equity market. annmarie: look out for university of michigan later for consumer inflation expectations. a risk factor in the rear -- a risk factor in the near term is that median dot in the fed projections comes down from three to two. is that a big deal when this market has gone from seven to three and equities are close to all-time highs? john: i do not think it is a big deal. it is not just the fed's part is in the right place but the tone of fed speak is very aware of what is going on. it is going gently into that good night and the sense they

are very sensitive to what is the mandate of the fed, which is to produce an economy that grows at sustainable pace without horrible inflation, and then when it comes to employment, full employment as defined between 3% and 4% unemployment, it looks like they are doing the job. i do not think jay powell and his fed want to have a legacy of cutting too soon or staying at the high levels relative to where we were before for too much longer. that said we continue to think the second half of the year when we see the rate cuts happen and we never expected the five to seven that others were. we thought it would be one to two or perhaps three which is what the fed intimated last year. jonathan: i want to finish up by talking about sectors. i know you liked cyclicals over

defensive's. traditionally defensive would include things like health care. now health care is a lot of where this money is going in the bull market. what is defensive to you? john: defensive would be consumer staples. a significant portion of health care outside the weight loss drugs and some of the offsets that come with that related to what can be done against heart attacks and things like that with the same drugs. we cannot help but think you want to be in technology, consumer discretionary, industrials, financials, and we are getting digital exposure to materials. it just looks like people are looking at the world and thinking china may be having real problems that it still has to address but the rest of the

world is in a process of normalization where we are in a better situation. we are leaving the emergency status of the world economy and in that process moving towards a more stable environment. that does not mean anything can happen that will counter that. you have to be diversified and know what you own and have bite sized expectations. you cannot get too gaga over the market. we are only 1% away from our year end target. people were asking us through most of the first quarter why don't you raise your target? when we started out in december we were indicating 13% upside. we did not realize how fast we were going to move. lisa: are you going to upgrade your forecast? john: we will have to see. i am looking at all the stuff you're looking at.

we have to give it consideration. i must say from where we are sitting today it would seem like the likelihood of being forced to raise might be necessary after all of these bearers have suddenly gotten under the case. some of these are talking out of both sides of their mouth. stagflation, other group saying it will go higher. i tried to avoid the noise and separate the signal from the noise. jonathan: appreciate your time. i think that was a diplomatic way of dancing around the question. lisa: it may be. only 1% away from the target. it is not exactly like the market will crash. jonathan: 5200 used to be really bullish and 5400 was just what are these guys on? here we are just around those levels. lisa: went away start to get 5600?

-- when we start to get to 5600? if things are bad the fed will cut rates and if things are good, things are good. jonathan: that is the challenge after the cpi and ppi prints. does a temper their ability to respond to adverse shocks. i understand what the consensus is. i wonder how challenge that view is. lisa: and how underwater this market would be for stagflation shock akin to what you're talking about. jonathan: let's get you an update on stories this morning. here is your bloomberg brief. yahaira: the chinese government is calling on electric vehicle makers to sharply increase their purchases from local chipmakers as part of a campaign to reduce reliance on western imports and boost china's domestic semiconductor industry. this follows efforts by the u.s. to curb chinese chip technology.

copper searching to an 11 month high. it rallied on bets that a pickup in global manufacturing activity would push up demand for industrial commodities. the metal is seen as a bellwether of the global economy has surged as investors warmed to the idea the worst of the global downturn is behind us. bitcoin is retreating from its latest record high amid an intensifying debate about whether the bull run into cryptocurrencies has reached a bubble. it reached an all-time high of almost $74,000 earlier this week. bitcoin in the top 100 tokens -- bitcoin and the top 100 tokens are up this year. jonathan: favorite story of the last 24 hours. bernie sanders. if it was up to bernie the weekend would've started today. 32 hour weeks. lisa: not a bad idea.

he knows how to cater to his constituency. jonathan: are you saying his constituency does not want to work? is that what i just heard. lisa: do you want to work on friday? jonathan: absolutely not. i am -- mi his constituency? -- am i his constituency? i will let you at home answer that. schumer reaching his breaking point. >> i believe a new election is the only way to allow for a healthy decision-making process about the future of israel. jonathan: that conversation coming up next. live from new york this morning, good morning. ♪ how am i going to find a doctor when i'm hallucinating? what about zocdoc? so many options. yeah, and dr. xichun even takes your sketchy insurance. xi-chun, xi-chun, xi-chun! you've got more options than you know. book now.

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jonathan: stocks around all-time highs.

equities pushing higher. phenomenal to see another hot inflation print with his equity market down. yields climbing higher. this morning a little bit lower. 4.28 on the u.s. 10 year. chuck schumer reaching his breaking point. sen. schumer: prime minister benjamin netanyahu has lost his way by allowing his political survival to take precedence over the best interests of israel. at this juncture i believe a new election is the only way to allow for a healthy and open decision-making process about the future of israel. jonathan: senate majority leader and longtime ally of israel chuck schumer calling for benjamin netanyahu's exit convert tensions -- calling on tensions in congress. mike johnson saying "it is plain wrong for an american leader to play divisive role in israeli politics while our closest ally in the region is an existential

battle for its very survival." greg valliere joins us. that was quite the address. does that help the president or hurt him? greg: i've seen reports that the white house cleared the speech. i have to think the white house thinks it helps them. to be a cynic, which i am most of the time, i think schumer and the white house realize they could lose the senate. larry hogan running from maryland makes it tougher for the democrats to hold the senate. i think the speech was designed to give cover for people critical of israel and they can now be more critical and say chuck schumer is as well. annmarie: we got the annual threat assessment this week and benjamin netanyahu was named in it, talking about his viability as a leader. was it appropriate for schumer to say this given the fact this is been widely broadcast already? greg: why say what is fairly

obvious? i fully agree. i think by saying it he brings out a lot of republican critics who say the democrats talk about meddling in our elections and we are meddling in other people's elections. annmarie: is this a pathway for congress to talk about strings attached when it comes to israeli aid? greg: you look of all at ukraine. things have started to move. mike johnson has said he would move the ukrainian aid bill but there would be different things tied to it. maybe it would be a loan, maybe it would be lend lease. maybe it would not be the full $60 billion. maybe we have gotten into the premise that the provisions in an israeli bill or ukrainian bill may get changed. annmarie: that is what was voted by former president donald trump. we have the remainder of the

bills by march 22. will those bills get done? greg: we have -- things have started to move. we have done six of the 12 spending bills. out of the remaining five are almost done. that leaves homeland security, the border, stuff like that. if we have now 11 out of 12 that is not bad. i think we will be done well before the april 30 deadline. if they do not get something by april 30 there is an across-the-board cut, which nobody wants, especially in the defense industry. i do see progress and once the progress becomes more obvious they can move onto to ukraine and israel. lisa: that is where the progress is. i want to go back to the heavy lifting of national security and tiktok and the discussion around that. progress may be on the defense spending and some of these bills.

do you see anything in some of the tiktok proposals that look viable in the near term? greg: we will see how much money steven mnuchin has. i'm not sure he has enough money to buy tiktok. maybe john has enough money to buy tiktok. i would say that would be a heavy lift. i do not think mnuchin alone can do it. he will have to put together a consortium. suddenly the idea of buying tiktok is on the table. jonathan: if i can put together some money there is a club in the north of italy i want to buy, never mind tiktok. i think tiktok has been smart about how they have dealt with this. they always frame it as a potential ban. they do not even entertain the other part of the bill that talks about a sale. they know how that will play. a lot of americans do not like the idea of something being banned, vertically if it is a place where they can express themselves freely. then they talk about how this will hurt business and

individuals livelihood. that will start to play well. china is very good. china is very good at playing the game in the west in the united states. we will explore everything legally and they will. then they start to push the buttons in society and a pretty effective way. annmarie: also they put a terminus amount of money behind this in the lobbying camp. $8 million last year alone. to your point about a ban, they constantly do this as a tactic. they want americans, the youth to feel like this will be banned. senator warner was on bloomberg and we need to make sure this is not a ban. lisa: i did a sophisticated social survey at the dinner table and i said to them, how do you feel about the fact that potentially the chinese government could be seeing what you do. one of the survey participants

said to me that he felt it would be ridiculous for him to look at the stupid videos he watches. why would the government care? i said you do not know what the messages are what else could be thrown in there and he looked at me like i'm crazy. maybe that is how survey participants are. i'm just saying it does not resonate at all. jonathan: and we know china's position is dripping in hypocrisy, but this is where we are. equities positive .2%. coming up, capital economics. expectations growing for the boj to hike next week. this is bloomberg. ♪

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jonathan: stocks just about higher on the week. a .2% on the s&p. on the nasdaq up .2%. we just focus on the front end of the yield curve. the two year yield close to 2024 highs. just short of 4.70. we have been in the 4.40 all the way up to close to 4.70. up every single day this week. encouraged by the economic data we have seen so far. lisa: jim reed over at deutsche

bank has great morning notes, concise with all of the interesting tidbits from the day talks about how we are now pricing in the fewest rate cuts of the year. 76 basis points being priced into the market versus the expectation of 158 basis points. massive repricing. where is it showing up? why do people not care on this particular level? stagflation will be the circuit breaker. we are not there yet. jonathan: this is where it may be is. brent crude and wti rally. wti back in the 80's. copper on the london metal exchange very close to 9000 right now. through that level in the last 24 hours. highest in 11 months. this is what katie kaminski said to look out for. lisa: and you are seeing in the

commodity market the idea of surprise -- of supplies not offsetting demand and your seeing goods have bottomed out. it is this double way me. goods pricing increasing. annmarie: it also shows the change in the economy and the need for these goods. copper is needed to make chips. this is the semiconductor industry. iron ore is to build houses and not doing very well. a lot of this has to do with china. jonathan: i will throw in gold as well. gold, all-time highs. lisa: eyed -- annmarie: my jeweler told me, no gold right now, you have to wait. jonathan: can we throw in cocoa as well? coming off of gold, coming up chocolate. lisa: [laughter] happy valentine's day. it is so hard to come up with a

cohesive narrative for gold. jonathan: just try it. another hotter than expected inflation print. a jump in u.s. yields. consumer spending showing some signs of weakness. jobless claims continuing to show strength. that is the difficulty for yesterday's data. take out the inflation stuff. jobless claims screamed nothing to see here. you look at retail sales and you are like maybe there is a problem. lisa: we don't know. we are looking into a black void in the fed is looking into the same black void. where are the balance of risks? people are speaking from both sides of their mounts. john stoltzfus was good on that. some of the data looks good. retail sales numbers do not operate. is it idiosyncratic or something that is telling? annmarie: i will go back to what

janet yellen said to foxbusiness. she said inflation is starting to moderate and the trend is good but it will be bumpy and that is what we are seeing this data. i find it a weird point in the economic cycle where we are at this place when some people say you get confused, it is because people have different views on could there be a hike after this entire year jay powell set us up for a cut? jonathan: ian lyngen of bmo coming up shortly. wednesday we were down 13%. thursday down more than 6%. the ceo of cleveland cliffs raising the possibility of another bid for u.s. steel. cleveland cliffs considering an offer in the $30 a share. the discussion coming is president biden pressures besides to keep the company under american ownership. annmarie: cleveland cliffs has the backing of the president. i would go to wolfe research

that says it is unfortunate timing of this deal being brokered. if this was not an election year? with this deal go through? probably. then you have to think of what were japanese executives thinking of weighing into this massive american name during an election year where both of these front runners talk about bringing manufacturing jobs into the united states? the timing of this -- they read the room completely wrong. lisa: i wonder what this does to international investment. it will not have a significant impact. it sounds really esoteric. there is a question of where national security leaves off and were politically motivated protectionism picks into play and you pick winners and yupik losers. you pick who will make money and who will lose money. you pick steven mnuchin and you throughout other people. at what point do you risk muddying the lines between what is real and what is politically viable? jonathan: i agree, particular in

the auto business. we are drifting towards central planning in the auto business in the west. i saw some comments from the mercedes ceo where he said we do not want tariffs, we do not want you to block chinese entrance because they have a big business in china and they do not wanted coming back on them because they want to sell mercedes in china and in europe. lisa: if you talk to people who want to effectuate this transition, they do not mind the idea of price competition. it will ultimately be the price-sensitive buyer. how you do this without creating blown out cities and industries -- there is a real debate and i wonder how much is getting money by political posturing. jonathan: central planning so far has failed, the market has won. the market is screaming hybrids and that is where toyota is and where others who've been pushed

by the government to invest huge amounts of money towards ev have to face the reality that the destination might not have changed but the time to get there has certainly lengthened. annmarie: this is what john kerry said in davos. it is not a light switch. this is a transition that will take years if not decades. going back to china, what mercedes said, we do not want to be ostracized from the chinese market. bloomberg scoop overnight, china urging ev makers to only use chinese semiconductors. they want to make sure they are building their own wall. jonathan: they put a lot of money into building out that market. big story out of japan. the largest union group announcing the biggest hike in wages in three decades. workers said to get raise to 5.2%. the bank of japan governor has cited the wage talks is something to watch ahead of the rate decision tuesday.

speculation the boj will raise rates for the first time since 2007. our guest expected a hike next week in joins us now. the yen has been week through much of this week. as the market starting to pick up on the fact that even if they do move this week this might be it? there are no more moves after that? >> i think that was probably known for some time. most of the them fact of the yen has been driven by foreign factors more than domestic factors. you are right this will be a one-off because inflation is coming down, it is trending lower in this year will be the high water mark for wage increases. the way unions operate in japan is they tend to factor in inflation the previous year which is why we are now getting

the 30 year high. it will take further heat out of the inflation cycle. jonathan: why is there a different approach to wage growth in japan compared to wage growth in europe and the united states. in europe it was seen as a problem. in japan it was seen as a solution, the start of a virtuous cycle. where does the difference in attitude come from? marcel: it relates back to the post bubble period. the last two decades where japan suffered deflation that is left deep scars on corporate executives. a lot of firms had to pay back debt for years, some for decades. constantly in retrenchment mode, trying to cut costs and pay down debt is something that has weight on the psyche of the japanese and on households. if you else have -- if you ask

households, a lot of households say wages are falling. i do not think it is good for consumer spending. consumer confidence is holding back confidence in the economy and also business investment in japan. lisa: abate with the shock be -- how big with the shock be if the bank of japan does not hike rates at next week's meeting? marcel: i do not think there will be a big shock. the business survey as well as reports from the regional boj offices across the country that will allow them to judge more of the conditions. the problem with wage negotiations is they only cover 16% of workers so there is still a question of how much our smaller firms that do not participate in those talks, how much are they raising wages?

that can only be gathered on the ground. there's not much statistical data to answer that question. jonathan: thank you for joining us. thank you for joining us late in the evening in singapore. you are on the money with that question. there is a risk in the fx market the yen gets away from them if they do not hike next week. they beat is too soon to say they have to do it this month and perhaps they do it the following month. that is what people are thinking about in foreign-exchange. lisa: securities coming out this morning and say they are changing their view from an april rate hike next week's meeting. they cannot ignore the window they are being given. if they do, what does that say and how much could that royal. the yen is banking on this. jonathan: we will throw that question to elsa of rbc. s&p futures positive .25%.

here is your bloomberg brief. yahaira: hamas has proposed a comprehensive cease-fire deal in a bid to move forward talks with israel. reuters reporting the plan would see the freeing of hostages. this in exchange for the release of up to 1000 palestinian prisoners. israeli prime minister benjamin netanyahu says the militant group is still making unrealistic demands. the country's war cabinet is expected to discuss the matter today. voting is underway in russia in election that is all but certain to extend vladimir putin's rule by six more years. it comes as the war in ukraine entrance its third year and a crackdown among media and rights group. putin is unchallenged. three other candidates on the ballot are low-profile politicians from token opposition parties that toe the kremlin line.

a mishap with a cockpit seat may have been responsible for the midair plunge of a flight earlier this week. the wall street journal reporting a flight attendant serving a meal to the pilot hit a switch on the seat, thrusting the pilot into the controls and pushing down the aircrafts knows. boeing told the journal it is in contact with the airlines and helping with the investigation. jonathan: thank you. no. up next, this week's data making the case for the fed to push back rate cuts. >> we have forecasts of the pce. if you look at the core i see forecasts that reinforce the comments i was making earlier on a steady glide path down to numbers closer to their target. jonathan: that conversation is up next. this is bloomberg. ♪

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jonathan: i'm trying so hard not to talk about this. i guess we have to. that flight. that is absolutely terrifying. lisa: i hope it is terrifying enough to keep people away from booking travel so the prices go down. jonathan: i did not realize they were still flying the plane when they sat there and ate. annmarie: what was the mishap? they were saying -- jonathan: they were saying she had food and bumped into the seat and push the buttons. that can happen. accidents happen. you do not believe them? lisa: people are trying to investigate the button pushing incident and figure out what led to this and how susceptible it is to hitting that button and going straight down and people going straight to the ceiling. we will have to see. jonathan: amh thinks it was

dessert. jonathan: in the bond market, yields lower by a single basis point, 4.2646. it is dangerous. this week's data making the case for the fed to push back cuts. >> we do have forecasts of the pce and if you look at the core, i see forecasts including the fed's own that reinforce the comments i was making earlier on a path down to numbers closer to their target. exactly how that proceeds and how they process that in their monetary policy transmission mechanism, that is up to them. jonathan: here's the latest. ppi and cpi data supporting claims inflation may be more persistent than thought indicating the fate -- the fed may delay cuts.

"the probability of march cut remains close to zero. a june cut remains a certainty. for dollar to break higher we would need to see reacceleration in inflation and a bigger non-us risk of shock." elsa joins us for more. let's talk about what we have heard this week and whether it smells like stagflation, project lay the week retail sales print and the hotter than expected ppi. how would you frame that data? elsa: if you look at the momentum in the u.s. data and also economic surprises they have been weaker in recent weeks on the activity side and then on the inflation side a little bit firmer. it is quite a jump from there to talk about stagflation. what is interesting is we are seeing the market reassess the outlook for fed cuts for this year. we just recently changed our call. we had a june start to the

cutting cycle from the summer of last year and we were looking for the terminal rate to be in the region of 3.75 and we have now revised that. looking for three cuts this year but it is more about the terminal rate, we are looking for something north of 4%, which is the more interesting next story. lisa: that is a fascinating story. a neutral rate of 4% or more. why is not be -- why is that not being priced into a stronger dollar? elsa: there a couple of sides. even though we are seeing weakness elsewhere there is an interesting relative productivity story. even though productivity has been stronger in the u.s., the wage growth we are seeing is less inflationary than it is in the euro area, canada, the u.k.. for all we see the fed cutting three times this year we do not see something radically dissimilar from the ecb or the

bank of england or the bank of canada. it is that relative dynamic that keeps the dollar from strengthening. that coupled with the fact a lot of investors are long dollars. lisa: i am still mulling over the idea of a neutral rate north of 4%. this is materially higher. the idea that this is not just a u.s. thing is fascinating to me. are you saying the american exceptionalism story has been overplayed and globally we have a higher inflation and growth profile going forward then we had pre-pandemic? elsa: that is what we are all grappling with. sell side analysts, policymakers, we heard loretta mester talk about that that she is thinking about raising her long-term dot. that is because we are grappling with how the economy evolves post-pandemic. i think there is a difference between the u.s. and the rest of the world and i come back to that notion of productivity growth.

it does suggest the neutral rate is higher in the u.s. than it would be elsewhere if productivity growth is that much stronger. jonathan: what everyone would love in foreign-exchange, the big fat directional trait and central-bank divergence. where can we find that playing it up against japan or something else? is it japan versus europe? how do i play that trait? elsa: i am surprised more people have not jumped onto the japan bandwagon. sell side in lists are always looking for dollar-yen to trade lower. the reaction has been relatively muted as we get closer and closer to the first boj hike. there is a potential for a bit more pullback in dollar-yen because the market is more heavily positioned. my core view has not changed and that unless you are seeing the fed cutting rates, hikes from the central bank of japan will not change the hedging dynamic.

fullback from dollar yen as we get the hike but that is probably a buying opportunity. jonathan: lisa asked what would happen to dollar-yen if we do not get a hike? is there a risk dollar yen gets away from the boj? elsa: at this stage there are number of people who think we do not go in march perhaps we go in april. given the emphasis japanese officials have placed on wages, it seems likely that by the middle of this year, by the time the other central banks are coming in june, it seems likely japan will have hiked rates. jonathan: are we talking about -- lisa: are we talking about a meandering year where they're not clear shifts in what we are doing? the ecb in the fed kind of on the same page. it seems like we are back in this model people have been lamenting the past couple of months?

elsa: it is a pretty depressive outlook for a lot of macro investors. we hosted a macro dinner last night. a lot of us talk about the real decline in fx volatility, the frustration for people looking for big trends and not finding them. it does seem to be an environment well-suited to carry. we have seen people piling in to some of those high-yielding emerging-market currencies. from my perspective i would be thinking more cautiously as to how you fund those. not defaulting to short dollars were short in but using other lowly willing options like aussie. jonathan: what is your favorite trade? what do you like at the moment? elsa: it has to be some form of carry trade. increasingly we prefer brazil over max and you opt to fund that over a lower yield and commodity currency rather than

dollar or euro. jonathan: this is a strong london conversation. elsa lignos. what i pick up is 4% terminal rate at the federal reserve. does the federal reserve know about that? lisa: why haven't they shifted up from their 2.5% terminal rate? the whisper is they are and they are shifting. if it is for point something percent, how much does that shift the concept of how much the fed put really is? it will not be cutting rates to zero or even 3.5%. that materially shifts some of the investment propositions for bonds that are not currently trading and yields in and allow that level for the next 10 to 30 years. the fed -- jonathan: the fed decision next wednesday. the risk factor for next week

according to many of you on wall street, ellen zentner pointing out saying it would take three participants to change from three cuts to two for the median dot to change to two cuts in 2024. we can all agree on the direction. it is fewer, not more than what you are looking for at the start of the year. lisa: which is the reason why it is compelling it is not taking a toll that much on equity markets or credit markets. it does not matter whether or not they can't. annmarie: i think back to what stephen stanley had to tell us and reiterated yesterday, that he will not call victory just yet, but no cuts until after the u.s. election. the fed wants to cut, the data is not there. annmarie: stephen stanley, they will wait until after the election, nobody else is on board with that. they will cut 100 basis points going into the u.s. election? that is quite a call. lisa: i was struggling with all

of the fed prognostications because that cristobal is looking cracked and cloudy and difficult for everybody. they want to cut. the problem is the data is not cooperating. jonathan: june feels stale and highly convenient. it is far enough out to say things are going to change between now and then and we will give the face to cut interest rates. it feels stale based on the data. lisa: basically we are dealing with people you're trying to push out the timeline before they get conviction. right now we are not getting any conviction. jonathan: we have had to change our view sony times. we should stick with our view and then in june everything will change. coming up next, sarah hunt, michael sheppard of bloomberg news, in lincoln of -- ian lyngen of bloomberg capital markets. the second hour of "bloomberg

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>> if the fed starts to materially push back rate cuts, that is when you start to have to worry. >> we thought the first rate cut would come in may. we have push that back to june. >> they are not in a rush. >> you can live with less easing by the fed if it happens in the context of a strong economy or strong earnings.

>> we are not in a recession or the edge of it. we do not see indicators that would suggest a weakening economy. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the stock market up on the session and up on the week. equity futures positive .2%. the second hour of bloomberg surveillance begins right now. we are closing out the week very close to all-time highs. this week's data was always about how it sets up next week's fed meeting and inflation dominating the conversation. lisa: how does the fed face-off with two inflation rates back to back that came in hotter than expected up growth on the margins may be slowing but getting to an area less comfortable. do they deal with it with the dots? if they give any signal or do they just back off and say do

what you do? jonathan: they have the luxury of time. the economic data seems to be in conflict. yesterday was a fantastic example of that. jobless claims said nothing to see here. second month of week retail sales. mohamed el-erian said there was something in the payrolls report for everybody. it was ambiguous. there was something in the data for everyone. annmarie: when it comes to the data you can decide which way it fits with your thesis. the fed meets next week but more interesting is what they have to wait for. this is not the inflation indicator we look at. for me it will be the end of the month, march 29. ian shepherdson this angkor pce advancing .4%. that is basically january's print. lisa: my issue is there is one conclusive point you can take. inflation is stickier than many

people wanted. it is not just coming from services, it is also coming from goods. how much are we looking at re-inflation from commodities and also from this idea people are shifting back to buying stuff after boycotting it for the services for a while. jonathan: let's go through commodities. copper highest in 11 months. crude back in the 80's. gold, all-time highs. across the commodity market, starting to see it across the board. annmarie: that is why the university of michigan sentiment, you saw people sentiment started to crack because higher gasoline prices. what you're seeing is oil came out and they see a supply deficit through 2024. opec is holding back on some of these cuts. jonathan: did you get the call from university of michigan? still waiting for the call.

lisa: i will crank you tonight. hello, jonathan ferro, what do you think jonathan: stop jonathan: why are you doing in which accent? lisa: i am calling from the university of michigan. jonathan: no. i still don't know what i think about that data. drew member the fed made a move? lisa: this retracts oil prices pretty closely and gasoline prices have been going up. annmarie: in the last month individuals saw inflation 3%, up from january. it is tiny but people's

expectations are rising. jonathan: coming up this hour, sarah hunt as another higher-than-expected inflation print. dan ives of wedbush. ian lyngen of primo of why he sees hints of stagflation. we begin with our top story, treasuries holding steady after selling off on the heels of another hotter than expected inflation print. 10 year yields on pace for their biggest rise since october. sarah hunt writing "there is a tension between the idea that not cutting rates means financial conditions will passively tighten if inflation continues to wind its way lower and concerns that when there is enough liquidity in the conditions are still too loose." sarah joins us now. what you think of that data? how does it change next week's

fed meeting? sarah: i agree with the guests you've had on earlier. the fed wants to cut. they don't want that to happen. this data does not give them any help. they could just ignore it and say we are looking at other things, we were look for the pce and we are not using this. i think it makes it tougher for them to do it on the timeframe they were looking at. if this had been a more benign number you would see the may call comeback. i do not think anything was looking for anything in march. they may not see a lot about it. jonathan: should jobless claims make them comfortable or should retail sales make them uncomfortable? sarah: yes to both. that is the problem. we get these different pieces. one of the things chair powell said his we see the risks of

being balanced between inflation and the labor market where before everyone was like they will try to kill the labor market. the other data was not that great. it strikes me that hypothetically some people might be very bored with the model because it has been the model for quite a while. what does a traitor do given the fact that we have a lot of them? sarah: they take out too many leveraged bets. this is the problem. someone is looking for a big directional trade. we have incremental moves. the site guys swings from recession to the economy is so great we do not have to cut rates. there has been a lot of moving back and forth but it is from the same two places and that does tend to get the same people. if people are not worried about

rate cuts being pushed out because the economy is good, that is great for the market. jonathan: understand they want more at some of the levels we have hit in the last few months have been incredible. lisa: they have not been a straight shot up. it has not been with any conviction. jonathan: in february we had two of the biggest cap names in the history of the stock market. lisa: is it because people are plowing in and so excited. you have won by not shifting around your portfolio. jonathan: that is why they are board. we caught up with mandy xu

earlier this week and they talk about positioning, upside bias. they are bored because the same things keep winning. well, i think to the extent that the ai stocks are winning, there is a there really making money. there's actual cash flow there. this isn't a group of stocks that is running on a promise, right? it's running on jonathan: there are a lot of parts of the market that is not been participating. lisa: you are bullish on energy and pulled back. we are seeing oil prices at the highest level since november and seeing that supply cannot keep

up with demand after a strong run. have you shifted your view on energy? sarah: cure point there is still excess supply. the stocks have not caught up. they are still seeing that issue going through. does that change, you can see tighter markets. the move has not been convulsive. annmarie: it is crazy we are all excited with a brent crude move in the 80's and there is a hot war in the middle east and you have houthis still striking vessels. how high could you see oil prices? sarah: you're seeing a problem that is causing.

it's staying within a framework that is staying with the fields themselves. if that changes you can see bigger moves because you do not know where the supply will come from. right now supply is not so much the issue. jonathan: you bought a policy shift in front of the election? sarah: it is the longest election of our lives. jonathan: not even getting a proper primary seem so anti-climactic. annmarie: it'll be expensive because these people have a campaign earlier on. especially the former president. jonathan: lisa comparing the race for bp to the bachelor. annmarie: we were floating -- lisa: we were floating a lot of names that had different attributes, he is a billionaire. annmarie: not when you have kristi noem coming out with hit after hit of videos. jonathan: what is happening with

her twitter account? annmarie: she seems to be doing what feels like infomercials. jonathan: have you seen the latest one? she is celebrating inserts for shoes. jonathan: a dentist in texas yesterday, the day before? lisa: the fact that we are talking about this and not the deficit. annmarie: debbie downer friday. lisa: this anxiety underpinning some of the commentary is not wrong if you look at the map. it is fine to talk about inserts and dentists and bachelor-type runnings, but where's the policy discussion i am looking for? i will be a debbie downer on this. jonathan: for those of you watching the bachelor i think joey should have kept maria. if you know you know. sarah will stick with us. let's get you an update on stories elsewhere. someone somewhere left that. yahaira: voting is underway in

an election that is all but certain to extend vladimir putin's rule by six more years as the war in ukraine enters its third year amid a crackdown on media and rights group. vladimir putin is unchallenged, with his political opponents in jail or exile. three other candidates are low-profile politicians from token opposition parties that toe the kremlin line. shares of adobe are falling after posting a week sales outlook. the guidance is fueling concerns new ai focused startups are threatening its market share. the company has been integrating its proprietary ai model firefly into top product such as photoshop or illustrator. a recent demonstration by openai of its video generation model is fueling concerns about competition. a midair plunged during a flight earlier this week may have been caused by a mishap in the cockpit. the wall street journal reporting a flight attendant serving a meal to the pilot hit

a switch on the seat, plunging the pilot into the controls and pushing the aircrafts nose-down. boeing told the journal it is in contact with the airline and helping with the investigation. that is your bloomberg brief. jonathan: up next, the tiktok bill stalling in the senate. >> nobody is talking about a ban. we are talking about transferring the ownership and the algorithm to some other controller that is not chinese. jonathan: tiktok is talking about a ban. that conversation is up next. ♪

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4.30. under surveillance this morning, the tiktok bill stalling in the senate. >> i think we need to get this done and we need to make clear nobody is talking about a band. we are talking about transferring the ownership and the algorithm to some other control that is not chinese. jonathan: tiktok bill facing division in the senate. lawmakers walking back the idea to fast-track legislation that would force the parent company to sell it. democrat richard blumenthal warning the deadline to sell is too short while ted cruz says the measures should face a full amendment process. michael sheppard joins us. how long will this take? a lot longer than we thought it would? michael: it could take a while. when we heard the words regular order later this week coming from senators mounts, that would signal they will put this

through all the paces, including putting it to committee, subjecting it to hearings and amendments and a lot of intensive review, essentially rewriting it and having to send it back to the house. a little bit more than a week ago this was still below the surface. the house went from zero to 60 in almost record times. now we are seeing the senate slam the brakes. they want to proceed the -- they want to proceed carefully. this app has 170 million users nationwide and there could be more at stake. annmarie: the ft also has exclusive reporting it has hit $16 billion in sales. a lot of money is at stake. what narrative is winning in washington? a ban for a rebrand? michael: the word people are settling on is divestiture. they would like to see the app survive but without the tie in

ownership related to china. they want to see it emerge as a standalone american presence separated from the chinese parent company bytedance. that is where things get very difficult -- they think the u.s. is barging in on private commerce where they should not. they are also concerned that giving up some of the crown jewels of the company, including the algorithm, could hurt bytedance. annmarie: cook for night china is urging ev makers to buy local chips. is this the trajectory regardless of trump or biden in the white house? michael: biden has picked up the torch where trump left off with china. he has not taken his foot off the gas when it comes to trying to contest china on a range of fronts. you brought up ev's and chips. that is another one.

seeking to restrict exports to china with some of the most sensitive chipmaking gear. jonathan: bureaucrats in washington talk about national security. the former president calls it america first. what is the difference in terms of policy? i understand the difference in the rhetoric. what is the difference in policy from this administration and the last one? michael: the america first of donald trump is more isolationist and it is one where we see a little bit more of a retreat in terms of those expansive global commitments. one of the differences with joe biden is it is mindful of those core constituencies. we saw him paying a great deal of attention to the steelworkers

and nippon steel to buy u.s. steel. that is one way to brand it differently. at the core there is a fair amount of overlap. they are each trying to build american manufacturing and trying to shore up u.s. economic prowess, even if it is at the expense of some of the global relationships we have built over the years in terms of commerce. jonathan: at times it feels like he is speaking directly to the people of pennsylvania, which again, with scott -- michigan, wisconsin. do they understand the language of washington? michael: the important thing is for biden to speak their language. he has tried to force those relationship with the unions. joe biden is a child of pennsylvania. he was born in scranton and he will remind you again and again of his heritage. you see how that plays out. whether people are buying the

economic message also depends on how they are feeling at home. biden can say one thing, but are they seeing it in their communities or feeling it in their pocketbooks? so far with our bloomberg morning pole in the swing states, they are giving the edge to trump when it comes to handling the economy. jonathan: great to catch up with you. michael sheppard of bloomberg on the latest stories. sarah hunt is back with us. we have these events on the calendar. the federal reserve in june. then you have this election in november. people looking at the calendar and saying it is there somewhere. do they need to think about it right now? sarah: the difficult thing is there such a long period of time and this expectation any number of things could happen. it is hard for anyone to pin it down and any changes on the global stage or anywhere else could shift things one way or the other. deciding today what you think

the outcome will be in acting on that is difficult. with the fed there is the expectation we will get rate cuts, but as those dial back it is not the same as saying we will be down 200 basis points and now we will just change everything and that is ok and great for tech stocks. on the other hand the fact you're getting interest on cash is a good thing. where the fed goes will be a big deal and that keep shifting around. we are hearing north of 3.5, maybe it is 4%. it is hard to say let's make a plan and let's make a plan on the basis of this going this way. jonathan: michael sheppard -- lisa: michael sheppard was talking about whoever wins there will be this emphasis on protecting u.s. workers from international competition. does that feature in what you decide to buy. sarah: i think that shifted from

the beginning of the pandemic to now. the move from what everyone a call it was home shoring or on shoring or however you want to -- i need to make sure i've a decent line of sight into my supply chain because we've had transportation issues. we are now seeing this issue in the red sea. they're all sorts of things on the international stage in somebody who was an ally can become less of an ally. i think that was already happening. i do not think either side of the aisle is pushing in the opposite direction. directionally that will continue. lisa: a lot of people say it has not happened in the near shoring was a lot of lip service that did not come to fruition. do you buy the story we are in the process that is going to be naturally inflationary and bill redundancies, that will have legs? sarah: there are a number of stories about the chips act and why that money is not going

places. from a standpoint of i am a corporate ceo i want to make sure i know where my things are coming from, is it going to be a chip plant in the u.s.? at some point, probably. in the scheme of things i will be more attuned regardless of how things wind up in the white house. annmarie: how does the u.s. block a deal from a friendly ally? how do you prepare for that? it is almost impossible. jonathan: such a good question. we have seen this repeatedly. we are dressing things up in language that might be palatable for our allies. this is the difference between the former president talks about america first, everyone is like america first, what is this about, tariffs on china? then here we are, same policies dressed up in different language, but ultimately the same thing. annmarie: national security in the wall street editorial -- the wall street journal editorial

says it will be a nasty election but there will be policy damage because of it. jonathan: coming up we will catch up with wedbush raising their price target on nvidia to $1000. that conversation up next with dan ives. will not just talk about nvidia. we will talk about tesla as well. what is going on with ev's? the big focus is on the hybrids. this may be the old-school detroit three might be the winners in this mess. equity futures positive .2%. bond yields a little bit lower on the session. on the week a lot higher. from new york, this is bloomberg. ♪

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jonathan: commercial break dominated by dan eyes talking about formula one instead of talking about tesla. >> we can talk about both. jonathan: equity futures on the s&p 500 are positive by .2% with equities lifted and the nasdaq slightly higher. the two-year and 10 year a little bit lower. we've gone from the 400 40's very close to getting back to the 400 70's into next week and that move backed up by the data,

lisa: the call of the morning so for his talking about not just fewer rate cuts. she says we will have a new four rate north of 4% which means the fed will stop very soon after starting with the rate cuts and this is a different commie they can handle a different benchmark rate area has credit woken up to that? it's a valid question. jonathan: there is an inflation field to the market today. copper in london, 11 month highs there and 2024 highs in the crude market. brent crude is short of that level, 85, close to 81. we've got basically year to date highs on cruise, 11 month highs on copper and all-time highs on gold. annmarie: when i look at the metal market, copper and iron

ore, you see the divergence because of china what they will be spending their money on when it comes to the commodity market. they need carper for the technology industry but they don't need iron or as much. when it comes to oil, supply and demand has flip-flopped and if opec decides to keep the supply on site, prices will go higher. jonathan: it took a while to get here. what is going on with crude? the fact that it didn't rally on the back end of last year. lisa: the curious case of the united states pumping oil at a record pace and that's been the story. do we see cutbacks and how much will opec plots undercut the u.s. supply? annmarie: sarah hunts point earlier was valid that supply hasn't been hit but transportation has been hit. for opec to come into this market, it might get political.

this is what happened i had of the midterm elections, prices got higher. the saudi's said we will not you help you out. jonathan: we also gave up some of the midterm reserve as well. senate majority leader chuck schumer calling for new elections in israel saying current prime minister benjamin netanyahu has lost his way. he says he made a grave mistake rejecting a two state solution in a single state controlled by israel guarantees certain war forever and republicans are critical of his comments. mitch mcconnell colleague it -- called it hypocritical for american to call for the removal of a democratically elected leader. not just that but one of the major allies of the united states. lisa: the biggest ally when it comes to the middle east. annmarie: we heard from the ambassador of israel to the united states saying israel is a sovereign democracy, all desk calling it unhelpful.

they aren't happy with netanyahu. he said the quite apart out loud but that leaves the path open for other democrats and not just ones on the left, other democrats to come out and be more critical of israel. jonathan:. is the latest in china. china is quietly asking its ev makers to increase purchases from local chipmakers as part of a move to release reliance on western imports. china had asked automakers to source 1/5 of their chips locally by 2025. it's grown dissatisfied with the pace of progress is now directly instructing firms to avoid foreign semiconductors if at all possible which is led to foreign brands losing out on contracts despite offering prices that are as much is 30% lower than domestic names. lisa: how much are u.s. companies going to get hurt with the tit for tat for china given the fact that there is this increase protectionist at --

approached by the united and there will be a response from china. at what point do you start getting pushback from some of the tech giants? will it be priced and more significantly? annmarie: u.s. officials have been talking about diversifying. we don't want to decouple. this looks like the start of serious decoupling. jonathan: dan ives is here of wind bush. i will not talk about nvidia right now but this is about tesla. wells fargo came on the program yesterday and this what they had to say, no growth this year, flat growth next year and how do you value a company if they don't have growth figures the next two years? >> i disagree in terms of the negative volume. tesla is easy now to get negative. we talk about the day after earnings, china demand has been soft in the communication. on the other cited this, this

will be a company on its way to 3 million units over the next few years. the leverage will be there and we will ultimately get numbers growth coming back out. jonathan: it doesn't feel like that's her the market is now. it feels like the space benefits hybrids. tesla doesn't feel like it's in the sweet spot. what will change your mind? >> do you want an ev or a tesla or do you want a hybrid? a lot of it comes down to price. they need to cut price and terms to of strategically. the problem now is that the numbers are coming down and it will be a sluggish 1q so in the near term, it's easy to be negative. we've been here before. the last decade, many times, we been in these white knuckle

period but this iss not the end of the growth story. ai and other things will still have a significant piece on the horizon but in the near term when i have a positive note on tesla, 30 emails within 10 minutes negative because sentiment -- my uber driver today was super negative on tesla. jonathan: if on the client, the stock is down like 30% to date. >> in my career, in my 25 years, our calls have been when things got to be the worst whether it's apple or tesla or amazon, when things got to the worst, you handheld through those periods in terms of the other side. it's easy to yell fire in a crowded theater when things are like this. lisa: we were just talking about china and this risk of real pushback against american made goods.

have you factored that into a bullish thesis for tesla saying that demand from elsewhere could overcome a lack of sales in china potentially? >> 20% of demand evaporated if you look at china. i just got back from the region this week. it's as negative as i have seen in china, hong kong because of this game of thrones price were going on. it's the domestic tesla and byd and others. i think you could have many winners here. i will say that this is definitely from a tesla perspective, it's the most nervous period i've seen in four years. lisa: let's talk about the other tech giants. there is a question of what other china exposure is there to say nvidia to microsoft or met with respect toa advertising in

china as we get more exposed to the tit-for-tat price war. how do you price that and understand it's being -- it is being priced into the market? >> apple and tesla are knocking on the door saying let us back into china. it's the china exposure. when you look at the godfather of ai and we will see it monday, right now it's their world and everyone else is paying rent. if you look at microsoft and the tech giants really of no china exposure. that's why what has been the magic in terms of the telling is a headwind in terms of china for cook and elon musk. if you look at tiktok and turns of touching the third rail issue, that's not an issue for others but for apple or tesla, they are the ones that have their bull's-eye on the back in terms of what happens domestically in china. annmarie: does it matter if china is urging these ev makers

to use homegrown chipmakers? >> we are talking about the gold standard. china can do that for the next two or three years with no alternative. that's why jensen is sitting there. longer-term and decoupling, we are starting to go down that path. it speaks to our view with tiktok and what we see in terms of the belt way. it's great for political theater in front of the microphones but the reality is the ripple effect here is important in terms of what it can mean for china-u.s. and the reality is selling tiktok in terms of the source code is a siamese twin operation. it's basically impossible. jonathan: let's get to this new price target, $1000 for nvidia. would you expect from jensen next week?

-- what do you expect from jensen next week? >> it's great event in terms of ai demand and some of the other technology changes we will see in this ai ecosystem where you come away being that they will continue to on this market. amd and others will clearly benefit but this is a grand entrance that's also a showcase. it's to flex the muscles for jensen and where his black leather jacket and showing that in the ai world right now, everyone else is following him. jonathan: are you looking for concrete changes to guidance? >> there could be longer-term metrics they give but right now, the last thing they want to do is start to give more and more financial targets. this is more about an event showcasing the technology, showing where ai is in a demand respect. we believe it's a 1995 moment.

this ai revolution is getting the popcorn out, it's 10 p.m. at a party that goes until 4:30 a.m. lisa: let's talk about the popcorn after this conference that is important not just for a signal of what are the products they have coming up but what industries can adapt most quickly to this 1995 moment. what are you looking for in terms of the type of technology and where they are geared to understand the efficiency and the potential areas where they will benefit? >> right now, it started with jensen and it goes to microsoft but now it's the software piece. when you look at ai and snowflake and salesforce.com, this is now starting to go into the software sector that ai momentum. despite macro and other issues, this tech bull market continues to go higher because of the numbers but it will be software

led. that's what you will see. it starts on the first leg been out the second and third and fourth derivative of this 1995 moment. jonathan: formula one, you converted, what changed you? >> the netflix show on this three week trip, i watched almost obsessively. i was not a fan and i become a super fan. trying to pick my team weathers mclaren, i don't want to go down the typical central casting. lisa: but you cover tesla, you should be into formula e. >> that's true, it started with ferro and it's open my mind to something that changed. jonathan: you are jealous that i'm beyond you. >> i think i will be in the 305. jonathan: no doubt, appreciate your time.

lisa: it can change desires when you binge watch a show. jonathan: elsewhere, here is your bloom break brief. >> bitcoin is retreating from its latest record high amid an intensifying debate about whether the cryptocurrency has reached a bubble. it recent all-time high almost $74,000 earlier this week. this comprised the top bitcoins are up about 60% so far this year. japan's workers are set for a big pay increases after members of japan's largest union group secured the biggest wage hikes in three decades. it was a combination of bumper profits along with a labor shortage, ongoing inflation and government pressure helped convince boardroom executives they needed to raise pay by more than past years. the result may be strong enough to knowledge the boj tuesday to ending the world's last negative rate.

hamas has proposed what is calling a comprehensive cease-fire deal in a bid to move forward with talks with israel. the plan would see the freeing of israeli women, children, elderly and ill hostages in exchange for the release of up to 1000 palestinian prisoners. israeli prime minister bennett min netanyahu says the militant group is still making unrealistic demands. the country's war cabinet will discuss this matter today. that's your bloomberg brief. jonathan: thank you. i think you are a mclaren kind of guy, orange suits. >> i'm actually a big fan of his. i could also go in that direction. jonathan: this works. dressed in rns, miami. >> and then vegas. it will be abu dhabi. jonathan: we should be in this together. >> i'm ready. jonathan: up next, data pushing back. >> we need to step back and we need to say we all look at this

data today and what does this mean for the fed next week? the fed doesn't really know either. jonathan: i'm not going to wear rns. just for -- i'm not going to wear our encz -- orange. the fed and that stuff is up next, this is bloomberg. ♪ chances of a plane crash -- 1 in 11 million. you're not gonna finish those salted nuts, right? never waking up from anesthesia -- 1 in 185,000. validate your parking or just see how it goes? what? why stress about the unlikely? does a killer clown worry about being struck by lightning -while winning the lottery? -sure don't. but your odds of falling victim to online crime are 1 in 4. you need aura. you, your family, all protected from scary online stuff. [ laughs ] protect everything your family does online with aura.

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the partnership built upon cutting edge american and australian and british point 2%, a flavor of the bond market for you through the weekend, on the session, through the week yields higher off the back of pretty strong economic data. on the inflation

i wouldn't expect huge changes from the statement next week or from what chair powell says in his press conference relative to what they been saying recently. we need to step back and say we all look at this data and what does this mean from the fed next week? treasuries selling off reinforcing bets that the fed is in no interest in cutting interest rates. let's get into this, is that what we are starting to smell, a sense of stagflation?

>> i think there is a nonzero probability that we find ourselves in an environment where demand continues to slow more and more in certain aspects of inflation proved stickier than the fed wants to see. how does the fed respond to that? i think they've done a good job of length groundwork to cut and not ease and we are far enough in the cycle they can justify that. jonathan: do you think they can still cut interest rates this year? >> precisely. jonathan: the markets believe this federal reserve has established a more asymmetric approach the monetary policy, that of strong growth comes through they can hike but if not they can height. you are saying they can still cut. out by how much? one or two verses five plus? >> i think it comes down to the composition of inflation and where the stickiness comes in. if it ends up being on the super court measure from -- which is

highly correlated to wages, that's a problem for the fed. if that ends up being the case, they can easily justify moving back closer to neutral if the situation warrants. it certainly isn't a flat gdp print. it would have to be well into negative territory. what is neutral? lisa: maybe neutral is north of 4%. maybe there's a rolling ball of cash shifting into different areas causing inflation to surge in different places that will keep inflationary pressures higher than they have been traditionally. can you get on board with that? >> i am on board with the notion that neutral policy rates are moving target and it's not a single number that will hold indefinitely over time. i think the fed would probably agree that because of a lot of the dislocations that occurs during the pandemic, stocks were

higher over the last couple of years. what is it like at the moment? are we truly in restrictive territory? the combination of the balance sheet rundown and the fact that is year-over-year core inflation numbers start to decline, real policy rates will increase and that puts the fed in a unique situation and one i don't envy. lisa: do you think it's restrictive based on the evidence that inflation is not getting tamped down as much as people expect? you look at the earnings and companies are still doing all right. >> i would say is clearly restrictive during the second half of last year which is why we so the progress made on the inflation front. the equity market doesn't believe it's restrictive and that's problematic for the fed since overall financial conditions are much easier than powell would want them to be in that feedback is why i believe there is some stickiness in the inflation at the moment. jonathan: you've alluded to the fact that you think he cares

about equity markets but he barely talks about financial conditions. equities are closed all-time highs in credit spreads are supertight. people say that's not important to chairman powell anymore. why do you think it's important? >> i think he's strategic in the way he chooses to emphasize the relevance of financial conditions. when they were tighter at the end of last year, it was important because it was consistent with the messaging he was putting forward which is we are nearing the point where we will cut rates. if the fed starts to reintroduce the conversation about financial conditions, that's hawkish in this environment and that was suggest that while the market seems to be pricing in a june rate cut, maybe the real departure point is july or later. jonathan: in the treasury market, what about the long and it? - e what don i do withd? >> in a period where we might

see upward pressure develop at the longer end of the curb at 10 years are going back to 5% and we will eventually find ourselves in a situation where inflation starts to moderate and that means breakevens will compress and that means 10 year yields above 4.354 4.50 start to look attractive but were not there yet. lisa: my eyes glaze over at the neutral rate but if the overnight rate is more than 4%, it doesn't make sense for tenure treasuries to trade at 4.72% currently. they would trade at a higher rate. at what point does the market sniff that out since right now, there is none of that being priced in? >> logic holds well for the two-year sector and the operative issue is whether or not the fed ever chooses to review the 2% inflation target. even if our star is higher, the

fed gets back to 2%, that means they have to risk greater demand destruction to get is there. i'm very on board with the bearish front end of the curve but it's hard to justify the 10 year yields at 5% even if our star is one hundred basis points i. lisa: are you saying the biggest rest -- risk cases for jay powell to say i care about equities? >> the biggest risk for next week is we all look at the 2024 dot and it says 50, not 75 basis points worth of rate cuts and it triggers a more dramatic bear market. jonathan: that would still imply 75 basis points. is it 50 or 75 next week? >> base case is 75 but there is a real risk of 50. jonathan: thank you, sir. what's developing in the economic data and how the fed will respond this year.

lisa: you've got a little bit of everything. they've been talking about the weakness allowing the fed to cut more even at a time when there is this inflationary pressure. a really tough moment. jonathan: getting closer to 4.30 on the u.s. 10 year. we are higher by 20 basis points on the week. coming up next hour, we will catch up with sam stovall, kathy but jan six, will kennedy and mark gurman will talk about the commodity market and what's developing with apple. there is so much in the commodity market. copper through nine a in gold at all-time highs in oil close to the highs of the year. live from new york, this is bloomberg. ♪

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>> perhaps inflation may remain high and perhaps much stickier. >> i think we will be in this choppy is -- choppiness for a