>> i think the fed needs to be market based. >> staying higher for too long. >> we expect data that will be forthcoming to give them confidence. it is the fed's job to take the data pretty much at face value. >> the best thing is to truly look at the data and standby that. no matter what data come you're going to get criticized on the timing. >> i'm not as concerned about the fed cutting rates. as long as the economy remain strong, those earnings will be there. >> this is "bloomberg surveillance." jonathan: a new trading week, freshmen, clean slate for another quarter and leaving behind q1 and hitting the ground running in q2. good morning, good morning.

this is "bloomberg surveillance." a stacked show for the first hour for the month of april. i am jonathan: alongside -- i am jonathan alongside anne-marie. lisa needing the extra week because the week looks like this. pmi and i said data today, tuesday, jobs data. wednesday, adp jobs. common's from powell. friday, u.s. payroll to round out the week. if you want a sneak peak in a next week, we have cpi and bank earnings kicking off as well. that is quite a start to q2. annmarie: it feels like we just heard from chairman powell and we did. he will be speaking head of the jobs number. looking for 200,000 to be added. what is interesting since the start of 2023, those payroll reports have been revised seven times. jonathan: let's talk about the

start of 2023. january data, booming. there is a feeling february did not confirm the boom of january. what are we expecting for the march data we are seeing this month? >> just going to the earnings calls come i think like things are pretty strong. i don't feel there is any imminent cliff we are about to follow. labor seems to be pretty tight. companies are being picky. i don't think there's been any big change. i feel like we are exiting that point where everyone is singly economy stings. it is, oh my god, the fed can possibly cut? that is where we are. jonathan: we have -- macro economics refer to january as a flute. after what we have seen the last month or so, would you refer to the january data as a bit of a fluke? >> there were some bumps in the road. i think we are the same thing from powell. i don't know if we can handle

too many bumps but i think a couple were to be expected. annmarie: what is interesting as it was revised higher when you look at that pce. it was higher than inflation than they had thought. it powell almost moved toward waller. what he had to say was information they are in no rush to cut rates. jonathan: let's start this morning with price action. looking at the s&p 500. on market yields, little bit higher. virtually unchanged. fx market, euro going nowhere. coming up, terry haines. we begin with our top story, setting up the first trading day ofq2. rbc raising the price target to 5300 from 5150.

the story we see in the data today is that the strong move observed in the s&p 500 so far this year has been deserved. a some of our work suggest games may be tougher to come by from here and that the stock market needs a breather. lori, let's get into the upgrade. it is subtle. you have a range of models to work through. which is the more constructive in which is less so constructive one? >> the lease constructive is sentiment. we thought sentiment was a problem for a couple of months. we are hanging out at one standard deviation above the long-term average on the aai survey. the more constructive data points i would say one is our earnings yield gap analysis. if you look at when it is flat and go back to the late 1980's, average return is about your team percent. that can get you north of 5400. if you look at the one that is changed most since the start of the year, as had the most bullish move, is the economic data.

consensus was looking for 1.3% on gdp for this year. stocks don't do well in that kind of environment. there is this constant oh my god, are we about to have a recession? that is what we have basically been hearing the last year or so. now the date of its to about 2.1% this year. 2% to 4%, a favorable range for stocks. average return is 12%. that is what we have baked in. your most bullish, not baked into our model but it goes to show 2% to 4%, people feel good. jonathan: energy start to pick up. the banks start to pick up. tech putting much did nothing last month. to think that a sustainable trend? >> we downgraded tech back in january. we look at median pe multiples when we pick sectors. i know the market is technically cap waited.

but portfolio managers are picking individual stocks. if you look back to 6, 9 months ago median was around long-term average in terms of forward pe and that shot up at the end of the year and was almost as expensive as the industrial sector, one of the worst we saw. i'm uneven talking -- i'm not even talking bank. energy are very cheap. financials are cheap. materials has been on the move. even utilities had a good end to the month and a couple books ago it started looking really good. annmarie: we have had a number of false starts. is this a real rotation? >> i think it is. we are seeing it in terms of so many parts of the market. even small caps relative to large caps are trying to make a stand. that is where you could have the most accusations of a head fake. we think it looks exciting and it gets knocked down but i think these things in energy and materials really generating some true excitement. jonathan: q4, kinda bizarre,

the nature of seem to shift. can you walk us through the relationship and what happened and rate pricing and developed in equities? >> we saw a strange relationship after svb. if you look at tenure, it was equating to growth outperformance relative to value. i think there were a lot of things that drove the big cap tech stocks that i think one was better balance sheets. mag7. they basically don't have balance sheets as a basketball's of the rest of the market has regular months of debt. last year when we were seeing -- one of the safety trades was going into big tech. now i think we're starting to see sort of a different kind of fed narrative evolved this year. there has been rising angst. i think the cuts are on the table. maybe that is going to break. we will see. i think of the fed can thread the needle -- a tough sentence

to say -- and we can sort of get to the cuts, interest rates can come down, the economy is kind of a show me story. we stayed about 2%. i think you will see things that financials do well. typically when interest rates to go up for the sectors but i think if interest rates come down and we don't kill the economy, either physical -- cyclical rotation. jonathan: it kinda feels like now, maybe they don't. >> i think what you want is a higher rate environment than what we have had in past cycles. i think you want them to come down a little so we can preserve the economy. i think they turn into a boring trade where they are the plumbing of the economy. if the economy is humming along, then they do well. but then you have higher rates than you've had in the past and that is also good for them. goldilocks. jonathan: towards energy, towards banks over the last month and people start to think about the rotation away from large caps and maybe toward

small caps. looking for that move in small caps to continue. is that something you can get behind? >> i think it should. i then saying this for a while but i think if you look at valuation data, 15 times pe on russell 2000, tends to top around 19,000 or 20, was down around 11 last year. you see the same things on the ftc positioning data. down around 2022, they were recessionary in terms of how bad they were. we are back to net long territory, three are high. if you look at nasdaq futures positioning, basically back to all-time highs or even a little above them uncertain indicators. i see a catch of trade in small caps and i do think they are bellwether. annmarie: when you are looking at your models, this is based on inflation moderating. what happens if it does not moderate? >> that is one of the reasons i think energy and materials have done so well.

there is some cyclicality but there are also inflation hedges to some extent. i think you'll see certain sectors like that do well. but if we go back to this environment where people are starting to freak out about balance sheets and interest rates are going to move up and we start talking about hikes again, it could feel people to go back to those balance sheets which could benefit. annmarie: whether or not energy -- it is the sector to buy? >> i think so. we left it as overweight at the beginning of the year and i was a little uncomfortable but my analysts liked it, the dividend yields were high, balance sheets have been cleaned up. i said, all my bedside making on positioning calls are about inflation moderating in the fed cutting and the economy taking up. what if we are wrong on that? energy seems a nice what have in your back pocket. jonathan: what is the difference between irrational exuberance and rational exuberance? how far away are we from one and close together?

>> keep an eye on aaii. if you get to two -- i think it would be a sign of irrational exuberance there. we look at it at the cftc data, back to early january 2018 highs. those stats make it very uncomfortable. aaii says we have a little room to go before things get silly. jonathan: this high-yield credit make you uncomfortable? you can basically say it is reflecting strength or reflecting maybe investors taking things too far. >> i would go toward the strength category. i'm not an expert on that. we do talk to our crew at the rbc desk and they tell me the same things i see on small-cap balance sheet data, which is things are not as bad as they have been in past cycles. there are some sector differences as well. i tend to lean more toward it is a sign of strength argument. jonathan: q2.

lori calvasina is going to stick with this. let's get an update on stories elsewhere. here is your bloomberg brief. >> salvage specialists are starting the daunting task of clearing debris from the destroyed francis scott key bridge in baltimore. ports are modifying their operations to absorb. the fallout is expected to be largely contained as neighboring his lips with spare capacity tweak their schedules. turkish president erdogan suffered an historic defeat at the balance -- ballot box. his party fell behind the country's main opposition, the republican people's party. his ruling party is the lowest on record as a nation battles rampant inflation and the highest borrowing costs as the president took power more than

two diggs ago. china's factory activity be expectations, boosting optimism about the country's ability to meet its ambitious 5% growth this year. the manufacturing index rose to 51.1 on monday to come the fifth month above the 50 mark which indicates expansion. the longest streak in more than two years. that is your bloomberg brief. jonathan: up next, biden's growing has advantage. pres. biden: a real inflection point in history. jonathan: good morning. ♪

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jonathan: live from new york city, good morning. closing out march, closing out q1 with a gain of more than 10% for the pierced quarter -- first quarter. biden's growing has advantage. pres. biden: i think our democracy is at stake.

we're at a real inflection point in history. things are changing. this guy denies there's global warming. this guy was to get rid of not only roe v. wade come he was to get rid of the ability of anywhere in america to choose. all of the things he is doing, they're so old. speaking of old. jonathan: president biden extended his warchest lead over donald trump after raising $25 million in a star-studded manhattan fundraiser. joining us now is terry haines. you've been saying for a while maybe the former has topped out. are you seeing that in the polls? >> i think so. the way i look at the election is there is five phases of it. the bad news is, it is going to go on for a very long time. the good news, we're into the third phase already. in the run-up to the convention

phase. part of that, you're going to see the polls settle out a little bit into what most people think they are, which is instinctively, which is pretty even raise. in that phase, what you're going to ci think is biden start making a case about why he should be elected, what he is the safer pair of hands and at the same time you will going to see trump disadvantages of topping out happening as well with continued split republican party and continued independents that are not for him. he needs both of those to be strong for him in order to win. annmarie: one bid disadvantage trump has is the campaign funding. in the money you can use to campaign around the country. biden is beating him by millions of dollars. but the biden campaign using this correctly?

>> two things. three things really on that. i am not wowed by $25 million in manhattan with three presidents when the entire financial system is basically in the major banks are basically down the street. i see people hedging bets there a little bit. secondly, what democrats tend to do is pledge money. pledge versus how much money is actually coming in is a subject that we all need to pay close attention to. finally, where they ought to put it? in the get out the vote efforts. hillary clinton had more money than donald trump eight years ago. that counted for nothing largely because it wasn't allocated well. biden is in the position of needing every single vote if he is going to win. the other priority they will use it for, frankly, is what gets

called candidate suppression. making sure the third party voters are as minimized -- third-party candidates i should say are as minimized as possible. annmarie: we have an update in terms of avp pick for rfk. who does he draw from now? is it going to be trump or biden ? >> well, i think he probably draws more from biden but i think we learned a lot about kennedy in the last week and none of it is good for kennedy. kennedy -- two things. one, he basically decided to become a niche candidate instead of a broad-based challenger. number two, he had a choice about whether to broaden his appeal or not. he has chosen not to buy picking what i think, frankly, is the wackiest vice presidential candidate nominee in american history. i don't say that lightly. what you have got is a niche candidate crowther proclaimed he

is niche and probably claiming he doesn't have any money. meanwhile, he is a problem getting on the ballot and he is a huge problem, to your point, getting a message that is going to appeal to a lot of people. my two cents, biden i think has him down and over the next six months, biden will go in for the kill and try to wring out any serious challenge that kennedy might pose. >> i get tons of questions. the other question he asked me is how confident are we were what are our exhibit patients regarding congress? most folks outside of the u.s. think we are going ever republican sweep. i tell them not so fast. i wonder if you have any updated thoughts on congress? >> two things. one is there is a great hunger in the american public for an alternative to trump versus biden. and an opportunity for a

third-party candidate. but that is not happening. i won't repeat what i said earlier. secondly in congress, the word "control" gets they need around a lot and that is the wrong word. you can see this today. there are majorities in congress but there is definitely not control. what you're going to get in 2025 is more of the same. the parties i think right now are likelier than not to flip where you get a small republican majority in the senate, very small democratic majority in the house. butnet net, what you're going in a fiscally and a lot of other ways is very much the same kind of congress you have got today that is not going to do with the fiscal issues if people are arrested of --arrestive and will continue to the half measures we have seen in american foreign policy at the time where there is a heist geopolitical risk in 50 years. >> how much do you trust polling

data right now? there's been a lot of skepticism around it. now that biden is starting to look a little bit better, do you discount that at all or can we trust the polls right now? >> i would never suggest anyone trust it. i would particularly urge people not to look at national polls. they're not only beauty contest polls, but the president is elected in the electoral college. thus the attention to battlegrounds. generally speaking, the last time polls were pretty accurate on biden, they tended to undercount trump slightly. i would look for posters to try to attack that a little bit and correct it. i would be looking at battlegrounds almost exclusively where i an investor. what i trust them?

no. will they give you? ? a sense of sentiment sure. jonathan: industry leading thoughts on the formal president and making -- former president and making out he is not the candidate previously. what you think is changing? >> fundamentally, eight years ago he was seen as a change agent and people were so frustrated they were willing to take a chance on breaking some china. in order to have change happen. this timeout, after eight years, whatever else he is, he isn't a change agent number one. number two, the trump base i think demonstrably is not getting any bigger. you can see that from primary election data. thirdly, frankly, people are getting tired of the act. and beyond that, i think you have a republican party that is

more than ready to move past him new matter whether you are a trump accolade or not. jonathan: terry haines. we started q1 i talking aboutlori's quote. is it the same in q2? >> there is the eclipse next week so people are going to be forcing themselves. maybe a good analogy for the market. i talk to clients and they don't want to be talking about this but there are getting questions and having to put out papers and start thinking about investment allocations. i do worry about the non-us investor who has been setting up for a red sweet. that seems like a pro u.s. trade. i saw some headline talking about interest picking up in europe. if election dynamics are changing, does it call them to pull out of -- cause them to pull out of the u.s.? is or something else under the surface too? jonathan: the struggle, still so early in the year. we think about who the vp is going to be for the former

president. it is not going to end anytime soon. he is going to draw this out. which is what you said a month ago. annmarie: it means he's going to get a lot more attention, get his name idea. he is going to float some people and see what part of those individuals outside his base potentially flock to his vp. jonathan: equity futures are positive. coming up next, china's factory beating expectation. this is "bloomberg." ♪ 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: equity futures positive on s&p. on the nasdaq, there is your outperformance on the small caps. we will ask the question, is it real or not a lot. in the bond market, things just stabilizing on the two-year. 4.5 917. the interesting breakout the last four weeks has been in the commodity markets. copper has broken out. gold, all-time highs. copper up.

energy breaking out. energy stocks up by something like 10%. annmarie: i am stunned by brent crude. jonathan, when i look at a number like that, this has to be a headache for the white house. do they have to think of a drawdown? this is the worst timing this administration could potentially have for a breakout. jonathan: is it just a supply-side story? subtle signs that may be they start to rebound. annmarie: absolutely. you are seeing a pickup in china. opec has been ratcheting back production. we will get a meeting on wednesday where they will be

four that we are keeping some of that production. part of it has to do with the fact that the supply is coming the usa. jonathan: wti -- under surveillance, busy week for fed data. we will hear from them every day this week. another round of jobless claims followed by the main event, payrolls on friday. 200,000 for the month of march. i want to talk about the data. what is more important to you? you get the feeling that maybe things are shifting away from api and shifting more towards peoples. >> i would say it is still about inflation data. i think on the jobs data, we

have talked a lot about small caps and one thing we have seen historically is when you get the negative inflections, that tends to be close to the small-cap performance. it is an idea that the cyclical parts of the market bake in pain early. and then you go ahead and buy it on the discount. i am a little less concerned about the labor market data. that news could end up being good news for the fed call, so i have a hard time. if we do not get the bad news and they cooperate, they could still cut. annmarie: jay powell said he will not see overreacting when it comes to cpi, but what happens if it is not two months and that cpi gives us insight into if it is more sticky. >> that is fair.

if you go back to the 1940's, we did see inflation and and flow. i do think that they are right to be vigilant, going forward. this fed has gotten so. i do not blame them for being cautious. jonathan: you will get cpi and some bank earnings as well. officials are said to open a temporary channel. this is part of a phased approach as they scramble to remove debris. department of transportation announcing $60 million going towards we building the bridge. the biden administration calling on congress to fund the rest. we were talking about the difference between having the majority and having control. who has control of the issue at

the moment? annmarie: this issue will be biotin reminding congress that they need to act. take a look at what maryland government said over the weekend. he said this would impact an auto dealer in ohio and a restaurant owner in tennessee. he said this is not a maryland issue. this is a national issue because this is what the issue is going to be. yes, technically the republicans have control of the house that they cannot get anything through without democrats supporting. jonathan: was it a challenge to goods disinflation? a step back in the last few months. how much of a challenge is it? >> it is something that you want to have reasons to be vigilant there. goods inflation coming up west may be a little bit of a bigger bump.

i think it is an important issue. we will have to see how it plays out. i think it brings the void infrastructure discussion back into focus. it has interesting ramifications down the road. at least he has done something on that front. i think we all assumed ever we get out of, maybe it is an interesting area of bipartisan agreement starting to emerge. jonathan: that is a good point. major bumps in the road over in china. chinese stocks gaining. rising to 51.1, marking the sixth straight month. troubles remain in the property sector. the value of new-home sales sliding 46% from a year earlier.

enda curran joins us to break down some of the data. let's talk about this. you have the official read. what are they saying, i wonder. >> they are saying it is looking firmer in china now. both in positive territory, both beating expectations. when you look at the data, they are suggesting that new export orders are doing well also. there is momentum. that gels with the idea that china's exploits are recovering as well. it looks like the industrial part of the economy is doing ok. the big question will be whether this industrial upswing proves

to be sustainable. we had a forestall, but right now it looks like a positive part of the economy for sure. jonathan: copper backs up at rebound as well. what is iron ore telling you, given the plunge that we have seen over the last month? >> it is a curious proxy. where iron ore was going, that is where china's economy was going, but iron ore fired all expectation. this yakym the story is meant to be one of putting more support into the economy. as you mentioned, it is not being translated into commodity price or the iron ore price.

probably speaking, there are concerns about how much stockpiling there is. do not stray too far from not target. many will tell you that even though it is ambitious, it will have some flow to commodity market. annmarie: we are looking at the numbers coming out of china. is this the resurgence, coming out of covid, that everyone was waiting for? >> that is a good question. the consumer side of things is fairly downbeat. the ongoing sentiment is in the doldrums, so to speak. housing demand has yet to turn a corner. let's not forget that there are contentions.

plenty of rival trading governments are doing well and questioning whether chinese products are being dumped into market and whether or not that is impacting their own production. it could end up stoking more political tension. i would say this is a bright spot but we still have a long way to go. annmarie: when it comes to estate and prop market, what can they do to prop this up? >> again, a lot of observers waiting for this rebound have wondered why have they not taken more steps to get the real estate story going again? it goes back to what can they do to tackle bad debt? what can they do those property developers?

recapitalize and get them going again. they have been taking incremental steps to bring down costs and make it easier to get finance thing. until they really do so the property story, then it will remain as a deadly on the consumer story. when you look at china's economy , it is real estate and asking when will it turn warner? jonathan: i want to talk about otto's. the auto sector in china right now. this is how the market has responded. announcing a plan today that provides up to 1,000,000,001 -- one billion you and -- yuan.

better trade-in for customers' used cars. some of those manufacturers will bring the challenge to the u.s. walk us through how the tension is building across the world right now from the u.s., to europe, to china. plex there is a view -- i remember speaking to an industrial executive last year, making the point that it was during the covid years that the rest of the world missed a step and china raised their head on the ev front. they were very with a huge market space there, the shift to the ev space is very much to homegrown company. we are seeing those tensions with worries about cheaper chinese competitors and how do

governments tackle that? it is one of the hot button political topics in europe and elsewhere, how to handle and compete with ev's. the industrial production recovery story is about solar panels and keep tech components as well. they dumping on the markets here? what will that mean politically? this remain a key topic. jonathan: annmarie is the frontline right now. annmarie: it is not just ev she was talking about. she was talking about solar panels. most economies the west think that they are dumping it. they say it is the last which

they say is very rich. they say it is the u.s. that is the problem. jonathan: they are dripping with irony. a little bit later in the program, we can get that picture and compare it to the model three tesla. they look like the same vehicle. if i had told you that was a tesla, would you believe me? annmarie: yes, especially when you do not see any bathing. maybe the color. i do not think tesla does that color. jonathan: let's give an update on stories elsewhere. >> the bank of japan's love -- supply of bonds is set to shrink. they are estimated to fall below the amounts of maturing debt for the july to september period. they are speculated to start slowing this month.

50% of all outstanding debt. it will not likely mid -- this interbank is keeping plans in place to offer cheap loans, encouraging banks to purchase debt. a breach of data at at&t is affecting current and former customers. the data leaked on the dark web and includes personal information like social security numbers. the source of the data is still being investigated and it is not known whether it came from the company or a vendor. back in february, it experienced the widespread outage that took hours to resolve and is now being investigated by the federal government yet tesla is increasing the price of its most popular sports utility vehicle. they are now $1000 more expensive. the hike was widely telegraphed from the.

china's automakers are piling into take advantage. that is your bloomberg brief. jonathan: up next, a patient jay powell. >> growth under 2% this year is roughly what this year looks like. we are not in a hurry to cut. jonathan: this is bloomberg. ♪

jonathan: live from new york city, equities bouncing back. adding some weight to the present rally of more than 10%. let's check in on byd unit

sales. up 46% year on year. the growth is nominal. this is where the competition is right now in a major way. annmarie: it is why you see the u.s. potentially adding more and not allowing china's vehicles to come in. they want to make sure that they can have their own automakers competitive. but jonathan, look at these numbers happening in china. you are seeing them cut prices just remain competitive. jonathan: under surveillance this morning, a patient chair powell. >> the economy is strong. we saw growth over 3%.

many see forecasters -- that means we do not need to be in a hurry to cut. can rate and become more confident that inflation is coming down on a sustainable basis. jonathan: reinforcing bets the central bank will cut rates later this year. we will hear from him later on wednesday. mike mckee joins us around the table. you drew the short straw. any change on the data going into the -- into the weekend? mike: no changes. it came and little below what he forecasted. basically what we are seeing is inflation is continuing to come down, but it has slowed its progression. towel was asked, why don't you

cut anyway? he said, we do not want to move the markets around. we do not want a lot of volatility. we want people to think we are moving in the right direction at the right time. we are going to be careful. he just justified it. >> waiting to see if february confirms or not. the spike in january is said to be a one-off fluke. is that how you characterize it? >> a fluke in terms of the extra added, but we are still seeing strength in hiring. strength in spending. the pce spending numbers came in , a phenomenal turnaround from january. we are seeing the u.s. economy

running ahead of potential growth, which is a warning sign for a fed worried about inflation. >> what do you think is more important over the next couple of weeks? >> the job numbers will add to how strong the economy is, but there will be a lot of data to absorb. that is what they have been looking at. they will push. jonathan: a lot of people are asking that question because there seems to be an emphasis on the labor market. what do you make of that shift, if we can call it a shift? >> i do not know if it is a shift as much as an insurance statement. we are focused on cutting rates.

if we had a situation where the economy was going into recession , we would cut rates much faster. he is avoiding using the word recession. annmarie: they talked about dividing critics into equal parts, saying those who think we should cut, stay the same or hike. if that is where you are, wouldn't that show the fed at a perfect position? mike: it should, but it is always the fed's fall. you do have half the people thinking that the fed needs to cut and half of them thinking that it needs to raise. you can say that playing out on social media. they do feel like they are in a good position because the economy is strong but inflation is still going down at this point.

jonathan: what is the distance between the rest of the committee? mike: basically everyone is moving in that direction. it is pushing people. we saw in march that a number of people had moved up and they would not be willing to cut. if the economy continues along this path, you probably will see a two dot plot. jonathan: how different with the conversation have been if we did get the shift from three to two? lori: i do not think it would have been enough to predict the bubble, but it could have dampened enthusiasm a little

bit. we have run the numbers and if we run our valuation model through that stress tests, i do not think -- if we take them all out, i do not think it kills the market, but it could flatten us for a little bit. jonathan: can i bring up that? what is the difference between the two? lori: when you ask, i started back in 10,000. these companies had the earnings to back up the valuations. the earnings growth advantage is accelerating. there is rationality but it is not a stupid market. jonathan: mike mckee breaking down the economy. thank you very much.

coming up for the next hour, we will catch up. around the table for the next 50 minutes or so. and ed from columbia. people talk about the potential that israel makes a move in the next few weeks. annmarie: axios speaking about talking to the biden administration today. they go in, it is the way that they go in that matters. jonathan: adding to the rally, closing out q1 with all-time highs. the second hour of bloomberg surveillance, up next. ♪ wealth-changing question --

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the >> chair powell will have some communication challenges ahead. >> they have a communication problem right now. the markets are really dependent on them being dovish. >> it is possible that they start to cut and the economy starts to accelerate. >> this is bloomberg surveillance. jonathan: leaving behind solid gains. good morning.

this is bloomberg surveillance. the second hour begins now. alongside annmarie hordern, i am jonathan ferro. if you are starved for fed speak this week, you will not be on a diet. look at this lineup. barkin again on friday and a whole lot more. it is payrolls friday. your equity market on the s&p 500 on the first trading day of april, equities look like this. closing out at all-time highs. plenty to talk about this hour. we will catch up. scrambling to absorb cargo. axios reporting the u.s. and israel will hold a virtual meeting today.

and liking long and bonds. kicking off the second quarter. jp low ski thanks the rally can extend, writing, we are optimistic not only about 24, but the other years as well. the difference is that this time, it is global. jay joins us right now. does the economic data back some of that up this morning? >> i think it does. it is not only the data. we vote a piece called listen to stocks. we want to pay attention to what the market are telling us. it is not just stocks but credit. and commodities right now are big. it is not just energy.

it is not just gold or copper. it is all of it. that is telling us that there is an opportunity and the global economy, as we have been saying since the fall is early cycle. jonathan: how would you frame it? >> i would frame it as both. the fact is that most people have not been investing in economies. now we are coming to a point where that lack of investment is going to bite at the same time a global economy is setting up for a considerable period of good economic news. that combination and the fact that very few people are invested there and understand that commodities are the best asset class in the world on the

year to date. commodities, people. it is simply buying the stuff that people still use. not much is hinged on china because it has been a week story and commodities have done well. they are forward-looking mechanisms. they know more than you, me, even you, john. commodities are the world's best-performing asset class. pmi is better-than-expected. raising the estimate. you are talking about the second biggest economy in the world looking like it is starting to pick up.

jonathan: i guess the caveat around that is it depends when you get exposure to it. i'm going to share this with the audience. we know the discrepancy, one that will increasingly have all of china to dominate. that is dominant. can you build that up a little more? >> i also wrote a couple months ago a pro to. when you hear on investable, invest. it cannot get any worse. i think the point about the tech is really interesting. there are a lot of things setting up to create a big opportunity. markets have already moved in tech. you want to be looking for new areas of opportunity. it allows us to go from point a to point b, etc.

we have been trying to freeze china out of advanced technology. they got the message. they had to build their own. now they are saying, fine, you cannot play in our text space. do you want to be invested in a market of 1.4 billion people growing at 6% per annum with a market that is double the size of the u.s., 10 psi rush 10 times the size of japan and trades at a discount? tencent trades -- china overall trades at nine times earnings. nobody owns it. i think it is an interesting story in the segway. k web can double. and double again, and still not get to the level of 2021.

the 2021 hi was $121. that comment to me is a no-brainer. full disclosure, we own it. jonathan: he will join us in the program the next hour. how important is that phrase going to be in years to come? >> our framework is regional integration in the three main regions. all of this stuff is happening as one would expect. supply chain, regionalization, development. everybody needs ai and climate proof, everyone needs electric vehicles and batteries. these are things that are driving integration. i think china is in a much stronger position that people -- then people give it credit for.

the reason they will dominate is the biggest, fastest growing region. >> it is striking that you have such conviction in china. we are hearing that they are just going to up the ante. we are listening to see if they will sanction the chipmakers. how much does that concern you? >> there is a race going on. they are trying to get independent and we are racing to freeze them out. the point that we see is the u.s. trying to freeze china is already in the price. anybody who does not want to invest in china is already gone, long gone. fine. we do not need them to come in. i will take the first double and leave the second to somebody else.

>> a tariff wall does not matter? >> sure, it will matter. annmarie: but if they build within. >> i do not think he want to bet against their ability to construct what they need to in -- what they need to construct. jonathan: what are the risk factors around this? >> if the former president wins, as i have set on this show, i believe joe biden will win by a landslide, but if they were to implement the tariff structures they talked about, that will set the chinese market back. by the same token, as we advance, china's own dynamics should get better. it should be better dealt with

to focus on moving further down the road. we have the ability to change our mind and positions. we will look at that when the time comes, but that is a big worry because everything else is in the price. alibaba does not grow as much as it did before. the same is happening in the u.s. text space. the other point is that these companies in china are just like the u.s. companies. they are cash making machines and they are paying dividends. i think the risk reward is some of the best in the world because the risk is already in the price and the reward is starting to materialize. jonathan: i'm sure you have converted a few nonbelievers.

it is 2025 and 2020 six. why has this been extrapolated out? it feels much more longer-term. >> we put out a piece in the beginning of november. the title was, surprise, surprise. we had lower inflation, sooner than expected, better productivity growth. all of those playing out with a return to stability argument. look at the move, look at the fed. with all respect, i pay virtually no attention to that anymore. jonathan: we just had an eight minute conversation and that is how long it took for you to mention the federal reserve in your whole thesis. >> it does not matter. the important thing is that the fed and the markets are in sync after being out of sync.

now we are both at three and guess what, that happened without a ripple of market on these. that is one of the thing that tells me that this market is a strong market. in our view, we are early cycle and have made a return to stability. the fed is our friend now. the rest of the world is picking up. we look at 2023 to 2027, that body of time is very much i can -- you had productivity inspired growth, lower inflation, good earnings growth. this time it is global and it is global because of the material and the fact that everybody has to spend on ai, on climate, on

electric vehicles. you are a much more stable global. you now have three centers that will be growing independently of each other. the question is, who balances best in the private and public sector? these are huge investments, game changing investments. who manages that best? that is one of the reasons why we like europe. europe has more experience than any region, and getting everybody on the same page. look at the u.s. and congress. not really an example of great governance. look at china stumbling after a really good run. china dominates, the fastest growing region in the world.

we look at europe, integrating and being forced by conflict to integrate, multiple countries spending together, raising debt together, so you will see that capital market integration. we look at the americas and we see mexico, which we have -- it is the flagship. biggest beneficiary of what is going on in the americas. we invested in poland and we are invested in china. for us, it is an exciting blue sky period ahead. the fact that most people are not there, people have gotten onto the tactical trade. if you are not on the tactical trade, you are probably not working anymore, but to us come the good news is that we see the process moving for multiple years and we are still early in

that. we are already double weighted commodities. we are just moving from point a to point -- point b. >> is sticking with us through the rest of this hour. positive by one third of 1%. with an update, here is your bloomberg brief. >> the turkish president suffering a strike beat. falling behind the main opposition, the republican people's party over the weekend. support for the ruling party is at its lowest on record as the nation battles rampant inflation and highest borrowing costs since the president swept to power. specialists are starting the daunting task of clearing debris

from the francis scott key bridge. they are modifying their operations to divert cargo from baltimore harger -- harbor. and eps has announced an expansion of its partnership with the u.s. postal service. after an initial transition period, it will become the primary air cargo provider. jonathan: up next, racing to reopen the pulte -- port of baltimore. >> that is the main way to get into the port of baltimore. it is important to get that port back up and running as quickly as possible. jonathan: good morning. ♪

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jonathan: equities doing ok on the s&p 500. just about unchanged. under surveillance this morning. racing to reopen the port of baltimore. >> that is the only way to get into most of the port of baltimore. it is important to our national supply chains to get that port back up and running. the work is already getting underway. jonathan: the latest this morning, establishing a temporary channel to access the port of baltimore as other ports scramble to modify operations. this is following can you talk

to us about how easier it is to redistribute some of the cargo that was meant for the port and taking it elsewhere? >> it is a large port, but not one of the largest ones in the u.s. it is a big player in export:. part of it could go telenor for. does a lot of business with automobiles and construction equipment. nonself will probably have to move to philly or new jersey. you will see those types of products be moved. on an intermodal basis, it is not a major container port. it is may number 11 or 10.

but it could get easily absorbed in the port of new york or philly. this is going to be a short-term kind of disturbing until the channel is clear. it is unknown how long that will take. we have seen estimates between six to 12 weeks. i am a little bit of a pessimist, so maybe more. the impact will be felt on supply chains, but it will not be a major blow like when we were handling the pandemic. it would be less of an impact from what we are seeing in the suez canal were with the who the rebels. >> the alternative channel, this is what they want to try to establish. they talk about this being for commercially essential vessels. what does that mean, exactly?

what is deemed essential? >> that is a fantastic question and i do not know the answer to that. i would imagine products like health care products and things that we need, not things that we want. i do not know how they would find those needles in a haystack . it might be very hard for them to do that. i think what they will do is try to find some priority for some freight that needs to get in and out the port, but it remains to be seen. >> how much do you think the focus on getting the port up and running plays off of the ability of pennsylvania and governor schapiro to reopen 95 in such a quick period of time?

it seems u.s. officials are more focused on being able to use these crises as demonstrations of ability to get things done rather than huge problems that are going to take forever to fix. is that your sins as well? >> at a time -- this is a reaction rather than something being proactive. the highway that stretched along the bridge is kind of small compared to i-95 or the bw parkway. those highways will see more traffic. it will not impact more truck traffic as far as them having to go to different route. the impact on highways is

probably not going to be that meaningful. it will impact the people who use the bridge every day more so than truck traffic. jonathan: the conversation started about rebels in the red sea and then the conversation shifted to the panama canal. where are freight rate? we talked about how it could be temporary. has it been temporary? >> our thesis has been that these locations are short-term in nature. they create knee-jerk reactions to rates. rates are down about 50% from last year. the -- transatlantic are up. what we are seeing on the

transpacific side, they peaked back during the pandemic and it has been a slow reversion. the supply demand dynamics are not favorable. a lot of supply coming onto the market. we should see continued deflationary pressures as it really. when you are looking at truckload rate, a totally different market, but spot rates right now are pretty depressed and poised to rebound, but we are still along the bottom. we expect rates to start inching up higher with more meaningful direction in the second quarter. that should be good for trucking companies. jonathan: good to touch base with you. we reflected on this last week. is some -- is everything more

fragile or are bad things happening more often? annmarie: what i find interesting is that a lot of these ports had peak capacity during covid and they started to lessen that, so they can absorb some of the shocks. jonathan: the u.s. and israel will meet virtually today as the prime minister promises to press on in russia. this is bloomberg. ♪

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jonathan: double-digit gains. let's just say that was largely unexpected. equity features positive. one third of 1% on the nasdaq. the nasdaq in march did basically nothing. i do not think enough is talked about with that. elsewhere, the banks. >> absolutely. it is the way the market is moving. people are looking for opportunities. things get exploited these days. it was tech.

the things that worked over the last month or so is copper and energy. copper minors are up. it is that type of marketplace where things go from point a to point b. >> i will go straight to the commodities board. copyright now is very close. i want to talk about gold. what do you think is going on with gold? what is underpinning that? >> gold is breaking out. multiple are breaking out at the same time, suggesting it is a strong move. people are under cap -- under allocated. for gold in particular, what is interesting is that the biggest buyers of gold are other central banks. this is another example of the u.s. sanction policy may be shooting itself in the foot a

little bit. you see a little dent of dollar erosion. you see every day talk about taking russian assets and using them to rebuild ukraine. maybe a good policy move, but it makes other banks and managers think about how much they want to have exposed there. jonathan: how relevant is it to this? there is a sense in some quarters. mohammed was talking about accepting the higher inflation rate, going beyond 2.0. does that get baked into the commodity price as well? >> for gold it is the rates. it opens the door for gold to start to move. one of the things we are waiting to see is for the dollar to roll over. it gives other parts of the

world bank emerging-market, an opportunity to move as well. that is the second part of the story. gold is moving first. the rate cut cycle will be the most synchronized since 2008. they are going to cut. that door opens and gold is opportunity to move on. jonathan: maybe hiking rates. the dollar-yen has done virtually nothing all morning. positive by 0.9%. no shortage of fed speak this week. scheduled to speak at 19 events. reiterating that the central bank is not in any rush to cut rates anytime soon.

reports coming out ahead of payrolls. you will hear from them. the list goes on and on throughout the week. annmarie: we already heard from powell. i wish he was speaking friday again after the jobs report. our survey is expecting 200,000 jonathan: i will not even ask what he thinks about the federal reserve, just next story. $1000 more expensive. the website displayed the higher prices in the u.s. and china. money counter to offers. i imagine this was to buy ahead

of the pricing increase. the pricing was intense. they have come out and announced a plan that divides graft to 130 $8 million for drivers of gasoline cars to make a switch. another company came out and said they would cover the cost of purchases and selected models, plus selected trade-ins. you think of a more competitive market than the chinese auto market? >> what i love about that is that they are communists. how does that even work? it is really interesting. to us, they had production in shanghai and production in the americas. now you see them doing the same thing, setting up a plant in hungary, wanting to set up a

plant in mexico. tesla is really an interesting fight to see. byd is like leading and. and doing fine in china against tesla. they are pricing the same. electric and ice is the same price. that will be a killer for the rest of the automakers around the world. annmarie: tier point, this hybrid push that people are looking at. it was flagged, but it comes as they told employees they will not produce as many. they went from a 6.5 day workweek.

jonathan: the difficulty of dominating three of those markets simultaneously. we get the sense that governments are basically determined not to allow byd to succeed mystically. we speak to the car companies and this is what it sounds like on record. on the record, they are willing to compete. what we are hearing from officials. are there companies that can be successful simultaneously? >> the best companies will be the companies that are able to do that. they are thinking. they are participating through ford. they hope to be able to put a plant in mexico.

the challenge will be the driver is the climate and we need to deal with climate and get our numbers on the climate. the chinese have dominated the renewable product line. so, how do you square that up? we need to do this many people ease to hit our carbon neutral targets. the cheapest are chinese, and therefore what do we do? i think that is a policy question. the world is moving in this tri-puller process, and these companies are the ones that are leading the charge. jonathan: a big story this year. u.s. and israel set to meet to discuss alternative proposals. the meeting following comments

from benjamin netanyahu saying they are prepared to move more than one million palestinian civilians out before launching an attack on the southern gaza city. joining us is the senior advisor for the project and a former senior u.s. intelligence official. can you talk to us about alternatives? what do you expect the alternatives are? >> the nature of the talks tell you something about the alternatives. this is an interagency team led by the national security advisor. it is not tactical operations. they do not need to work in those areas. they need to focus on the inner city where the tunnels are located. the question becomes, how do you move portions of the population to open up areas of the city,

likely in a staged progression? the challenge is that hamas's primary defense is to fight from behind civilians because civilian casualties creates pressure that restraints israel. annmarie: is the meeting political? has any other networked and materialized? >> the political pressure placed on israel is certainly genuine, but it is meant to ensure that the administration is conducted in such way that produces the least amount of hostages. the challenge of how to be involved enough to save lives but not deeply enough that it is part of an operation that will inevitably lead to casualty, if only because hamas propaganda no

claim it. annmarie: over the weekend, the washington post reported that they quietly signed off on another round of warplanes and bonds headed to jerusalem and tel aviv. >> the weaponry provided to israel primarily consisted of explosives that are critical in bringing down tunnels. it can be used in a way to minimize civilian casualties. the biden administration can slow the deliveries. they need this to work against iranian operations in syria. it is unlikely the u.s. will cut a, but they can constrain it. annmarie: if we are looking at future aid, do you think this administration would sign off on

what some progressives in their own party one, which is strings attached to weapons going to israel? >> it is unlikely but only because of the complexity of the statement. if the strings are the israel withdraws from gaza, then they will probably push out the palestinian authority, which leaves a hamas state in gaza on the border of jordan, which is a somewhat fragile state. they have a complex geopolitical dynamic, but concerns over civilian losses are genuine. jonathan: the president appears to have set a bed line. what do you think the consequences actually are if they cross that perceived bed line? what kind of change in policy would it generate? >> the bed line is difficult to

understand because u.s. supports israel eradicating hamas, it is just about how it is done. as long as they do not create huge casualties. if israel crosses the line, i think you would see a larger deposit in aid. we saw a dispute over a $10 billion a package. it was mattel until the israeli government made exceptions. it has been really challenged and even staying by this event and it will take some time to recover. jonathan: wonderful to get your view on this story.

>> openai is expanding it footprint. they are set to open an office in tokyo. it will be the company's first location in asia after opening branches in dublin last year. they have been in talks to raise. a big data breach is affecting more than 70 million customers. the company says the data leaked on the dark web includes personal information like social security. the source of the data is still being investigated and it is not known whether he came from a company or a vendor. back in february, they experienced the widespread outage that took hours to resolve and is now being investigated by the federal government. in the march madness tournament,

the men's team continuing their shocking run with a win over duke. the victory has the wolfpack back in the final four for the first time since it won the championship in 1983. the women's tournament, facing off tonight in a rematch of last year's national championship game. jonathan: this is where the man from duke says he does not care about basketball, right? >> more than i do about the fed, a disappointing outcome, but i am focused on duke football. we are football focused here. jonathan: i have to do this every year. i think we do that every year. final four. i was messaging him yesterday. i said semifinals and he said no, it is the final four. i'm adjusting.

chair powell sticking to the script. flex inflation has been coming down. we will be careful about this decision because we can be. jonathan: finding a way to weigh in on fed speak. this is bloomberg. ♪

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jonathan: equities on the s&p. the silence around the table. futures positive. they are so excited about sports and baseball. positive one third of 1% yields about unchanged. under surveillance this morning for some of us at least. chairman powell sticking to the script. >> we do not see it appropriate that we would begin to reduce interest rates until the

committee is confident that inflation is moving down to 2% on a steady basis. >> we could hold rates where they are for longer. labor market is strong right now and inflation has been coming down. we will be careful about the decision because we can be. jonathan: inflation data coming in line with expectations. ed writing this. i suspect we are underpricing how much easing is likely to be necessary to offset the normalization this year. i like owning long and bonds with this backdrop. and is with us around the table. good morning. there is another thing i want to use of years on the framing of the policy.

as the fed moved from looking at real rate settings to making rate normalization contingent. how would you answer your own question? >> not yet. the focus remains firmly on inflation and the judgment -- we saw chairman powell reiterated that. once we start focusing on unemployment, the buyer for starting those rate cuts goes up significantly higher. jonathan: cpi next week. is cpi still the biggest number? ? definitely. i think that is right. this is the struggle that the fed is having at the moment. they are so focused on short-term data and short-term inflation data.

there is not really a great framework for this environment. we are feeling our way out in the dark and that is what the fed has reiterated for us a number of times. our wheelbase in the right place? this is the big question. they are shying away from that later question and we are focusing on short-term inflation. >> i have two questions for you. one could argue that monetary policy is superior tight. we know what happened at that point in time. second question, our firm is bullish on commodities. do you have a commodity view built into that? if they go up, does that make year long and buying recommendation less attractive?

>> commodities space is really interesting at the moment. growth was surprised so consistently over the last year and a half. if you look at the span of the last six months, they will have doubled. from below one to a nexus, this is a fantastic backdrop and a lot of it has been led globally and now potentially accelerating. a pretty decent backdrop for commodities. where it starts to disconnect from the fed strategies, and not fed into underlying inflation. while prices back to 12 month highs and yet they have continued to systematically

decline. squeezing out that last bit. a fantastic space. remind me of your first question. >> the spread of fed funds. >> the question is, what is the benchmark for that? this is very get into the neutral rate conversation for the fed. it clearly looks like it has drifted higher compared to february pre-covid. >> we heard last week, but maybe looking at the broader end, two reasons, one supply and another the limit of easing compared to what you might get elsewhere. how do you think about that versus what is happening abroad? >> the key differentiator is the

domestic growth story in the u.s. we are a relatively closed economy and have not been impacted to the same extent by the energy price shock. we have seen that in the manufacturing story in europe. where i think it gets more interesting is the judgment call of whether we can continue to surprise growth to the upside. we shuffled in a way to grow faster post-covid. some of the growth that we brought forward -- this dining wheel weights are a little bit more attractive. >> i like that because it extends the story. we have a view where it is a

certain period in the u.s. where we have several years of solid economic activity ahead of us. we are set up such that rates could be cut in 2025 and that backdrop reinforces a pretty positive outlook and probably reinforces the non-us play because that should lead to dollar weakness. what is the view of the dollar, given your expectations? our view is that will be the second leg for the commodity cake, etc. >> it begins with aggressive ratings. some of the midcycle adjustments probably not going to do it. they will need to do a little bit more. the outlier event is a risk off environment. that is very difficult to

predict. valuations right now are a little bit on the rich side. what knocks that off course, i have no idea. jonathan: thank you, sir. thank you for the last hour. enjoyed this. every single month. i love it. positive with a quarter of 1%. former new york fed president bill dudley. and former fed vice chair. a whole lot more still to come in the third hour of bloomberg surveillance, up next. ♪

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>> i think the fed needs to be market based and not academic base. >> they need to cut before they risk staying higher for too long. >> we expect data forthcoming to