>> everything is pointing for the fed to start cutting rates. >> this year has one or two rate cuts. >> when you are the federal reserve, once you start cutting rates can you stop? >> if they cut they are only cutting a little bit. >> our expectation is rate state where they are, potentially a cut at the end of the year. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city this morning, good morning. four day winning streak on the s&p 500 into wednesday.

bond yields dropping five consecutive days. this line from bank of america, no news is good news. there has hardly been any news. today light on data, light on earnings, heavy on fed speak. vice chair jefferson, governor cook, boston fed president collins. tons more fed speak. lisa: this is giving you a sense of where we are in the cycle of data that we are focusing on fed speak as the leading issue because that is the only thing. neel kashkari was so loud when he said his base case was staying on hold for a longer time. he raised the possibility of a potential rate hike but he talked about the euphoria of markets. there is an embrace of every disinflationary print we get and he thinks that is premature. jonathan: are we calling it euphoric? lisa: it is a bias to see things in the most disinflationary way possible. jonathan: disinflation the theme

of the last week. pushing back rate cut calls. september feels like the new june. this from morgan stanley. "we remain bullish on our call for basis cuts this year but we are pushing out the start to september." annmarie: you have other analysts saying we might not see one until december. this goes to what neel kashkari said. "the most likely scenario is we sit here for an extended period of time." the question is what is that extended time and what date it is he want to see before they begin cutting rates? jonathan: let's deal with central banks elsewhere. the world's oldest central bank, the ricks bank in sweden, they make a move. in japan he is starting to make a different kind of move. he is starting to talk of a policy shift. he said abrupt one-sided weak

yen is bad for the economy and maybe they can -- lisa: the yen is losing value which means the credibility verbal intervention has in japan is nada. raising the prospect but not seeing it in market action. annmarie: they've already tried verbal intervention and it did not work, and it did work, but it is not holding on. i maintain that 160 is the in the sand. jonathan: back down to 155.40. plenty of developments in the middle east. according to a senior u.s. administration official united states has paused a shipment of bombs to israel. clear concern about a military offensive in rafah and unclear whether those bombs will be delivered. annmarie: this is a pause but not a suspension yet. the u.s. administration has not

made a final decision but it comes at a time there trying to get israel on board for a cease fire negotiation. reuters reporting that a key negotiator will be traveling from cairo to israel to speak to benjamin netanyahu, potentially that that is coming down the pipeline. at the same time the u.s. is saying we will hold off on shipments for now. lisa: you have to wonder how much this is driven by the politics of the moment. i was reading the ratings for president biden when it comes to the younger cohort there is a question of how does he get out from under this? is it enough to get a cease fire. can you expedite that? that is what i am watching. how much that is shaping his rhetoric will stop at the holocaust remembrance speech he was very supportive in talking about the importance of supporting israel. jonathan: difficult to hide from the brutal reality on the ground in gaza. a place like rafah competence urban area with more than one

million palestinians. this is playing out in real time and is utterly devastating to watch and it is clear the president is in a more delicate position now that he was in early october. lisa: if those bombs are used to kill thousands and thousands of innocent civilians, that will be devastating at a humanitarian level and in terms of what that means for the united states. jonathan: terry haynes of pangaea joining us a little bit later on those issues. s&p 500 just about unchanged. in the market yields higher. on the 10 year 4.4795. we will talk a lot more what is happening in the commodity market with crude a little bit lower. coming up, marvin lowe of state street. terry haines, and angelo zino. we begin with our top story.

neel kashkari warning rates may stay higher. marvin loh of state street saying this. in that instance, the 10 year will remain closer to 5.5%. marvin is with us around the table. is that a base case call on the tenure north of 5%? marvin: once we get through the start of the cutting cycle. september, the new june, where is it settled? how deep or shallow is this cutting cycle going to be. we are getting to the stage where we need to think about that. can a 2% inflation target work in this new environment. jonathan: the last time we spoke you said do not fade the market strength. where does that stand now? marvin: the tailwind created by

rate cuts coming is powerful. you could still get to ration that would outperform once we get there. we are trading this type of environment which is great for the screens but in terms of setting up asset allocation we need to think about what the world might look like in 2025 and beyond. lisa: raises the question on how you were still positive on stocks if you see a 10 year yield of 5.5%? marvin: is a relative game we exist in. growth in stocks and equities have outperformed. you want to own that growth in my mind. there will always be opportunities. u.s. exceptionalism is making its way through the stock market and that could be somewhat sustainable. if we talk about an environment where inflation is higher, that means there is pricing power that exists for these companies it comes down to blocking and tackling whether we are looking at individual equity names in

our portfolio. lisa: in the bastion of worries, we have the federal deficit. the people who say that are wrong and have been long -- and have been wrong for the past years. you have paul ryan -- he basically went on -- bloomberg television was talking about failed bond options -- and he is watching bond options. is that something on your radar as a market risk? marvin: it is. it is one of the biggest criticisms i have. the amount of deficits we are running is unprecedented, especially during boom times. the fact we are talking about unemployment numbers around 4% and still running deficits is unprecedented. the amount of debt we have. i have heard about deficit concerns and the many decades i have sat in the seat and they have not come to fruition. we have so much debt now and we

are seeing that the central banks of the world are buying less. the official reserve managers are buying less. that means the more price-sensitive folks need to buy more and they are not as flexible. or they are much more flexible whether or not they want to go to that market. lisa: does that five point 5% baseline call take that into consideration? how much is the deficit part of the extra premium? marvin: term premiums are one of the things we look at from the bond world. how much compensation you need to own treasuries outside the inflation numbers. greater inflation volatility, potential supply and demand issues as a result of the amount of debt is part of that discussion. annmarie: lisa mentioned paul ryan. what he was talking about was the next president could have a debt crisis on his hands. you are looking at positioning into the election. how are you preparing? marvin: we put out a report that

is debt taxes and bigger deficits. we see both administrations pushing further on that. there is not a lot of details. i think that if one wants wants to look at fed independence it is easier under the current administration versus some of the chatter with the trump administration might go with. that does play into how the curve is shaped and whether or not the markets pushed back against the deficit numbers. annmarie: what about the dollar? marvin: we will see a series of central banks move before the fed. this will support the dollar in

the short-term. jonathan: can you think of a better example of the deficit them paul ryan? lisa: that is the entirety of congress always which is why we are now saying -- jonathan: the deficit. do you think this will change soon? annmarie: people saying the market will force washington to react, not washington reacting to a market that many say this debt is not sustainable. jonathan: tax cuts are about to expire next year. that decision for 2025. if you just push that out, do we absorb that in the treasury market? marvin: we have to. the fed can always come back and buy more. that is a risk on both sides of things. starting the taper of the q2 process earlier makes that balance sheet much bigger.

it may not have the same degree of flexibility they had in the past. jonathan: what did you make of that decision? marvin: i thought it was premature. i thought the draining of liquidity did not recur the way we would have thought. jonathan: -- lisa: you talk about how the fit could buy more of the debt and that is what paul ryan was talking about, monetizing the balance sheet. does that make you long-term bearish on dollar? marvin: i would not necessarily say gold but it makes the argument the amount of liquidity will suppress the dollar. lisa: i am wondering how you see the new asset allocation with a benchmark fed rate of 4%. what is your biggest overweight? marvin: commodities and real assets play a big role in that type of world. it will not be the best thing for those trying to get into the real estate market, but real estate continues to float to the

top of the list. jonathan: this was great. marvin loh of state street. equity futures pulling back .05%. with news elsewhere here is dani burger. dani: jp morgan is limiting dealings with tiktok. according to our sources, jp morgan will not engage with the find a new block trades and ipo's globally. it had long in a prized of wall street banks. the fund does say it intends to defend itself against the charges. a quick check on reddit shares. they are surging nearly 15%. they posted better-than-expected results in the first quarter. revenues increased 40% which far surpassed analyst estimate. the company says that growth was backed by investments making the

site easier to use. reddit shares are slightly lower it since its trading debut in march. the irony of all ironies is customers of ftx will be getting their money back, plus interest, something rare for bankruptcy cases. ftx is selling off all of its parts and will be worth over $16 billion, more than what it needs to cover what its customers and creditors lost in the november 2022 collapse. that is about what it valued in 2020 near the height of the pandemic trading boom. although all of the debts will be paid in full, nothing will be left over for the equity holders according to the court documents. that is your bloomberg brief. jonathan: thank you very much. if there is a book i want to read, it is the book on this. the cleanup.

but they walked into when they had to look up the bankruptcy of this company. how much was left. you will sit here and say there is enough money to cover the people who are owed money. listen to these numbers. $16.3 billion in cash to distribute. lisa: to me this is the question. how much has leaked out with all of the donations. this is the fundamental issue. is it a crime and how big of a crime is it if everybody gets their money back? a lot of people would say it is still prime because you could have gotten bigger returns. annmarie: it is the end sum that is shopping. some creditors could recover as much as 142% of what they are owed. they are making money even now. jonathan: let's hope we do not get a turn in the market. lisa: if you hang on long

enough, boom. jonathan: equity futures slightly negative. up next, the white house sending a message to israel. >> if you will carry out a military operation you want to see people evacuated but those people need somewhere to go and we've not seen a plan that would deliver that. jonathan: that just around the corner. live from new york, good morning. ♪

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jonathan: good morning. equity futures slightly negative. down .03% after the s&p 500 managed to squeeze out a fourth day of gains. yields higher on the 10 year. under surveillance, the white house sending a message to israel. >> it is no secret they want to conduct a major military

operation. we have made clear we oppose such an operation. you want to see people evacuated those people need to have somewhere to go. the place they need to go to needs to have sufficient food, water, housing, sanitation. we've not seen a plan that would deliver that. jonathan: the u.s. pausing a shaman of arms to israel about rising concerns about its planned military offensive in rafah. u.s. officials saying a final decision has not been made. israel also reopening a peak crossing in the gaza strip for a deliveries following pressure from the white house. terry haines joins us for more. there is a long history of this going back several decades. how big is the signal? terry: is a series of signals and they are somewhat inconsistent and somewhat confusing. you have stand shoulder by

shoulder on one hand and on the other hand wanting to nitpick operational plans on the ground as well as humanitarian plans on the ground. nary a word and all of that about what the white house is doing about the artificial harbor it was building or what it has been bringing into gaza itself. there are a lot of different signals. this is characterize the administration from day one in the middle east since last fall, and also others of its major foreign policy initiatives whether afghanistan or ukraine. annmarie: yesterday the state department spokesman matthew miller spoke about the proposals the u.s. government put on the table to the israeli government. at the same time what we hear is biden does not want to see any invasion in rafah. do you foresee a plan israel can undertake the u.s. would be on board with? terry: no. rhetorically they will not be on board with it no matter what.

the reason i say that is the united states has not been on board with the military operations the israelis have conducted for quite some time, no matter what they are. i do not see them changing that rhetoric anytime soon. to answer the next question, i do think that is partially politically motivated. annmarie: the timing comes as reuters is reporting bill burns will be heading to israel to see netanyahu. you think this can be used as leverage to get the israelis on board with the cease-fire agreement? terry: that depends on what the israelis want. they have been cagey in public about what they want, only saying the hamas counterproposal of monday was far away from what was that was in their security best interests. i don't blame them for that. negotiating in public is a full's game and a loser's game which is why hamas has tried to

drag them into it. do i see a difference in the trajectory? i do not. you have netanyahu on the one side but you also have a war cabinet that has centrists in it but you have hardliners. neni yahoo! has to set up -- benjamin netanyahu has to set of five all of those people. -- benjamin netanyahu has to satisfy all of those people. as long as net yahoo! -- as long as benjamin netanyahu and gantz are together they can do -- lisa: what more can president biden do -- he is going out and interviewing at a time when his competitor is locked in a criminal trial in new york city. what can he do to get an upper hand on this conversation? terry: my on to sense of advice for the white house -- my unwanted two cents of advice

for the white house is the need to be clear about what their goals are and they need to execute them clearly. if they lose people as a result of that they will gain people on the others by virtue of being cleared and standing cap -- and standing up for what it is the administration wants to do and what is in the united states best interest, not political interest but united states best interest. the administration is not clear on that. they never have been clear. that is why it took six months to get ukraine eight. the administration is not clear and they are not persuasive and there -- and they need to be both. lisa: is there a clear message coming from the trump campaign right now? terry: what the trump people are doing is they are distracted. secondly they are following the political adage that when your

opponent is tearing himself up there is no reason to jump on board. annmarie: we know that president biden will be sitting down with erin burnett of cnn this evening. he has not sat down and done the formal interview process. they've been looking for other ways to get the message out. does he need to be doing more of this communication? terry: he needs to be doing more of that and he needs to be doing more unscripted. i am not privy to what erin burnett or cnn are doing, but the white house seeks to control -- any white house -- seeks to control the environment or the questions as much as possible. the president needs to be out there more unscripted and able to be a little bit more blunt about what his priorities are in foreign policy and domestic policy as well. jonathan: if the election was today, who wins? terry: today, i think trump probably wins by a nose but it is six months out.

as i have said before, i think the biden campaign's discipline, message discipline and get out the vote discipline probably carries over. rump has topped out and third-party candidates -- trump has topped out and third-party candidates wane in popularity. jonathan: thank you. this has been his base case going into november. annmarie: there is a lot of time. you had a split screen like yesterday, the president giving a speech on antisemitism and at the same time you have the former president in court where we learned a lot of salacious details regarding the selection of fair. jonathan: some details we did not want, to be honest with you. annmarie: some details too many and that is wall-to-wall on a lot of network news creeping into the american psyche.

lisa: didn't the prosecutor say i think we are good? i just want to say this gives me complete confidence they will get the debt under control. you talk about the split screen. you have stormy daniels on one screen and then you have concern about the message on the other. i am just saying. jonathan: so many quotes from that testimony. things you do not want to think about. lisa: do you want to share? jonathan: absolutely not. even i can filter that. coming up, angelo zino. apple up .4%. from new york, this is bloomberg. ♪

jonathan: into wednesday on a four day winning streak on the s&p 500. the longest winning streak back to the middle of march. equity futures unchanged. the russell is down today but over the last five days up big time, close to 5%. in the bond market, lots of supply to talk about. yields unchanged. 10-year climbing two basis points after yields dropped over the past five consecutive days. over the past week we are down 20 basis points from the two year out to the 10.

lisa: you want to talk about options? 42 billion dollars of 10 year note being sold at 1:00 p.m.. the two-year option yesterday went fine but we saw yields the second-highest, one of the top levels we have seen. jonathan: good stats. lisa: this is going down in flames. basically it is getting more expensive for the government to borrow money. jonathan: 4.4774 on the tenure. let's go to foreign-exchange. the euro is a total snooze. dollar-yen 155.37. the language has gotten tougher from the bank of japan governor but the price action speaks for itself. lisa: weaker means people do not believe it.

that is the issue for japanese officials. show us you can do something and he will do something, not just coming in with a couple billion here and there and trying to push out some of the people who are more speculative. that is what this market says. jonathan: it reminds me that mario draghi used to say we do not target the foreign exchange rate but the fx channel is important for price stability. that is basically what you are hearing from the bank of japan. annmarie: how do you interpret that? jonathan: serious about policy. i wonder how serious they are about hiking in response to this and whether the shift in language of the back of something secretary yellen might have said, may be in private or on the record is to push them to change the way they are approaching this issue because it is a shift. lisa: is a great pr move to say if you are jawboning you have to show you recognition your policy

is inadequate to capture the moment and that seems to be what he acknowledged. jonathan: speaking of changing, if you're wondering why that currency is on the table, euros sweden, that is a weaker swedish currency on the screen. a rate cut, the first one in eight years. lisa: and they indicated they will cut rates two additional times later this year. there currency is already down about 4.5% versus the euro and more than 7% versus developed market currencies this year. there is further weakening to go. they say they are ok with it. this is what we need for our economy. to me how much does this hinge on it being ok if the fed cut rates and that remains a question. jonathan: the governor of the bank had an interesting line and this is what -- i wonder if this was what we will hear from the federal reserve.

we have come a long way but i will never say we defeated inflation because my job is to be vigilant. lisa: this shows how to call it is for them. we want to make sure we are not overly restrictive but we are still worried about inflation. it is the ongoing concern. jonathan: that is the latest out of sweden. under surveillance, u.s. pausing a weapon shipment israel. an administration official telling bloomberg president boston has concerns over the invasion of rafah. the administration has not made a final decision on whether to go on the shipment. annmarie: right now this is just a pause. we need to see what really happens. there will be a meeting with bill burns and benjamin netanyahu. axios reporting that israeli officials are increasingly frustrated with the with united states his head hailing the hostage negotiations. when you have things like a shipment of bombs not being able to go through does that push the

israelis to sign up for the cease-fire agreement? jonathan: the history of this goes back decades. we have seen some examples of this tactics. annmarie: whether it was shipments or loan guarantees, we have seen this with obama, with reagan, with nixon. it is not unprecedented but it is rare. jonathan: i want to turn to tiktok. the parent company bytedance taking the u.s. government to court. the chinese company claiming the law violates the first amendment. bytedance has until january 2 sell or face a ban. a chinese company using the u.s. system against itself. lisa: which is exactly what you will see with freedom of speech versus national security. this is the core issue in this court case and it is fascinating. how much does this set a precedent for what we can understand under the rubric of national security which is being

used for a lot of things. this will be a landmark moment where they have to define that. annmarie: it will happen at the start of 2025. this is just before the inauguration. added on top of the debt ceiling , on top of tax cuts being extended. what you see is the current president could add on an extra 90 days to that. this will drag out. steven mnuchin speaking to bloomberg saying he is looking at algorithms to see if they could remake the algorithm. jonathan: it is amazing to see chinese companies talking about freedom of speech. the deep irony of this playing out. lisa: china does not allow u.s. media companies to operate in china because they do not want it. in the u.s. we operate under an umbrella of free speech and a host of other freedoms that are guaranteed. to meet is important to go by that and follow the rules.

there is no question is the u.s. becoming more like china to defeat china and it is important to understand where that is ok and where that is not ok. jonathan: iphone shipments in china jumping 12%. apple saw a boost for the month of march after retailers/prices. the retailer faces a slump of 37% in 2024. angelo zino covers apple for cfr a and has a buy rating on the stock. let's catch up on yesterday. the update to the ipad. we are talking about five consecutive soft quarters. you see enough to turn that around? angelo: we do. we are looking at five year-over-year declines. it has been week for a while. they had to go through the post-pandemic blues.

there has not been an update since fall 2022. this is a notable step up in terms of capabilities on some of those internal upgrades. specifically on the pro side of things. the higher price point on the pro side of things will help reinvigorate growth on the ipad side of things. our view is over the next three to four quarters we expect a return to year-over-year growth within the ipad category. that said it is only 7% of the revenue base so it will not be a huge deal driver for the broader company, but it is an indicator nonetheless. jonathan: i wonder if it is an appetizer for the main event, which is the carrot that will hang over the stock, the next iphone. you see anything about what we can expect from the iphone? angelo: the one disappointment that came from the event is somewhere hoping for a little

bit more on the ai side of things in terms of keys ahead of the developers conference. this is tim cook, us waiting for that event next month. there is not much we saw on that side of things, but that said, clearly the fact they are being quicker in terms of some of these hardware upgrades, the fact that they just had the m3 and the mac seven months ago and they've already launched an m4 tells you the urgency the company has on the ai side, at least on the hardware side. we think that will follow through on the software side of things when we hear that development conference next month. lisa: what is more important for uv cash what is more important for your review of the stock? what they are doing with ai or china where shipments rose 12% in march after serious

discounts? angelo: if they can answer the ai issue or at least show some of the capabilities on the ai side of things, show some innovation on that side of things, that will help the story on the china side of things. you look at china. it is tough to understand what is going on on a month by month basis. he had to typically listen to what tim cook has to say and rely more on that type of data as well as the quarterly data. with that said, our view is the rest of this iphone 15 cycle will show year-over-year supplies to china and as we going to fall, something apple is missing is ai capabilities and that is something some of these china vendors are starting to show. china also has a leg up in the sense they are releasing more and more phones which the

consumer likes. that is something apple does not happen its pipeline. if they can answer questions on the ai side of things and showcase for the consumer that helps the china story. lisa: can apple charge more for phones with ai? angelo: i think they can. a big reason for that is i think the consumers love the apple brand. the way apple showcases the messaging when it comes to new capabilities on their ecosystem gravitates to the consumer out there. there are number of individuals -- ai is going to be a much bigger deal than that. if they can wrap this up nicely and select the consumer in a positive way, you can decrease

some of the prices on those pro devices and show a return to growth on the iphone side of things. annmarie: when it comes to the price point in china, given the fact we have seen uptick in march data, do you think apple is at a sweet spot in terms of pricing in mainland china? angelo: i think this is definitely becoming a more competitive market. you heard tim cook illustrate that. he alluded to the fact that china is the most competitive market. it will be difficult for apple to continue to sustain that market share they have deployed in 2023. we expect them to be a share loser and likely an incremental share loser in the foreseeable future. they can continue to grow in that region or sustain revenue in that region. we think if they can continue to

incrementally increase pricing through the new capabilities, this is something we will do over last 15 years or so, nunley only across the iphone ecosystem but the entire hardware ecosystem. jonathan: does it just me, but is the product seemingly getting worse on the iphone side of things? bugs on facetime, the headphones have not improved? angelo: i think it is you. it is one of those things where for us the experience on the iphone side of things has improved. i think you will always have your hip cups across that ecosystem as well as other devices as well. our view is it is probably the best experience you will get across different mobile operators there. jonathan: i would expect nothing less from a man with a buy on

the name. i'm not the only one. every family member has that issue. lisa: having delays. annmarie: the issue i have is battery life when a new iphone comes out and you start to notice your battery gets trained quicker. jonathan: let's take 2 billion dollars of that $110 billion share buyback and put that into an effort to solve those issues. wouldn't that be good? lisa: he is trolling us to try to say maybe this is delivery, maybe they do not want to do that because this encourages people to buy more phones. jonathan: we are stuck in the ecosystem of apple. annmarie: you could be the next ftc chair? jonathan: i do not think that will work out. get what is happened with lena con. -- look at what has happened with lena kahn.

here is your bloomberg brief with dani burger. dani: the second advanced world central bank has cut rates. first it was the swiss and today it is the riksbank. the debate is whether you can cut before the fed or the ecb. the decision indicates whether concerns ever recession in sweden take precedence over currency. riksbank that they could cut twice more this year. donald trump's criminal trial for potentially mishandling classified documents has been postponed indefinitely. he was indicted on 40 criminal charges for allegedly taking documents when he left the white house. three of four criminal cases against the former president have now been postponed. trump is currently on trial in new york in a hush money case. in the first crude mission of boeings start liner space

capsule has been delayed until at least may 17. the initial flight was halted monday due to a potential issue with that oxygen relief valve in the rocket. the spaceflight has taken on greater significance with boeing navigating a leadership shakeup spawned by a safety crisis with its 737 max 9 jet. jonathan: will catch up with dani in about 30 minutes. coming up, too soon to declare victory. >> the second half of 2023 surprised us with how rapidly inflation fell. it is too soon to declare we are stalled out. jonathan: great exchange with the minneapolis fed president. more on that conversation in just a moment. ♪

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jonathan: equities unchanged on the s&p 500. we are slightly negative. down 0.02%. yields retracing some of the moves. higher by two basis points on the u.s. 10 year. too soon to declare victory. >> we are committed to 2%. we will get to 2% and we will get an interest rate environment necessary to achieve 2%. the second half of 2023 surprised us and how rapidly inflation fell. it seems like it stalled out. it is too soon to declare we are definitely stalled out. jonathan: minneapolis fed president neel kashkari urging caution, saying the fed will keep rates on hold for an extended period. jefferson, collins, and cook all speaking.

janet henry and the team at hsbc expecting the first cut in september and the boe to move in june. some people are saying september is becoming the new june. what is the risk december becomes the new september? janet: there are always risks where markets are concerned. it was not long ago that markets were pretty convinced the first rate cut would be in march and then it briefly went right to the end of the year. september for us is the new june. back in december we were saying june. it really will depend on the data. as jay powell keeps telling us, it is the totality of the data. they need to see further improvement on inflation but they do not need to wait until 2%. the urgency they will feel the need to act will depend on all of the data, including the labor market. it may be the progress on

inflation is relatively modest. if they see more that scares them in the labor market data that could cause them to act. if in december we are still at unemployment less than 4% and still getting payroll prints of 200,000 and core pce is above 2.5% what is the urgency? jonathan: it is not where we thought we would be three or four months ago. let's talk about september. you are not alone on september. other people have that on the calendar. the natural question for us is is the politics relevant into the election in november? is september still an option open to this federal reserve? janet: i think every meeting is open to the federal reserve because in any scenario, including the most likely scenario for any fomc member is the next move in rates. any scenario is still on the table. the next move in rates will be a

small one. a 25 basis point move in rates is what will happen. while that is consequential because it will be the beginning of a sequence of rates, even if it is not every quarter, maybe it is a bit more intermittent. they will take the decision when it is appropriate based on the data. i do not think we will have to wait until after the election, we cannot be too political. many will be having that thought at the back of their mind but it will be about what is most likely to settle inflation, at least a bit more confidently back on track towards the 2% level even if we never get there without inflicting more damage than is necessary in terms what is happening in the labor market. annmarie: whether they come out and say we do not plan to be political, that will be the optics. what is the bar they need to see to feel comfortable taking that move knowing many will view it through a political lens? janet: go back to the data.

in the last set of projections we had in march, what was in the fed forecast for core pce for the end of 2024 was 2.6%. we are at 2.8%. we know this is a bumpy ride for inflation. just as we were overly excited to downside surprises, they have gone hawkish early part of the year when inflation surprised. i think what they do need to see now is to get a core pce print that probably is more like 2.5% as the headline figure but they will also need further evidence in the data. slower employment growth and the wage numbers. the more .2's on monthly

inflation and the more payrolls we get is what we need to see the september rate cut. annmarie: if september comes and goes do you think they push it to december you think there's a chance november could be a live meeting? janet: i think it would be unusual to cut in an election month. when we look back at this, and certainly when i spoke to other previous fomc members they can only remember one meeting whereby the timing of an election actually influenced the fed's outcome and it was under greenspan ahead of the midterm elections. the next week after the election was a 75 basis point move so it was consequential when you're delivering a rate rise of that magnitude. for me it is a case of we go in september or we wait until december. i would not rule anything out.

lisa: one of the most interesting aspects of your forecast is you now call for 25 basis points of rate cuts this year. it was 75. you keep your forecast for 75 next year. do you think we are headed towards a higher neutral rate than you previously expected? janet: we are moving towards a higher neutral rate. the movement on the longer-term dot plot has edged up to 2.6%. i get the impression from various fomc members they think it is more like 3%. i guess what we have in our projections is the idea that policy will need to stay relatively restrictive. i think this is what you might hear from all central banks. you could hear something like that from the bank of england. the idea rates could be cut a little bit and still be

restrictive. if we are still at 4% fed funds which we are by the end of 2025, arguably that is still restrictive to ensure an ongoing disinflationary process. we do not have core pce at 2% by the end of 2025. jonathan: appreciate the clarity as always. janet henry of hsbc. 2025 is such an interesting year. how difficult it is to have a view on next year without any clarity on the expiration of tax cuts, what will happen with tariffs if president trump gets another term in the white house. all of these things will have big implications for what happens with the broader economy. lisa: which is the reason i find it interesting. a lot of people are just -- lori calvasina -- the blinding white light of the sun. jonathan: that is 2025. staring at the sun.

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>> margins are up high but companies will have more. >> we will grind higher from here. >> you can make the argument the market over interpreted the weakness of the earnings data. >> there is still room for repricing to take place well we are overweight u.s. equity. >> it's knocking to be a sweet path. >> this is bloomberg surveillance with lisa

abramowicz, jonathan ferro and annmarie hordern. >> live from new york city this morning, good morning. one stock on the board right now in the premarket sinking getting absolutely hammered is uber. down in early trading. >> on a broader lever consumers are spending on riding around. have they reach their price tolerance limit. their bookings were lighter than expected. it came in at 37.6 5 billion versus the estimate of 39.7 billion. the forecast came in on a weaker and of what they expect to see. this is a protracted perhaps relative expectations. >> we will do our best. we've been talking about high end stability and low-end fragility. we would describe the consumption backdrop as bifurcated between high-end stability and low rent weakness.

we think staples of discretionary make sense for that reason but we spoken to the company in the last 24 hours with a different story to tell. the walt disney company talking about the theme park business. >> it's a confusing moment because it's difficult to know what is discretionary. they go to disneyland every year. it's a staple in their lives. i don't know if that's representative. what you saw yesterday with the consumer credit rating from the federal reserve's people were borrowing less than they expected. you can say it's not by now pay later. a question of our people now seeing that weakness for quite a while. annmarie: coming out of the pandemic people are leaning into services. you could not go here you wanted to take your family. especially in places like asia which were locked down. also look back to the conference board.

people talking about concerns in the labor market. the real concerns have been inflation and everyday goods like gasoline and groceries. jonathan: uber down about 7% in early trading. equity futures on the s&p 500 shaping up as follows prayed negative by 0.1%. lighter after four days of gains on the s&p. after five days of falling, yields are climbing. coming up this hour on bloomberg surveillance we will catch up with tracy mcmillan of wells fargo. enda curran on xi jinping's trip to europe and how the u.s. election is already being priced into financial markets. stocks surging a fourth day of gains. tracy mcmillan of wells fargo writing this. we remain more cautious at current levels of fixed income and equities until valuations improve and better opportunities present themselves. we expect broader opportunities

in equities over the next six to 12 months. joining us now is tracy. courses on both stocks and fixed income as well. how does one inform the other? tracy: we are cautious on both equities and fixed income. we are waiting for better opportunities to add to both of those asset classes. right now what we see is the short end of the fixed income, the yield is over 5%. so you have to compare that to the opportunity in equities. her large cap forecast for the end of 2024 is 5200 at the midpoint so there's not a lot of upside potential we see in equities going out to the end of 2024. 2025 we think could be a better year so we favor large cap equities but right now the

balance between risk reward, between fixed income and equities does have us more cautious in equities going up in quality, in fixed income and staying towards the short end of that fixed income curve. jonathan: how do you think bonds would behave in a draw down in equities paired with they still perform well? tracie: that's a really interesting question. the past couple of years what we've seen is higher correlations between equities and fixed income and that's because of the driver of the downturn in both of those markets or conversely the upturn in those markets. that's been the expectations for interest rates based on inflation. we typically have seen bond yields rise prayed equities, down. both of those negative at the same time and then conversely.

what we are telling investors is going forward that should start to normalize as inflation comes under better control. and diversify into assets that do not have that strong correlation right now and alternatives. lisa: you talk about the consumer and a weakening in the consumer. how much, get a read of that which has been pretty strong on the earnings-per-share basis but you've seen that, in light. they're talking about bookings coming in lighter than expected. they talk about latin america, early holidays. do you think this is evidence of tired competition, price pressure by the consumer or all of the above. tracie: what we are seeing in terms of the consumer is that image a little bit earlier. consumer confidence is -- does appear to be waning and there is

a bifurcation as you mentioned. in the upper income tile. and the bottom for income quintiles which have exhausted all of their pandemic savings. so really relying on that upper end consumer to carry the market. we will sales next week. that's further indication of whether or not consumers are continuing to spend some of the underlying information we are getting out of recent data and recent reports is that consumers are pushing back on pricing faces and companies are feeling less confident about their ability to raise prices so all in all that could be good for inflation but we see the consumer starting to pull back in aggregate. >> a lot of people would agree prayed the issue is the speed and where this is going to go in terms of the weakening. you have people say we will see

a protracted weakening and that true downturn. we've got that yesterday. you have other people saying it's the appropriate softening. allowing small caps to rally prayed which camp do you fit into? >> we do think we will see more of a soft patch. we think the data last week is supporting that view that we will probably see that soft patch growth slowdown labor market slowdown starting to occur in the second half of this year. so more of a soft patch. we think there's less risk of a recession then there was in 2023. but that doesn't necessarily give the refresh, the reset that we would need the clearing of markets that we would need for small caps to reassert themselves. small caps really for decades now had seen the ranks of non-earners increasing and that

gives us some longer-term concern about small caps. there is certainly a case in the cycle to invest in them we just don't think the time is quite right yet. >> all morning we've been talking about the developments in the middle east and in your know you talk about how this could be a risk. which we seem pullback quite significantly. what upside do you think we could see in the oil market? >> we have a price target on oil between 80 and $90 a barrel through the end of this year. but we could see towards the upper end of that target range if we were to see oil trade restricted more in the middle east. we did get good inventory member -- numbers in the u.s. and producers could ramp up production but that will probably take a little bit of time. in the interim we could see some supply constraints that would push prices higher.

and don't forget about opec being able to bring on more supply as well so we don't see oil prices necessarily skyrocketing but we could see the upper end of that range and we think that would put pressure on markets because it could imply inflation. >> if that were to be the case, say $90 a barrel where would you want to shift in that portfolio? >> we have already shifted towards commodities with an overweight bear. the non-correlation we like that about commodities. we see precious metals performing well. and we think that oil does have some upside from here. so a commodities position we think is probably a smart thing to do at this point. >> a little bit lower on the session this morning always wonderful to hear from you. kicking off a conversation about the broader market. new yorkers loaded.

amazing. global ranking of the wealthiest cities that's in immigration consultancy. 350,000 millionaires in the city which is the most of any city and 48% from a decade ago. that is one in 24. >> i thought to myself is that just the people who can afford to live in manhattan or is that a socially just because there's opportunity here or a little bit of both. annmarie: i saw this and thought wow i sit with two of them every single month. >> what are you talking about? 60 billionaires, 744 people with investable wealth of more than $100 million. for all the talk of florida let's give you some numbers in florida. we are talking about wall street now. miami ranked 33rd among the cities with the most millionaires up 78%. >> some people would say rife for opportunity. that seems to be the direction

of travel. a lot of people talking about migration from new york city. it looks pretty crowded to me and the numbers pretty much back it up. >> new york city, the bay area. and london. just about still in the mix as well. here's your bloomberg brief with dani burger. >> let's get you a quick check on rivian shares lower in the premarket by 6.7%. the ev makers earnings but it still stuck by its plan to build vehicles this year. rivian had warned investors it would shut down its illinois assembly lines in order to make upgrades and reduce -- produce a lower cost model. analysts say investor questions will remain until rivian shows proof of execution and demand. read it shares for their part surging premarket up 14 and the third. they posted better-than-expected results in their first quarter. revenue increased far surpassing analyst estimates.

the growth was thanks to investments making things easier to use and improvements in its ad targeting technology. shares are slightly lower since the trading debut in march. panera bread is no longer selling its caffeinated charged sip strengths. they included an ultra caffeinated lemonade and some other fruit drinks were the subject of at least three lawsuits claiming the people who drank them were harmed or even killed. the drink set up to 390 milligrams of caffeine per 30 ounces. about four times the amount of caffeine and energy drinks. it will introduce new beverages in the next two weeks like a blueberry lavender lemonade. that's your brief. >> what is that about? >> i love lavender. but as a soap. >> before bed. >> these are all things that are not in there. >> i like lavender lemonade. >> and then pumpkin his fall.

>> lavender is supposed to relax you. it's weird to put it in a caffeinated drink. >> very confused. up next on the program bytedance biting back. >> we are not going anywhere prayed we are confident we will keep fighting for your rights. the facts and the constitution are on our side. we expect to prevail again. >> that conversation coming up shortly. good morning.

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get your business online in minutes with the power of ai... ...with a perfect name, a great logo, and a beautiful website. just start with a domain, a few clicks, and you're in business. make now the future at godaddy.com/airo >> equity futures on the s&p software. negative on the s&p 500. yields are up by two basis points. under surveillance this morning bytedance biting back. >> rest assured we aren't going anywhere.

we are, but we will keep fighting for your rights in the courts. the facts in the constitution are on our side and we expect to prevail again. when we make our case in court you'll still be able to enjoy tiktok like you've always have. >> tiktok's parent company suing the u.s. government over a law signed last month forcing the app by january or face a ban in the u.s.. and violates the first amendment rights of its 170 million users. mike joins us now for more. highly anticipated here it is. what is this look like now. will this take months, quarters, years. >> this is not a case that would be handled on emergency basis it's clear that the courts are not treating this as something that will have to be resolved tomorrow. the law as signed by president biden gives the company until january 19 of next year to find a buyer and even after that the

president could extend it by another 90 days so we were already talking about a year potentially to resolve the whole matter. bytedance is not interested in that kind of resolution. it made clear in his court filing not only does it not want to sell. it sees it is commercially and technically legally feasible. >> it looks like this is a lever that will see the biden administration poll that firmly puts it in the hands of the next administration. how can we see biden even continue on this path or trump deal with this on 2025. >> it's a great question because politics has played a role in this from the start. donald trump when he was president actually signed a ban on an executive order banning tiktok in this country. that was stopped in court. there was not enough authority

the judges said and it also raised a great question but tiktok is arguing right now. it infringes free speech rights. the question is how will donald trump handle it going forward. he came out most recently against this move to force tiktok to be divested or band and he called the law flawed and said it would benefit the parent company of facebook which had banned him in 2021. >> when it comes to what happened in montana do you think that's a harbinger for how this would play out? >> tiktok is really raising the first amendment as its primary argument against the law. and any sort of first amendment case the court sets a really high bar for any restriction on speech. they're going to come in with a national security argument saying tiktok poses a risk to u.s. security because china could have access through the

chinese parent company to u.s. user data and could use the data to so disinformation print tiktok's argument saying congress did not provide enough evidence to back up those arguments. so we will see how the national security argument that the government has put forward in the law itself plays out against the first amendment claims that tiktok and its lawyers will seek to defend. >> tiktok is arguing it spent more than $15 billion to move their data to oracle cloud to insulate it from potential manipulation. how much do you think on a broader sense this will stymie the administration's efforts in such a broad set -- to use national security in a broad set of things. >> national security is driving a lot of these export controls and other measures and this one is crossing into more than just congress. it really is free speech, the

first them the constitution and i'm glad you brought up the project that tiktok has spent roughly $2 billion on to fence off this data of u.s. users away from really any foreign government's ability to access it. however congress was aware of that project and still proceeded with that. it does come down to a collision in the court. >> how much does it matter in the sense a lot of politicians will try to pass certain rules that would go into effect and the challenges would take a while to go through the court system. they can make a statement, changing market and then later not if it's overturned they've already had their impact. >> for some of the politicians in washington they are willing to wage that fight. rand paul warned this is not going to hold up in court. he opposed it for other reasons.

but that was one of his arguments. that we shouldn't bother with this because in his view it ran the risk of being overturned by a court. nonetheless there are number of lawmakers who viewed it as a matter of principle that the u.s. government needs to take a stand against the potential risk for china could be using a legally viable platform here in the united states to do some things that could undermine national security. what we have to watch for is during the court arguments and as this unfolds whether we get more evidence of what kind of threat to national security official members of congress actually see in this platform. >> the financial times yesterday had a story saying the u.s. revoked export licenses that allow intel, qualcomm to supply huawei with certain ships. as we get closer to the election can you expect more of these

restrictions to happen? to tighten the reins when it comes to what they are allowing china to get their hands on? >> the commerce department has suggested an ink -- interest in maintaining not only the u.s. technological edge, but they are also preserving that edge for the sake of national security. it's a commercial argument but it is also a security argument. they even said in remarks a few weeks back technological security is national security and so they are looking hard at these areas where an edge is needed to maintain and huawei's interesting because it was already subject to sony restrictions. for the companies affected by this measures that we reported on yesterday. the business that they do with huawei is negligible.

nonetheless there's is a high symbolic value because it shows the u.s. government is taking this very seriously and is trying to send a signal to china that there are two tiers of access to technology that you get and we want to preserve the most advanced technology for the u.s. for not only the competitive reason but also the security reason as well. we can look for other steps to be taken in key areas like artificial intelligence and quantum computing going down the road. >> what kind of signal do you think china has received. is the message from america we can only go so far. mike: that's a great way to put it because we've heard the president and other members of the administration including a few who visited china to meet with senior officials put it roughly those terms, that we don't want delinking or decoupling. we still want to do business

with you but we recognize we are not exactly aligned politically and commercially and on a security basis. so therefore we can only go so far and then we need to make sure we maintain this technological edge for all of those reasons and so you are not seeing a push for delinking. we still want to do business with you. >> it's a difficult balance for sure. a range of issues. ev's, but we will see in the next few months some big tariffs on chinese ev's. what we want, things out of china to build ev's. >> china has control of the supply chain when making a battery when it comes to the raw materials and processing but whether or not it's biden or trump you will not see a chinese ev coming into the united states. the tariffs are prepared to get higher. lisa: there needs to be a true

and honest debate about electric vehicles in the united states and how different it is the cost-benefit analysis over in china not just from dollars and sense but also from global warming and emissions in all of that in terms of production. there's a question about whether the administration is committed to an idea that is not possible to really compete on when it comes to countering china. >> president xi jinping with talks -- stops in serbia. equity futures pulling back just a touch. negative by 0.2%. you are watching bloomberg surveillance. ♪

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jonathan: equities pulling back. down .2% in the s&p. on the nasdaq down .2% also. deutsche bank just dropping this one. five reasons to be positive markets. data releases are looking increasingly positive across the board. chairman powell's comment seem to have taken out the terrorists of rate hikes from the fed. oil prices are coming down once again. the global economy has continued to prove impressively resilient. number five. although a few indicators are pointing in a more negative

direction, this cycle has seen several periods where the data deteriorated. jonathan: -- lisa: is this euphoria? is this what has driven people to keep buying risk assets? we are getting earnings from uber, from shopify. there is clear margin compression. people are able to shrug that off. on the broader sense it'll be a slow down but not something more serious. jonathan: conditioned by experience over last year. we have had so many false dawns. a prime example of that is the tension of last spring. hard landing, rate cuts coming, not so fast. that is what we have to be focused on. we drew this distinction yesterday and we have done it months previously as well. the difference between a welcome loosening in the labor market and an unwelcome deterioration.

how close are we to one and not the others? lisa: that has been the divide among many people we have had on the show. there is the question of is it just enough to be a soft patch or do you have the frances donald view where you are getting more protracted slow down in the fed could cut significantly. if you believe this federal reserve will not cut rates significantly then you have to believe the neutral rate is now north of 3% or 4% and we are looking at the new normal. that is a new set of investing parameters and i am not sure that has truly brain -- that has truly been comprehended. jonathan: the federal reserve is still lagging based on what we are price for in financial markets. yields coming down. we have dropped about 20 basis points across the curve. 4.84 on the u.s. 10 year. on the 10 year up to 4.4876. lisa: after getting this, or

pivoting back to the original pivot by the federal reserve where people are saying we do not see a likely chance of a hike. neel kashkari was the outlier in saying he does not see this as a likelihood. now the question is the bar lower for the fed to cut rates if we get data that does show weaker inflation next week. jonathan: let's talk about hikes and the potential for them. dollar-yen 100 5550 -- 155.50. this is in the wake of the governor saying a one sided yen is weak for the economy -- depending on those moves, a monetary policy response might be needed. lisa: which might be a direct response to janet yellen and her request for greater communication. you guys have a lever you can pull. maybe this is a nod that the

market is not believing yet and that we have talked about it significantly. at this point you have to wonder what the bar is for the bank of japan or japanese authorities to intervene in the market when they've already done their piece, it has had some success. this looks like something fundamental. jonathan: this is where we miss tom keene. he knew the best bar in every single city. lisa: you, me, we go to the best bar. annmarie: a really nice part the one from the film where you overlook the entire tokyo. i think it is called the manhattan bar. jonathan: tom knows. he would always try to sell it. lisa: we really need to go there and then afterwards he would be serious. jonathan: top stories. the u.s. pausing a shipment of bombs to israel over concerns about a potential invasion of rafah. a senior administration official

telling bloomberg washington has not made a final decision on the shipment of weapons just yet. this goes back decades. this relationship. annmarie: it is rare but it is not unprecedented. we have seen it with nixon, reagan, obama, h w bush. these moments that have been paused. what i find interesting is bill burns is sitting down. he is the may negotiate or representing the united states. this is before it is also in the israeli press that the war cabinet will be meeting this evening at 7:30 local time. that is just in a few hours as the u.s. is potentially waiting for whether or not they could get the agreement over the finish line. lisa: i wonder how much this will fade in the u.s. as a domestic issue and how much it will be protracted. this is dominated the headlines.

along does that have to go? jonathan: new story out of china. bmw lower in germany. the automaker did outperform its european rivals. toyotas cautious outlook overshadowing the surgeon hybrid sales that boosted profits to a record last year. china has been a key issue for sales for some of these manufacturers. for ari not a great example but certainly struggling in china. many others are facing the same experience. lisa: i am looking with the bmw ceo said. he said i would war against something like that. they are looking at subsidies eu was looking into. basically saying we should allow china to get access to a market because they want access to china's market. jonathan: we heard the same thing from mercedes-benz. this is what they're worried about. they're worried about european policymakers putting up walls and chinese officials doing the same thing. lisa: if you look at their

market is almost half of their total sales. you are talking about companies that are designing different models for the chinese consumer. do you know really of expensive cars -- bmw cars sold in china, need to have a bigger backseat area because there is a driver in the front. the driver is not luxurious, it is the back of the car. jonathan: to be driven. that is why you want a rolls-royce. i wonder what the automakers tell us in public is the same message the officials receive in private. i wonder if these western companies want to be able to say on the record we do not want tariffs, we want to complete fairly with chinese automakers. past, see what we are saying. in private they are saying something different. lisa: basically put up the walls , maybe that will help us sell more cars. jonathan: chinese president xi

jinping continuing his european tour with stops in serbia and hungry. writing in a paper that china's cooperation is a sign of the times and the trend of development. earlier this week xi made a stop in france. let's talk about things. i want to talk about this tort and the locations for it. france, serbia, hungry. why are those three places so significant? enda: it is weighed down with symbolism and speaks to the idea that president xi is trying to peel parts from the u.s. where he can. in belgrade our colleagues were reported and the talk was all about deepening the economic links and deepening investment. serbian officials saying the skies the limit in terms of the two countries. in paris when he met emmanuel

macron, even though it was cordial, during those talks president xi warned about prospects for a new cold war and warned against decoupling and pushback against what he termed blaming third parties for a role in the russia ukraine more in the president used it as an opportunity to push back against china. you a president xi trying to peel off where he can. in china you had tensions arbitrate investment. in serbia you had a country wide open for business. jonathan: it is not just about economic development. it is also about foreign policy. the 25th anniversary of the nato bombing you go sloppy a. what is the fundamental -- the nato bombing of yugoslavia. what is the fundamental weakness president she looking to reverse -- is looking to exploit?

enda: highly symbolic he went to the embassy. president xi has cited that nato strike several times in speeches and some analysts interpret it as the reason they have made that alliance with russia and that does make the point that president xi wants to pitch an alternative to the u.s. lead a security order. he is saying there is an alternative and that is why they have been offering china's alternative to that popping up in the middle east. arranging the no limits agreement with russia and now they are arriving in serbia and using the embassy as an american mistake. it does go beyond trade investment and is about pitching china as an alternative in the global security order. annmarie: in april of year emmanuel macron came back from china and gave an interview to politico. and that he talked about strategic autonomy. not to follow the united states

when it comes to europe's relationship with china. what kind emmanuel macron did xi jinping get this time around? enda: this is where there seems to be inconsistency between europe and the u.s. in inconsistency within europe. president macron was pitching to president xi an agenda of cooperation and pitching to china to play a role in trying to diffuse or bring the ukraine war to some kind of any indeed. at the same time both paris and beijing used those talks to sign agreements from corporations and ia. agreements for where they can do more trade, more cooperation. he did have this its consistency. here we are this year stub i am told about doing more trade in business together. at the same's time i'm speaking to idea that france and europe have its own sovereignty.

it is mixed messaging. the common thread is all of these countries, while they are taking a different approach with china they certainly have their own problems and concerns when it comes to doing business with china. annmarie: how much of a win is it that president xi will be welcomed with the red carpet when it comes to hungary? enda: when you want to talk about where the world is dividing into blocks and where the world is taking sides, obviously serbia and hungry are very open to doing business with china. the serbian officials said the sky is the limit when it comes to that. hungary expected to give a world welcome. this speaks to the idea that china is wooing a global south and pitching itself as an alternative at the same time the u.s. is losing ground in popular appeal. we saw the recent survey that global perception towards the u.s. has taken a hit over the war in gaza.

china is using this opportunity to pitch itself and choosing those countries carefully where it thinks it can peel them off from the u.s.. going to paris and then serbia and hungary is clearly a significant symbol il -- clearly a significant symbol in itself. lisa: on commerce, the question of what does china want this to look like? do they want to sell cheaper goods to europe and not have any international companies come to their own land? what is this arrangement that it seems xi jinping is lobbying for? enda: i do not think it wants to be blamed for exporting cheap goods. they do not like this idea -- some parts of the world are accusing china of making cheap goods into liberty exporting them. they are pushing back on that and they're pointing out where they have complaints with their own and equally worded --

they're also showing their countries where we do not have trade tensions, were nobody's talking about decoupling. that is why serbia is such a good example. in serbia there is talk of more investment. i think china is pushing back on two fronts. they are not accepting overcapacity allegations in their highlighting countries that are more than happy to do business with china. jonathan: you are one of the best. enda curan with bloomberg in d.c. i thought this meeting was important. this is a clear line to the isolationist temptation of the american right and the american left going into a big election in november. the message is if you will eat out we are left -- we are -- if you are ready to lean out we are

ready to lead in. lisa: from europe's perspective we do not have america as our back in from chinese perspective america is losing some of those ties, how can we get in the middle? annmarie: president xi knows exactly what he is doing. there is a war on european soil and china is the reason vladimir putin is able to fight the war. this is europe's number one existential concern. jonathan: he wants to highlight mistakes in foreign policy future opportunities as well. equity futures negative .1% on the s&p 500. with some stories elsewhere, here is dani burger. dani: shares of uber are following 6% in premarket trade. the cfo blamed tough comps last year captured higher demand tied

to the return of carnaval in brazil and put into an earlier start to holidays like easter and ramadan. both lyft and doordash beat expectations which raises questions over uber's strength in the u.s.. shopify tumbling, down 17%. the e-commerce platform swung to a surprise loss in the first quarter and it also said gross margins will decrease 50 basis points compared to the first quarter and revenue is projected to be lower after the sale of its logistics business. for the first time in the leak history, and the wnba is getting full-time chartered flight services according to a report from the associated press. the commissioner said it will cost $50 million over the next two years. players have long been advocating for the change to address the safety concerns of flying commercially. now it means no longer will have to face long lines, cramped legroom, and layovers for professional athletes on their way to games. that is your bloomberg brief.

jonathan: i feel the same way. up next, pricing in the november election. >> the united states has the most insular economy. the fact that tariffs will go on to china, big deal? jonathan: that conversation is up next. ♪ ♪♪

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jonathan: wednesday morning, good morning. equity futures on the s&p 500 softer. down .1%. going against the trend of the last five days, yields have been lower. they are higher now four basis points. under surveillance, pricing in the november election. >> do i think donald trump would increase tariffs and china? sure. do i think that would have a massive inflationary impact on the united states? i think that is ridiculous.

united states is the most insular economy. you'll hear a lot of rhetoric about appealing the ira or changing the ira and stocks will move on. at the end of the day nothing will happen. jonathan: here is the latest. traders bracing for volatility is the countdown to the u.s. election passes the six-month mark. mandy xu with what is interesting is how early markets are embedding this election with the premium and how weekly -- at how quickly volatility is expected to normalize -- mandy xu joins us. you call this the kink in the futures curve. mandy: we have been observing that the october future is trending at a premium to september at two to three points. that is unusual because we are many months ahead of the election. at this point there was only a one-point difference between the

september and october contract. a lot more volatility being embedded early on in the cycle. the second thing is if you look at the november future it does not show expectations of persistent volatility. people are expecting it to be resolved, which is interesting given the candidates involved. lisa: can we brought it this concept of volatility? a lot of people are saying the market is getting more volatile. market metrics are not getting more volatile. you look at specific stocks and their whipsawing. how do you put that together? mandy: we have a great metric to illustrate that. this is been a key feature of markets over the past 18 months. while macro volatility has been muted, single stock volatility has not. in wild swings of the stock and sector level. the dispersion of stocks has been high while because of low

correlation indexed returns are muted. if you look at the vix, that is low. annmarie: given we know what happened after the tory 20 election, where is this conviction coming from -- after the 2020 election, where is this conviction coming from saying there is little fear of a contested election? mandy: even in 2020 we saw headlines about election fraud and one candidate not conceding, even 2020 volatility came in rapidly in november. in terms of a realistic path to a contested election, i think the hurdles are high and that is what investors are focusing on. you may get noise and headlines. there is a process in place and investors trust that process and that is why you're not seeing that persistent peak in the curve. jonathan: how does this compare to previous elections, not just 2020 going back even further?

is this normal? mandy: what we see in this cycle is higher than what we see at this point in the cycle but if you look at how the vix outperforms it is underperforming compared to more recent cycles. in 2016 and 2020 we saw more significant volatility in october than what is priced in. i think 2016 and 2020 have averaged a 10 point increase. as we get closer to the election we will start to see that increase. mandy: how does -- jonathan: how does this stack up with what you would advocate for. steve eisman writes tariffs on china, big deal. you might get changes, we might move on that for single day, but at the end of the day nothing will happen. is that how you view things? mandy: can terms of fiscal policy in the state of government and politics nowadays , to get fiscal policy through you have to have a clean sweep. that is what people are focused

on. part of the reason why there is less volatility priced in relative to how it performed last cycle is there is less chance of a potential clean sweep by the democrats or the republicans and that is what you need to enact significant fiscal policy in the market. annmarie: divided government means there will be gridlock but at some point of need to contend with the trump era tax cuts. you expect some of them to be extended. mandy: i don't have expectation in terms of the fiscal policy but i can say that would have an impact in terms of the rates market. that is where a lot of people are focusing. the big driver in the rates market is the fed and monetary policy and that is front and center for a lot of investors. we will see as we get closer to the election. it is still very much focused on inflation and potential fit rate cuts. jonathan: the spike in volatility in april.

was it a one-off? how do you guide that conversation? mandy: insomuch as the april selloff was driven by rates, it is important to recognize that the balance of risk and shifted when we talk about rates. we are talking about rates higher for longer for a long time but now the focus is on the longer part of that. how much longer which is actually volatility dampening. it is about rates being unchanged for longer when were talking about rates higher for longer. the question is how much higher inflation can go. the right tail when it comes to the rates distribution was more significant. what stands out for me in april is volatility was muted in the late -- in the rates market. -- double during the rate selloff but this time around it went up very modestly and is now back down to a one year low. the more contained reaction we are seeing in the bond market

has spilled over to the equities and that is why the vix is back to a 13 handle. jonathan: you're one of the best of this and we always enjoy catching up with you. mandy xu going through some of the fed talk. the emphasis on time. vice chair jefferson a little bit later. fed governor cook committee will hear from bostick. you'll hear from a more fed officials throughout the week. coming up, we will catch up with krishna memani, bloomberg's craig trudell, kathy jones, and citi's scott corona. lisa: are they going to argue for no tariffs because that would embolden their chances in china? jonathan: that conversation is just around the corner. futures -.2% on the s&p. a little bit softer of the back of four days of gains. from new york city, this is bloomberg.

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>> everything is pointing green for the fed to start cutting rates. >> this year has maybe one or

two rate cuts. >> when you start cutting rates, can you stop? the markets are not convinced. >> our expectation is that rates stay where they are. potentially a cut at the end of the year. announcer: this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: you might get what you want and you might not like it. good morning for our audience worldwide. "bloomberg surveillance" begins right now with equity futures negative by 0.2 on the s&p 500 following five days of which treasury yields following -- falling. coming up this hour, we will be catching up with krishna, craig

trudell and casei jones. looking forward to that later this hour. both the fomc meeting and the last employment report were positive for prices but it does not change the challenge that the fed faces. inflation is sticky. the net outlook is still the same. the fed wants to cut but will not find the opening in the near term. we careful what you wish for. is that the message? krishna: chair powell made it clear that the way they are thinking about risk is the upside is limited so the upside to raise is pretty limited. what they have to contemplate is when do they actually cut. the direction of policies is really set. when the employment report comes out and you see a market rally, i have to ask myself do i like

that situation better than liking what the fomc situation was which was cut-rate, growth good. as opposed to capped rates and the economy slowing down significant. i prefer the first one rather than the later scenario. if you think about it from the fence perspective, inflation going up or stagflation or any of those things are not big concerns at the moment. the biggest concern is if things go south, how fast do they go south and what do we do. that is what they focus on. jonathan: let's build on what you just said. you divided it between a post fed world and a post of form seaworld.

krishna: it is important to recognize that the labor markets are rationalizing therefore we probably will not see the growth we before. there is enough stimulus that was put into the system that is still going through the system that if you look at what happened to inventories in the last gdp report, that alone gives you a percent point in growth. if you look at the fed gdp now, things are not slowing down and i think that is why the fomc scenario probably holds even if we see a couple of weaker employment reports. anne-marie: is this another way of saying that a post fomc meeting kind of world is one in which people are not depending on humans and they are depending on judgment calls and they are not as data dependent as the fed says that they are? krishna: yes.

at the same time it is with recognizing that the data is actually supporting human dependency. if the data came in and we saw an employment report of 50,000, that scenario would be dramatically different. if that came after 200,000 or 250,000 we would freak out a lot more. the data is very consistent. anne-marie: you have been good about talking about why you think it is a good place to be. do you still think that or do you think the persistency to that, is enough to start loaning out? krishna: at some point there will be a time to buy long-duration. today is really the question. the reason for t-bill and chill is the equity market is not

correcting in a big will because nominal growth is relatively solid. -- a big way because nominal growth is relatively solid. on the other hand, equity markets given valuations and the dispersion of returns in certain sectors as opposed to broad-based return profiles ensures that it cannot really run away from you. it is really an environment where you're getting 5.5 percent, why take that risk when the upside or downside is pretty limited. anne-marie: are you saying the idea is flawed if rates are where they are? krishna: likes broadening out in the rally but it is that happening to the extent that we would like. if you look at postemployment report market reaction, what did well? tech. that has been the primary driver. until the profile of the market changes dramatically, the likelihood that you get another 30 percent return out of

tech, i just don't see that happening. anne-marie: given how the markets are reacting, do you agree with the fed that we are sufficiently restrictive? krishna: i think so. if you look at any metric, things are certain. another thing to remember is the inversion of the curve itself ends up being restrictive from a creation perspective. if you are funding costs at 5.5% and you can lend out at 4.5% the likelihood that the banking sector would create a lot of credit is not possible. it is restrictive. could it be more restrictive? yes. if it is more restrictive than the risk of a recession becomes significantly higher. that is what worries the fed far more than whether inflation can persist for another six months or not. jonathan: can we build on the importance of the banking channel? if we set her last spring he would have said what is about to

happen is about to send the economy into recession. michael sat in your chair last week we talked about the importance of credit markets, private markets, private credit, really picking up things on the back of the banking sector that may be struggling bit given the forces you just described. how important is the bank lending channel to the broader economy? krishna: i think the private credit market is important for the financial economy far more than the real economy. that would be my sense. the banking channel is still very important. the assets in the banking chapter -- banking sector, the user orders of magnitude -- these are orders of magnitude difference. it probably helps with financial assets because of in the financing cost and things like that but at the end of the day what happens in the real estate market, it is really driven far more by banking. irrespective of how large the

private credit market gets, the impact of that and the overall economy is still going to be relatively small for some time. jonathan: is the officer opinion survey still relevant? krishna: absolutely. the fed pays a lot of attention to that. that is their benchmark about how people are feeling and what is the duration of credit creation. lisa: that is the reason people have been paying attention to this but while we have not seen the kind of weakness we would expect to see. people no longer rely on that bank lending in the same kind of way. i wonder, do you think that this market has fully adopted to rates where they are? i understand the mortgage market is separate but aside from that that corporate america has largely adjusted to rates? krishna: let's talk about the two different issues. one is did the rate sensitivity of the u.s. economy go down because of a low level of rates

for an extended period of time. . absolutely therefore the rate sensitivity today will be meaningfully lower than what it was in the 90's or early 2000 and those time periods. having said that, this level of rates in an inverted curve, saying that there is no impact of high level of rates in the market, including mortgages, it is not as large but it is still a driver of investing decisions and things like that. if there was not enough stimulus, if you analyze it you have to strip out the impact of stimulus and the fiscal policy on growth. if you do that, you will find rate sensitivity lower but still significant. lisa: going into later this year you talk about the fiscal side and i know you have been focused on the question around fiscal stimulus, what happens with the tax cuts that might get extended

next year, tariffs that might come in. how much are you factoring that in at a time where a lot of people are saying that kind of meaningful impact on where the rate structure is and in general on the deficit? krishna: i think the fiscal policy will be important. i will make a couple of points with respect to that. disbursements are still going through the system. the fact that it was passed does not mean that it was not dispersed. that ends up being supported for a little while longer and perhaps even in early 2025. having said that, my judgment would be that the likelihood that in the future given the state of the economy, deficit, inflation, everything that we get the same level of fiscal impulse in the economy, i have a great deal of difficulty accepting that premise. it is probably going to be lower than what we have experienced over the last five years. lisa: base case, just an extension of tax cuts and that is it? krishna: if there is an extension of tax cuts, it will

have to be after a big fight and toughs log rather than it happening naturally as it would have happened with an inflationary episode. jonathan: this was also -- awesome. thank you. the latest on tesla. just a little bit softer, negative in the premarket by something like 3%. the call from reuters read this follows, u.s. prosecutors are examining whether tesla committed securities by misleading investors and consumers about its electric vehicles self-driving capabilities. this according to three people familiar with the matter. the stock for now down about 3%. lisa: the hits came on coming -- keep on coming. this is not necessarily related to elon musk. this have to do with the steering my breaking and lane changes and self-driving systems that are overseeing them. this will be pertinent especially as they try to shift into robotaxis.

jonathan: we will stay on top of the story. a little bit softer in the premarket. here is your bloomberg brief with dani burger. danai: president biden will channel a major take investment in wisconsin today. he will be joined by microsoft president brad smith who will be announcing a 3.3 billion dollar plan for an ai data center. the facility will be built on land that had been picked to become a fox con plan during the trump administration. fox con scale back plans. tiktok's parent company bytedance is taking the u.s. government to court. the company claimed a ban law violates the first amendment. bytedance had until january 19 sell or face a ban if the courts did not intervene. intel has issued a warning and a new filing. the chipmaker expects revenue to fall below the midpoint of its estimate for the second quarter. the company did not change its

guidance which is currently 12.5 billion dollars to $13.5 billion. it comes as the u.s. the part of converse -- commerce developed new licensees where qualcomm will not be able to sell to china's huawei. jonathan: thank you. much more in 30 minutes. we will get you some morning calls plus falling short on earnings boosting ev output. we will be talking to craig trudell. the latest on tesla from reuters. u.s. prosecutors examining whether tesla committed fraud. the stock little bit early as well. from new york, this is bloomberg. [city noise] investment opportunities are everywhere you turn.

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jonathan: four days of gains on the s&p 500, pulling back just a

little bit. we are down by one third of 1% on the s&p. jp morgan lowering its price on disney to 135, an overweight rating on the stock. disney's streaming additions and profitability are underappreciated positives. sticking with an equal rate rating, a jump in bookings and no signs of consumer weakness. finally, maintaining a neutral rating, the ev maker's strong product roadmap as investors weigh it strong product model. let's get to craig trudell. i want to go straight to the story from reuters. the paragraph that prosecutors are examining whether tesla committed fraud by misleading investors and consumers about its electric vehicle self-driving can abilities. this according to people familiar with the matter.

the stock is lower in the premarket. how much more does this push the story forward? how much more is here that we did not know already? craig: without disrespecting reuters, honestly not a lot. this is something that we reported in late 2022. it is something that we reported again in early 2023 when we reported that elon musk himself played a very hands-on role in this infamous video where tesla had a questionable disclaimer about this idea that the car you are about to see is driving itself. it was not actually driving itself. tesla actually has acknowledged in its securities filings that the justice department has sent information request which is another way of saying subpoenas. this is something that has been known and a known risk for tesla and this story does not necessarily unearth new details

to flesh that out. jonathan: as you know and reuters alludes to this, tesla is ready to take over driving. what is the ultimate remedy for all of this? craig: i do think this draws attention to this idea that for years now they have been selling a product called full self-driving which is not self-driving fully or otherwise. it is a system that you, the human are responsible for the car when you crash using the system. you run the risk of tesla going to court and pushing back against you trying to have the manufacturer take responsibility. this is becoming all the more relevant given the amount of leaning in we are seeing a lawn musk do -- that we are seeing elon musk due into the self-driving story because that

is part of what tesla bring to the market that other manufacturers don't. i think it is a fair question to raise as to whether or not he has overstepped in terms of what he has claimed about his technology and what is capable of -- what it is capable of. lisa: what about the railroad tracks -- the robotaxi? craig: the robotaxi has been on the drawing board since 2016. we will see in august just how far along the company is. i think there are real questions about whether or not you can take a sort of iterative approach to drivers systems that becomes gradually more capable. you have to make a real serious sleep from a system -- a real serious leap from a system that is monitored by humans at all times to one where there would

not be anyone in the driver seat. there is a huge leap that most have not come to grips with. anne-marie: you have the china daily talking about the fact that elon musk proposed to launch in china. is he doing this because of the regulatory concerns he is dealing within the united states? craig: this would be a test vehicle in china which is by no means unprecedented or something that is even -- something we have seen going back to the 2015, 2016 time frame where it is a big difference between testing this technology with a human behind the wheel to take over in the event that the system struggles with an intersection or is potentially going to crash into something. you can call that a self-driving test pilot but it is a whole

another thing entirely to actually take the human out of the driver's seat. we have seen companies do this in way mode and crews. we have seen these companies get into really troubling issues with this technology. cruz late last year having a grisly incident where a pedestrian was hit, ran over and dragged. the company's handling of that, it is still coming back from that. you take over as an example going back from that even further -- you take uber as an example going back from that even further where a pedestrian was killed in arizona. jonathan: the stock is down pretty hard in the premarket. the stock down by 7.6%. we have also heard from the likes of bmw and toyota in the last 24 hours. what is the take away from the

big automakers over the last day or so? craig: i think it is universally tough sledding in the sense that no one is relighting the world on fire. maybe the one exception being toyota which had a really incredible result for the last fiscal year. as is typical for toyota, they are very conservative about the year ahead. they see operating profit dropping this fiscal year. we will see whether that is just typical toyota conservatism or a reflection of just how challenging things have gotten. we have seen bmw earnings. mercedes is also talking today about the idea that they expect to sell combustion engine vehicles for longer than previously anticipated. i think for robbery and porsche -- ferari and porsche have

highlighted real weakness in china. you definitely want to have reasons to be cautious about the idea that this has gone from an environment of having more demand than you can keep up with as a manufacturer to may be struggling little bit for that incremental sale. jonathan: i'm sure they want to go back to the 2020 challenges we could not make them quickly enough. that is not where we are. it is so difficult to get the byproduct at the right time for consumers. they have nailed it with the hybrids. i want to real you into a conversation about politics but do not be worried. i want to understand what automakers are saying in europe about the prospect of tariffs on chinese ev's and what they might be saying privately to ev officials. craig: it is a really interesting story and something that is coming up just this week is a lot of executives are in town for financial times conference related to the future of the car. we sat down with the coo of

hyundai who just went to beijing for the car show that happened last month and he was blown away by what he saw in terms of the progress that chinese manufacturers had made. he told me yesterday they want to dominate. they want to come here to europe and really have big ambitions. he specifically flagged byd which has dominated in china and mg which was a british brand that was bought out of administration by a state on carmaker that has really caught on both here in the u.k. and europe broadly and in large part because it is a brand that people recognize. they think it is british even if it is under connie's ownership now. -- under chinese ownership now. these companies can compete and there is a real question of whether they will still be competitive even in the event of higher tariffs aimed at trying to level the playing field. jonathan: thank you so much. craig trudell with the update

out of london. they want to dominate. the european officials, u.s. officials, the u.s. president. lisa: when it comes to europe and listen to the likes of byd, they want 5% of the market share when it comes to europe. look at the bmw ceo today. i would warn against doing something permanent. we could end up quickly shooting ourselves in the foot. jonathan: i think we get the message loud and clear. tesla down by 3.5%. equity futures down by 0.3%. coming up next, kathy jones on the rebalancing of the labor market. just around the corner. from new york, this is bloomberg.

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jonathan: we are 60 minutes way from the opening bell. following four days of gains on the s&p 500. the longest winning streak going back to the middle of march. equity futures or softer, negative by 0.4% on the nasdaq 100, down by 0.5%. on the russell which has performed quite tremendously, 0.9%. in the bond market we can talk about supply. we are super excited about all of that. some 10 year bonds later. $42 billion worth. tomorrow, $25 billion worth of 30 year bonds.

we have rallied quite hard over the last five days. yields have been falling before today by more than 20 basis points across the curve on the two year and the 10 year. the two year is that 4.8365. bear in mind where we were last tuesday. it came in hotter than expected. we have come all the way back down. on the 10 year, 4.4815. we are up by two basis points. tons of fed speak. we will hear from the boston fed president collins as well. more fed speak on thursday and into friday. i want to sit on the politics of dollar-yen. it is more interesting than the economics of the japanese economy. 155.57. the currency moving by 0.6%. the message coming from japan is the same of the language being used has changed and they are starting to lean toward the prospect of doing something with

monetary policy. lisa: we have only seen it work when they actually intervened into the market. you brought up a great point. maybe this is japan having something to say after we have remarks from the treasury secretary who said if this were to happen, the bank of japan or the treasury of the finance department of japan should actually be consulting with some of their g7 partners, notably the united states. she called that rumors that the intervened. potentially shade thrown to the treasury secretary and tokyo and this was their response. jonathan: it happens -- it reminds me of something that happened with president draghi. it is not a target. we do not target the euro or the exchange rate. the fx channel is important for price stability. foreign exchange rates make a significant impact on the economy and inflation. depending on the moves, a monetary policy response might be needed.

this is reverse engineering on what we heard from him 10 years ago. clearly at the moment some of the japanese officials want a stronger one. under surveillance this morning, elsewhere united states pausing on shipments to israel. senior white house officials telling bloomberg the president is concerned about a possible invasion in a gazan city. the u.s. has not made a final decision on whether to proceed with the shipment. lisa: this is an pause not an outright suspension. the u.s. is waiting on what kind of invasion israel might be planning and what is going on with hostage negotiations. bill burns is the cia director currently in israel sitting down with netanyahu. the war cabinet will meet this evening and from there we could see the direction of travel for what comes next. jonathan: what the president of the united states is worried about. we are talking about a very

dense urban area populated by more than one million palestinians and at the same time you have a delivery take place of 3500 bombs from the united states america. 3500 bombs to be delivered at a time where the israeli government is talking about going into rafa. you can see why this would be deeply unpopular given the devastation that has already happened in that part of the world and that will continue to come in the monster,. lisa: the president does not want to see a full born invasion even though we have heard from the state department that they have put proposals on the table. you have brought this up a number of times today. it is not unprecedented for an american president to be in this situation with israel even though it is rare. it is not happen all the time especially when they talk about this ironclad commitment that the u.s. has to israel. former president obama delayed delivery of missiles in 2013.

reagan did a shipment in 1982. nixon held off on arms in 1973 and george h.w. bush withheld loan guarantees in the early 1990's. jonathan: here is the latest on tiktok taking the u.s. government to court. widely expected. bytedance is suing over the new u.s. ban law claiming it violates the first amendment. bytedance has until january 19 to sell tiktok or face a ban unless the courts intervene. this was widely expected and this will take a lot longer. anne-marie: also likely what is going to happen is the president of the united states will extend that deadline. this will firmly be in the hands of the next administration whether it is biden 2.0 or trump 2.0. what tiktok will do is they will say this violates the u.s. constitution, free speech. some of their other arguments include it will hurt millions of small business owners who use

the platform. they will really try to come at this from every angle possible. the irony is not lost on you and i when you look at how the chinese government treats u.s. social media. jonathan: we have a sure distinction. it is between ability and willingness. the administration is willing. ability is a different thing. are they able to do anything about this and ensure that these companies are able to use the u.s. system against itself? lisa: this will come down to national security concerns. does the u.s. have to even show some concerns, some intel that right now is secure? they have not been showing to the broader public. they have to potentially start opening up some of these books that you hear about that they are briefing congressmen and women about. potentially we will hear about that. rupert murdoch became a u.s. citizen so he can buy the remainder of fox. there is a reason why for certain networks you have to be an american citizen.

they don't want this in the hands of adversaries. jonathan: this is latest on tiktok. the minneapolis fed president says it is too soon to know if inflation progress has stalled. the quote, "we are in a good place, the labor market is strong, we can take our time to get more data to see if disinflation will continue." a whole lot more to come this week. kathy jones joins us now. what are you expected to hear from the fed officials over the next few days? kathy: the same old thing. patience. we are on hold. things may or may not be moving in the right direction. we think they are moving in the right direction and we will stay on hold until we get more data. jonathan: you have a different view on the data. was the hot economy a bit of a head fake? kathy: the domestic demand numbers in q1 were good like

3.1%. that is where we have been for the last couple of quarters. the employment data with the revisions and with the latest numbers were a little bit softer than people might realize. not only was the payroll number last month below trend, we had some downward revisions. the workweek was down. we are seeing wages and wage growth edge down a little bit. you put all that together and aggregate income might not be as strong going into the next several months as it has been over the past six months. jonathan: i know we are waiting to get to the weekend but the isom service members looked terrible. go through the details. the first contractions 2022. below all estimates in our survey here bloomberg. limpet -- business activity slumping to a four year low. what did you take away from that? how much weight do you put on the p.m. i? kathy: i do not overweight it. i don't make it a heavy part of my analysis.

some of those surveys are diffusion indexes. they are lumpy sometimes. it was not good news. . i am less worried about the price index as i am about the overall direction of trend in terms of activity. i think that is probably a better read than the price index. jonathan: what we're trying to establish and what we have been talking about for the last few hours over the last couple of days the difference between a welcome calling and an unwelcome deterioration. what is the line of descent? how do you draw a distinction? kathy: if we see a deterioration in job creation, rise in the unpleasant rate or a real tailing off in terms of the aggregate hours worked, the workweek earnings, then i would be concerned because that was signaled to me -- that would signaled to me the labor market can move pretty quickly. anne-marie: we have an incredible amount of integration

-- immigration in this country. when you look at the response rate, it has been quite low. kathy: it has been a real problem. post-pandemic it has really -- it is really low. we can expect a lot of revisions to the database. we usually get revisions because they get more data over the course of a couple of months. in this case it is even more likely to see some substantial revisions. post-pandemic everything is thrown off anyway in terms of the data. the seasonal adjustment factors have not been working well. you name it. it is less reliable than it has been in the past but it is what we have. lisa: how do you view this labor market really being able to handle all of immigration? is there basically a lineup in terms of the workers coming in with the jobs the u.s. economy needs? kathy: i am sure there is some mismatch. the truth is that a lot of the jobs we need are lower level

service sector jobs. healthcare in particular. we need people in nursing homes and daycare centers and these places. a lot of these are lower wage jobs. a lot of immigrants are willing to take lower wage jobs. they do that because they need to work. to tell you the truth i don't think it is a huge mismatch. i don't think this is a big problem for the economy. i think it is a big help to have people filling these jobs that are difficult to fill. anne-marie: when john talks about the line of cooling versus serious deterioration, whatever looking at in terms of what the fed needs to see to make that first cut? is it 4.2% on a plumber rate or higher? kathy: i think 4.2 would start to get them seriously considering the timing of the first rate cut. long period under two years

under 4%. we take above 4.2. if the other data are also soft, corroborating the rise in the unemployment rate, that will get them seriously moving. jonathan: we have questions about whether the rest of the world needs the federal reserve to cut so they can cut. the rest of the road is not waiting around. we have heard from sweden. they have cut. "the fit is unlikely to break the current cycle. the growing rate differential between the u.s. and other countries is another marginal factor that would encourage the fed to follow the global trend toward lower rates." how does one inform the other? kathy: global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. it is global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. . had a very strong dollar. the dollar was starting to come down a little bit without the fed was going to cut. then it took off again. after the fed extended that timeline. we have seen the pressure on the

japanese yen as a potentially destabilizing factor. we know japan is not happy about it. i know the dollars on the margin for the fed but it is there and widening rate differentials can create their own set of problems. jonathan: you have gone through the framework for thinking about the global economy and central bank decisions. the two year at 483. the 10 year at 4.48. what do you want to buy? kathy: we have been talking about extending duration for quite some time throughout this upturn in yields and the reason is beyond just locking in yield for the future and getting those cash flows and we do think the economy slows and inflation continues to fall. but also the upside downside risk reward is pretty attractive. when you have coupons at 4.5% to 5.5%, the amount that rates have to jump in order to have a negative return is very high. if you just sit there you will

earn the coupon. if they go down, you will have that capital gain kick in. we look in that in terms of managing portfolios. jonathan: our client still holding onto money market funds? are they listening? kathy: they are gradually moving out. if you get the yields below 5%, we will start to see people migrate out. right now the short end is very comfortable. you can sit there for a long time and earn the interest. jonathan: that is why krishna memani was talking about bills and chill. let's get you an update on stories elsewhere. here's your bloomberg brief with dani burger. dani: tesla shares are following in the premarket 3.7%. reuters reporting that u.s. prosecutors are looking into whether tesla committed fraud by misleading the public about self-driving capabilities of its

ev's. tesla's autopilot systems assist with steering, braking and lane changes but are not fully autonomous. doj is examining statements by the company and elon musk that suggest the cars can drive themselves. shares of uber down 8.7%. it reported weaker than expected demand. the cfo blamed -- pointed to earlier starts to holidays like easter and ramadan. yet both lyft and doordash beat estimates leading to questions about the strength of ube and their market share in the u.s. -- the strength of uber and their market share in the u.s.. the subject of three lawsuits, claiming people who drank them or harmed or even killed. the drinks have up to 390

milligrams of caffeine per 30 ounces which is four times the amount of caffeine in a cup of coffee. but nara said it will introduce two beverages in the next two -- panera said it introduce new beverages in the next two weeks. lisa: it sounds like thom's tank. jonathan: absolutely ridiculous. up, following the euphoria. >> certainly growth in stocks and equities have outperformed. you want to own that growth in my mind. jonathan: some of the opportunities next in the equity market with equity futures near session lows. going into the opening bell, about 44 minutes away. from new york, this is bloomberg.

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jonathan: let's get you the scores in the opening bell. the open 42 minutes away. equity futures pulling back by 0.4% following days of gains. yields a little higher by three basis points. 4.4876 on the u.s. 10 year. following the euphoria this morning. >> certainly come a growth in stocks and equities have outperformed. you want to own that growth in my mind. there will always be opportunities. u.s. exceptionalism making its. way to the markets. jonathan: sentiment indicators at two major banks fall filling -- faltering. a risk reward set up to clearly bullish levels according to the

managing director. scott is with us now. let's get to it. here outlook, constructive with complications. let's start with the complications. scott: we still have a number of issues to contend with. the use of effective rate hikes to this point weighing on economic activity. where we are with the interest rate and the influence on stocks, all of which give us pause but we are increasingly constructive on the fundamentals as we head to the back half of 2024. jonathan: can we talk about sentiment? where is sentiment now? scott: it is part of the puzzle. as it turns out, our go to sentiment read, in a quick

reversal, it has come back out as we have moved through the bulk of the q1 reporting period. we are back in a higher end of neutral but you have taken some of that euphoria out of the circumstance. at the same time but i would emphasize is that when we use the sentiment indicator, it is usually in the context of other indicators. our implied growth work also tells us that you have gone from a level headed into the q1 reporting period that would be tough for corporates to surpass to something that is also more reasonable at this point as we move through the reporting period. jonathan: some people have been pushing back against earnings expectations including jp morgan. can you give us insight into where earnings expectations are and how they have evolved through the year so far?

scott: we are at 2.45. we have been at that level since last july. we feel as if our top-down sector driven models have gone pretty well for us. consensus has moved up around 243, 244 right now. the way the q1 reporting period set up is we got a pretty clear beat but a whole dynamic where your full year consensus numbers did not move much. this is not uncommon. it is typical to see expectations come down into the reporting period followed by positive surprise. the set up given what we know about the economic condition right now is that we should begin to continue to see that consensus number lyft marginally as we go into the q2, 23 timeframe -- q2, q3 timeframe. jonathan: the big debate over the last 12 munch which has been everyone inching for small to

work and you get series of head fakes and small caps get hammered again. what is a sustainable shift away from large-cap growth toward small caps? scott: what will happen as a function of the numbers. if you look at the set up over the past year your mega-caps growth cohort have seen their 2024 earnings expectations rise by 28%. the other 493 within the s&p down 8%. we have seen flattening in that other 493 number and the set up if you look at the way that progressions go by sector is that we should mechanically begin to see improvement as we go into the back half of the year. we are looking for a broadening effect. we have been for some time now fundamentally. that should augment what is happening on the price side already. here's where it gets interesting. we have been coming out in front of the mag-7 versus 493.

we have come in from a sector perspective. if you look at small versus large and value versus growth, the set up right now as we turn the corner on midyear 24 and begin to look at 25 should be earnings growth between those cohorts. what you get here is a gradually improving fundamentals set up in favor of small versus large and value versus growth, all of which is quite healthy to the underlying market dynamic. jonathan: you mentioned 25. how difficult. is it to develop a few on 2025 without knowing the outcome of november? how important is november? scott: it is difficult. we have not gotten there yet. more to follow on that. this is typically what analysts do. you hit midyear of one year and look forward to the ensuing year. we have the elections coming up later this year. we have been looking at a tail

risk and we think the outcomes in either the candidate -- either candidate or party are probably negative. we have a lot of room to grow in terms of policy positioning unfolding as we get closer to november. jonathan: we are looking forward to hearing from you and the team this summer. you have a case of 67. can we talk about that briefly? when i read the description, goldilocks backdrop of soft landing, are we getting that? scott: in our view we are getting close. i would like to see those 10 year nominal's come down. we like to think of those having influence on how you price out mega-caps growth side. we want to see fed funds coming down as a harbinger of the short term duration part of equities. in terms of the soft landing playbook, that is up in the air. we are still pointed toward something more contractionary.

all told, we are feeling pretty comfortable that the macro influence is happening incrementally. it is not happening in a shock-affect format which usually triggers bigger negative repercussion. as long as we continue down this incremental path that goldilocks scenario sets up in the beginning of 2025 is an open question. we think the trajectory is quite positive here. jonathan: scott, it has been too long. scott chronert breaking things down on financial markets. it is so difficult to develop a view on 2025 when you have no idea what policy will look like. when you have policy driving market, it has been that way over the last decade. it is also taught you about how wall street feels around the options going into the end of this year. coming up tomorrow, blackrock, wells fargo, the former world

bank president and barclays. from new york city, this was "bloomberg surveillance." ♪♪ sandals jamaica sale is now on! with rates from $199 per person per night. visit sandals.com or call 1-800-sandals

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it's t-mobile. it started when we tried to get him under a new plan. but they they unexpectedly unraveled their “price lock” guarantee. which has made him, a bit... unruly. you called yourself the “un-carrier”. you sing about “price lock” on those commercials. “the price lock, the price lock...” so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for.

manus: a very good morning. i am manus cranny in new york. no one likes mediocrity. that is what intel gave you in terms of guidance. we will count you down to the open. big tech and beyond. coming up on the show, futures moving lower after consecutive days of gains.