>> in terms of the soft landing playbook -- >> we think we will see more of a soft patch. >> it's important to recognize the balance has shifted when we talk about rates. >> i think everything is open to the federal reserve. they can wait till september or december. >> the biggest concern is if things go south, how fast will

they go south and what do we really do? >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: bramo got so bored with this market that she took the next two days off. yesterday, 5187 in this equity market going absolutely nowhere. dani burger is in the hot see this morning, good morning to you all. amh is down in washington dc and we have a lot to talk about starting with central bank decisions. some might say the global easing cycle is underway. first out of the gate is the s&b bank than the ecb. dani: you brought the fake britt joining the real britt. the swiss and the sweetest have already shown as there's a willingness to not just go before the fed but before the ecb.

the concern is currency weakness. deutsche bank says actually the sterling will move less than it has the past decade and the rate sensitivity is not as big as it used to be. jonathan: sterling is $1.24 and that decision is about 15 minutes away. dollar-yen $1.55. the yen has been weaker every single day this week in the face of increasing criticism coming from officials at the ministry of finance and the boj. annmarie: not only has been weaker but we consistently seen this market and hedge funds willing to go to $1.60, and might be an issue of credibility but one thing we forget is that the boj is not independent in the sense we think about the fed. it's part of the japanese government. they were speaking days ago and then we get this outcome. jonathan: it's a very different central bank and will talk about

those moves later in the program. if you've missed this week, you've been absolutely punished. a close to 10% move in the walt disney company earlier this week. holdings are down by about 8.5% in the market. it doesn't take much in his equity market to trigger an outsized move in response to those earnings. dani: usually when you see move like that, what a great opportunity to buy the dip but something is different this time. people have reduced their shorts but they are not putting on new longs. things are expensive out there and perhaps with the volatility of every economic data point, earnings need to be perfect. jonathan: let's get to the price action. we are pulling back by a quarter of 1% on the s&p 500. five days with no real losses. yields are higher by a basis point or two but back in the 400 50's. in the fx market, the euro is a

touch weaker here. coming up this hour, we will catch up with black rock as equities snap a four-day winning streak. present is sending a warning to israel with investors looking ahead to cpi next week. the s&p 500 is treading water after delivering its biggest four-day advance this year. russ joins us now for more. it's good to see you as always. if you miss this week or this quarter, this reporting season, you get punished and it doesn't take much. what do you make from that? what is the signal you take away from it? >> i think the short answer is the markets moved a good deal off the activity of last year. we got some crowded trades and this is an earnings driven

market. you think about 2023, it was all about repricing. it was all about multiple expansion and because of that, the market is not cheap and this is a year where stocks will be driven much more by earnings and cash flow and profitability. companies are not showing investors what they like. you will get punished very quickly. jonathan: jp morgan says this -- earnings expectations are too optimistic. do you take the other side of that? >> first of all, if you think you've got a number of companies that are dominant in the indices that are tremendous in generating cash flow. they are levered to long-term things like artificial intelligence and e-commerce and that continues to be a long-term trend. the simpler answer for most of the companies is that ultimately the top line will be driven by nominal growth. you think about what has happened. you go back to last year and you

saw a lot of calls for recession and now it got estimates for 2024 gdp at 2.4 percent. inflation obviously is stickier than everyone would like but you add that up and you are likely to get nominal growth this year and nominal gdp 9% or north. that's a good environment for earnings and what's expected is 244 for the s&p 500 which is about 10% growth and if you get 5% nominal gdp, it's a very attainable number. dani: i get why stocks would do well in that environment but the thing that confuses me is that small caps have not been growing. they are underperforming the market. if growth is lifting all tides, why not the small caps? >> that's a great question and i think they're a couple of reasons. this has become very much a winner take all economy. the growth you are seeing from the large companies and some of

the magnificent seven is a multiple of what you get for smaller cap companies. the other reason the small caps have struggled -- they had a decent rally in november and december. back then, rates were lower. one of the things that has reasserted itself is here is this notion of rate beta. parts of the market that are more sensitive to rates and whether it's small-cap or early growth companies, they had a banner year. we've seen nominal real rates up 50 or 60 bps and that's having a set -- an impact on several segments of the market. dani: you also like credit but bank of america said a record amount of high-yield bonds are trading like ig. does that not worry you? >> there are concerns about the current spread levels but a lot of the credit we have in the portfolio we bought when spreads were much wider back in 21 and 22.

we are not adding significantly to it. there are parts of the market they're interesting but we are basically clipping that coupon. for the first time in years, we are craving a nice tailwind and a multi-asset portfolio. going back to the nominal growth argument, if we aren't in an environment where nominal gdp is 5% or north where a lot of companies in ig in the high-yield space termed out their debt several years ago, i think that's an environment where we can expect the default rate will stay low as it has for a while now. jonathan: given what you expect nominal gdp to look like, does that keep you away from duration and government bonds? >> it depends on the part of the curve. we've been modestly under way to ration for a long time. we are keeping that. it's not everything. we got an overweight to credit and their parts of the curb where the short part looks more reasonable. we have been more cautious on the long end of the curve.

stronger growth environment and the fact that inflation has remained sticky and as we've spoken about while it's a longer term issue, you've got to be cognizant of the amount of supply coming into the market particularly when it comes to treasury. jonathan: within the portfolio, where you find risk mitigation at the moment because you are underweight duration and you are underweight defense in the top of the pile seems to be staples and you don't like those of what do you like on the defensive side of things? >> one of the challenges in a multi-asset portfolio is your hedges become more difficult. there were a lot of challenges last decade but your concern was low growth and rapid inflation and the hedge was easy. you but long duration and that worked well for over a decade. i think it's a tougher call now. there is no one single asset i can give you for strategy. belong on the dollar at least against the euro and that has worked in an environment where

the market sells off, you are most concerned about the fed. using volatility as an asset class, you are doing this when option prices are cheap and you can manage the downside risk. the last tip is the notion of having high-quality stocks as a self hedge. a lot of those companies with high profitability with margins that are consistent not that they can't go down but on a relative basis, we think they hold up that are than the broader market. dani: right now is the moment where volatility is cheap. it's extremely cheap with decade lows by some accounts. people are not looking for protection there. what gives? >> i can't really answer that other than we have an environment where people are still looking for risk. the other thing to note is one of the factors that supports the market going higher beyond earnings and beyond rates is the fact that there is still a lot of cash on the sideline. as we get to a point later in

the year where we think the fed will cut may be later than people had hoped, some of that money is likely to come back into the market. part of the reason people may not be looking for protection as much as they might is there is still a lot of cash to be put to work. jonathan: you mention a couple of rate cuts, is that sufficient to unlock all that money in money market funds? >> i think to rate cuts is different than seven that we expected at the beginning of the year. i think the market can move with an environment where growth is strong and maybe the fed only cuts a couple of times. one of the things that has helped this year's rates have moved up and generally the move has been contained in rate volatility has come down. if we get a couple of cuts, yes, the short answer is the market can live if we just get to cuts this year. jonathan: good to hear from you as always. we've been stuffed with data this week and it picks up at 830 eastern time where we get

jobless claims. fast forward a week and we can get real about real data, cpi retail sales the same day, may 15. dani: earnings season is largely going to be over and we will not get a fed decision for a while so what happens with each data point where we don't know what the fed will do? it's lots of volatility which a market that's not very well hedged can get scary on days like that. jonathan: how is the consumer doing in america? if you take starbucks, not great, theme parks are tremendous. where is the u.s. consumer right now? dani: clearly not drinking lavender lattes. it's the whole thing of the shift of they want experiences but there is this degree to which the lower consumer, the one who is going to mcdonald's is the one who is not spending. it's a bifurcation of the american economy we continue to see. jonathan: mike wilson of morgan

stanley talked about this. equities are little bit fragile reginald says relative to the stability over the last week. with an update on stories elsewhere with your bloomberg brief is show ali bassett. sonali: shares are falling in the premarket and the chip design company gave a lackluster revenue forecast for the year raising concerns that the tech industries ai spending spree might be slowing. an upbeat forecast set arm shares slowing and turn the company into an ai darling on wall street. the stock was up 41% this year through wednesday's close. living in manhattan is getting even more expensive. apartment rents rose to a new high for april and leases were signed at a medium of 4200 and $50. that's up from a year ago. rents have climbed annually in three months in the past four months suggesting a record shattering summer to come. msaga between the first trump

affiliated account on the chinese own social media app. attacked president biden's own record and labeled independent presidential candidate rfk as a radical leftist. trump and biden who have been on tiktok since february have both supported a ban on social media over's national security concerns. jonathan: thank you, more in about 30 minutes time. 4250 the median rent in manhattan, absolutely ridiculous. up next, bidens wording to israel. >> i've made it clear to beebe that they will not get our support if they go into highly populated centers. jonathan: if they go into rough, they will not supply the weapons, that conversation up next.

jonathan: it is thursday morning, good morning to you and welcome to the program with equity futures a little softer on the s&p 500. yields are a touch higher, up by two basis points. this morning, bidens warning to israel. >> they go into rough up, i'm not going to supply the weapons that have been used that deal with the cities and deal with that problem. we will continue to make sure in terms of the iron dome and the response to attacks, i've made it clear to beebe on the war cabinet, they will not get our support if in fact they go into these population centers. jonathan: the president delivering his most public criticism to date about israeli military actions in gaza and biden warning the delivery of this weapons may be delayed as

israel continues its ground invasion of rough up. benjamin has yet to respond. let's go down to washington, d.c. good morning. annmarie: good morning, that was the strongest warning yet we've heard from this administration regarding the military weapons they have been supplying israel. what do you make of that? we talked about this in the context of this is just a pause. now this sounds definitive. >> there is an election in november and president biden is looking at the polling data and it shows that geopolitical risk and any rising tension is a significant headwind to his reelection. if you have israel expand the war after he signs into law a defense supplemental and is transferring the weapons to israel, he owns this much war and politically, that's impossible for him to withstand. this is closest to a redline as

we will get from the biden administration. annmarie: how does he do both? he also said he talked about the iron dome and he said his support for israel's ironclad and he also says we are not going to supply the weapons and artillery shells. >> it's both strong support for israel and conditions. especially when it is u.s. taxpayer dollars. i think what was also really important in the interview was he was discussing after there is a cease fire how does gaza get rebuilt? different arab neighbors of israel, one of the things we've heard a lot from our contacts in d.c. is that the biden administration is looking at saudi arabia as a potential longer-term solution. can they formalize relations with israel in exchange for israel recognizing a palestinian state? that's also a both and. they are dealing with immediate conflict but are also looking at

what comes next and what's the rebuilding and what could be the legacy of this administration? annmarie: we know the direction of tribal -- of travel that the biden administration wants. if they say they will not -- supply the military weapons, how do they get from point a to point b. >> i think it's a very thin line you have to walk. i think the concern is the humanitarian issues within gaza in an attack on roff. this is an administration that has been desperately wanting a cease fire and there is obviously clear concerns within israel about any continued control of gaza by hamas who launched the terrorist attacks on october 7. it is trying to work diplomatic angles and trying to de-escalate the near-term situation to put together a long-term solution that actually works. annmarie: how much of this going

on at college campuses does biden need to secure versa -- for november? >> we've seen in polling data the biden administration or biden himself was doing quite well after his march state of the union address but with the increase in geopolitical risk and the college campuses demonstrating, you've seen a rebound for former president trump in many polls especially in swing states and especially among younger voters. the cratering among younger voters for president biden is an alarm bell for his campaign. he cannot see an expansion and having a humanitarian crisis that expands within gaza. it will probably win those voters over. annmarie: also an alarm bell is the economy. biden sat down and gave an interview yesterday and they continuously give trump higher marks for the economy and rate the economy as the number one

issue. let's talk about taxes going into next year. yesterday we heard from the cbo and if the trump era tax cuts come back, it will be $4.6 trillion added to the deficit. how is this sustainable? this is what the trump campaign is campaigning on. >> what was remarkable about the 4.6 trillion dollar estimate is the last estimate from cbo was only $1 trillion. we also heard yesterday from the chairman of the house ways and means committee, a republican on the tax-writing committee that he's talking to his colleagues and a number of republicans are saying the corporate tax rate might have to go up so the market has expected that if there were to be a trump victory and republican sweep that all of this gets extended. at $5 trillion, it's becoming less and less likely. january 1 of next year, we have the restart of the debt limit. will the bond market allow congress to lift the debt limit

and maybe cut taxes by another 4.6 trillion dollars over 10 years? i'm getting skeptical and for democrats if they are in charge, if they do nothing, taxes go back to where they work under barack obama and state and local taxes and the $10,000 cap goes away. a lot of clients i talked to her like $1 trillion tax cuts for new york and new jersey and california and massachusetts and wisconsin, there are a lot of democrats that says doing nothing and outspending the additional $4.6 trillion might be the preferred path especially democrats win. annmarie: if republicans are voicing concerns about the corporate tax rate and they want to potentially come in line with the democrats and raise it, what about the extension of these tax cuts? >> the face cases mode things get extended on republicans and most things go back to what they were under president obama by the democrats. a couple of things need to be dealt with. first is the pass-through for small businesses. there would be a huge

differential if we don't do anything there. it will probably raise the standard deduction so most people don't have to itemize. they will do something on rates especially for lower income households. they could do a short-term extension and we talk about these in 10 years numbers and that's four point $6 trillion and nothing stops them from doing one or two years because when congress has an option, they like to take the least difficult option especially if there is not a majority across the board for democrats or republicans. short-term will cost less and they can get that done. annmarie: if you are seeing cracks in the republican party and people talking about even if trump gets elected and even if we get a sweet, we might want to raise the corporate tax rate. when you are on wall street looking at washington, what party is more favorable for big business? >> it depends upon what part of business. we are having conversations with

raymond james clients about defense stocks and the supplemental and normally you would say democrats are kind of skeptical and republicans are good for defense spending but it was the reverse on the supplemental. we look at china and tech restrictions and trump could come in and ramped that would be much less predictable on taxes. historically, republicans have been more variable and they are more like likely to extend this out but it is not a one-party good or one party good anymore. it's more nuanced which gives me a more interesting job. annmarie: thank you so much for joining us this morning. big fights ahead in 2025 especially the tax cut them especially when you come to washington and year republicans talking about their concerns that they potentially want to raise the corporate tax rate which is what democrats want to do. jonathan: a busy six months ahead from you. so much as been said about the

situation abroad and what it means for the president's reelection chances in november here at home particular in places like michigan. think about michigan for a moment. he's down seven in arizona, six in georgia, 10 in north carolina and down for in wisconsin. he is up against the former president by 2 in michigan so it's not about foreign policy, it's about economy. dani: he's the advantage of trumping tied up in new york so he can make these trips while trump can't but is it the right message? jonathan: much more on the economy with the former world bank president sitting down withamh in washington and a couple of hours. sarah house looking for a softer cpi print next week, a look ahead up next. ♪

jonathan: equity futures are negative by 0.2% on the s&p 500. that's following yesterday's day of unchanged price action, going absolutely nowhere. on the nasdaq 100, down 0.2%. another third of 1% on the russell 2000. if we get to the bond market, yields are lower for five

consecutive days and then yields are higher this morning, up a single basis point. plenty to talk about in foreign exchange. later on today, we will hear from the san francisco president mary daly and then jobless claims. dollar-yen $1.55. they've got up problem in japan. dani: they do and it is made abundantly clear by the fact that they spoke to each other and it's a problem for people who want to go brought in japan but it's a problem for importing. it's a government problem and therefore it's a boj problem. jonathan: how many people are going to tokyo? dani: i'm ready to go, it's cherry blossom season. jonathan: is it leaf peaking? dani: all i know is there is a great view of the crossing at

the starbucks and that's all i got. lisa: jonathan: let's look at sterling briefly, 29 minutes away from the bank of england decision. $1.24 on cable, totally unchanged and look for the evolution of the vote. you got a couple of officials two meetings a coastal calling for hikes in a drop their call and one official called for a cut. we are trying to work out whether that official gets that. dani: it's david ramsen who says he is less concerned about inflation. his opponent has the same view and that rates needed to be higher for longer. we know it is a split mpc but that is more than what andrew bailey says. we care about the individual members than the man himself. jonathan: looking for the breakdown of the votes in about 20 minutes or so. on surveillance this morning, president biden sending a warning to israel that he will

delayed more weapons of israel continues with the ground invasion of roff up. the comments commit to the u.s. already paused a shipment of about 3500 bombs. the warning was pretty clear and the president is clear about what could take place if they go into rough a, i'm not supplying the weapons. dani: he said these weapons avenues previously to kill civilians and one of the interesting things about this is that originally, biden had hoped this would be under wraps and he would negotiate with the israelis and the public wouldn't know about it. biden has given few media interviews lately which she has gotten criticism about. the fact that he is not doing these negotiations behind closed doors but he is using one of his few interviews to talk about it and send a message. jonathan: think about what's on the table, 3500 bombs which could be used to target one of the most densely populated areas on the planet. we're talking about rough a with more than one million palestinians.

can you imagine the devastation that can be done there and the headlines back home going into november? dani: he can't that. he's had the youth vote turn against him and you see what's happening across college campuses. the impact is that the republicans can say look at the lawlessness on the commotion that biden has made come to the fore. one of the ways he gets that settled is by something that creates a cease fire and that's the tool that america can use. jonathan: dear is the latest in japan. the boj governor using tougher language on the yen after meeting with the prime minister. he said he's carefully watching the impact of the weaker yen on prizes and then speaking at an event saying weekend moves raise uncertainties and are negative for japan's economy. that was a quote from the last 24 hours.

janet yellen comment is that economic changes should be limited. dani: and the idea of continuously saying that when they deviate from fundamentals, that's when we are concerned. if you are at yen bear, you say this is fundamental. they say we are going in and we will push this and see if we can get it to $1.60. this is a change of language in only two weeks. it gets to the point of credibility. if he changes his tune so quickly, why would we believe him this time around? jonathan: the imf meeting a couple of weeks ago, you could hear the complaints but not a big response from the president. getting more of a response from the treasury secretary janet yellen. fed president susan collins is adding to the higher for longer narrative. investors are looking ahead to cpi next week. excluding food and energy, we estimate prices rose 0.3% which

would break the streak of 0.4% gains january sarah house is with us around the table. is .3 good? >> it's better than the last three-month where we had a string of 0.4 readings which surprised to the upside. i think it's a step in the right direction of resuming the journey back for the fed's inflation target but i think that's still a bit strong but it's an improvement for what we saw in the first quarter. jonathan: doesn't open the door to a conversation about july? >> i don't think a .3 would be a starter but you need to see some core numbers closer to .25 to keep a september rate cut in place. april will be the first step to keeping the door open to a september cut and july will be tough unless you see the market

weakening in the labor market. jonathan: maybe q1, the strength might have been a head fake, would you go with that? >> there is the potential for some residual seasonality where you saw such strength at various points in the year that the seasonals are not fully accounting for the typical early your strength. they still do anticipate more strength in the early part so there is still some signal in the firmer readings as possible it's catching up for the second half of last year which was a bit of a head fake in itself. we are still looking at overall core inflation will be 3.6 even with some downshift in april. dani: it seems like every piece of data is a head fake. is this really the trend or not the trend? that's not how the economy works. with each piece of data coming in, can you get a clear read?

can you have conviction in your calls now? >> the second-quarter numbers will be important because q1 was messy whether it's inflation or maybe payrolls. q2 will be important for how much of that was noise or a signal but it makes it difficult to really have a lot of conviction in terms of what's not necessarily direction but what's the magnitude and the pace of whether it's inflation or job growth or the overall economy? dani: the magnitude is slow going in the right direction but not going as fast as the fed would hope. is that enough to say that policies not tight enough? >> when we step back and think about how restrictive is policy, it's in part inflation dacia but i'm also looking at inflation data. inflation is a lagging indicator but what makes me which in the restrictiveness is the strong activity data we continue to see coming in with at least the

underlying components of gdp and some consumer spending numbers. that leads me to question more than inflation. if you see a downshift in activity, that will help inflation along with some of the supplied dislocations over the past couple of years. dani: there has been anecdotal evidence of weakening growth and every flocking to buy now pay later. how much you pay attention to those pieces? >> i think they are important and we are looking for any pieces of data especially given timely reports like that, anything that helps us parse at happening across differ segments of consumers is helpful. wehave not been impacted by the rates as much and we think about their mortgage payments and things like that so that's helpful in terms of starting to see pushback in terms of the pricing. there is not a lot of great indicators to the degree of pushback. that doesn't really get at it

where we are having troubleer, y from bloomberg news overnight with the harris poll, they found 43% of those who owe money said they were behind on payments 28% so they were delinquent on other debt because spending of the platforms. can you help me understand we will get an accurate read of what's happening with the u.s. consumer? >> i think that is one of the pieces that it's been harder to get a fix on. my colleagues have talked about this is the phantom debt component. i think we are seeing the stress and the consumer that i think is also indicative of the buy now pay later in terms of the credit delinquencies. they've gone back to the highest rates since 2008 in terms of reddit card rates. -- in terms of the credit card rates. jonathan: it's whether we are sufficiently restrictive or not plus where we end up.

where is neutral and wise the federal reserve not engaging in that conversation the same way market participants appear to be? >> we don't know at -- where neutral is. we only know it in hindsight. given the uncertainty around it, it's made it difficult for fed officials to really engage with it but we are starting to see it more. neel kashkari earlier this week said he's thinking neutral maybe higher that's why financial conditions might not be as tight as he would've expected. we are starting to see it in the dots. even more so the average. i think there is a lot more thinking about that even if it's not front and center. dani: mohamed el-erian says you cannot get back to 2%. in order to do it, you cause unnecessary damage to the economy. is it right to get back to 2% or would that be ugly in this american economy?

>> we've seen a lot of supply on this front. i think we are in a harder part of the cycle where if we look at labor force growth which is closer to 2% this year but you have things like participation close to the highest it's been in 20 years so i think it will get harder to see those additional supply-side gains with supply chains returning to more neutral levels are think the next phase of the inflation fight will require more pain and a bigger hit to demand and what we've seen over the past year or two. jonathan: you been talking about the last mile for a while, it's good to see you as always. looking ahead to data next week, cpi on may 15 along with retail sales. jobless claims at 8:30 a.m. and the estimate is 212 and the previous one was 208. here is your bloomberg brief. sonali: the bundle is back, disney and warner bros.

discovery announcing they will sell their biggest streaming services together starting in the summer. subscribers will have access to disney plus, hulu and max. the companies have not given a price for the combined service but similar offers typically come at a discount to individuals. elon musk is closing in a major funding round or his ai startup. x-ai is said to be $13 billion when it closes this week which is triple what had been estimated. sequoia capital is can tripping to the valuation. the platform will be able to train from data to help build its language models and ultimately it aims to compete with openai. it currently g operatesrok on x. there will be a champions league final in london next week. too late goals from adrenaline fueled there when over munich to

advance to the final will they were look to win their fifth title in the past nine years. they beat dortmund earlier. that's your bloomberg brief. jonathan: just leave the picture of that man right there up. that's the manager, four-time winner as a coach, twice as a player back in the days. an absolute legend. what a finish it was through the end of that game yesterday. up next on the program, traders looking for doves at the boe. >> i think we have felt the maximum impact is tightening. there is a clear possibility there would be more easing than the market is currently pricing. jonathan: that conversation is up next and the rate decision is about 15 minutes away. ♪

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jonathan: live from new york city, equity futures are pulling back a touch. yields are little bit higher by a single basis point. on the euro, negative by 0.1%. traders are looking for doves at the boe. >> conviction is quite low not just in the fx market but i think also in the rates market based on what's priced in. i don't think the u.k. has felt the maximum impact of monetary tightening. there could be more easing than the market is currently pricing. jonathan: the bank of england rate decision is due at the top of hour. jeremy joins us now for more. we've heard from the s&b and

that rick's back so will we hear from the boe >> >>? i think that's highly probable. we would expect both of the central banks to be biased toward monetary policy easing over the course of the summer. we are looking for ecb and the bank of england to adjust their policies in june. bank of england, the inflationary dynamics have yet to come into play in terms of reaching the target but when we get the next cpi release come i think it will be close to the 2% threshold. the important point today is not only the composition but it's also going to affect the inflation profile the bank produces. there was little to the pressure on their strategy from the bernanke review but i think we will focus on that inflation profile if it's revised down. i think that will open and prepare the ground for policy easing at the june meeting. jonathan: how different is the inflation profile in the united

kingdom compared to what we experience in america? >> there are certainly some similarities but the u.k. continues to witness significant degrees of service sector inflation and i think that's one of the factors we continue to monitor and the labor market is also continuing to generate or register reasonably elevated to of wage growth. i think we are starting to see some signs that discretionary spending is under a degree of pressure. we expect that to be further compromised as we see mortgages work through the system. i think we can and she's debt should see some degree of moderation. the euro zone and the u.k. are probably in similar circumstances regarding the macro or inflation profiles and perhaps that's the delineation with europe relative to the u.s.. the macro story is much weaker than we are currently sitting in the u.s. and s the reason why the fed will be more reticent to adjust policy. even there, we expect the fed to

start to cut rates by september. dani: no central bank wants to go at it alone but they will if the data says they need to. is the ecb going in june? is that a huge opening for the boe to tailgate off the back of their cuts? >> i think there is certainly some communication but it's on going between the various central banks. we've seen a couple of central banks ignoring or moving well ahead of the fed in terms of the riksbank this week and the snb. the bank of england will look to adjust policy without reference to what the fed is doing. there will clearly be some policy indications in relation to the valuations of sterling relative to the dollar so we may see a slightly cheaper value of sterling. i think the bank will be very much focusing on the domestic data that will be the important factor here. in the context of today, the

bank of england governor will try to maintain maximum optionality in terms of policy outcome but the data i think will be allied to the forecast profile and it warrants policy easing at the next meeting in june. dani: many folks have said the fed cannot move when it comes to november because of the election. in the u.k., we expect an election and it would happen in the second half of this year and it needs to happen by january of 2025. does that impact the boe timing? >> i don't think it does. monetary policy doesn't operate in a vacuum but in the context of this, they are judged by their economic threshold and that inflation profile. yes, there will be some external influences on the banks thinking particularly if there was another physical event announced by the government before the election. it doesn't look as though public finance will warrant that but there have been previous

speculation there could be more physical easing in an early autumn budget. i don't think the fiscal timetable in itself will cause a significant to re-of consternation for the bank of england. they will look purely at the macro dynamics and that will warrant the timing as early as june for policy easing. jonathan: many would agree with you and that would apply to the federal reserve which is why people are looking toward september. first cut from the federal reserve, where it changes is 2025. i struggle to find any clear outlook whatsoever on 2025 without knowing or understanding the outcome of november. >> that's absolutely true because if we were to have trump back in the white house, the risk would be if we saw a real acceleration in trade pressures, that would clearly have an important dynamic or underline the important dynamic regarding

fed thinking. in a sense, that is the difficulty we all face in the market in terms of trying to anticipate the policy outlook for the fed in terms of 2025. we have to make judgments or assessments in terms of the underlying inflationary dynamics. as it stands, we are still expecting a graduated easing through the course of 2025 and we should see the yield curve steepen as we see the fed reacting to a slower growth trajectory or moderation in inflationary pressures by some toleration of easing a policy. we expect to cuts this year from the fed starting in september but obviously, 25 will be contingent on political outcomes. jonathan: does the federal reserve dictate how far the others can go? does that shape how far the ecb can go beyond the june cut? >> i think june has -- that's

the way the market is price. if the fed was on hold for longer, there would be a risk that if the ecb were more activist in the bank of england would be in the same boat perhaps, that would potentially have some implications by the currency transmission channel in terms of inflationary dynamics. there is an element of constriction in terms of how far the ecb and bank of england can move ahead and beyond the fed dynamic. we assume 50 basis points of easing by the ecb this year and that's not inconsistent with expecting more from the bank of england. dani: what difference in timing would it take for us to talk about euro parity again? >> if we were starting to see the fed off the agenda through the context of the rest of this year, i think that would be something that would be necessary. we probably need to see the ecb announcing a rate cut in june

but also leaving open a clear bias toward significant policy easing in the second half of the year if the inflationary dynamics are proving to be well behaved. that's the sort of narrative we would need to see, a significant degree of diversions in terms of rate expectations in order to facilitate a move down for the $1.05 area. if you were to get down to those levels, parity thresholds would start to come back into vogue or into discussion. jonathan: thank you. i want to bring up david malpass, the former world bank president. he will speak to anne-marie in about 35 minutes time. january 1, the suspension of the debt limit will be extended. tax rates will rise at the end of 25 and was congress and the president can agree to extend

the expiring divisions. 2025 is difficult to get your hands around. if the former president gets a second term, you were staring down massive tariffs. dani: there is also the idea that it stymies the flows of immigrants. immigration has been such a big topic and why the economy looks as strong as it does and why the labor market is healthy and why inflation is low. what happens when that's not the case anymore? jonathan: that conversation is just around the corner. here is the line of you -- -- here's the lineup for you. the bank of england decision is about four minutes away. the equity market in the s&p 500 is negative by 0.2%. the second hour of bloomberg surveillance is up next. ♪

and they're all coming? those who are still with us, yes. grandpa! what's this? your wings. light 'em up! gentlemen, it's a beautiful... ...day to fly.

>> u.s. exceptionalism is making its way through the u.s. stock market. that can be somewhat sustainable. >> dispersion of stocks have been high as far as performance. >> we would like broadening out in the rally but it's not happening to the extent we would like. >> we are looking for a broadening effect and have been for some time now. >> we are conscious on equities

and bonds and we are waiting for better opportunities to add to both of those asset classes. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: live from new york city this morning, good morning, good morning.for our audience worldwide , the second hour of bloomberg surveillance begins now. an absolute stacked lineup for you coming up. we will talk about the bank of england rate decision and the perfect storm facing the next u.s. president and what's behind the surge commodity prices. the bank of england is leaving rates unchanged as expected. dani: the split is important. we now have two mpc members who have voted for a cut. we expected david ramsden to join the cut. you also have inflation at one

point 9% in the second quarter of 2026. we been pricing the boe a lot like the fed. perhaps they move in july or august and perhaps we need to rethink that. jonathan: they say the risk from inflation is persistence but it's receding, optimistic things are moving in the right direction. sterling off the back of this is weaker and the pound is down to about $1.24 negative a third of 1%. let's break this decision down. >> good morning. it's a dovish hold this one as expected, holding at five and a quarter percent. only 1% in markets. the signal is dovish and look at the split, 7-2. davidramsden made his face that said he had a dovish tilt and there was speculation that he

would join. in november 2021, he voted to hike before the majority followed in december and at both february and september 2022, he voted for larger hikes and the rest followed. the market will take this as a dovish signal. perhaps you've seen the response in sterling there. it will be interesting absent the press conference to hear when andrew bailey gives more of a signal light christine lagarde did about which data points they are watching for as to when to cut. will they go for june over august? jonathan: a rate decision, the bank of england leaving rates unchanged in line with estimates in the consensus was always about the vote split. out of the nine, seven votes to keep rates on hold and to voted for a cut. the guidance from the bank of england, risk from inflation persistence are receding.

the governor of the bank of england sing optimistic things are moving in the right direction. what needs to happen between now and next month to make that cut a reality? >> there are various bits of data that they are watching for. what would be embarrassing is if inflation gets to 2% and the bank of england hasn't cut by august. it's easier to explain these things when there is a press conference and there is one today and august but there isn't one in june. if they wait until august, there will be a lot of pressure but it will be harder to get the computations right. dani: what sort of bailey will we here today? weise heard from huw pill but what have we heard from bailey so far? >> he has also joined the dovish signals. he has acknowledge the bank of england situation is a bit more like the ecb than the federal reserve. that's in terms of the inflation

story. it took a long time for that acknowledgment to come but it's a dovish signal in that you can read into it that the cuts could become sooner because inflation is coming down in a different path to the u.s. i doubt he's going to give us any sort of clarity on the scale of the riksbank yesterday. i don't think you will be telling us that one or two or x number of cuts are coming in 2024 for the boe. jonathan: the bank of england is on the margin, dovish with sterling weaker. the yields are lower by five basis points on the u.k. to year and that yield is 4.24. let's get into this one and how it follows up the riksbank in sweden. the s&b in sweden, is the bank

of england about to join them. >> there is a good chance now in terms of the vote split but also i think the forecast has been interesting, the downward revision across the inflation outlook is quite key. if you look at the undershooting for the target, i'm looking at the summary now. that could be quite interesting which is why we see the price action now. they wondered whether would be june or august and now june becomes more likely, looking toward that press conference and the direction from their area i don't think they want to rule out june but it will be conditional upon data from here. jonathan: they see inflation at 1.9% in q2 of 2026. can you give me an idea of what's driving that? is that the supply or demand side of the economy? >> it could be a combination of both. if we think near term, there's very little adjustment there and we are expecting a dip below

target over the next few months. that's partly based affects from energy prices. going forward, we are likely to see some of these pandemic driven impacts on inflation and that's starting to subside. they are also looking more critically at the core underlying inflation and specifically at wage dynamics than the labor market. the key drivers there are likely to be focused around the labor market dynamic and that's something they been talking about materially. dani: the split of the vote is also important to something i find fascinating because it is a fed so cohesive in their message and it's a boe which is anything but. ramsden now vote to cut now and few pillows talked about table mountains. bailey is more biased toward the cut, what does it mean to have such a divided mpc when we are

nearing the start of a cutting cycle? >> i think the vote split is an interesting messaging tool. i think it's less divided than before. there was a three split in the past. this is clearly having a mark dovish tilt but we have heard more hawkish messaging from huw pill and haskell and mann as well but it's conditional upon the data. it's an overall split so let's see what forward guidance is on the press conference. it looks like we are past the worst in terms of the inflation dynamic. we are starting to see labor market conditions cooling a bit and then it's going to be the focus on wages which is unfortunately above target consistent levels. from the projections, they are signaling confidence that they can see wages cooling for a time. it could be the case from the

messaging that we see they don't actual hat have to wait for inflation to prove that wages are cooling and they can actually start the easing cycle. remember, the messaging is also even if they start cutting, rates will remain elevated for a meaningful amount of time. this will not be jumping into easing monetary policy, it still tight conditions above neutral rates. dani: bailey has to get up there in front of the crowd at the press conference and speak to the market just as much as he speaks to the journalists and say perhaps some version of what you said. this is currently a boe where the individual members set the pace and get the market reaction. it is not bailey acting as the weatherman. is this a credibility issue? >> i don't believe it is. i think this is a technique that is very exclusive to the bank of england. it's also useful transparency as

well. i think the fact that there is one direction split has started to move more dovish, is the majority on the whole. you are correct, we need to look at not just what the governor says today but also the individual speeches that will come after. we will start to hear more now that we are over the blackout period. we need to focus on the commentary from the more hawkish members. i think looking at the guild price action now with yields falling, it doesn't look like the markets have interpreted this as a clear dovish signal. jonathan: the news conference starts in about 20 minutes time. we've had a cut in the last 24 hours from the swedish riksbank. also the swiss national bank and anticipating more as soon as next month perhaps from the bank of england.

what does that mean? the growing rate differential between the u.s. and other countries is yet another marginal factor that would encourage the fed to follow the global trend toward lower rates. how do you think this sets the scene internationally for the federal reserve? >> what we have seen recently over the last few months is a narrative that suggests because the fed will delay the start of the easing cycle, that will have impacts on other central banks. that is clearly not the case. it seems each central bank is very focused on the international drivers but more specifically now on domestic drivers and domestic and core underlying service sector drivers. if you have confidence there, you can start the process of easing. with the fed, it's at a different stage in terms of what's happening in the labor market and what's happening with

wage growth. we had a mix of data recently with payroll data that was more in jay powell's favor but that doesn't necessarily mean they will be able to start easing soon. we expect the first hike in september. it might be just two hikes were previously, they were signaling three. obviously, the markets have shifted on those lines as well. the fact that other central banks have moved won't necessarily impact the fed decision. the fed are focused on that domestic labor market dynamic and i think that will continue to be the case. dani: when it comes to the issues of currency weakening, there is this idea that for europe, where growth is anemic, the concern is not necessarily the landing but what it looks like after that landing that they would welcome a weaker euro because of the growth. would you agree with that? >> i think that's true actually.

you need to think about the long-term structural outlook as well. there is less of a focus on that right now and markets are very much when is the date? is it june or august? that seems to be the focus but longer-term, we need to think about that divergence across economies. when looking at that yield spread from fed to other economies, the euro area is one place it has an impact but also japan, we have seen there's been a huge focus on the governor having meetings and potentially, they will be forced to raise rates themselves a bit sooner than originally planned. there is a dilemma between managing inflation and also managing the fx impact and how that has broader spillovers. it's a very challenging backdrop as a result of this yield

differential between the u.s. and other countries but each country has to deal with that in a very specific manner. the euro area impact will be very different than japan or broader aipac economies. that leads to more divergence and opportunities for markets. jonathan: that's really well framed, wonderful to hear from you. if you are just joining us, welcome to the program. rates unchanged on the bank of england decision. a change to the vote of the nine officials on the monetary policy committee, seven voted to leave rates unchanged into voting for a cut which is an additional member voting for a cut. the guidance is interesting, risk from inflation is proceeding in things are moving in the right direction. more in that guidance in about 15 minutes time. the news conference is about 15 minutes away. gilts are rallying at the front and the little bit and if you look at sterling, weaker on the

pound by one third of 1% against the u.s. dollar. let's get you an update of stories elsewhere this morning. here is your bloomberg brief. sonali: shares of arm falling in the premarket and the chip design maker dental lackluster revenue forecast for the are raising concerns that the tech industries spending spree may be slowing. an upbeat forecast three month ago sent armchair soaring and help the company turned to nai darling on wall street. the stock was up 41% this week through wednesdays close. shares of airbnb are falling in premarket trading is the company posted revenue that beat analyst admits but provided lackluster guidance for a second consecutive quarter. the company that specializes in shared home and vacation rentals said it sees growth slowing before an uptick in summer travel and it's expecting revenue growth to re-accelerate in the third quarter as key international events like the summer olympics in paris fuel travel demand. some distressing news in the housing market, approximately

one and 37 homes in the u.s. are now considered seriously underwater. 2.7% of homes carried loan balances of at least 25% more than the market value in the first two months of this year which is up from 2.6% in the previous quarter. kentucky, mississippi and oklahoma saw the biggest increase. that's your bloomberg brief. jonathan: thank you. up next on the program, the importance of earnings. >> this is an earnings driven market. companies are not showing investors what they like and are being punished very quickly. jonathan: we saw that with sony which is down in early trading. from new york this morning, good morning. ♪

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welcome to the program with equity futures z -- negative by 0.1%. we will catch up with anne-marie in about 10 or 15 minutes. lisa will be offer the next few days but dani burger is with us. on surveillance this morning, the importance of earnings -- >> this is an earnings driven market and you think about 2023, it was all about repricing. it was all about multiple expansion. because of that, the market is not cheap and this is a year where stocks will be driven much more by earnings, cash flow and profitability and companies are not showing investors what they like and they will be punished very quickly. jonathan: stocks are on pause following the biggest four day advance this year. eric friedman of u.s. bank writing this -- eric joins us now for more,

great to see you. you been trading up a storm. can you walk us through what you been doing and why? >> with an active and i think it's been environment where we been using price weakness to bolster our thesis that we think corporate earnings will deliver this year. we also want to be protected against perhaps the incipient inflation environment. we've looked at people wait s&p as our more favored choice right now because we want to stay in large-cap and state domestic. we also want to be more spread out from a factor standpoint. we think the s&p is a good way to express that view. we also think inflation will be hanging around and could reaccelerate as we get deeper into this year due to both the catalog cost, shelter cost but also the considerations around comparables. we think those are two spots. we are not looking for shock and all but would think the gradual incremental increase is a risk

we want to make sure we are protected on. jonathan: your favor sectors are tech, energy financials and mid-caps. there is strong nominal gdp so what your base case for the economy? >> we think the economy will be on the back of a consumer to starting to incrementally slow but is still in good shape. we also think corporate cycle remains quite robust. we've seen a lot of that through this earnings season and the themes you've seen in terms of spend remain ai and cyber and big data. those are things we think are more durable. on nominal gdp, we are starting to see some participation from across the pond which is a good thing in terms of the consumer hanging in there and financials are in relatively good shape. those are things we think leave us more with an overweight position bias but also a flexible buy side. if you don't have tight stops around your views in this environment, there is a level of

hubris we prefer not to have. more of a constructive bias but also making sure we are not risking too much and what will be a very dynamic back half of this year. dani: part of that hubris could be having protection for when things go wrong and your viewpoint doesn't play out and an economy that we are unsure of. you look at things like the vix, there is nothing there, no one is willing to go out and buy these cheap hedges. what works in this environment? >> i worked alongside those that develop the vix and is something i think is a great affirmation because the volume has been limited. we are underweight fixed income as jonathan mentioned but we do own some longer duration exposure. that's something that we think makes sense in the event there is a significant surprise with either the fed or a deflationary pickup.

we think that makes sense. we think the commodities exposure which is not energy related but direct exposure, the broadening of exposure, you are seeing it in wheat and coffee and cocoa and we want to make sure we have that in the portfolio. having a view and a tight stop around those views, we think that will serve investors well in this environment. dani: you said people waited s&p is one of your views. if you had said to someone that valuations are too high in the last decade and maybe not go to the market index, you would have been wrong because expensive companies could keep getting more expensive. you look at arm earnings that are getting punished. i wonder how much of that is down to being expensive. it is more expensive than nvidia. is this a market that cares about valuations? >> i think that's an important observation. we think it is. one of the reasons why we went more equal weight is because

that value factor because of our desire to stay large-cap, we think there is a risk of refinancing with small caps and the unprofitable nature of one third of that index. it has lagged but we would prefer to be in a higher quality index like he will wait s&p. you are seeing the standard deliver type of market from companies now. if you do not have strong guidance or good reason why you missed, this is a market which is quite punishing. we think there is a level of marginal safety that's not the cheapest we've ever bought but it's a space we think will be well represented in a decent earnings climate for the next couple of quarters. dani: the value trade usually does well in a rate cutting cycle. how much of that is dependent on the fed delivering cuts? >> we think if there isn't one and it's a great phrase you've

all used which is the dovish pause, if you will, if there is more of a dovish pause type of language or ultimately we think one cut could be a signal for a bias toward a market which is a bit more vulnerable. it's not so much went to the rate cuts start. we think the market is starting to pay more attention to the terminal value. if you look at expectations through 2025-2026, it's hard to look out that far. this is an environment where the terminal rate is becoming more important. some cuts this year with a signal for 2025 are important but not necessarily. we think the terminal rate is more important. that two and three quarters or three on the terminal rate cycle would be a good place to anchor. higher that -- higher than that would be difficult. jonathan: cpi retail sales next week, it's good to hear from you.

a conversation which scream strong nominal gdp in america. dani: i go back to the idea of value so in order for value to work, you need a cyclical upswing because the weight cheap companies not get cheap as they deliver good earning so it says a lot about where you are in that cycle if you're willing to make that bet. so many people over the past decade have said now is the time for value and it hasn't happened. jonathan: overweight equities, overweight real assets come overweight commodities, underweight bonds, that's a very constructive outlook on the u.s. economy. coming up, the former world bank president david malpass, that conversation is just around the corner. from new york, this is bloomberg. ♪

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jonathan: two hours away from the opening bell with equities pulling back just a little bit. jobless claims in america just around the corner. very light on data this week. very heavy on fed speak. more fed speak later. san francisco president mary daly coming up. in the bond market, looking like this on the two year. yields higher almost a basis point. on the 10 year higher by two.

let's take a quick sneak peek at what is happening with sterling in the fx market. the pound against the u.s. dollar, 1.2456. we are softer one third of 1%. under surveillance this morning, the bank of england keeping rates on hold. seven members voting for no change. two voting for it immediate cut. for a lot of people, nudging this decision to june and a lot of people encouraged by this idea that is when we get the 25 basis point cut. dani: the market is starting to go there. gilts little changed. what we are seeing under the surface are prices for futures. for so long this has been trading on when the fed goes maybe the boe will go. it was following that pricing. we are starting to see a change.

deutsche bank underlined this. the risks to sterling are not that great if the boe goes before the fed. the move will be a rounding error. the currency effect is not bad enough to hold them off like we saw from the swiss and the swedish. jonathan: i am guessing we read the same note because this was from jim reed of deutsche bank. he had this to say about the bundesbank. if you need a long history of the ecb we only have so much. if you include the bundesbank and say that is the same thing -- here is what he said, the bundesbank is not eased before the fed except in 2011. this is a history going back to 65 years ago from jim reed of deutsche bank where on the ecb/bundesbank it is rare for them to go before the federal reserve and we are about to see that next month. dani: maybe it is because this is not exactly a rate cutting

cycle. if they will cut once or twice -- jonathan: it is not this -- it is not the same as it used to be. it is not the same type of impact if you start the cutting cycle a month or two months before. jonathan: may be a midcycle adjustment. that is a phrase i have heard. that is the latest on the central bank stuff. shares of warner bros. discovery trending lower after wider than expected losses and a revenue miss. bloomberg reporting the company is looking for further cost cuts and in a surprise move, disney plus, hulu, and max will be sold together starting this summer. we have long talked about this. the return of the bundle. dani: i cannot get my head around it. it seems like at some point there are so many bundle offerings that this is cable tv. it is the problem you go to the grocery store and there are too many jams, whichever one you by

your unhappy with. jonathan: and you end up with a fridge full of jam. that is what the tv looks like. dani: expired jams everywhere. jonathan: that is definitely a uk thang to have a fridge full of jams. in the united states president biden's redline on a rafah innovation is becoming clearer, saying he will stop weapons to israel if it launches a ground invasion. rare to hear from the president directly in an interview. we got one this is -- we got one yesterday evening and very clear about what he thinks should happen next. dani: it is a different biden then we heard in march. he gave an interview on msnbc saying that going into rafah is a redline.

he said there was no redline that he would stop supplying weapons. it is a change in tone, it is a public change in tone, it is biden trying to make a point to the israelis. jonathan: the commentary on the president is this is important to his reelection chances, particularly in states like michigan. when you go through swing state polling, michigan is the least of his worries. in our recent poll he is down hard everywhere else. if you take an average of all swing states he is down six against the former president. dani: one of the things that pulls extremely well that biden has an advantage on are things like abortion rights. you do not hear him talking about that. obviously current events are taking over. the messages are the wars and the economy. there is low hanging fruit he is not getting after. jonathan: six months out from

the november election and the next president could be heading into an "perfect storm" according to former world press president -- according to former world bank president david malpass. writing in the washington journal he says the spending bills will be extended just long enough to kick the can into 2025 in tax rates will rise unless congress and the president can agree to expand some of the expiring provisions in the 2017 tax cuts. annmarie hordern joined by david malpass in washington. good morning. annmarie: i am joined by david malpass, former world bank head and undersecretary of the treasury under the trump administration. john outlined some of the thoughts you have. the debt ceiling, the spending fights in washington, and the expiration of the trump era tax cuts. ouch of the next president be thinking about all this? david: good morning. you have to recognize what has

been going on and politically in d.c. which is not making decisions, not sorting out what to do about spending or debt. that has pushed into 2025. that has an impact on businesses. the uncertainty is what is prevailing within the economy. i do not want to invest if there will be a big tax increase but i cannot see what they will do to avoid it. that is the time clock is going on now. annmarie: i would like to talk about taxes because ed mills was on earlier this morning and he made a great point that yesterday we heard from the house ways and means committee chair jason smith saying there are republicans who want to see higher corporate tax rate. trump brought it down to 21% to 35. janitor joe manchin has said maybe 25 is something we can agree on. where do you see republicans and democrats have an equilibrium when it comes to the corporate tax rate? david: you have a choice of do

you want the economy to grow stronger and you think tax rates matter? i think they do in terms of the growth rate. if you raise taxes there is less investment in the corporate sector. we are already seeing it in the small business sector. very hard for them to make new investments needed to improve the supply chain. we are seeing this persistent inflation. annmarie: what you make of republicans and it should be higher? david: party unity is not as much in the republican party. they have to sort out what is the message of republicans. you want washington to be bigger? it'll be fun for a lot of politicians in washington to have a big debate over which taxes to raise. that pulls in a lot of political contributions. what we should be looking at is which taxes affect growth the most anyone to hold those down so you can have more jobs and

more people back to work after covid. a lot of people are staying out of the economy because it is not strong enough to bring them into the labor force. annmarie: labor participation rate is high in unemployment is below 4%. most people would say this is a very healthy labor market. under 4% for more than two years. david: the labor market does not include those who opted out and those are people we need in the economy to be catching up. in the meantime, china's numbers show their trade numbers, they are cleaning up by having factories running at full speed. i am from michigan. what you see our manufacturing inventories not building. the whole u.s. economy is waiting to see what will happen in terms of policy in 2025. that is this fiscal train wreck and they want to see how that will be resolved by washington

to get washington out of the way. what we are seeing is this regulatory push that is going on day by day. you are seeing massive new regulations out of washington as an end point to the current administration. also proposals for big tax increases. there'll be some republicans who say we need it but i think the public recognizes if you give more money to washington, it will just be spent. it is not really going to help on the national debt. annmarie: when it comes to the national debt and taxes, the cbo said if we were to see an extension of the trump era tax cuts, $4.6 trillion. fiscally this would be challenging. how do you think about that. with the bond market allow that to happen? david: this gets into what are the taxes and how they affect growth. there is a tendency of people to do static modeling, which means

they save nobody changes their behavior than a tax cut will just be added to the national debt. the whole point of taxation is to raise revenue without stopping people from doing what they need to do. small businesses reinvesting. i think we are over the laffer curve in terms of small business taxation. i don't know if you saw the statistics. as president biden has proposed tax increases on capital gains, it causes small businesses to stop investing in their business. they look to sell to somebody big because they cannot afford the taxes. i challenge that statistic and say you would get more growth out of the economy if you had better tax policies. you do not need to raise the corporate rate. annmarie: that will be day one, and we already see committees

being formed to try to map out what the tax policy will look at -- will look like. i also want to talk about what we could see under trump 2.0. you joined the administration. you ran the world bank. when the wall street journal says trump wants to put his thumb on the scale when it comes to the fed and questions fed independence, do you think that actually would be happening? david: i saw that story. there were not any sources. i do not think that is the policy that would create growth. i've criticized the fed for being too big and inserting itself into too many markets. the interbank market is gone. the trading of fed funds that were so vital to the dynamism of the u.s. economy, that is gone. the repo market has been almost nationalized as you love the amount the fed is controlling. we could have a smaller fed, a smaller balance sheet for the

fed, and that would be very positive for growth. commercial banks would love to be lending right now to small businesses. the way the regulatory policy works, they cannot do it. it is biased against small businesses. that is true of the borrowing done by treasury and the fed, they borrowing at the short end of the curve and that is crowding out small businesses. that is the p dynamic. annmarie: there borrowing the short end because everyone thinks why lock in rates at the long end, we will do it when they come down. isn't that prudent? david: that is not prudent. the yield curve is deeply inverted so if you borrow at the short end you are paying 5.4% by the fed. they are buying in 5.4% to own bonds that yield less. that is not prudent. what it does do is help prop up

the stock market. there is some end game going on with the in the economy where it is part of the kick the can to say let's just borrow short-term hoping for better in the future. global markets look at that and they are not voting for the united states on that. we are weak at home in terms of the economy. 1.6% growth. the cbo forecast is for weak growth into the future. abroad we have the weakness leading to wars in multiple parts of the world. they look at the fiscal situation in the u.s., the inverted yield curve and say why would i invest into that high a short-term interest rate? annmarie: you think under trump there would be an of thomas fed? would you go back into a trump administration? david: right now that is premature.

the issue is for people to sort out the policy differential. you have a choice of weak versus strong and growth versus stagflation. that is the decision for people to make. trump would have an array of people who could implement a growth policy. that is quite possible. it is the election cycle, so let's focus on that. annmarie: david malpass, thank you for your time. that was the former head of the world bank. he thinks we are potentially going into a stagflation environment. we should remind with the audience -- we should remind the audience what jay powell said, he does not see any stag or any flation. jonathan: i want to check out sterling. 1.2458. bank of england leaving rates unchanged. the news conference underway. governor bailey saying it is likely will need to cut the

bankrate and make policy more restrictive. rates may fall more sharply than markets expect. take a listen to what he had to say about june. a june bank rate cut is not rolled out or planned. helpful. dani: very helpful. that is how i find all of his comments. he says do not over interpret the data but also we need the data to help us interpret the cpi. this is about giving himself optionality. in the last comments he cannot help himself to have the dovish tilt. it was january last year, remember we are turning a corner, we are almost there, it a year later we are still kind of there. jonathan: a three month rolling view. it is always three months out. sterling is weaker one third of 1%. cable at 1.25. here is your bloomberg brief

with sonali basak. sonali: xi jinping appears to have wrapped up his trip to serbia without visiting the site of the former chinese embassy bombed by nato forces. he time to's visit to coincide with the 20 put in a bursary of the bombing where u.s. missiles killed three chinese journalists. the white house later called the stryker mistake. president xi wrote an article published in the serbia newspaper on the anniversary of its arrival promising to never forget the attack. maga has joined tiktok. it attacks bidens economic record and labels robert f kennedy as a radical leftist. trump and president biden have both supported a band of the social media app do national security concerns. living in manhattan is getting

even more expensive. apartment rents rose to a new high for april. leases were signed at a median of $4250, up nine dollars from the same time a year ago. rents have climbed annually and free of the past four months, suggesting another record shattering summer is to come. jonathan: thank you. here is the deal. it is a lot of money. people are paying it. this is what stands out for me. leasing has soared 42% on last month over 20 trade three. dani: you are attempting this rant from me about how there are too many people in new york. jonathan: i will be with you. dani: there are too many people here are willing to pay that. it is the banks and the consultancies. they all over hired and are paying the rents. jonathan: the churn they are speaking to is starting to

happen. is a lot of money but people seem to be paying it. coming up, the case for commodities. >> we have already shifted towards commodities. a commodities position is a smart thing to do. jonathan: will catch up with the brilliant xavier glass in a moment. ♪

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about opportunities like clean water. and how clean water advances can help transform our tomorrows. better questions. better outcomes. t. rowe price jonathan: equities pulling back. stocks down. no drama. yields higher a single basis point. on the 10 year 4.5062. crude $79.55. the case for commodities. >> we have already shifted towards commodities with an overweight there. the non-correlation, we like that about commodities. you've seen precious metals performing well and we think oil

has some upside proof. from here a commodities position is probably a smart thing to do at this point. jonathan: soft commodities rallying with extreme weather and shortages driving prices of coffee and cocoa. hobby or glass of -- xavier glass explaining why coffee is rising -- coffee what is the view commodities you could analyze without paying attention to china. that is not the case anymore. how great a source is china of demand for coffee? >> you are looking at the coffee market 20 years ago you do not have to think about china. 10 years ago china was not the top 50 consumers. today it is the seventh largest consumer. this from a country that has been almost synonymous with tea consumption. china is a big factor in the coffee market.

it is not the main reason the beans are the highest in 45 years, that is mostly the weather, it but it is a factor we need to consider. dani: how much of this is about the fact that it is a cheaper been, it is not the expensive stuff that people will keep paying for? javier: it is a factor. let's look at the fundamentals of the coffee market. the biggest producer is vietnam. they have suffered with the heat wave and drought. we saw a roasters of coffee that were very aware we were living on a cost-of-living crisis and consumers would trade down and try to get a cheaper alternative so the demand for -- went up an expectation there would be more consultation and the supply would be there. that is the combination. the increase in demand from the road suggesting they need a

cheaper planned and the supply failure and crop failure in vietnam. dani: usually it is the demand mechanism that sorts this out. it is really expensive now so you get something like a starbucks where people are less willing to buy fancy coffee so they are not selling as much. you mentioned the big issue is the supply issue. do we need to start thinking about the soft commodities in a very different way considering what climate change has doesn't -- has done in terms of storms and severe weather? javier: we need to think about soft commodities being always exposed to the weather. coffee has been exposed not to heat waves, but mostly frost in brazil. we had a big frost in the 1970's. at one point in the mid-70's we lost half the crop of brazil. that was it. we need to see the commodities as the areas where demand needs to increase and elasticity of

demand to prices is very low. we will still be consuming your cup of coffee every morning. let's be honest. the price of the commodity makes a small fraction of what we play. that is a lot -- the profit margin is very little of that. whatever it is today, any i visit new york i'm shocked by the cost of a copy. that has very list -- that has very little to do with the price of coffee in the market. jonathan: copper has rallied. it is all about supply there. iron ore has started to pick up. would you call this a perfect storm for commodities on the supply side? javier: i would not say that. you look at other commodities. soybean prices are coming down. even all of oil is starting to

come down -- even olive oil, the prices are starting to come down. copper has upside to go up. oil is more balanced. supply and demand are balanced. the price will stay between 75 and $95 a barrel. i would not go to say this is a bullish story for commodities in general, but certainly for some of them there is a bullish picture. jonathan: we should avoid the olive oil argument. lots to talk about. underway at the moment, a news conference with governor bill lee of the bank of england. here's another thing to talk about, no law that says the fed would move first. dani: i love the idea that there would be a law. jonathan: sometimes we have conversations as if there is a law. coming up we will catch up with david leibowitz of jp morgan.

that is coming up next. from new york, this is bloomberg. ♪

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>> in terms of the soft landing playbook, that is up in the air.

>> we think we will see more soft. >> the balance of risk has shifted when we talk about rates. >> the federal reserve, either you go in september or wait until december. >> the biggest concern is if things go south, how fast do they go south? >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: last week we were overwhelmed by economic data and we said this week we are light on data. a sprinkle this hour. a: 30. job numbers just around the corner. vets be going into tomorrow on to the weekend. eight: 30 a.m. eastern time, what it means for the federal reserve. with the federal reserve means for everyone else. at the moment, not much. we've had a cut from the s&p out of switzerland, a cut from the

sweedish -- from the swedish. lisa: there is no law that says they must do that, but we heard from lagarde that ever ecb speaker is saying that we don't need to wait for the fed. the swiss and the swedish showed us they don't need to wait for the fed but the calculus becomes different if we talk about waiting for the fed passed this year. what happens if the fed doesn't cut this year, cut until the funny 25? they have started their cutting cycle and that is where you get the tricking us. jonathan: it might not shape when they start. it might shape how far they can go. we will have that conversation in a moment. the governor of the bank of england speaking in this news conference started 32 minutes ago. this to say on the outlook for inflation. two more prints before a june rate decision. the second round inflation, if we call it inflation shock, fading faster than previously anticipated. things seem to be inching

towards a 25 basis point cut from the central bank. dani: he also expects inflation to edge up later this year. wrap your head around that. he is saying two different things potentially at once, it shows that i don't know the path of things going forward. he made the mistake before saying we are going in the right direction. here he's giving himself an out if he doesn't go that way. jonathan: you here on wall street optionality. they want the option. the pound against the u.s. dollar a little bit weaker. the broader price action, down .2% on the s&p, weaker going into the opening bell in about 88 minutes. the bond market yields higher by two basis points, the 10 year 4.5141. the euro is weaker against the dollar at 1.0729. we will catch up with david leibovitz as stocks are on a four-day winning streak. we will speak with mandeep singh

as chipmakers become a geopolitical flash point. and what it would take for rate hikes reenter the conversation. i can't keep up talking about rates, cuts, now hikes again. market momentum is stalling as investors look ahead to next week's cpi print. ap morgan's david leibovitz saying that as long as the fed remains biased to cut rates at some point we think that risk assets will remain supported. david joins us for more. good morning. did the bias change last week in any shape or form? david: when we talk about what happened last week, i would describe the market as almost's past. we started with a hot eci print and everyone was pricing out cuts. the fed won't be able to go this year. we ended with a nonfarm payroll support, essentially goldilocks. there was something for everyone and you

can see that in the way the market was moving. the most important thing is what powell said during the press conference, when he laid out potential scenarios for interest rates this year and it didn't talk about hikes. he talked about staying on hold, easing policy, and we've done work and looked at whether it is the stock of cuts that the market is expecting or more of the flow. as long as the market is continuing to price in cuts over the next 12 months, we think that that will keep long-term rates in a range and likely leave equities. jonathan: saying yesterday that there are two worlds. one where the economy is great and the fed can't cut. is there a better outcome for markets? david: i don't think that there is. i think that the latter might be better for the market. i think that the market is getting twitchy about this robust pace of nominal growth. the issue is earnings are coming through but you are caps on multiples given the subsequent outlook for rates. i think that a little bit of softening in economic activity may be getting the fed to acknowledge that easier policy is on the horizon.

that could be the ideal scenario going back to a world that feels like the one that we were in for the better part of the expansion postage efc. dani: you can feel the markets desire to get back to that. i wonder in what you were talking about about powell laying out scenarios where he could have said that will lead us to hike, to not cut. david: i think it's important to recognize what the issue is that they are dealing with. the fed has this dual mandate for full employment and price stability. they don't need to be worried about the employment situation given the data that we've seen. inflation remains public enemy number one. what i think with lead the fed to become more hawkish is if we saw that re-acceleration in inflation, which in our view would be tied to a labor market that heats backup. if we see nonfarm payroll prints go back that could give us pause, but the overall direction of the labor market and wage data is supportive of some easing later this year.

dani: we have a quiet week with more data next week, but here is the thing. it seems like we are in no man's land. earnings season will be over and we won't have those fees for corporations, we are a far ways from the next fed decision. what does it mean for each of these data points in the middle of nowhere? david: it is the level 1 data, the cpi numbers, the employment numbers, that move rates and subsequently equities. i think it's not the worst thing in the world that we have a somewhat quiet week. the market can digest what it learned last week. we got a lot of data in the u.s. and around the world. the market can process that and listen to it that speakers have been saying. we are seeing relative balance between those continuing to talk about easing later this year and those who may be more hawkish like the man from minnesota and his blog yesterday. when we think about with the markets going to do this week, it is going to digest that data. frankly, the outlook for the economy looks good.

two q growth is nice. i'm not sure the market with this like that. jonathan: the bar is higher in we need to talk about that data relative to expectations. looking at u.s. economic data, incoming relative to what we were expecting, it has nosedived, turning negative in the last week. do think there are better opportunities abroad. we are beating expectations and starting to deliver rate cuts? david: the international story is interesting. what i will say about the u.s. economy before moving onto the rest of the world as we were thinking about the various pillars of growth as being assets or liabilities. there is a lot in the neutral bucket today, but that skews a bit more towards the liability side than the asset side. that is supportive of slower growth in the u.s. during the back half of the year. the counterpoint is that the rest of the world is picking up. if you look at the edge of the world being south east asia, semiconductor activity and

overall technology exports, things have picked up nicely and we are seeing green shoots beginning to emerge out of europe and that makes us constructive on a pickup in the overall global manufacturing and global goods cycle. what we need to see is the european consumer, back. the european consumer, if they come back and that source of demand reemerges, we will see the inventory pickup and manufacturing activity re-accelerate and europe emerge from a soft period of economic truth. jonathan: i feel like europe green shoots 10 years, same story. david: it has become convention, but the reality is that you have seen an extended period of 18 to 24 months were manufacturing globally has been soft. you are not only seen things pickup in asia and europe, you are even seeing things pickup in the u.s. barring the most recent ism manufacturing print. dani: when we get the cuts out of europe, what happens not to the landing but after the landing? i know that you are seeing green shoots, but is it enough to get

some growth coming back into europe? david: i think that we can get growth going in europe again. i think that one of the bits that we have been really focused on as of late is the response to the pandemic. in the u.s., you had money dropping from helicopters. people got laid off but got a stimulus check in the mail and that created too much money chasing too few goods. europe furloughed their workers putting them on a percentage of their overall salary and that led the consumer to retrench further. as we see consumer confidence begin to pick up and as we see signs that the labor market is remaining healthy, that makes us more constructive on opportunities in europe than we have been until this point. the one thing that i will say is the folks who like to point to, well, you can invest in semiconductor producers in europe, it is as expensive in the u.s.. this is more about picking up the cyclical trade and jumping on board as things accelerate. dani: it is so hard to remove the american bias and go

overweight europe. his now that on? david: it is a good question. the thing that's played to that trade for the better decade plus has been the strength of the dollar. i think that the way to weigh this and to think about this is, if the ecb is easing and the fed needs to stay on hold, what happens to the euro? if we can get the euro strength, maybe the fed easing as well, that will be an additional tailwind for u.s.-based investors in european markets if we have a fed that keeps rates where they are in the ecb starts easing. even if you see a pickup and local market activity and local currency returns, the dollar may work against you. dani: european growth is better going not just to expensive tech, but by all accounts the fed is not going to cut as soonest the ecb. the dollar remain strong. which one is out? david: if the fed is able to ease, and we believe we will get one to two cuts by the end of the year, you will see some euro strength come through and will

be able to participate in a recovery across the pond. jonathan: you will be sticking with us. david leibowitz is sticking with us. this week started the conversation about u.s. exceptionalism and how exceptional that exceptionalism is. he is right to ask it given how the data has come in relative to a higher bar. dani: i will channel my inner lisa, since she is not here. the debt is exceptional. perhaps that is the exceptionalism we see. can a country be exceptional with this huge debt pile? it's a concern. more folks are talking about it. maybe it's not so exceptional with that considered. jonathan: you say bramo and i go to the bloomberg terminal. 30 year bonds, 35 billion dollars worth coming in later this afternoon. bramo, if you are at home watching, that was for you. your bloomberg brief with sonali basak. sonali: the bank of england has voted to hold rates steady for a sixth straight meeting. seven members voted for no

change with two votes for an immediate cut. also cutting the inflation forecast. the governor saying that he is optimistic that things are moving in the right direction. bloomberg is reporting that alphabet is in talks to buy marketing software provider hub spot. discussions are ongoing with no agreement reached according to people familiar with the matter. the deal would allow the google parent company to compete with microsoft, oracle, and salesforce. they have a market value of $30 billion. this could be one of the biggest takeovers of the year. shares of warner bros. discovery are trading lower after wider than expected losses and revenue miss. the company is looking to further cut costs, including layoffs. in a surprise note announced yesterday, disney plus, hulu, and max will be sold together in a bundle this summer. that is your bloomberg brief. jonathan: i have hulu, and with hulu i get disney plus and espn. i will get max as well? dani: i think verizon has

something where you can get max and netflix. your number the thing of everyone teaming up together and offering sports? you thought that you got to just -- that too. there are plenty of bundles to choose from. jonathan: netflix, prime, paramount for italian football, the list goes on. i pay more now than when i first moved to this country and got cable and had the full package with sport and everything. i pay way more now than i used to. dani: i am sticking to cable and netflix. i can't be bothered. jonathan: the bundle is back in a big way, apparently. we will catch up with mandeep singh of bloomberg intelligence as chipmakers weigh the impact of new u.s. restrictions on while way. that conversation is around the corner. i from new york city, good morning. ♪

jonathan: the price action for you on the s&p 500, -0.2% going into the opening bell in about one hour and 14 minutes away. the morning call, citibank raising its price on uber maintaining a buy rating. the ridesharing company is one of citibank's top picks as it sees booking and profitability growth. the second call from jmp security raising the target on instacart to 42 with an outperform rating. the strongest first quarter earnings and of the new restaurant delivery deal with uber. jp morgan raising the price target on arm to 115 keeping an overweight rating highlighting another positive quarter with a jump in chip design activity. even with the stock getting hammered this morning, down in the premarket by more than 8%. cfra maintaining a positive fundamental outlook on the chip

industry. the commerce department's blacklist of huawei won't negatively impact u.s. firms, writing, we anticipate no change to qualcomm's revenue outlook as the company cited that it planned to completely stop shipments to huawei by the end of the year. the impact on the industry isn't a needle mover, china remains a long-term risk to the supply chain. investors should expect more sanctions through the pipeline. mandeep singh, good morning. chipmakers are navigating choppy waters in china. mandeep: it may help qualcomm. they were gaining traction on the premium side. remember, they used android, and all of the oem makers like samsung, apple, weigh weight competitors in china use qualcomm processors. if you are sanctioning qualcomm

from supplying the modem and connectivity chips, also part of their business, that actually helps the other android makers who may see more business. qualcomm benefits. intel, i'm not sure. if you aren't providing the cpu that goes into a way weight laptop -- into a huawei laptop? jonathan: could you talk to us about nvidia? what have they been doing in anticipation of some moves around china? mandeep: they have come up with a scaled-back version of their chips. that is how they have been skirting the restrictions on the latest. nvidia pretty much has the entire gpu space to themselves in the sense that everyone needs whatever they can make. even if they are making a low-end chip the market is taking it. especially the chinese oem companies trying to catch up, they don't mind taking the

low-end chip because what is the alternative? in that case, it hasn't affected nvidia in a big way. barring an outright ban where you cannot sell to the china market at all, that is when it will hit nvidia. this news may be good for apple, too. if huawei cannot make a good smartphone, and that is who they were targeting the premium end of the market, it benefits apple to an extent because suddenly the iphone is a viable alternative, as is android oem makers. i think that this is targeted to driving -- helping to an extent of the u.s. phone makers as well as the alternative to huawei in china. dani: how long until the conversation turns from not what is the impact on u.s. restrictions on china but the ev conversation of the homegrown chinese players posing a real threat? how far are we from that? mandeep: when you look at all of

these carmakers coming up with new designs, -- they have come up with their own ev. they have used their own components. as long as you limit the supply of those components they cannot innovate as fast as shaomi or tesla can. you really pick your spots, and that is how you can make a difference in terms of applying those restrictions. david: how are you thinking about the overall cycle? we were talking during the prior segment we are seeing signs that overall semiconductor activity is picking up in places like taiwan and korea. how much runway does this have been light of political issues coming into play? mandeep: right now, every sovereign is trying to build as much capacity as they can on the ai side, because everyone realizes that this is the cutting edge stuff. this is what the governments need to focus on.

i am not surprised that every sovereign is investing in such a big way. you kind of focus on the things that really matter in terms of the early-stage infrastructure. applications and software will come much later. now, it's about setting up the infrastructure that can propel you to the next wave of ai and innovation that's about to come. david: it is fair to say that you see more opportunity and the picks and shovels today than in software? mandeep: this is a multiyear secular trend and we are in the early stages. now everyone is trying to get their hands on as much capacity as they can when it comes to cutting its chips. dani: why isn't the market awarding someone like arm who says that our next venture is to develop things that go into data centers? surely the market would say great opportunity. instead, we see the opposite. mandeep: when your trading at 30 times price to sales, you have to ask yourself how much of the good news is already embedded in the stock price? there is nothing wrong with the

quarter, it is just that the expectations had gotten to a point where you have to beat and raise like nvidia does. not everyone can deliver results like nvidia. dani: arm is more expensive than nvidia, so that tells you something. how much of this is that softbank owns 90% of these shares? there's barely any float. if you want to buy than the supply is so little. can you say that that is the impact not that the expectations are so high? mandeep: i haven't looked at the short interest but these things matter when it comes to what the company reports and the impact on the stock price. the knee-jerk reaction. long-term, the story is intact. there are more arm designs that arm is going into data centers and edge stuff. clearly, they have that wind on their back. the valuations got ahead of themselves, and sometimes you see that sort of reaction. jonathan: arm is down, it doesn't take much to push the stock around.

nvidia reporting may 22. thank you. mandeep singh a bloomberg intelligence. you nailed it, how long is this runway? how many more quarters can nvidia keep coming out saying, beat, raise, beat, raise? david: we saw the dent in the armor was vis-a-vis the guidance. if you didn't upgrade your guidance you got pummeled the next day in the market. how long can these companies maintain these rates? making a point about the physical impulse when it comes to these and the sovereign spending being funneled in. at some point expectations become too high and you settle into a sustainable rate. jonathan: can we talk about outside moves post earnings? you can't do single names but arm is one a move of something like 8%. a double-digit move in one direction on meta, similar on tesla and other tech names. what do you take away from that? david: we crunch the numbers at

the index level and if you beat on earnings and revenues and increased your guidance, you were flat relative to the market the next day. if you beat on earnings and revenues and didn't upgrade your guidance you were down 150 basis points relative to the benchmark. expectations potentially have become overextended for some of these names. yes, nominal growth is robust in the united states. as we talked about earlier that is not necessarily going to last forever. we are seeing people readjust to a world where regrowth is at 3% with 3% to 4% inflation. dani: i asked that question to peter scheer who had a technical answer. moving 10% like penny stocks is a liquidity problem. people have pulled back. do you see a degree of that? david: you have definitely seen people step back from being all about tech. you have seen the market brought an out. financials in particular have been behaving well. i think that that could be part of it. liquidity always matters when it comes to outside moves, but when

we think about the fundamental story, these stocks are trading in valuations that were simply extrapolating current rates of growth. nearly indefinitely into the future. at some point you need to land the plane and that is what we are in the early innings of beginning to see. jonathan: over the weekend, 10% is the new 1% from mecca cap tex. drill dollar names moving double digits which is unbelievable. -- trillion dollar names moving double digits, which is unbelievable. we will catch up with barclays to react alongside david leibowitz of j.p. morgan asset management as we count you down to data in america. equity futures down .1% on the s&p 500 and yields higher by a single basis point on a 10-year. 4.5082. ♪

abigail: -- jonathan: some data for you, equities pulling back .0 .5% and a little bit lower on the nasdaq. the switch to the board and get to the scores with jobless claims. yields are higher at the job -- at the two year yield. a little bit higher on the 30 year. on the 10 year up by a single basis points job claims. mike mckee is with us. mike: 231.

first data point of the week, 231,000, quite a change from what we had in the previous month. the continuing claims at this point looked like they have gone up. i am waiting to get the change from the revisions. and they are at 1,785,000. the initial print was 1,000,774. 209 is the revision so we go from 209 to 231 and from 1,000,768 to 1,000,785. not a huge rise, but a big proportional rise in the initial jobless claims number, but we have been here before. jonathan: we have gone up to this and then dropped again. the question will be asked versus the estimate of 212, what is the difference between a welcome cooling and unwelcome

deterioration? let us turn to the prize action and get to foreign exchange. equities are positive off the back of this and unchanged on the session. bear in mind where the bond market was, yields were higher by a basis point or two and now we are lower by a basis point on a 10 year. we unwind some of that move, and on the two year down a single basis point. all of this is marginal stuff. the euro is erasing losses and now just about unchanged at one -- 107.44. that will be on people's minds. are we seeing a welcome cooling in the labor market or deterioration? mike: with this data it will take a number of weeks to find out because it is the first time in a while that we have bounced up. do we stay up, our companies laying off more people or is

this a one-off that we have to figure out going forward? that is the hard part. abigail: we ask this every time and it feels like it needs to be asked again, what is the usefulness of initial job claims to give a signal value? mike: only in an aggregate over time. on a weekly basis 2 -- two things, the initial rise suggest that companies are getting rid of workers because they see something that worries them. a rising continuing claims is that it is getting harder for people to find jobs. we had this a couple weeks ago and then it went away again. you have to be extremely careful in deciding that this is something that matters. >> it is the highest frequency indicator we have for the labor market so if you are trying to keep your finger on the polls it is good to look at. what is interesting about the print is that claims have been

sitting on one side with respect to being very tight and running hot. you are seeing it moderate and -- moderate and move back with the broader set of labor market data. mike, i would be curious, when you look at the u.s. labor market and think about the indicators, where do you think we are? you get a sense that the labor market is moving in the direction that the fed wants it or it is tight and there is more progress to be made? mike: we are moving in the direction that the fed wants but when you look at jobs created and the decline in openings, and other indicators, it suggests that we are seeing the labor market commit to a better balance. but, even on this point, 175 and jobs is a big number. so, balance is a better word than getting rid of a lot of slack. we are not sure with what is

happening with all of the immigration into the u.s. and how many people are going into the labor force. it seems to be a lot of them that keeps us higher and able to hire and holds down wage gains, we have to see. jonathan: over the last few months, there is enough data for everyone to construct what people would make. that is construct a bad one, that is easy to do. let us take the data last week and go to payroll, the wages the slowest pace in three years. look at first contraction since 2022 below all estimates and business activity slumping to a four year low and input costs in the wrong direction. we are starting to see an upside to price. we could sit here and make it sound gloomy and say q1 strength had fake, what is the counterpoint to that? david: the counterpoint is where you peel back the layers on the first quarter gdp data.

you saw final demand very robust. yes, we can interpret this as the beginning of a cooling in the labor market and a cracking, but the counterpoint that you can make is that we are starting from a positive position so unlikely that consumer falls out of bed overnight. at the same time you are seeing business confidence pick up and ceo confidence pick up leading to an improvement in investment spending and manufacturing activity. you would not be getting that signal from the corporate board rooms if they did not perceive the end demand to be there. often times when you get a couple of negative prints the nbr comes out and says we are in a recession and we did not know at the time. that always exists as a risk but the fact that you are hearing business leaders continue to illustrate and remind us that demand -- that demand is robust the economy is let -- unlikely to rollover. jonathan: you said the narrative

was fragile. we have had hard, soft and no landing. we had seven cuts and went down to one. why has that narrative been so fragile? david: it is a simple answer, a lot of us have never been in this situation before. we went through covid and the pandemic, none of the economic models worked in the forecasting was off and we are dealing with this reemergence of consumers globally that a lot of people just do not have experience with. it was a couple of years ago where people were talking about embarking on the roaring 20's, a period after the pandemic -- jonathan: people still are. david: people will be doing it today and not tomorrow. that narrative have faded we match it with what has happened with the last couple of quarters in particular. mike: they came out with their second-quarter gdp now number yesterday and it is 4.4%.

it is really early and that is really high and it will come down. it is funny that we are seeing signs of strength in some areas. the fed is like a driver who is stepping on the brakes. they want to step on the brakes but not so hard that they get rebranded as a recession. we are going in the direction they want because they raise rates in the economy is slowing. how far did they do too much? we do not know. david: if you look at high-yield default rates they remain low because a lot of these companies were able to turn out their debt during 2020 and 2021. if you look at bankruptcies the number is rising. a lot of those businesses rely on flooding rate that. what gives the fed confidence that they are applying the break in the right way is that they are seeing the impact of higher rates filter through and show up in some of the data after a period resilience. >> everybody refinance and we

are ok, it is ok if rates stay higher for longer because everyone took out cheap debt but that was in 2020 when the fed cut dramatically. are we four years out and are we finally facing some manner of maturity wall? david: you are facing more of a maturity wall. it is important to look at the share of debt outstanding with the maturity wall. it is mid to high single digits for high-yield and investment rate. the real issue is private credit where it is 15% over the next couple of years. private credit loves nothing more than to kick the can down the road so will that lead to default? your guess is as good as mine. what you have seen with the bank loan market heating backup, there is competition to do deals allowing people to address higher interest rates we are dealing with and not having that become a problem until somewhere down the road. >> then you get private credit having to make concessions and

not have charges and high fees. private credit has done and extend and pretend. when the music stops what does that look like with a nontransparent and unknown entity? david: it looks completely different than what we went through 50 years ago because at the end of the day the people on the hook are investors. i am not saying it makes it ok but if you think about who invests in private credit it is pension funds and high net worth individuals. it would be unfortunate if all of them had a problem and people began to lose their shirts. people try -- try to draw parallels and it is apples and oranges. jonathan: welcome to the program a rare upside surprise on jobless claims came in at 231 and as we like to say the wrong kind of upside surprise. 231 against an estimate of 212. futures were negative, the midterm positive.

unchanged on the s&p 500. yields were higher and now they are lower. we are down on the two-year at 4.80. in the fx market the dollar was stronger. the euro 1.0 750 far. -- 54. there has not been so much data so far this week. tomorrow you get consumer sentiment expectations and on the big one next week, ppi, cpi, u.s. retail sales. mike: we put it into one week to make it exciting. we are looking at a slowdown in inflation which will be the big story. we are watching every day to see what fed speakers have to say. retail sales are interesting. you have people all over the map on what is happening, i have a lot of notes from people saying that retail sales have slowed and bank of america saying that not only are retail sales holding in, they are not growing hugely but they are holding in. they are seeing at the lower end

of the income scale which everybody has been talking about. the poor people are out of money so they cannot spend anymore. that is not what bank of america is seeing. jonathan: can i get into the set up? we were talking asymmetric risk and if the data is hard the yields will not rise because the fed will not hike. if the data is weak, we will get a cut. we have reset a little bit. is there still asymmetry risk? david: i think there is because if you look at the positioning data there is a massive short position sitting across the rate market. i think part of why you our rates come down so sharply was really just people adjusting to maybe the economy is getting cooler. maybe we should not be betting on going to five but maybe to 4.30 or 4.25. i always come back to the move index because it is important to think about volatility.

yes, we have come off of the boyle but we are at elevated levels. that represents a wider dispersion of outcomes. back to where we started a conversation, last week had something for the bulls and something for the bears. we need to see more data, particularly the cpi print to get a better sense. mike: i am trying to do what i can for both sides. >> can i take that logic and apply it to equities. it was michael harden said it was low enough that it brings stagflation so in that way bad news is bad news. we got a lower print and i higher print for job claims. are we worried about that? we are in the early innings of seeing that the fed and we are seeing bad news becomes bad news and we are seeing payroll growth

is not bad, 4% wage growth is not bad and unemployment rate for percent. that signals a robust labor situation. jonathan: bank of america institute numbers are out. lower income household balances with 60 percent high and an average. middle income household balances 58% higher and higher income households 45% higher compared to where we were back in 29. those numbers were absolutely staggering. more a little bit later. here's your bloomberg brief. sonali: approximately one in 37 homes in the united states are now considered seriously underwater. 2.7% of homes carried loan balances and at least 25% more. and then the market value and that is up from 2.6%. kentucky and mississippi and

oklahoma are the biggest increase in homes seriously underwater. living in manhattan are getting more expensive. they rose to a new high for april. up nine dollars from the same time a year ago according to miller samuel and douglas almond real estate. rents have climbed annually in the past four months with another record set -- record shattering summer to come. the company posted revenue that beat estimates and provided lackluster guidance for a second consecutive quarter. the company specializes in shared homes and vacation rentals sees growth slowing and an uptake in summer travel and growth will re-accelerate as key international events like the summer olympics fueled travel demand. that is the bloomberg brief. jonathan: thank you very much. back to the bond bill.

>> the other positive is the streaming service. the progress we have made that business in a very short period of time. jonathan: just moments ago jobless claims coming 231000 and , your equity market recovering just about unchanged. the opening bell 45 minutes away.

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in minutes! -how? -a.i. (impressed) ay i like it! who wants to come see the future?! get your business online in minutes with godaddy airo jonathan: jobless claims data moments ago at 231,000 and the estimate was 212 and that was a wrong kind of surprise and equities arrayed with morning losses. yields were higher and now they are little bit lower on a 10 year. under surveillance is morning it is back to the bundle. >> the other positive is the

streaming service, we encourage by the project -- the progress be made. we took prices up a little bit in the beginning of this year and did not see much of an impact. but we do leave that the great experiences that we provide, people are willing to pay for it. jonathan: disney, warner bros. and discovery combining streaming services into one bundle starting this summer. subscribers would have access to disney +, hulu and max add free and ad supported. we talked about this for years now. the bundle is making a comeback and what is the price point? >> we do not know the price point just yet, but what was old is new again. and it is all about creating a super bundle. for disney and max it makes sense. it will have full quadrant appeal. why we are seeing this, there is

a hint of desperation from all of these companies because we know that subscriber growth has hit a wall. disney is not able to get beyond the 60 million subscriber mark. if you look at max, which has been successful, they struggled to get past the 100 million mark which is reinvigorating the subscriber growth but also one thing with streaming is that we know it is very easy to cancel the service and they are hoping that they are able to keep customers on the bundle. jonathan: as was mentioned earlier it is not just as effort. as you look at the companies that are combining, what is bringing those specific companies together versus tieups with others? geetha: this particular instance, with the disney and warner bros. i think it is perfect timing. it is a good set up. you mention sports. both of these companies along with fox have the sports joints

ventures. they have now this disney plus max product and the sports product which sets up a path to have that super bundle, if you will. that is what they are aiming for. so far what we have seen with bundling is that it does work. disney has said that 40% of subscribers take the bundle. so that is the disney bundle with disney+ with hulu and espn+. so bundle's work and that is what they are betting on. >> what about the math about the company. we know that warner's brother -- warner bros. and discovery want to cut costs. what happens if you need to price a bundle competitively to be the super bundle? geetha: i think they will. this partnership is a little bit different from what these companies have been pursuing. what we have seen until this point has really been bundles with telecom providers.

we know we had the verizon bundle where verizon was offering the bundle with max and netflix. you had t-mobile with netflix. there is a revenue share agreement and what these companies are doing is doing themselves -- doing it themselves without a partnership, they are trying to keep more of the partnership -- the profit for themselves. this comes to cut costs and this cuts down on marketing costs. if you look at marketing costs for all of the streaming subscription services, apart from content, marketing and selling expenses is one of the biggest cost centers which helps with that. david: that is a perfect segue into the discussion i wanted to ask, we have talked about scriber's and -- subscribers and cost but content is king so how will this be relevant? geetha: disney has its own

appeal with the younger children. hbo max is prestige tv. and then hulu right now is getting into more edgy entertainment and with max you have a whole bunch of movies coming on the service as with disney plus. once they release in theaters. that is what they are betting on. the -- you have two superpowers in terms of storied brands. they are really betting on getting those brands together and appealing to a broader section of the audience. jonathan: this is great and always great to catch up with you. trying to get our hands around this consumer is. want to go over the bank of america numbers and the institute research page -- peace. lower income balance is 67% higher at the end of april. middle income balance is already 58%. higher income households are 45%. obviously the months of -- the

month of april is skewed by tax returns where is the u.s. consumer, that is something we grapple with. jobless claims tell you one thing, and growth tells you another. you hear from disney and the theme park business everything is fine but starbucks has a problem, where are we? david: the consumer is in a period of transition. when we look at the data we have access to one of the things we are seeing among lower income individuals is trading down, so not brought -- not buying the namebrand but people are still very much valuing experiences because experiences were taken away during the pandemic. you are seeing a lot of spending continue at the underlying profile has shifted. what is particularly interesting is that it comes back to the labor market. if you want a job can get a job and if you look at the data from the atlanta fed where a disaster

where wage growth is the most robust it is in the lower income buckets. that cash is coming through the door given the higher marginal propensity to consume they do not savor invested they go out and spend it. >> not only is what they are putting it in changing but how they are doing it. they can get jobs, but at the same time pandemic savings have run out. buy now and pay later, 43% of those who own money to buy now pay money -- pay later said that they were behind. as people shift to that type of credit so they are spending for now but when does the music stop? david: you are beginning to see the stress. it is part of a broader story. we talked about this earlier in terms of small businesses and floating-rate debt. you have seen delinquency rates on credit cards and auto loans rise. one of the things that came out of the great piece was a lot of the folks that are engaged with

those services also tend to have credit cards that are tied together. you are seeing the leverage profile build which is something that we are watching. the conversation is shifting from it looks like the economy might cool off, but how much cooling will be see? the big risk is if we see people get over their skates and consumers lever up and ceo's become confident and go for capital expenditures and vehicle sales and housing, the cyclical parts of the economy. if that heats up we will be nervous. jonathan: this was fantastic to have the hour with you. this week might be a little bit boring, the last 24 hours was. 5.1 8770 on the close on tuesday and yesterday five point7 and we have barely moved. tomorrow morning here is the lineup. kevin mccarthy will speak to jim

bianco. anastasia amoroso. we will do it all from new york again. this bloomberg. ♪

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manus: very good morning and welcome to the show. you get a big penalty in the box. airbnb. the bookings are done. the stock is 8% lower. we had a whip around in the jobs numbers. what it means in the data. good morning. ♪ coming up, initial jobless claims coming in harder than