>> the fed is backed into a corner. probably a while until we see the cuts. >> the risk to the chairman is to cut too early and then reverse course. >> inflation is looking cooler. >> if inflation gets to to point something, that gives the central bank the ability to start cutting rates. >> i think it is a wake-up call that this is actually going to happen. the soft landing can occur. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: bloomberg surveillance

starts right now. live from new york city, good morning, good morning. equity futures slightly negative on the s&p. going into thursday with equities at all-time highs. on the s&p 500, on the nasdaq. looking for the first interest rate cut from the ecb since 2019. lisa: it was kicked off yesterday with the bank of canada meeting. it was the first of the g7 central banks to start cutting rates in what a lot of people believe is the global rate cutting cycle. key questions for the ecb will be do they signal to july and beyond that what kind of tone to they set in terms of the balance of risks and a time where that is the struggle in markets? jonathan: the next stop on the labor market train, jobless claims at 8:30 eastern. job openings have been soft. adp softer than expected. i think this is a stretch.

ism services was decent, employment component weaker. put it altogether and this is the recipe the market wanted to see. lisa: this market is embracing goldilocks and cherry picking the data points that highlight a slowdown in a way that causes a weakening in the labor market as well as some sort of disinflationary trend without the inflationary pressures in the ism services report. you say it is a stretch. people are picking and choosing the aspects they want. how much does that continue and how high is the bar for a downside surprise on fridays jobs report? jonathan: what is not too hot and not too cold on friday? have we figured that out? lisa: no. everyone has a different view. people say 175 is perfect. people say between 125 and 175 is goldilocks. we have bacon a lot of rate cuts in the past four sessions.

we are talking more than 30 basis points for the 10 year, 25 for the two year, you are looking at these shifts. we have bacon a lot of that. it raises the question of how much more goldilocks can we get. jonathan: 4.29% on the u.s. 10 year. i will run with that phrase later. how much more goldilocksy can we get? nvidia up another .9%. this time last year at nvidia was a $900 billion name and we were looking at it that that is a big market cap. microsoft $3.15 trillion, nvidia 3.0 one trillion. apple $3 trillion. amazon $1.89 trillion. those five names bigger than the dax in germany. lisa: the top names account for 20% of the s&p 500 to give you a

sense of that scope. to put into since the scope of how much nvidia has risen since april 19, it has gained $1 trillion. that is adding more than a berkshire hathaway in less than two months. that took six decades to build. this took less than two months to add this kind of valuation. it is a freight train and it is unclear how much far further it has to go. jonathan: unclear if you want to step in the middle of this one. what would you be more nervous about shorting, this one or gamestop? what would make you more uncomfortable? lisa: probably nvidia but at the same time i do not understand gamestop so i do not think i would want to do either. i will take a rain check. jonathan: you can answer that at home. scores more broadly look like this. on the s&p 500 going nowhere. bond yields higher by a single basis point.

lisa went through the numbers. five consecutive days of yields falling, down by more than 30 basis points on a 10 year maturity. lisa and i will go through the numbers. i want to check in on the euro. 1.0 880, a slightly stronger euro. the currency pair firmer .1%. coming up we will catch up with ed mills of raymond james and elaina of bnp paribas are on the state of labor market. nvidia has surged to a $3 billion market cap helping to push stocks to all-time highs. "with a potentially weaker than expected data on u.s. growth risky assets might become more vulnerable to rate indigestion. this would make a dovish fed pivot even more important. " can you tell me your reaction to

the data we have had and the all-time highs we printed on the s&p and the nasdaq just yesterday? christian: it is interesting discussion on the different shades of goldilocks. a lot of the goldilocks we got in the last year and a half was inflation coming down with growth being good. growth being better than what most people expected. now we are having a flavor of bad news is good news where growth starts to be weaker. there is a very thin line we have to walk to understand how much weaker growth can hurt risk sentiment. if you look at the macro surprise relative to our risk indicator, they indicate the market is not fully embracing the weaker growth data and it makes it vulnerable to a disappointment. what we need to understand is weaker job market data -- is it less job openings or job losses? that is weaker labor market data

-- these are the things we're watching out for. jonathan: we can pack all of that into a single word, rebalancing. we have heard from a ton of economists talking about rebalancing. only a few are talking about real deterioration. what we have been asking on this program for a number of weeks, what is the difference between a welcome calling and an unwelcome deterioration. from your standpoint, what is the difference? christian: we are in the rebalancing friendly slow down camp. a big difference is does the consumer remain healthy? the consumer is keeping the economy going. the services pmi was strong. the idea is you can have labor market slowing which gives you the benefits of that which means lower wage growth. at the same time you do not see job losses which means the

consumer remains healthy and keeps consuming. one of the core reasons we have been in a more optimistic camp with regards to the economy and equities where we are still overweight equities is the fact the private sector is very healthy. if you look at the private sector financial balance it is looking pretty early cycle. everything else looks late cycle. profit margins are high, unemployment rates are low. risk premia are low. all of these things look late cycle. the sector balance is healthy and that should mean the rebalancing is possible as a resilience for the consumer. lisa: you are still positive on equities given the extreme valuations you highlighted in the fact profit margin seem to be late cycle. what would make you change that view? christian: the longer your investment horizon gets the more you start to worry about how much equities you want to have in the portfolio. if you are on the five to 10

year horizon you need to have pretty favorable macro conditions in the next few years to have equities deliver as good returns as we are accustomed to in the last 20 or 30 years. we do have ai being a big success driving productivity growth so the longer your investment horizon gets the more you are honoring the balance between fixed income and equities. the equity risk premium is very low. because of the late cycle we always want to stay invested in equities and possibly overweight . the longest possible we have found looking at late cycle episodes, their two optionality's. overshooting or leveraging and restructuring. supporting equity markets late strike will. you might say hasn't that happened already? if you look at our fair value model which incorporates corporate profitability, we find the s&p multiple is marginally above the fair value.

it is from a level point of view comparable to tech bubble levels , but because corporate profitability is so much higher we can justify those multiples as long as that is the case. in the short run, we are comfortable with the valuations where they are. lisa: you talked about different shades of goldilocks. what does goldilocks look like in the data we get on friday? how much are we seeing the shades of goldilocks get darker, get brighter, how do you gauge that in terms of the way you look at asset allocation right now? christian: i think as you were saying we have to understand how much the labor market slows and the good and bad things about the slowing. if we get a payrolls number close to 160 which is where our economists are and average hourly earnings are starting to go down, that could be the

goldilocks print we need in the sense you do not have a material slow down that gets you worried about the consumer weakening because you have a few data prints, we had results that have made the market worried about that. you do want to see the cost benefits. the benefit is less inflation. that is what we are looking for. in terms of market so far we are starting to see a subtle repricing of growth. if you look at cyclicals versus defensive we've seen a major unwind of trades. we have seen a pickup in the mix. it does seem the market is starting to build a bit of growth risk premium. as long as the growth does not significantly disappoint that could allow the market to make progress. you need to have confidence the growth picture remains solid but inflation is coming down.

jonathan: mea culpa i'm from me. i never thought the european central bank would be able to take rates from negative territory without causing a big downturn in the economy, stress and european peripheral markets. we have not seen that stress in a big way. i wonder what your expectations are for the ecb and what it means for european debt markets. christian: obviously the cut today seems to be a done deal. if you look at the data since, the inflation data and the growth data, it has been stronger. you could say president lagarde has a bit of footwork to do today to explain the outlook. certainly likely to be a bit of a hawkish cut. the short story is we are likely to get that cut and it is exactly to your point, it will be a relief.

this is why we have been leaning more bullish on euro risk assets because maybe it is not fully deserved with the macro data but we are going to get a cut and that will help certain parts of the economy that are more levered. your question, why hasn't there been more pain? there has been paid in small it mid-caps but certainly areas that are more levered. an interesting thing about the periphery and the remarkable resilience of periphery spreads is these economies are doing well right now because they are very services driven. there is a lot of travel and leisure. we are coming into the summer season trying to book our holidays. italy, spain, portugal are outperforming materially versus germany and france. jonathan: thank you. i was wrong. i thought you would see that stress on the periphery. lisa: you know who else was wrong? everybody else.

you have a lot of company. that was a common belief. jonathan: the most important thing for the ecb is not the decision, not the news conference, it is the hours after the press conference finishes that you look out for a story that might come from us. our reporters will try to break something. when governing council official start to leak their own personal views about what they thought about the meeting and starts to establish how much daylight there is between the president and the rest of the governing council. lisa: my favorite part of that is trying to imagine. you did this wrong. there is also been the aspect of cleanup acts that we have seen on a couple of occasions. jonathan: there will be a big fight over july and beyond. i wonder what that sounds like in the hours after the press conference in the weeks and days after the news conference. ecb coming up later. here is your bloomberg brief. yahaira: staying on the ecb, it

is widely expected to deliver a 25 basis point cut. bloomberg analyst pulp showing almost unanimous agreement. president christine lagarde saying last month that inflation in the euro zone was under control following a historic spike. lululemon shares are rising in the premarket. the athletic wear company reported first-quarter earnings that beat wall street estimates and raised its profit outlook for the full year. lululemon also boosted its share buyback program by $1 billion. the stock has had a rough year so far. down nearly 40%. former president donald trump is beating biden on tiktok. the former president got 5.9 million likes on his first video posted to the platform. his account now has 5.6 million followers. biden's campaign account which is posted hundreds of videos has just 361,000 followers.

that is your bloomberg brief. jonathan: thank you. bizarre state of affairs. lisa: also at the same point, making cookies, dana white. what are these likes and followers really following for? drama? policy? jonathan: cookies and ufc. i had not thought of that. up next, president biden making a pitch to save democracy. pres. biden: at the end of the date most of us believe america must stand up for what is right. we do not walk away from our allies. we do not let tyrants when. we do not watch gold -- we do not watch global events, we shape them. jonathan: that conversation just around the corner. ♪

(traffic noises) (♪♪) the road to opportunity. is often the road overlooked. (♪♪) at enterprise mobility, we guide companies to unique solutions, from our team of mobility experts. because we believe the more ways we all have to move forward. the further we'll all go.

jonathan: coming into thursday at all-time highs in the s&p 500 . equity futures shaping up as follows. yields up a single basis point. in foreign-exchange, euro-dollar 1.0 881. president biden making a pitch to save democracy. pres. biden: at the end of the day, most of us believe america must stand up for what is right. we do not walk away from our allies, we stand with them. we do not let tyrants win, we oppose them. we do not watch global events, we shape them. jonathan: president biden is in france to commemorate the 80th anniversary of d-day. he will then meet with president zelenskyy, the trip highlighting the importance of foreign policy ahead of this month's debate with donald trump's.

ed mills writing "in the upcoming election defined by geopolitical issues biden is likely to lose. we expect the biden campaign to work to neutralize the multiple geopolitical hotspots and shift focus to trump, raising questions on his leadership during crisis." let's start with foreign policy. where does that rank in terms of voter concerns? ed: i think it is one of the biggest drags on joe biden's reelection. if you look at right track or wrong track, when you go to see where it has shifted from biden having a net favorable rating to a net unfavorable rating, it was back in the awful withdrawal from afghanistan in august 2021. he has not recovered since. when you look at trump voters they are saying there was not the same level geopolitical issues under trump. fear or not, that is driving support for trump and it is

pulling down the polling numbers for biden, especially among key parts of biden's base, younger voters. jonathan: you think it is execution or ideology? biden is proud of it and talks about allies and multilateralism. what you hear from the former president is isolationism and that is going through parts of congress. which is it? ed: america first is something that is really popular with trump space. it is part of populism politics. that is a part of the ability to appeal to a broader swath of voters than republicans have traditionally done. there is a bifurcation when you look at the senate which is a more senior -- fully supportive of ukraine and overwhelming in their support for the last eight package. it was the house of representatives, the newer members to d.c., that are more aligned with president trump, more aligned with the maga event

and those were the ones who do not want to see funding that went to ukraine and got past a couple months ago. lisa: tomorrow president biden will be in france, he will be there ahead of the g7. he will deliver a speech on the anniversary of d-day. i am curious about this speech on democracy and freedom. it will be music to the ears of a lot of european leaders. how will it be received in the united states? ed: it is important to remind the world of america's power, to remind the world of the accomplishment that occurred 80 years ago. i'm also looking to the fact that we will celebrate the 75th anniversary of the nato alliance. i still think american leadership is important. there is also, it is the economy, it is inflation, it is the day to day harder existence as voters that look at this more as a nice to have the necessary because we have not had that

same level of threat we felt in the immediate aftermath of world war ii. one of the questions i get a lot at raymond james's we are still breading the 75th anniversary of nato. are we going to celebrate in 80th, especially if there is a second trump presidency? what i tell them is something that was under the radar in the defense authorization bill is congress tried to future proof this. congress is concerned about the nato alliance and stripped the president of the power of unilaterally withdrawing from nato. congress cares about this. lisa: though not necessarily be a galvanizing impetus from the idea of talking about democracy and freedom. this is a divergence from the last trump biden mixup. you had the threat of losing democracy galvanizing voters. will it have the same appeal this time around? ed: that will probably depend on how much the biden campaign

tries to execute on the strategy and how much trump talks about it. to the extent he is tweeting out and raising great awareness with january 6, that was something that helped up democrats in the lead up to the midterm elections. the biden focus on democracy do not rate high with voters, but on the margin, this election will be decided by very small margins, biden will try to shift the attention to trump, shift the attention to what we are talking about as it relates to temperament during crisis, the leadership of the united states and same for next four years who do you trust more? you might not have liked the geopolitical risks over the last several years, but going into the future, the next crisis, who you want in the oval office? biden will make the case that it should be him. jonathan: can we tease out your thoughts on nato a little more? we have had the dutch prime

minister and he has made the point that the former president was right. you think he undermined the alliance are reinforced it? ed: donald trump's number one issue with the alliance was the members of the alliance not paying their fair share. over the course of the last six plus years you have seen a dramatic increase in the other members besides the united states increasing their dollar amounts. one of the questions going forward is how much does a threat to the alliance come down to a transactional discussion? if you get up to that 2%, it may be look at the 2% that was not spent over the last several decades, that shift in that dollar burden goes back to the conversation of a lot of americans support nato. a lot of americans want to be the world superpower. i do not think they want to be the only ones paying for it. jonathan: ed mills of raymond james.

very difficult waters for the president to navigate. lisa: it is hard to know whether it was policy or just the way he carries himself. that is the uncertainty i heard from ed, that it goes back to a policy shift of withdrawing troops from afghanistan. then there is a question of an older person who is not projecting strength. jonathan: the former president wanted to -- it is the execution. the former president wanted to do the same thing. lisa: and if you are an isolationist should it you want -- shouldn't you welcome departure from that policy? you're right, it is about how it is done. jonathan: coming up, we'll catch up with orlando bravo. look out for that in just a moment. this is bloomberg. ♪

♪♪ sandals jamaica sale is now on! with rates from $199 per person per night. visit sandals.com or call 1-800-sandals

her uncle's unhappy. visit sandals.com i'm sensing an underlying issue. it's t-mobile. it started when we tried to get him under a new plan. but they they unexpectedly unraveled their “price lock” guarantee. which has made him, a bit... unruly. you called yourself the “un-carrier”. you sing about “price lock” on those commercials. “the price lock, the price lock...” so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. people couldn't okaysee my potential. for. so i had to show them.

i've run this place for 20 years, but i still need to prove that i'm more than what you see on paper. today i'm the ceo of my own company. it's the way my mind works. i have a very mechanical brain. why are we not rethinking this? i am more... i'm more than who i am on paper.

jonathan: equity futures unchanged. fireworks yesterday, record highs in the s&p. the team at bloomberg still counting. 25 all-time highs at the close. can we make it 26? turn the page and get to the bond market. bramo still counting. down by more than 30 basis points on the tenure. quite a run in the bond market. lisa: there a lot of rate cuts suddenly being priced in. when you go back to how much more goldilocks can it get, how can the payrolls report confirm

a softening in the labor market that that is not over soft and can confirm this lovely decline in yields comes with the rally you just mentioned. jonathan: will try to work out what just right is on friday. let's finish on the euro. euro-dollar 1.0 876. a little bit of euro strength into the ecb decision. a busy week of data continues. ism services expanding the most in nine months after downside surprises to isa manufacturing. the median estimate expecting today's jobless claims to come in at 220,000. the estimate for payrolls on friday is still 185,000. we mentioned this briefly 30 minutes ago. it felt like a stretch yesterday. if you had told me the headline ism would come in the way it had done i would not expect equities to go up towards all-time highs. the focus seems to be on the employment component of the ism services read that came in soft. lisa: when you say what is the

recipe for goldilocks, this is a stirfry, it is not a cake. you can choose the things you want. it just comes out and it tastes good versus actually needing the correct amount of baking soda and salt to offset the flower. that is where we are at right now. people are choosing the ingredients they want and what you're getting is the 25th record high on also getting a rally in bonds. jonathan: it is a low end stirfry because the market is easy to freeze. lisa: a stirfry being fed algorithms. jonathan: central bank expected to cut interest rates for the first time since 2019. president lagarde giving a news conference 30 minutes afterward. this is not about june, which sounds strange, but for most people they assume the rate cut is done and you will see that 8:15. this is what happens beyond.

july, september, and further out. lisa: you mentioned the discussions, the leak stories from ecb who do not feel like there view is reflected. people are uncomfortable with pre-committing to a rate cut. how much do you get pushback into data dependency and we will not give you any information. is that going to count as hawkish to give a nod to those people saying it was a mistake. we have to be just as opaque as the federal reserve? jonathan: lagarde will be interesting. president joe biden is in france marking the 80th in a grocery of the d-day landings at normandy. he is then expected to meet with ukraine president volodymyr zelenskyy tomorrow and he will deliver a speech on democracy and freedom. we just caught up with ed mills of raymond james. it feels like the president is caught between a rock and a hard place. it will talk about the importance of multilateralism,

alliances, and a time when what plays well domestically in america, increasingly you get a sense is isolationism at the moment. lisa: who is his audience? you will get a complete round of applause from european leaders who are very worried about former president trump. we heard about that at davos. at home there is a question of whether is isolationism or people do not care and/or numb by the inundation of it will wreck your world and all these threats. there are people tooting that out and are looking at empirical experience. there is a lack of trust. you can feel that on the polls and see that in terms of consumer sentiment. jonathan: the top issues, the economy, immigration, repeatedly. the races on to invest in artificial intelligence. we saw nvidia make a big move.

names like that stock absolutely soaring. asset managers are looking for other ways to get involved. blackstone ceo telling a german newspaper the build out of ai will need $1.5 trillion over the next five years. dani burger is with orlando bravo in berlin. good morning to you. dani: good morning, thank you so much. that is part of the mood at super return. what does the industry do with ai? we have the perfect man, orlando bravo. if you look these public markets , there used to be a friendly over all of ai. if you mention ai your stock goes to the moon. lately something has changed, nvidia is the winner and we are more skeptical of other companies ability to monetize ai. did we get over our skis and the promise of ai? orlando: i can give you the enterprise view of ai, the business view, not the consumer

view. if you look at the software landscape, some of those software companies have been providing ai solutions to their customers for decades. some of those companies are pure ai companies. let's differentiate that. when you talk about generative ai, a new form of technology in ai, this is what is going on today. many software companies have produced and delivered and introduced gen ai solutions to their customers but they are not charging for them. dani: is that a problem? we saw that in salesforce. two companies need to get better at finding a way to monetize this? orlando: yes they do. at the same time the software business has to continuously add value to your product, not only to fend off competition but to upsell your customers.

this is a good element overall. today we have $25 billion of revenue coming from our software companies and 75% of those companies have released solutions to those customers. dani: what you are not talking about is not extra profit because they are not charging and that promise of outsized profit is misguided. it sounds like you are saying it a continuation of value offering? orlando: you should be able to monetize it later. if you run an efficient operation and take all of the engineering talents and your product management division, you have to move resources around. dani: how patient should we be for that? what should be the timeline we give companies to figure this out? orlando: we as a big investor in software, we look at is the company achieving the level of earnings was set up to receive -- to achieve? if we are we know the company can move around resources to fit what they need. dani: in software in general, i

mentioned salesforce having a tough time. not just issues with ai but may be sales were not as good. in the private markets you see vista taking a huge write-down on their online learning platforms. it is pockets of software stress. what is going on? this happened in q2 of 2022. that is when we first saw a big drop in new business generation by these companies and a drop in bookings. always as an owner you think what can you do about it. what we do about it is we protect the p&l. we have to cut costs to protect the level of earnings we set out to achieve. those pockets of weakness are also related to the business model of these companies. you look at genai and the technological shift in the software world but also in business model transition. people do not talk enough about that.

companies that charged by the user will be more challenged than companies that use other forms of pricing. jonathan: are you still in -- dani: are you still in cost-cutting mode? orlando: we are protecting the p&l. it is better to be early so you do not chase earnings. that way if the environment improves you can invest in that the environment stays your saved you can run your business profitably. dani: i talk to folks about ai they say it is not as big of a topic this year. is this industry behind and having an ai game plan? you think these private equity companies, do they need to a plan for all of them? orlando: you need to have an ai game plan. in the air that got started in 2010, we used to say every company needs to think about becoming a software company or the digital side of their business.

now we need to say every company needs to become an intelligent software company. if you look at the buyers of our companies, many of them are industry buyers that are looking to transform their companies through software. dani: i don't need my refrigerator to have ai, do i? it is in some of this we are selling a dream that is not there? orlando: sometimes you are. that is why there is so much value in the software incumbents. there are two reasons for that. the software incumbents are working with customers, thousands of them, sometimes the entire fortune 500 customers on so -- on solving an important business problem. it is cybersecurity on a vertical. those are the companies in a position as a trusted advisor to develop genai solutions that have value. secondly, something became very valuable in software enterprise and that is data.

proprietary data. many of the companies you mentioned are sitting on proprietary data they can use from their customers that can be used to develop genai solutions. dani: that huge treasure trove of data come it is no secret it is something regulators have looked at. an investigation is opening up now. we heard this today with microsoft and openai. there is been a lot of concern about antitrust. how big of a headwind is it to you? have you had to approach investing differently given what is happening in d.c.? orlando: very differently. we take a practical view to our genai trust in the regulatory environment. it is a fact-based approach. if you believe you can have a lot of value selling the company at the right price and you are a buyer and you believe you can add a lot of value by buying the company, you have to appreciate there is a public policy

underpinning environment towards this and you have to live with that. dani: are there deals you have not done because of this? orlando: most of the time know because if your facts are right you have to go forward and be willing to be creative, collaborative with regulators, and the regulators are smart. it may take nine months to close a deal instead of three months. it may take a year to close a deal. for something that adds value you have to look forward to that. dani: you think this regulatory environment is a problem that it has gotten this much more scrutiny? orlando: i don't think the regulatory environment is a problem. software is a highly competitive industry and the regulators are experiencing deals. the regulators understand the industry very well. in our field of enterprise software it is not a problem. the problem is when buyers and sellers want to shy away from doing the work it takes to

explain it so they can move forward with their transactions. we know of a number of large strategic buyers that from a management perspective do not want to deal with that environment. dani: you want to give us an example? orlando: orlando: you know i cannot because many of those are partners with our companies. to adapt to these processes come is important buyers and sellers do that. dani: thank you so much for doing that. that is orlando bravo talking about this regulatory environment. it has changed things but he says those struggling are not doing the work. jonathan: fantastic work at this conference over last couple of days. appreciate your time. dani burger with orlando bravo. let's give you an update on stories elsewhere with your bloomberg brief. yahaira: the ai rally has gone global. dutch chipmaker asml surpassing

luxury giants lvmh to become europe's second-biggest listed company. shares jumped 8% on wednesday after asml confirmed deliveries of its high-powered chipmaking machines to its largest client. each machine cost 350 million euros apiece or just over $380 million. as for lvmh, shares have fallen over the past month on concerns of a slowdown in luxury sales. u.s. regulators are investigating whether a deal microsoft struck with ai startup inflection may have been structured to avoid scrutiny. that is according to the wall street journal. in march microsoft agreed to pay the start of $650 million to license its ai software. this coming after the u.s. company moved to higher much of inflection staff. the wall street journal saying the ftc is now seeking information about how the tech giant negotiated that

partnership. new york governor kathy hochul pausing the states first in the nation can jesting pricing plan indefinitely. it is a stunning reversal for kathy hochul who just weeks ago tout of the plan as a way to reduce traffic. the program is set to roll out later this month with almost all of tool systems installed. the program was expected to raise $1 billion annually to help modernize new york city mass transit. jonathan: more on that story at about 7:30. bramo's thoughts just around the corner. coming up, the labor market softening. >> what we have to keep in mind is there are data that are suggesting things are looking softer from a labor market perspective. jonathan: the words you will hear repeatedly -- "rebalancing" or "normalization."

we will talk about what those words mean. live from new york, this is bloomberg. ♪ [smoke alarm] recipes written by hand and lost to time... can now be analyzed and restored using the power of dell ai. preserving memories and helping to write new ones. ♪

(♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses

and more in prospectus at invesco.com jonathan: we have had a ton of economic data already this week. jobless claims later this morning. equity futures unchanged on the s&p. under surveillance, the labor market softening. >> think about where we are right now, what we have to keep in mind is there are at assortment of data suggesting things are looking softer from a labor market perspective. i will hasten to add i think on friday we could see 200,000 jobs being created. this is where the fed comes into play. jonathan: more labor data on deck with jobless claims at 8:30 as we push ahead to tomorrow's jobs report. the median estimate calling for payrolls to rise 185,000.

the estimates on wall street look like this. the team at bnp paribas expecting a print of 200,000. she is with us around the table. the word we afford repeatedly, rebalance -- the word we have heard repeatedly, rebalance. >> that is the word of the day. we were normalizing from a big swing between march and april that could have been easter related. we are also normalizing from the pace that probably overstated what the true state of the labor market is. i think we are going to a more normal pace of job creation. annmarie: what gives you -- jonathan: what gives you confidence we stabilize? yelena: i wish confidence was the other word of the day. we will hear from the ecb and the fed later. they are talking about confidence. that is what they want to do. there is no confidence.

we are getting into a very dangerous area, and inflection point, where we could see more slowdown in the labor market. increase in unemployment. we are below 5% on the opening rate, the vacancy rate. the jolts data we received earlier tells us it is getting to a very dangerous point at which we may see a little bit of a worsening in the labor market, not just rebalancing. lisa: let's quantify the tipping point you identify in some of your research as being right now if you start to see a tick up not from the expected 3.9% of unemployment but 4.1% for this month and next month. you could see a shift in terms of your view of the economy. could you tease that out more? yelena: we are expecting 3.9% in the jobs report. if it goes up more rapidly like 4.1% in may and june, that could

trigger -- we know that is not a good thing. it is all about the speed of the increase in the unemployment rate rather than the actual level. if it rises very fast, that could trigger the same rule where you have your current decreases in the unemployment rate relative to the 12 month minimum. lisa: we were talking yesterday and one thing we were talking about is due feeling more clarity about what will happen in the second half of the year that in january? yelena: i feel more clarity about what will happen in 2024 rather than 2025. i think what gives me more confidence about the state of the labor market in the state of the economy overall is the consumer. consumers are doing fine. if you look at numbers on good spending, that is a little bit

weaker. at the same time you still have the economy where people would want to spend on services that should support the leisure and hospitality sector. people want to travel and go out. lisa: you talk about ism services, this idea that you can tell there is been working. the idea you can pick and choose the aspects of all of these data points, throw them in a pot and get the goldilocks you want. how clear are some of these indicators given the fact they conflict with each other and have conflict at the same time? yelena: they conflict with the actual data as well. it makes our life very easy. i think there is some signal in the survey data that people are feeling the fatigue from high inflation. they still think inflation is going up, not down. even though the actual data is telling us otherwise. i think we will see a slow down in economic growth.

we are around 2% on gdp growth. i think we will see more of a significant slowdown in consumer spending and the second half of the year because delinquencies are going up and there is still inflation there. i think at the same time we will not see something really bad because balance sheets are still great. consumers are still a good position. nobody is paying interest rates that we see they are paying much lower interest on their debt payments. i think we are in that soft landing scenario right now. jonathan: we know what to expect from the ecb, rate cut and a fight about what to do beyond that. what are you expecting from chairman powell. you're talking about a low conviction outlook beyond 2024. yelena: our baseline is for four

cuts next year but that could change easily to hikes if policies that have been talked about are implemented. jonathan: election dependent outlook for 2025? yelena: totally. we see one rate cut in december because of the election. the economy may be ready for a cut in september. if you're sitting at the table and the staff is presenting different outlooks for 2025, which you choose? you're better off waiting until december. for 2025, if a lot of these policies on immigration, tariffs and things like that are implicated -- are implemented, it is very inflationary. our team did analysis and we see almost a five percentage point increase in inflation if the 10% tariff -- obviously it is an extreme scenario and probably we will

get the full extent of what the policies are. it is a very inflationary scenario. not so much an impact on growth. if that happens the fed would have to react. jonathan: you think november could be the difference between cuts and hikes? yelena: if we are lucky and we get the results in november. that could be a wait based on the recent history. seriously speaking we should get more clarity by the december meeting and that will be interesting. i think we will get a hint of what the fed is thinking at jackson hole. that will be a very interesting event as well. we will get a little bit more clarity on inflation with a few more readings there. the labor market is at an inflection point. we will see which way it goes. i think it will not be a policy

move or policy action, but at least they will tell us what to think. jonathan: thank you, appreciate it. echoing adam posen of the peterson institute was on this program a few weeks back. lisa: and we have seen other estimates from deutsche bank saying depending on who becomes president you will see -- i will channel annmarie and she would say it is all based on congress and the mix. when you start looking at tea leaves. the atlanta fed gdp now is 4% two weeks ago and out is 1.8%. jonathan: a big change. coming up next, jay pelosky of tbw. francis: blanche and ian lyngen of pima. all of that is come -- of

bmo. all of that coming up in the second hour, next. ♪ and using workday to put finance and h.r. on one platform. tim, you are a rock star. using responsible ai doesn't make you a rock star. it kinda does. you are not rock stars. (clears throat) okay. most of you are not rock stars. oooh. data driven insights, and large language models. oh, that's so rock roll. it is, right. he gets it. yeah.

hi, i'm janice, and i lost 172 pounds on golo. it is, right. when i was a teenager i had some severe trauma in my life and i turned to food for comfort. i had a doctor tell me that if i didn't change my life, i wasn't gonna live much longer. once i saw golo was working, i felt this rush, i just had to keep going. a lot of people think no pain no gain, but with golo it is so easy. my life is so much different now that i've lost all this weight. when i look in the mirror i don't even recognize myself.

>> job -- job openings are coming back towards normal. >> the economy is normal leasing -- normalizing and has decelerated. >> you get these bifurcations. it is a tough environment. >> i think we are in a much more normal environment right now. >> it is not higher for longer, it's normal for longer.

>> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. lisa: we have -- >> we have heard that line repeatedly. the second hour of bloomberg surveillance against right now. that phrase, normalizing. we are rebalancing. when you look at a soft adp, the employment component, a bit softer too. that is not deterioration, that is rebalancing, normalization. lisa: we don't really care what it is, it looks like it is pretty good and will keep stocks and bonds going up so let's go. that seems to be what the markets have been looking for for the entire year and it seems to be, at least aced on their interpretation, what they are getting. jonathan: let's go to the calendar and check in on things. jobless claims at 8:30 eastern time. before that, we get the ecb rate

decision. sneak peek at the data in our survey, still, 185 is the estimate. goldilocks, what is goldilocks tomorrow morning? >> we heard 160 thousand from earlier this morning. christian miller said that. we heard the idea of 125-1 75 as being goldilocks for other houses. we have to look at the internals because that was what allowed bonds and stocks to rally yesterday. we are going to pick out one data point underneath the hood of the headline number after this. this is my prediction. this is the most important thing, not the headline. that's what i will guess will happen. jonathan: do you think we confirmed the bias of this market? lisa: we have. the question now is how much have we baked in the downside surprise? have we baked in a whisper number into yields going as low as they have based on rate expectations coming up more significantly over the past couple of trading sessions?

jonathan: let's get the market board up and check on the scores. let's talk about a 10 year maturity. lisa has been covering this. five consecutive days of yields falling and moving more than 30 basis points. on the two-year, the front end of the curve, we have had a double digit basis point move as well. over 20 basis points in the previous five days. lisa: the commentary has shifted. peter about a note saying he expects a rate cut in july, next month. this is the gravitational force after apollo got the main stage, saying there would be no rate cuts. it gives you a sense of why you are seeing this reaction in the bond market. there has been a reset of the framework we had a week ago. jonathan: what was interesting about the chair call is he thinks chairman powell puts july firmly on the table. that's what he's looking for. that's interesting to me because

he may single just one. -- signal just one. lisa: people are saying the fed is apolitical, hogwash. they will want to make it look like it is not clinical because that will affect their independence and ability to deal further. -- political because that will affect their independence and ability to deal further. they are human, they are human beings that have eyes and feel and see and these ramifications go to the hearts of credibility of the institution, which is important. jonathan: coming up this hour, quite an hour. jennifer -- jay pelosky. francisco blanche and ian lyngen . we begin with our top story, all-time highs for the 25th time this year. nvidia surged to a $3 trillion

market. jay pelosky wrote this. inflation is yesterday's problem. we focus forward, onward on a return to economic stability with a clear early cycle outcome as global manufacturing picks up. a good friend of mine, this program and of ours, jay pelosky joins us. that early cycle call, let's start with that. what tells you we are early cycle and not late cycle? jay: semi conductors are considered an early cycle indicator. you go to exports in south korea and taiwan and they are also considered to be early cycle indicators. they are up significantly. as an aside, south korea's exports of semi conductors are around 55% year on year. then, you go to the two regions of the world which have been problematic. europe and china and both of

them are clearly accelerating and picking up people who are very concerned about european recession. that risk has been truncated. i would note that european stocks hit an all-time high. not just the u.s., and then you look at china. in the pmi numbers that just came out earlier this week. significantly stronger than what we are seeing in the united states. so, we believe we are at the beginnings of an inventory restocking cycle in the united states. a great chart was put out that showed the inventory supply level in the united states is at the lowest point it has been in the last 40 years. one of the four lowest points in the last 40 years. suggesting we are about to see a pickup in a restocking. and so, to us, we have what we

call a return to stability. everyone else sees it as normalization. we talk about a return to stability and we talked about it in november. it's our third surprise for 2024. the fourth surprise was early cycle. it too is playing out. jonathan: do you think the bond market move speaks to that? this move lower of more than 20 basis points and 30 basis points plus on the 10 year? jay: i think the bond market has not been a good tell over the past couple of years, right? it is gyrating and trying to figure out where it wants to sit. i think what is important is in the marketplace, a lot of technicians pointed out a four point 35% level on the 10 year as an important level. and if grades were to rate below that, that would signal an opportunity to get into beta.

and that is what we have seen over the last couple of days. i think that explains yesterday's action. and i think it suggests that the market feels very comfortable here because it knows it now has the fed in its back pocket, so to speak. you have a situation where earnings growth is very solid and we have discussed this many times. earnings are what fuel stock prices. earnings outlook is very robust. not just in the u.s., but globally. and so you have robust earnings outlook and you have a fed and an ecb that are going to cut rates. that is a pretty good environment for growth and a pretty good environment for risk assets. lisa: prof ability is looking great if you look at one name, nvidia. since the middle of april, less

than two months, that's more than the entirety of berkshire hathaway. how much do you see this as a one-stop train that is not percolating out into the others versus how do you extrapolate out and say this will benefit everybody, even though we are not seeing that in the numbers? jay: that's a great question. we are big believers in the ai age. we believe we are in the first inning. we want to be in the digital and physical realms, the semi conductors and the digital space. and uranium miners, silver minors, etc., in the physical space to help ai factories of the future. also known as data centers. that is a massive, massive theme of ours that we are weighing both in the digital space and in the physical space. regarding earnings, a point that i would make is that when we look out over the next couple of

years, we are not all that concerned about what already happened. we are much more focused on what's likely to happen. and what's likely to happen, based on consensus, is that we will have double-digit earnings growth, not only in 2024, but also 2025 and also 2026. and not just in the u.s. but also in europe and china for 2024 and 2025. this is a global earnings acceleration. lisa: it's a dream to get you, dan ives and i into a room together. i don't think it could contain the bullishness. it would destroy the walls with glory. there is a question about how much valuations affect where you are going and where you are waiting things. you are saying around the world, it will be this incredible boom of productivity and joy.

are you still heavily going into china? jay: we are big believers in the to text active i've thesis. china is falling off. the wall street journal today huge article on tuesday explaining this exact point. we are very bullish on china tech because china tech is a huge market. they understand. they have to participate in ai. everyone must have an ai capability. and remember, in our thesis of regional integration in asia, europe and the americas, these semi's with ev plants and battery plans are fueling public and private sector investment around the world. we are writing our monthly right now and our focus is on who will win the second half of the 20 20's. so, we are looking from our global macro blue sky outlook,

which we have already elaborated on. 2023-2027. we are extending that to who will win the second half of the decade, 2025-2030? it will be the countries and the regions which integrate public and private test. it's fascinating, your prior guests, talking about the implications of the november election. it would be amazing, frankly, for the u.s. to take the gift force -- i'm not sure what the phrase is but to really miss the opportunity that is being presented by what i think is --, which is a democrat sweep. they have demonstrated that they get the point that we have to move fast and we have to move big. china gets the point. it's moving fast and big. europe, we will see if they get the point.

european parliamentary elections, five your budget up ahead. mario draghi reporting on what's needed. it is a really fascinating time to see who is going to best integrate public and private and best integrate their regions to compete in a world that is moving very, very quickly with very very high stakes. jonathan: i don't remember the phrase but i understood the sentiment. super constructive. the audience wanted to hear from him. there he is. lisa: i'm getting a lot of messages about it. some people disagree and would point to certain things. i just think it's refreshing. i think we needed it yesterday. he got all of his friends on board yesterday. jonathan: record highs for the 25th time this year. still counting here at bloomberg. i love that. the fifth time. it could between he six later. -- b 26 later.

here's your bloomberg break. >> it will be the longest visit to a single country of his presidency. biden is set to meet with president emmanuel macron and vlad amir zelinski on thursday. he will look to -- volodymyr zelenskyy on thursday. he will look to link this to russia's invasion. elon musk is planning to construct a facility in memphis to house a supercomputer. it's part of the company's plans to bolster its ai capabilities as it works to build and offer chat box and other artificial intelligence tools. many details are still under wraps but local officials are touting it as the largest multibillion-dollar investment in memphis history. and after years of setbacks and delays, the boeing starliner is

found for an international space station. the space taxi took off from cape canaveral with two veteran nasa astronauts on board and is expected to dock at the iss just afternoon eastern today. the launch went off without a hitch and some much-needed good news for boeing which has seen shares fall over 25% here today. nasa has a new option for delivering cruise from the space station, more than a decade after the space shuttle was retired. that is your bloomberg brief. jonathan: an update from spacex, i know a lot of you are key -- keen to the launch of the starship rocket. that is h: 50 eastern time. lisa: i'm excited for this one. it is focused on reusable parts and has the most powerful engine which could further the race to morris. -- mars.

jonathan: the webcast will go live 30 minutes ahead of lift off for those of you who want to truly engage in that later this morning. up next, nvidia. >> they are where apple was when they launched the iphone. nvidia is the new gold, the new oil when it comes to tech. lisa: i know his background would have been a pattern. jonathan: in a different color. i'm with you. that conversation is up next. from new york, this is bloomberg. ♪ for everything we had. they taught me the value of a dollar, and how to use it wisely. those lessons are forever, and today i share them with all our employees. it's why i team up with vanguard

for our company's 401k plan. because everyone deserves to have someone look out for their financial well being. helping employees be well on their way to their financial goals. that's the value of ownership. get your business online in minutes with the power of ai... ...with a perfect name, a great logo, and a beautiful website. just start with a domain, a few clicks, and you're in business. make now the future at godaddy.com/airo

jonathan: one hour, 12 minutes away from jobless claims in america.

payrolls just around the corner and equity futures are unchanged for the s&p. yields are higher on the 10 year. all-time highs on the s&p 500. under surveillance this morning is jen sanity from nvidia. >> they are where apple was when they launched the iphone. it's not someone you want to bet against -- jensen is not someone you want to bet against. now, the baton is being handed to software. nvidia chips are the new gold, the new oil when it comes to tech. jonathan: nvidia shares rose to a record high. the company becoming the first chipmaker to hit $3 trillion in market value, causing apple to become the world's second most valued firm.

mandeep is with us. how relevant is that milestone? >> it's huge in terms of what a chipmaker can accomplish. intel was the best prime. nvidia clearly has taken the charge. they are executing to perfection. it is hard to dispute when you are growing at that scale. expected to do $200 billion in the next three years. when you compare their cash flows to apple, which is also a $3 trillion company, they can have the same cash flow, one hundred billion dollars in free cash flow, similar to apple, whose revenue is $400 billion. that just goes to show, they are doing it at high margins, which is unheard of. jonathan: it's notable that we have achieved this milestone three earnings and not through multiples. if we said this 12 months ago, a lot of people would not of made that call. you've been talking about this

for a while. these things come in cycles. when it comes to this company, we don't seem to be talking about that. how long is this runway? how long do you think it is? >> that's fair. there is a question mark when you compare the microsoft versus nvidia which will do $100 billion in data center revenue. everyone agrees there is no guarantee that it will be a recurring revenue because, in the end, it comes down to cap extend. 40% of nvidia's 100 billion dollars in revenue comes from five players. are they going to keep growing their capex 30% to 40%, which is baked into their estimates? time will tell. we have not seen these sort of steady capex increases, ever. you have 2-3 years of high capex and then there is a phase. i think that's going to play out in this cycle too.

you want to see the roi on that. some are seeing it in terms of intangible ai revenue. but the other players, we saw sales and software companies miss. even though they are investing in generative ai, they are not seeing the revenue yet. and companies are substituting their software for investing in invidious ai infrastructure. there is a lot of substitution going on and, at some point, i think there will be a digestion phase. lisa: there's a lot of interesting points to unpack. you talk about if you are not seeing other companies in the chip sector benefiting to -- tremendously from artificial investments being made, that will reflect badly on nvidia and reduce demand. do you think this is a reversal of what we see in the market, which is nvidia's gains will percolate out to the rest of the world? you are saying it could be the opposite and the rest of the

world is not feeling and that will eventually come back to nvidia. >> there is a lot of disruption that's going on. i.t. spending does not grow 20% to 25% every year. the cpu through gpu substitution is -- has already happened. things are good and substituted on the softer side. everyone is thinking do i really need to buy that million dollar software contract and then i can do things differently using generate of ai? there is a pause in terms of how generate of ai will interrupt -- disrupt existing workflows. it's hard to imagine them one from $100 million in eta center revenue to $200 million in three years. lisa: i guess another way to frame this is how much growth, what's the growth path that is being baked into valuation, as much as it has risen over the past year? >> 100 billion dollars in data

center revenue is a given. can they doublet over the next three years and will it be at a steady 25 percent clip? my prognosis is probably not because that's not how companies spend their budgets and right now, it is a case of lifting nvidia. -- hyper scalars lifting nvidia and nvidia lifting hyper scalars. it's great the hyper scalars are spending their capex in tandem. that is driving the big lift in nvidia every quarter. they can't keep going. it's a $5 billion contributive. the risks are if china revenue holds back more than consensus expects or if one of the hyper scalars skills -- scales

back. how do you feed it into the ai systems? you are not going to see a return in the next 12 months. it takes a while to get the data you need to feed into ai. sovereign is a catalyst but i can't see everything panning out perfectly in the next year. jonathan: can we finish on this? acquisitions, something i know you are thinking about. ability, willingness, acceptance. they have the ability and the cash, tell me if they have the willingness and acceptance. >> absolutely. look at the acquisition they did in 2018. that's one of the reasons they keep raising their es's. they are selling you a system. you don't have to do anything, plug it in and you can start training your models. rumor the -- remember the acquisition that didn't go through? they can buy anything. -- that is the only way you keep

expanding your product and that is paramount for nvidia. jonathan: will it get approved? lisa: i mean, right now, we had the top regulator in the u.s. yesterday, talking to the financial times about how they want to go after a whole host of different big tech companies. hint, hint, microsoft, for recent non-acquisitions that looked like acquisitions. it seems like the screws are tightening just a touch. jonathan: thank you, sir. appreciate it. coming up, we will catch up with francisco blanch on opec-plus's latest decision. from new york, this is bloomberg. ♪

her uncle's unhappy. i'm sensing an underlying issue.

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

jonathan: we have 20 minutes away from an ecb rate decision. looking at little something like this. adding some weight to the record-breaking rally from yesterday. down about one third of 1%. having quite the rally over the last week or so. yields are a lot lower over the last week. lisa: it is basically the retracement of some of the rises

we had seen in the past week. it shows how much people i cleaning to each data point. they're looking for confirmation in all the data points. jonathan: we will ignore the headlines. success way the weakness is. we have come back all the way. going back to that ecb rate later. going into this one, under surveillance this morning. counting down to that decision about 40 minutes away. clues on the path forward for the rest of the year. i want to understand what kind of fight took place, what kind of verbal battle took place

going into that decision about july and beyond. lisa: and the singling about whether they wanted to give a hint on whether they wanted to be as ambiguous as possible. i agree with you. i think it will be interesting. people seem to be shifting on the margins on how much they can cut and how much the u.s. is behind. i thought this was fascinating. he expects weakening. he sees the fed. try to understand what the ecb is doing and take that in there. jonathan: you would hear her sing -- central bankers talking about the limit of divergence. they did address this issue. you can go without the fed, but

there are limits to the divergence. lisa: i was not being snarky. i really enjoyed bank of canada. there were other people who wrote in as well. but to me, i feel like there really is a signal here. the balance of risk. jonathan: shares of nvidia rising again. apple rejoining that club. past 3 trillion for the first time since january. the market cap of the top five is absolutely ludicrous. nvidia three, apple three, amazon 1.9.

i thought my stat sounded crazy. yours is even crazier lisa:. it is insane. it is just lunacy. we are talking about adding another big tech company. i think him saying some of the most profound things that made me think because of this virtuous cycle as well as google, it just feels like they are all benefiting each other and there is a cycle that is going. you just wonder what makes people rethink that and how vulnerable index levels are given how heavily they are weighted. jonathan: you do not even need a catalyst. new york governor pumping the brakes on a plan to charge motorists $15 to drive into the

busiest parts of manhattan. citing inflation and financial pressures for the surprise u-turn. it was going to cost you $15. it came down to two things. it is about crime. it is about people who do not want to use public transport. lisa: why isn't there some sort of deal for people who live in manhattan and chempark or avoid some of these fees? there is another aspect and that is politics and the election and how much this is a concern of the democrats losing on the heels of this. why would it come now? you think inflation and cost-of-living have surged that much that suddenly it is at a crisis? jonathan: when the president changes policy on the immigration come have a look

around. the new york governor is in the room with him. it is becoming a big issue. i think that they understand that for democrats, there is a lot and play for november. i'm talking about what is happening on the ground in politics. these are big changes. lisa: that is why you will see shifts in policies. a lot of different aspects suddenly not becoming as popular. jonathan: let's talk about crude extending its -- extending. opec-plus defending the move even as some question whether the market can absorb the extra supply. it has been too long. what did you make of that

decision over the weekend? >> it had a bit of a bearish undertone. the devil is in the details. they planned to increase it, assuming that the market could take it. they are expecting demand growth this year, which is about 2.5%. everyone else will have that rate. we will see how it plays out. if the number is correct -- i was in vienna last week and had a chance to spend time with them. the whole structure hinges. we still think it will be good. the crude market will be supported, but there is that element of potentially moving into an oversupplied market in 2025.

jonathan: what underpins their call for demand? >> they claim that we are too focused on developed markets. focused on the economy. they are saying it is east of suez. southeast asia, africa and middle east. there is some truth to that. we have to watch that carefully, but i am not nervous. that is kind of our call. we are sticking to it for now. lisa: we have been talking a lot this week and this year about demand versus supply. he sent to oversupplied based on demand in those regions. how do you even understand any of this with the fact that there are alternative fuels coming

into play. it seems like people are traveling around that much more. i got a note about tsa volumes being as high as ever. >> it is a bit of a funny dynamic because we still have room to grow. we are seeing a deterioration. gasoline and hybrids. they are very efficient cars with high mileage per gallon. they are coming in to bite in the equation. look, all of this is part of the energy transition. i think we need to see a big transition in how it works. i think the world still wants to grow.

if the fed follows along in the next few months, we were talking about financial conditions. we cut rates and you think that there will be upside pressure. we have it pretty high in the system? i think the pmi is looking a bit better. there is a lot of posturing and trade, but the economy will pull ahead. lisa: i want to talk about how the rate cuts are feeling out the economy and that they are going to cause oil prices to go higher. is oil still the macro player given some of these other aspects we are talking about an >> it goes --talking about? >> it is from producing a loaf of bread to everything is oil.

but the matter is, as we transition the economy, there are some in a better condition. some of them are copper, which has been a source of high speculation market. they have been waiting for the price to rally at this point. once you get to the end of it -- they are always going to benefit. another big dynamic here, oil and gas still playing with force on energy markets. we had the big inflation in the 70's. this time around, prices responded. we saw prices going negative for weeks.

we are in a world where there are commodities -- that is the balance that we are seeing. jonathan: how distorted are the cyclical cycles around copper? on the influenced by the cycle? i wonder if we have confiscated that. >> we are taking a look at pmi's. 10% to 15% of the levels justified by industrial activity. that is correct. we need to see the rate cuts and refill those inventories. there is a big cycle coming if we go into a soft landing scenario.

copper and aluminum will be beneficiaries. we do not like nickel as much. but then there are other commodities, if you go to the other end of the cultural sector. they have had good runs. lisa: i love how personal that is. jonathan: copper has become a kind of scientist. lisa: i am curious. you talk about the transition and secular themes and how this dovetails into the macro economic cycle. i wonder at what point some of the cleaner energies to the increased energy needs of machine computing etc. --

doesn't benefit as much as others. for the foreseeable future because of some of these push pool dynamics? >> if you look at five-year oil, it has been anchored at $70 per barrel. this is the important thing. there is this dynamic going on. they would like to have a higher price. there is not too much supply coming through. that is the prices, enabling them to fund themselves in the markets. the other operators in opec -- and thinking of a few trying to

raise cash. by the way, it works for the u.s. as well. they are trying to push prices lower to contain inflation. just allowing this wave in oil. the price comes down. that has been a successful move to contain inflation. they had to stick to this up and up cycle. we have reverted and now we are in a happy medium. right where we are. i can make pieces on both ends. still a very tense environment. tensions have been rising recently. we still have russia and ukraine. so there are a lot.

it has been exporting a lot more oil, so it is hard to call, but from here to the election, i think it will be 75 to 90. jonathan: francisco, thank you. $79 on brent. 74 .73. >> we do see the normalization. whether it is the labor market, whether it is other economic activities, regional sales, you name it. jonathan: jobless claims i just around the corner. ♪

jonathan: we are totally unchanged. going absolutely nowhere on the s&p. retracing some of the moves over the last few days on the 10 year. going against the grain. yields are a lot lower over the last five days. under surveillance this morning, all eyes are on the labor market. >> there are a lot of opportunities out there. you can lock in they attractive yields. limited duration risks but that being said, it is an uncertain time in terms of the fed with this normalization of a two a risk in the labor market. whether it is other economic activities, consumption, regional sales, you name it. jonathan: studying after early

april. fueling expectations for right -- for rate cuts. payrolls tomorrow morning. writing this, the prospect for payrolls to stage an even bigger rally as a four handle on the unemployment rate would clear the path the test. hello. nice deceived. what you make of the rally before today? >> i think it makes sense for the data that we received, but it puts them in a specific situation going into the payrolls. both in headline and for the unemployment rate, but if we get a surprise that gets the market all the more worried about the trajectory of employment growth, that is where we get the big rally.

especially with the bank of canada having cut. jonathan: we were told that risk was skewed. they will not respond to strong data like they would week data. >> i think to some extent that the buyer is relatively high. if you get a 150 or 175, i do not think we will really push to a lower rate plateau. i do think that we cannot forget about the average earning numbers. we still have the cpi number looming over the fed and its decision. lisa: we have talked about what has driven yields lower so far. but there was this other less viewed report that took a look at how employment grew last year .

it actually came in a lot less rosy in terms of employment growth. how much was that around rally and bond? >> they were willing to ignore the service sprint. we are at the point in the cycle where everyone is looking for some evidence that employment is finally rolling over. that is why the initial jobless claims will be relevant. the marquee data is tomorrow. lisa: do you think right now some of this data has opened the door more significantly to a july rate cut then a few weeks ago? >> i think that what it did was reduced possibility that when we get an updated plot that we will see 25. it has cemented 50. july is really difficult to

justify, given the timing of the data, but it is important to keep in mind that we will see four updated cpi prints, plenty of time to be convinced. jonathan: we have a few people out there who think that we will cut rates in july. i thought that was you and not me. he came out pretty early on in march. what do you think he does about july? i imagine someone will ask him about that. do you think he leaves it open? >> if you get a point, it is a reasonable conversation to have. it should be on the table, if it is going to the floor. lisa: something happens in between that could potentially matter quite a bit.

i am still struggling. two cuts and a hike. how do you sort of frame out the sensitivity of the market to whatever may transpire in april? something i can to that kind of disruption. others say it will take more than the election of one person to determine that. >> i would say the election outcome matters the most when there is a sweep in one direction or the other. it is almost a nonevent. even a trump victory would not be the surprise that it was in 2016. what is more important is the overall trajectory and then we will start to look forward to any implications on the geopolitical side, the trade side. but i do not think it is quite as relevant as it could have been. jonathan: we appreciate the

update. i think we can run with this. i do not think it has to mean that we have a crisis in financial markets. i think we can have that conversation. lisa: i would agree with you. it was put best when they said, what we are looking at is a treasury market expanding rapidly. a small pool of dealers who do not have the capacity to take down the way they used to. what happens if they cannot buffer an increase of yields in the wake of a not very good option? what happens when the u.s. government is depending on them to finance the deficit? that seems plausible. jonathan: we also do not know what the plans are and how they will be executed. we could have five percentage

points if some of these plans go through. the difference between hikes next year and cuts is a big difference in the policies. coming up, legal catch up with keith. rob from invesco. that conversation coming up shortly. your rate decision is about 20 minutes away. ♪ >> of setting in the august window of her career. paolini becomes just the for the italian woman to reach the semi's and au pairs. one of the top 10.

do not forget that you can watch all the action live on tennis channel. ♪ [spenseful music] trains. [whoosh] ♪ trains that use the power of dell ai and intel. clearing the way, [rumble] [whoosh] so you arrive exactly where you belong.

- after military service, you bring a lot backctly to civilian life. leadership skills. technical ability. and a drive to serve in new ways. syracuse university's d'aniello institute for veterans and military families has empowered more than 200,000 veterans to serve their communities and their careers. from professional certifications, to job training, to help navigating programs and services, we give veterans access to support from anywhere in the world. craig here pays too much for verizon wireless.

so he sublet half his real estate office... we give veterans access to support [ bird squawks loudly ] to a pet shop. meg's moving company uses t-mobile. so she scaled down her fleet to save money. and don's paying so much for at&t, he's been waiting to update his equipment! there's a smarter way to save. comcast business mobile. you could save up to 70% on your wireless bill. so you don't have to compromise. powering smarter savings. powering possibilities. food isn't just fuel to live. it's fuel to grow. my family relied on public assistance to help provide meals for us. these meals fueled my involvement in theater and the arts as a child, which fostered my love for acting. the feeding america network of food banks helps millions of people put food on the table. when people are fed, futures are nourished. join the movement to end hunger and together we can open endless possibilities for people to thrive. visit feedingamerica.org/actnow

>> the fed is kind of back in the corner. it will be a while before we can see the cuts.

>> the key is to cut too early. question inflation is looking a little bit cooler and we are seeing signs that the economy is moderating. it gives them the ability to adjust. i think it is sort of a wake-up call that this is going to happen. a soft landing can occur. >> this is bloomberg surveillance. jonathan: the third hour of bloomberg surveillance starts now. morning. coming into thursday at all-time highs in the market. the s&p right now is totally unchanged going into a very busy 60 minutes. ecb rate decision and 50 minutes after that, we will get jobless claims. a news conference with christine lagarde.

if that was not enough for you, let us kick it off. the ecb is one of them and we are looking at the first rate cut. lisa: you have highlighted how important this is. we have pre-committed to this, but now we will check out all the data. will there be a sense that we are on the downward trajectory and now we need to handle growth more significantly? that will be more important than the decision itself. jonathan: we have to reflect. we got into negative territory 10 years ago. we were talking about negative interest rates. we went into the debt crisis and were able to hike interest rates. going into the pandemic. we facing another decade where the ecb cannot hike interest rates an they have gone from

negative territory all the way out to 4% on the deposit rate, which was unthinkable a few years ago. the idea that we had this massive fallout for me is just absolutely staggering. lisa: it is staggering for everybody. nobody expected this to happen. does this give them more ammunition? the central banks have been given a gift that they can use to respond to some sort of crisis or we talked about bob diamond the other day. do they not matter because people have insulated themselves that much? it will not have much of a stimulative effect on the others. i think we still do not understand the mechanism on the margins. jonathan: we have widely

expecting this is rate cut and it would be a shocker if we did not get one. what is up for play is july. just what we have heard from some of the officials the last few weeks. if there is a rate cut, we have to wait until maybe september, so we know, they are pushing this out and saying do not entertain a july rate cut. wonder how that plays out. lisa: i wonder if they have terminals in the ecb and are saying it is a good thing or a bad thing. at one point we thought that they were sensitive to the markets. how market sensitive are they? have they moved away from that paradigm entirely? jonathan: early days at the ecb. we are not here to close friends and then five minutes later, we are here to close friends.

lisa: it was in part after some criticism by unsourced messages from the ecb governing council. tier point, full circle. jonathan: it is not the decision or the news conference but the story that comes out later in the afternoon after the decision people unhappy with the performance. we get more of the same little bit later. equity futures just about positive on s&p 500. we will catch up with keith lerner. reacting to the ecb rate decision and veronica clark looking ahead to payrolls. all-time highs. the s&p 500 hitting its record. whether it is ample fodder and a near-term environment is expected. the weight of the evidence suggests that the uptrend

remains intact. with us for more. keith, i wonder what you make of that record high and why you believe there is more in store for 2024. >> it feels great to be with you. we actually upgraded equities on that pullback. also on duration. i will say, new highs is a characteristic of a boom market. historically, we put out a chart for all-time highs and you see the common basis. as long as it is supported by earnings as well. i will say that when you look historically, the medium gains are a little over 100. we would expect more of a

moderation. overall, we give them the benefit of the doubt. jonathan: we know the headlines from yesterday, carrying weighty market caps. is that what you still expect for the year ahead? >> we have been avoiding tech for some time. the top 10 stocks in the market are now about 34%. that is the most in the last 40 years. the market has become more narrow. three sectors are outperforming. the average stock this year is up about four to five versus 12. that is where the earnings momentum is. we see them continue to be more.

just to be candid, i think that the risk has become so narrow that i would welcome this rally from the top-heavy segment. each of those top stocks, each of them alone are more, overall. lisa: i love some of these statistics, just how distorted the market has become, for good reason. especially if you are talking about focusing on big tech names, even without a broadening out, how much some of that will matter. does the report tomorrow move the needle for you? >> everyone has so much anticipation. it acts differently than you expected and then it gets revised the next month. the trend is just as important.

people are using the word cooling, but we think the economy is fine. one thing has changed. we came into this year with estimates around 1%. they have been high all year long. now you have seen that flatline. economists and underestimating economic growth, we are going to see more of that two-way economic data become accustomed over the next year. lisa: how much of an offset our bonds? we have been talking about how it will be reversed or twisted with bonds holding more value. do you agree with that or are you sticking close to what has been working or not? >> we still like stocks and we still like bonds.

stocks have gone at 8% over the rally. we still think that bonds have some value. there are a lot of crosscurrents. but if you look at it on a 10 year treasury, the total return is still about 1%. if you go down, we get closer to 8%. it is still important to diversify on portfolios, but we are not tilting. we still like stocks over bonds. that is how we are positioning. jonathan: some of these stats are unbelievable. lisa: i love this. what everyone is trying to do is give context and scope. the idea of gaining a trillion

dollars is rather staggering. jonathan: equity futures are just about positive. let's get your bloomberg brief. >> nvidia is the first chip company to hit a trillion dollar market cap, surpassing apple. the biggest beneficiary of the ai frenzy as more industries adopt the technology. adding about one point $8 trillion in value. wall street expects that to change. the union representing flight attendants rejected the company's offer of a pay raise. negotiations have stalled over compensation and scheduling roles. they have not received a pay raise since before the pandemic. they are set to resume talks

june 10. spacex poised to launch on a fourth major test flight, part of the push to develop systems into orbit and beyond. they are expected to lift off this morning. they are meant to advance the progress with the company now focus on rocket back to earth's atmosphere in tact. that is your bloomberg brief. jonathan: the ecb just around the corner. 62 people were surveyed. just one said no change. just to frame things. absolutely shocking if they did not cut rates.

in ecb rate decision and then 30 minutes after that, this one right here. christine lagarde from new york. ♪

jonathan: ecb rate decision in just 20 seconds time. finish on the euro. german yields inching just a bit higher. there has been a theme. up by a couple basis points, over in italy. this is what things look like. the euro shaping up as follows. there is your rate cut. 25 basis point cut on the main

refinancing rate. in line with expectations. in line again with expectations down 25 basis points across the story. this was widely expected by pretty much everybody. it is going to set the tone for the summer. lisa: kind of echoing what we heard from the bank of canada as they embark on the rate cutting cycle. just what this means going forward will be key. expectations have declined just to make -- this is the first rate cut in five years. how deep is this path? jonathan: this is what they have to say.

inflation has fallen by more than 2.5 percentage points and improved markedly. price pressures have been weakening. monetary policy has kept financing restrictive, keeping them well anchored. a major contribution to bringing it back down. domestic price pressures remain strong and inflation is likely to remain above target. they have been revised up compared to the march projections. 2.2 in 25. for inflation excluding, 2.2 in

2025. it is expected to pick up. 1.6% in 2026. there is your forecast and we will return to that in a moment. determined to ensure that inflation returns to its target in a timely manner, it will keep rates restricted for as much as possible. determining the appropriate level of restriction. and particular interest rates will be based on the assessment of the incoming financial data. the governing council is not pre-committing to a particular path. i imagine that last line will be on repeat. lisa: you can see a bit of market response.

in the market, it seems like they are looking for 40 points of basis cuts. as he said, all eyes on the press conference. jonathan: how easy is it to do that this morning? lisa: it seems like some of the rhetoric is in conflict with itself. the ongoing growth in the economy and inflation not getting down until 2026. it becomes even more difficult. what does it mean in a timely manner? jonathan: going from the top line for you. >> they put it well and called it a data independent rate cut

for we got the decision. the economic data that we have had recently, inflation is sticky. output surprisingly robust and look at the forecast. inflation lifted for 2024 and 2025, so some have been saying that they talked themselves into this rate cut, even if it was well telegraphed and fully priced, almost expected by economists, perhaps if they had seen that recent data beforehand, they would not have talked themselves into a june cut. jonathan: is that going to navigate what you have described in this news conference? how do you do that? >> i think you picked the exact line that she will be holding onto. she will be hedging her bets because they may need to keep rates restrictive. it is similar to what you have

in the u.s. they started very differently with that massive fiscal stimulus and with the energy crisis after the war in ukraine, but now the parallel is being drawn between the ecb headache and the inflation problem looking a little more retractable, as forecast today. lisa: do you get the sense that they are going to be emboldened in the wake of this, given the rhetorical challenge that lagarde has facing her and a rate cut? >> i expect it especially from the northern european officials. they have been particularly cautious about the path ahead. we have heard from the likes of isabel saying that july is off the table. saying he only sees two cuts for

2024. i recommend -- i reckon that they will keep their options open. it will take a lot of clarity and terms of the cuts coming to have sustained weakness in the euro-dollar off of the back of this. you can tell how markets are reacting to it. jonathan: wonderful work off the back of this rate decision. it is difficult to reconcile with some of the things they are saying. joining us now, how can we get a statement that shows a rate cut? make sense of it for us all. >> it does not, actually. what is happening here is the ecb went into the previous meeting having a high degree of

confidence that the data is going to cooperate. with all that noise about the importance of negotiated wages for q1, they became available in may and in the end, pretty much all the data surprised to the upside. the updated projections, that i thought there was more than i expected. they went from 0.6% to 0.9% and inflation from 2.3 to 2.5%. all of that within the context of data dependence and the condition of guidance. yet we had an interest rate cut being delivered today. it is almost exclusively driven by the fact that -- going forward, i hope that in terms of

credibility, what the ecb is going to do is maintain a neutral stance and definitely going forward, the bar for gaining more confidence has increased. lisa: it is interesting at a time where you do see inflation in germany ticking up a little bit on the heels of this report. i'm curious of what you make of this, before the release, he expects the fed to cut rates more than the ecb. are you on that page now? >> given where the data stands right now, it does not seem likely. at the same time, we have to point out that where the bed stands right now is higher. that is compared to the fed. it would take a significant acceleration for the u.s. economy and a significant

resilience. i think i have been in the camp that they have been surprising to the upside but nonetheless, in order for such a scenario, which receives the ecb cutting by less, they would need to see a significant thing happen. he would need to see further fiscal expansion that i do not think is likely. he would need to see chinese growth on the upside. i would not say that we are comfortable. jonathan: responding to that ecb rate cut moments ago. this will be an interesting news conference. lisa: it will be an interesting one for her. it does not paint an easy story for her to tell.

she might say, we want to go now and we will wait as long as we can for this to go down, but it is still challenging. this is a twisted decision. jonathan: a data dependent rate decision. is that what this is an lisa: it is an ecb that took some framework. the others are saying, i do not know. jonathan: they are going to fight over july. it will be very interesting to see how this plays out in just a moment. jobless claims in america and why city thinks we will get a rate cut in july. ♪

jonathan: jobless claims about 20 seconds away. equity futures are totally unchanged. the nasdaq is firmer by .1%. yields a little bit higher and sympathy with what is happening in europe as well. off the back of this call, a rate cut. 24. flying blind for the rest of this year. good morning, mike. mike: it looks like we are going

to be debating. from the initially reported last week, it is the continuing -- it is the continuing claims number. 219 is revised to 221. continuing claims. it is a 2000 change -- not much change at all, but in is in the wrong direction for some kind of signal. the forecast was for a flat meeting in the first quarter. this is a revision. it recently goes down from the prior months. labor costs up 4% from what was

initially reported. maybe that is some good news on the inflation front. where do we go from here? that is the debate to be had. you are saying in the commercial. jonathan: if you told me, i would not know what to do with it. when you have put the right trade on the bond market? lisa: it is really challenging. i wonder what other report mattered that came out around the same time yesterday. you have to wonder what is pushing what around.

jonathan: yields look like this. let's pick up on the two-year story and all the way back down again. i can tell you briefly that it went to the 109. not just the ecb in the makes but taking away the of cuts and jobless claims. just spiking that additional move. lisa: there is a creeping feeling that they are on some kind of expansion. you could get that stronger euro and you are seeing that play out. jonathan: i am not going to bury the lead. we will go straight to the call. i need to know how bad the number needs to be tomorrow.

>> i think the by is pretty low. tomorrow we think we will see 140 barrels from the slowing that we had in april. the level of job growth is still a healthy level but it is the trend that is concerning. that is the end of year forecast. jonathan: the favorite phrase is rebalancing. you do not share it. >> when you're moving to a region where you are running two-week, you will have a moment where you look like you are in balance and i do not see any good reason my the cycle would not follow previous cycles where you suddenly get an accelerated. lisa: he does not think july is

anywhere in the cards. how much do you disagree with that approach? >> we think that the growth will continue at a more steady pace. we have an economy and the growth on its own does not really justify a rate cut. the rate cut narrative is built on a growth narrative. it is kind of the way the bank of canada leading out. inflation is coming down and we are in a continued disinflation. that is a different kind of narrative and one where the fed will be a little more cautious. they do one in september and they will watch to see how they come in. maybe two cuts. jonathan: you have a completely different way of looking at the

economy. 200 -- 200 basis points total. you could drive a truck between the opinions at the table right now. lisa: to elaborate, we are hearing from veronica that this will be more like a normal cycle. the data -- what in the data gives you confidence that this is not the case? >> there is a lot of concentration and looking at past cycles and other things like this that have pointed to recessions following. what we see is that the stress has been removed from the labor market with job openings. but still a healthy labor

market. we do not see a big growing weakness there. lisa: i'm sure that you guys get a lot of pushback. >> i would agree. in the labor market what we have seen is hiring rates at 10 year lows and hours worked coming down. it looks like they are looking to cut labor costs. what we do not see yet are the layoffs. we have had a worsening of consumer sentiment around job prospects in the last couple of months. we see that reflected in a pullback in spending. it can be that pullback in spending and activity that gets businesses to that last step. jonathan: can we talk about

communication? how do you think this plays out? >> i do think that the report tomorrow, if it is showing what we ask act, i think this is a fed that will leave all options on the table. we do see them showing the basis points of cuts, but i think it is important to base the fed outlook on where we think the data is going and not what sounds stale. lisa: we have seen more rate cuts baked in. how do they respond to the idea that this is a market more bias? does it make their trend more easy on the same path? >> there has been a real challenge for the fed. the narrative has changed so

much over the last year. if you look at the volatility, it has been huge. higher for longer and then slower, multiple cuts at the beginning of the year. you have not see them react to that. we think we have a chance at a soft landing. they have been very steady. i think we are going to get powell talking about disinflation continuing with a lot of attention around exact inflation numbers. i think we will see quite a bit of conversation around that. i would not be surprised if there is a lot of discussion around the labor market. jonathan: let's have a discussion about the labor market. more than 20 basis points lower. we were talking about this earlier. have had a lot of conversations about liver yields because the

fed will not respond to strength. what is the set up going into payrolls and cpi? >> the further you go out in the curve, i think that limits the ability to rally. if you get down closer to 4%, we would be going underweight. the rates market is a range trade and has been for some time. jonathan: you do not think we are more sensitive to the weak data but more sensitive to strong data tomorrow? is that fair? let's think about it. maybe it is the way that i phrased it. quite the call for july. a lot bigger than meets the i. lisa: it is what happens for the remainder of the year and the next 24 months.

how it is an adjustment or a recessionary type. jonathan: you do not hear that. let's get an update on stories elsewhere with your bloomberg brief. >> u.s. jobless claims coming in slightly higher than estimated. this is compared to the 220,000 that we expected. last week claims where revise. the highly anticipated u.s. payrolls report is due tomorrow at 8:30 a.m. eastern. a widely expected interest rate cut stopped shortly. the ecb cut by 25 basis points saying the inflation outlook has improved remarkably. they are not pre-committing to a

particular rate path. it is due to start in just a few minutes. pushing for regular fight -- regular flights. they are expected to lift off from boca chica, texas. the company is now primarily focused on bringing the rocket back to earth's atmosphere intact. that is your bloomberg brief. jonathan: look out for coverage of that. from deutsche bank, 25 basis points. they might have been expected.

a hawkish cut. a rush to ease policy. lisa: even more so considering inflation is ticking up. jonathan: coming up, a news conference with christine lagarde. ♪ (♪♪) ♪ well i was raised by careful hands ♪ ♪ yeah, they made me who i am ♪

♪ so i'm off to see... ♪ we invent them. we design them. we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪

jonathan: the opening bell is 45 minutes away. negative by 0.04%. the focus on what is going on in the euro zone. the euro-dollar positive by .2 percent. a lot of people describe this one as a hawkish cut from the ecb. lisa: there was not any guidance

in terms of what this means for further rate cuts. arguably, given the inflation forecasts rising, you might argue that there is more reasoning to hold rates where they are. jonathan: it is a line in the statement that i imagine that we will share an -- on repeat. the government counsel is not committing to a particular rate path. what is strange about this particular decision, they basically precommitted in june and we thought the biggest fight -- i'm wondering if there is a big fight over 2024 and whether it is in play at all to make another move. lisa: what are the movements?

how do you understand it as a normalization? what normal are you going to? they are frankly the subject of massive debate on the council. jonathan: imagine chairman powell did something like this. the federal reserve projections have been revised and at the same time, the statement read that we have lowered basis points. we would be up in arms at the table. lisa: i'm sure you will get the haters that come out quietly who speak to publications afterward saying this was an absolutely irresponsible move. there was a question if this removed the onus. we are getting ahead of any weakness. how much does this give us ammunition to go further?

jonathan: you know how we talk about chairman powell and how much distance there is between him and some of the members. i wonder how difficult it is to establish a basis and coming out into a news conference after what many might consider to be a controversial decision. we are going to find out what she is going to do. let's take a listen. >> the governing council today decided to lower the three key interest rates by 25 basis points. based on our updated assessment of the outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to monitor the policy restriction after nine

months of holding rates steady. since our meeting in september 2023, inflation has fallen by more than two .5 percentage points and the inflation outlook has improved markedly. underlying inflation has eased. inflation expectations have declined at all horizons. monetary policy has kept financing conditions restrictive. by keeping expectations well anchored, this has made a major contribution to bringing inflation back down. at the same time, despite the progress over recent quarters, domestic price pressures remain strong as wage growth is elevated and inflation is likely to stay above target well into

next year. the latest staff projections for both headline and core inflation has been revised up for 2024 and 2025 compared with the march projections. jonathan: we continue to monitor the press conference in frankfurt. but we now want to take you to boca chica texas -- boca chica, texas. the test flight of its massive starship system on the launchpad. each generating 230 ton forests for us. demonstrating. let's listen in.

>> pushing down range. jonathan: clearing the tower. dissent into orbit by the super heavy booster. there will be a hot staging and the specific engines ignite. the ambition in this fourth test is to demo reusability. the booster is destined later in the process to safely and in a

controlled fashion drop into the indian ocean, but the spacecraft portion, once it has reached orbital velocity, it will reach a top speed of 15 miles per hour and the goal is very clear in this instance. to conduct a controlled entry back into earth's atmosphere. they hit a number of milestones, as we look at those live images reaching stress on the rocket. on the test flight, they did number of firsts. they had a successful reentry but it was disintegrated into space. they did a demo. but we are seeing is that everything is nominal.

starship goes to 15,000 miles per hour. we get hot staging. they blasted away from the super heavy booster which then falls back down into earth's atmosphere. this is the fourth test flight test. but we want to continue to monitor that and take you back to frankfurt. >> continued job growth in the near term. the unemployment rate edged down in april, the lowest level since the start of the euro. companies are still posting many job vacancies, though slight -- though slightly fewer than before.

national fiscal and structural policies should aim at making the economy more productive and competitive, which would help to raise potential growth and reduce price pressures in the medium-term. an effective, speedy and full implementation of the next generation program, progress towards capital market unions and the completion and strengthening of the single market would help to foster innovation and increase investment. implementing the eu's governments framework fully and without delay will help bring down budget deficits and debt ratios on a sustained basis. looking at inflation now, it rose to 2.6% in may.

that is according to the estimate. food price inflation declined 2.6%. energy price inflation increased to zero point 03% after recording negative rates for a year. goods price inflation continued to decrease in may. by contrast, services, price inflation rose markedly from 3.7% in april. most measures of underlying inflation declined further in april. confirming the picture of gradually diminishing price pressures. however, domestic inflation

remains high. wages are still rising at an elevated case. owing to the staggered nature of the wage adjustment process and the important role of payments, labor costs will likely fluctuate over the near term, as seen in the pickup and negotiated wages in the first quarter. at the same time, forward-looking indicators signal that wage growth will moderate over the course of the year. profits are absorbing part of the pronounced rise in unit labor costs, which reduces the inflationary effects. inflation is expected to fluctuate around current levels for the rest of the year, including due to energy-related base effects.

it is then expected to decline towards our target over the second half of next year, owing to weaker growth in labor costs, the unfolding effects of monetary policy and the fading impact of the energy crisis and the pandemic. measures of longer-term inflations have remained broadly stable. turning to our risk assessment. the risk to economic growth are balanced in the near term but remained tilted to the downside over the medium-term. a leaker world economy or an escalation in trade tensions between major economies woodway on area growth. russia's unjustified war against ukraine and the tragic conflict

in the middle east are major sources of geopolitical risk. this may result in house was becoming less confident about the future and mobile trade being disrupted. growth could be lower if the effect of monetary policy turns out stronger-than-expected. growth could be higher if inflation comes down more quickly than expected and rising confidence and real incomes mean that spending increases by more than anticipated, or if the world economy -- jonathan: what you're looking at on the right-hand side of your screen is spacex's super heavy booster, traveling back to earth's atmosphere. this was part of the plan. a controlled the reentry burn of the super heavy booster, basically dunking it into the indian ocean. the spacecraft is traveling at

orbital velocity speed around the earth, with the ambition much later on of having an hour or so's time of having controlled reentry, the purpose is to demonstrate reusability of the system. the reason spacex is able to maintain such clear visual images at all stages of both the spacecraft and super heavy booster is that they are equipped with the starlink system. as either part passes through or into orbit, different satellites pickup a signal from the corresponding electronics aboard the spacecraft, maintaining that constant livestream. we will continue to monitor as they travel at orbital velocity around the earth for the next hour or so, conducting a number of tests and then spacex will

conduct the reentry. what that looks like, we do not know. the hope is that maybe they can land it, something they have not done fully, but stunning images. that is the spacecraft going pretty fast. we return you back to frankfurt and christine lagarde, speaking as part of the press conference. >> it rose from 0.9% in march. in linethe governing council thy assessed the links between monetary policy and financial stability. euro area banks remain resilient. the improving economic outlook has fostered financial stability, but heightened geopolitical risks cloud the horizon. an unexpected tightening