>> the theme is still patience and the fed wants to see more data to see that inflation is moving lower. >> there is no clear indication that they need to rush into cuts. >> they are keeping all optionality open. >> even if there is a shift in the pace it seems like the direction of travel is towards a rate cutting cycle. >> it is a tenuous period, and no one knows for sure and this reflects that and that is not necessarily bad. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: let us get you to the weekend. live from new york city, good morning for our audience worldwide.

bloomberg surveillance begins with equity futures down .5 -- .4%. we have had a record-breaking week, four consecutive all-time highs and can we make it five or five. cpi's downsize surprise. jobless claims, the wrong side of upside surprise. if you look at the equity market you have no idea that very confused federal reserve meeting took place. lisa: what is going on in the same thing, the macro weighted sock are stocks wavering that the ai drivers powering ahead. you look at the index level in ca 29th record high you have to wonder is this reflecting broad strength or the dominance of u.s. tech? jonathan: we have heard quite a bit in the bond market, the double-digit moves across the two year and 10 year. the 10-year is down for the 4.20. the 10 year down to 4.67.

some news coming out of washington, d.c.. the former president donald trump on capitol hill reportedly promising to cut the corporate tax rate to 20%. vowing to make the vowing -- the 2016 tax cuts permanent. he wants to exempt tips for -- from federal taxes as well. how will he pay for this? according to permit -- for people familiar he floated the idea of using tariffs and the revenue you get that to offset some of the tax cuts that he would make permanent next year. lisa: and even get rid of the income tax. this is going to be in all tariff funded kind of deal and i kept thinking to myself adam posing let us hear what you have to say whether that is feasible and what that does to trade and revenue and to a national dominance in certain industries. a lot of questions about the details. i am curious to hear but --

about what the ceos have had to say. they have talked about the importance of recognizing global trade partners and that sounds great, mr. former president. the date -- did they say may be re-think that a little bit? jonathan: i would say i love that 20 i am not sure about the tariffs. i was like yes give us that 20 put on the record you're like we need to work with our global trade partners. lisa: it is difficult to understand what the dynamic is like because as you said yesterday and it was an astute point. these are pragmatic leaders and the new diplomats of the united states. they go to different countries and they want to do business across borders. how do they deal with protectionist policies and how similar was it to what was said verbally in a way to assuage worries about the debt but not actually answer questions. jonathan: how business friendly will the republican party be. it is going to be a big part of the discussion.

for the next month or so we need to talk about french politics. the latest news is that the parties on the left are forming an alliance. the finance minister with quite a big warning about the left-wing alliance, if they do win, it would mean an e.u. could be on the -- exit could be on the table. the cac 40 has erased all of the gains. we are down by more than 15% not year to date to date. french banks have been absolutely hammered so far. lisa: do you think that was because of the proposal to possibly leave the e.u., or because no party will get the debt under control. the country has been downgraded once and you have this idea that not only did emmanuel macron have an error to call a snap election but if the left is coalescing around a couple of candidates and the right coalescing around a number of candidate sketch was -- yes

which party uses. people are looking at this and saying he blew it because he will get what he did not really want. he thought that everyone would coalesce around him. that was my impression. jonathan: the fx market is a relative game. if you look at stocks up and bond yields lower but you might think the dollar is weaker but the dollar is stronger because the other side of the trade is dreadful and that is the euro. lisa: just to put this in cold relief, the e.u. and u.s. divergence is shocking. you are seeing a 1.3% gain on the s&p 500 week to date and basically a 1.4% decline on the stoxx 600. this would be largest divergence. this is market and highlights a lack of risk appetite beyond the big tech, but also american exceptionalism and all of the

people calling the death of it might be a little bit soon. jonathan: back on the table. last week euro-dollar was 1.09 and now 1.0 680. the s&p 500 down 0.6% and we have been spoiled by four days of gains. looking at losses moving lower by three basis points on the 10 year. coming up we will check -- we will catch up with dry as u.s. equities take -- continues to grow and we will talk to barclays saying that the fed will be on hold until december. the s&p 500 looking for five straight record-breaking sessions. the market is now, as it was when rates were rising, more dub -- than the fed. we will still see a rate cut in september but recognize the need for greater confidence. he joins us now for more. we step back and get your big

take on the week so far. tons of data. what stood out for you? geoff: how many people are actually now looking at the bund spread and going back into history on how high that could go. if the scenarios are along the lines of what some french politicians are talking about that could go wider. and looking at the flow data from fixed income there is a big position out there that can continue to unwind which is my concern. jonathan: when you listen to the french politicians, which ones because clearly the finance minister is trying to scare people into voting a certain way. who are you listening to? geoff: both. the bond market, the euro zone bond market is catching up on the fact that it does not matter in terms if it is a left or right coalition, the fiscal policies are worrying. the comparisons and maybe this

is a thing in the u.k. but drawing comparisons between what could happen in france versus the budget crisis in the u.k. in 2022. i have heard a lot of questions and those of the scenarios that people are talking about. beyond the headlines let us look at the policies. is anyone proposing fiscal consolidation and it does not sound like it. lisa: when you just off -- dust off some of the history books, what is your big concern? is a systemic risk, broader contagion or send -- or simply highlights the fragility of a region with some distress left over? geoff: distress left over and the somber reality of the euro. those old arguments from 12 years ago are being dredged so to speak. we are not looking at bad scenarios and let us be clear the ecb has so many more facilities.

i think the omt will be mentioned soon as well. it does highlight some structural issues, which i think the euro zone policymakers need to start to address because the timescale is limited and 2027 the next round of presidential elections and we will be looking at budget read gauche -- renegotiations. lisa: reminiscent of things that happened in the u.k.. we are wondering how much we could see market disruptions from unpredictable political events that are much likely for the rest of the yard not just in europe but also in the united states? geoff: what you mentioned at the top of the hour, the next administration, how are they going to fund certain physical commitments is very much what we are focused on. again looking at the flows across the border in international investor community. are they going to buy u.s. treasuries and is the fiscal premium going to be demanded. if the market needs to worry

about europe and the u.s. the u.s. will be a safe haven. jonathan: can you explain to me how you take positions in fixed income where we have all of these risks around the sovereign and europe and united states potentially as well. geoff: i would not worry about the front end, but let us bear in mind that last week the talk was the hawkish cut by the ecb. that means long-term bond yields. they will move up anyway and -- in real terms of the government in terms of financing the liability. those pressures are still going to rise and given the amount of buildup in the french government and market but the u.s. debt market. the pressure on yields are back and it will still be to the upside. lisa: there is a larger take away which is why our bonds rallying and yields lower? is it because of easing or some fear of flight to haven trade that is keeping this equity

rally from broadening out? how much do you sniff out the potential fear or weakness or hiding out in havens rather than something broader fueled by the rate cutting cycle? geoff: here we need to define what is a haven. bunds are considered havens within the euro zone and u.s. treasuries on a global scale. i am looking at the swiss franc. the cut rates are being brought back very aggressively and i think we might get a quasi-cut next week as well. i still like the swiss franc which takes the haven box. the yen has been very undervalued. it can be a haven. the market is going to search havens. is u.s. tech a haven in this environment? how does european politics affect tech innovation? would it really affect u.s. equity markets? probably not as much in the

past. jonathan: wonderful to get your perspective. if you look at the french-german spread on a 10 year maturity we have gotten down to 75 basis points. so the widest level going all the way back to 2017 when we had that macron-le pen presidential race, you are looking at something closer to 200 basis points. this is the political stress of 2017 at the moment. it could get worse or better. it is not the economic or financial stress of where we were a decade ago. lisa: that is the reason he says i was looking at the history and you can go a lot further. how much would that fly in the face of the ongoing consolidation of the european union and the bringing together of some of these nations and how much does is underscore that there is no alternative to the dollar at a time where a lot of people are saying maybe it will weaken in response? jonathan: it makes that g7

meeting feel more bizarre. when things like this are happening around the world and we are not talking about it on the g7 level and we are focused on tapping russian assets and helping the global south, all things that warrant significant conversation. but when you think about the top priorities worldwide, and what is happening domestically for people, that has not been part of the conversation at all for global leaders, at least not publicly. lisa: there was one article that was wonderful about how rishi sunak was supposed to be the lamest dock at all and emmanuel macron said hold my be a and george macaroni is laughing in court as it is her g7. jonathan: she is pouring the drinks. lisa: when you are ready we could have a conversation, just keep flailing. jonathan: let us get you up to speed on news elsewhere with the bloomberg brief. dani: donald trump told u.s.

ceos that he will cut the corporate tax rate to 20% if he wins a second term. that is according to people familiar with his remarks. he met in washington with 100 ceos including jamie dimon and tim cook. the current corporate tax rate is 21% and even a small reduction represents a tax cut worth billions of dollars each year for profitable u.s. companies. a check on adobe shares up nearly 50% in the premarket trade. they project a small -- a strong sale for its creative products and suggest that customers are adopting the new ai-based tools. it has been integrating ai into some of its most popular products including photoshop which is helping the company attract "an expanding universe of users." keith gill appears to have exited his entire options position in game stop. a screenshot showed that his portfolio no longer included the

call option set to expire next week. at the same time it also showed that he added to his keep of common shares. all of that happening on the same day that gamestop had to delay her there should -- to delay their shareholder meeting because they had technical difficulties with the livestream. jonathan: more from her in about 30 minutes. the g7 facing a world of unrest. pres. biden: the agreement that president zelenskyy and i just signed laid out our vision for a just peace. peace in the principles of sovereignty and territory. a piece that holds russia accountable for the damages it has done. jonathan: anne-marie live on the ground alongside the world bank president. a conversation you do not want to miss. good morning. ♪ usic] recipes. recipes that are more than their ingredients.

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jonathan: session lows in the equity market. on the s&p 500 we are down by 0.5%. 4.2074, a 20 basis point lose -- move lower over the week so far. under surveillance the g7 facing a world of unrest. pres. biden: the agreement that president zelenskyy nine just signed lays out our shared vision for a just peace, rooted in the u.s. chart -- in the u.n. charter and sovereign territory. with a broad base of support around the world that holds russia accountable for the damage it has done. jonathan: world leaders continue discussions looking to boost investment to the global south and east migration in europe and the united states. this coming after the g7 came to an agreement of providing aid to

ukraine by tapping frozen russian assets. joining us is annmarie. annmarie: good morning. what we saw yesterday was a boost from private investment from larry frank about tasha blackrock and what these private investment funds are trying to do is to boost money going to the global south. middle income countries. part of this is made possible by programs at the world bank and i am pleased to be joined by my guest. john was talking about an emphasis on africa to try to counter china from the u.s. point of view that you -- but european leaders are trying to stem the flow of migration. our you seeing that play out? >> the real site -- situation in africa is a billion and a half people and how can you not put that into future economic growth. and so what i am trying to talk about is what creates jobs for the young people that has a

demographic dividend coming through it but if you do not get health care, and education and their growing up with no jobs you will have a difficult product from -- problem. these are all the ways to get private sector money as well to cover that scale to create the jobs. annmarie: how difficult are these conversations on the sideline when you see the leaders here coming up wounded by recent elections and battered because what their electric is forcing -- focusing on our rising prices at home and immigration coming into the country and you have leaders talking about investments in other parts of the world and what is going on with the war in ukraine. ajay: if you are discussing private sector investing it is good for the leaders because it is a way to enhance every dollars that government put in to add a little bit more and

that is helpful. it just depends on how you took -- how you approach the discussion. it is not the money you give one-on-one bilaterally but about the leverage. if you go to the institution that provides grants and financing the poor countries which is every country in africa, unfortunately. every dollar is capital and i can make it four times. and then if you bring in the private sector the four can become it and then 10. people are trying to get a dollar to go to 10 not just a dollar for dollar. annmarie: is multilateralism harder when you see the rise of nationalism? ajay: i have been saying for years and my old job in the private sector that one of the biggest things that worries me is shaaban's stake nationalism -- chauvinistic nationalism which makes the absence of

connectivity. we have been able to get capital and hybrid capital into institutions and we are the ones who are working with this. that may give you an example. we'll keep asking about the debt crisis in africa. but if you when you -- but if you think about the four companies from africa, from the time they enter, we in the bank have given them $16 billion of money and no one else has. of that eight was concessional and the other were programs. of that 16, 9 was net positive. that is all multilateralism at work. people just talk about one part but multilateralism works. annmarie: we have a u.s. election coming up and what you have wanted to expand is not just poverty but also climate. do you think that would be at risk if you were to see a trump presidency? ajay: not really. during his prior pregnancy he gave a capital increase to the world bank and he sees the value

of this leverage and time -- and this kind of institution. when i talked about a livable planet i want to make sure it is not just climate it is fragility and violence. things like pandemics and health care. the idea of a livable planet allows to expand depending on what is relevant in that country. in some cases it is climate and fragility conflict and there are things in others. you have to get to the root cause. annmarie: will there be more pressure whether it is trump or biden to figure out what is going on with china. they are the biggest bilateral creditor and many say what they are doing is a debt trap. ajay: interesting. where they are is different than where it was a few years ago. all of the conversations we have had with the imf and world bank ants the -- and the sustainability roundtable.

that everybody comes. the multilateral as well as bilateral creditors, and the private sector creditors and the so-called earlier ones. what has really changed it is not just bilateral but also the private sector involved. so if you want to do a debt restructuring you have to first know who has put what money on the table, what is the cost and the governance and what is the whole thing. get that data on a sheet. and then how to adjust that. so as you see it getting done begin to see countries moving through the framework and i think it is too slow. i think it should be faster. if you make it faster more countries will feel important to enter into the framework. and we need to work our way through this. annmarie: do you see what you are offering as a viable path instead of turning to china? ajay: people are borrowing

monday -- money from india and from the u.k.. bilateral creditors have been around for a long time. maybe actual lending through some countries. there are countries bilaterally as well and i do not think it is either or, multilateral or bilateral. i think it has to be a fair transparent way and do it in a way in which countries do not use that as a resource and also spend efforts on domestic resource. mobilization and doing multiple things to free up resources. annmarie: thank you. that was the world bank president on the sidelines of the g7. a lot of this discussion when it comes to the investment in the global south and those developing middle income countries. jonathan: great work as always. we will catch up with her a little bit later.

squaring the circle and the federal reserve trying to square the circle. lisa: trying to figure out how we deal with the fact that a lot of these countries are becoming increasingly nationalistic. jonathan: i have never heard that before. lisa: i wrote it down and looked up the definition to try to understand it. you know what i met -- what it meant that what was the actual nuance. jonathan: is the kind of chauvinist? lisa: is it that national superiority and the mail/female -- male. female. jonathan: good morning to you. ♪

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jonathan: this morning is a struggle, negative by 0.60%, record highs every day this week though. monday, tuesday, wednesday, thursday, we are down about .30% on the small-cap. we said that it was anything more than a day. small caps suffering this morning. lisa: the fact they have suffered is interesting because every gain we have seen, the 29th record i we got yesterday was kind of tiring. under the hood, a lot of stocks not participating. you wonder if this is actually

an immaculate disinflation of the early rally. jonathan: five days of gains on the s&p 500 and the equity market, the two year yield down by two basis points to 4.67, and about to drop to 4.19 on the 10 year, down three basis points. this is a move of more than 20 basis points over the week so far, and there is a lot of data behind it, to ppi to jobless claims. lisa: when you look at the flows, people are looking out and saying now is the time to lock in duration. you can see the flows into medium and long bond terms outpacing short-term funds by nine: one as people try to get in on what they see as the beginning of some shift the trend. what does that mean for the rest of the economy? is this still the immaculate disinflation or was the jobless claims a shot across the bat? this will not be an easy kind of

wonderful panacea that a lot of people would like. jonathan: climbs of nine-month highs, but the problem is we have had a little head figure and then we have come back down again. i'm with you, that is always the concern, that the fed is full of upsides, and this is what you've talked about for a while. lisa: i do not want to be subject to narrative ping-pong, but i'm curious how much this can gain speed where you get ongoing highs for the area is getting really thin of here with broadcom leading the rally, adobe. this is not a rally driven by consumer cyclicals to the sense that suddenly the economy will be pouring ahead. jonathan: give yourself some credit. you have been pretty consistent. lisa: bearish. jonathan: bearish and consistent. the fx market, you might expect a weaker dollar. we have a weaker euro. this has been about the single

currency, last thursday, 1.09, this morning, holding onto 1.06. under surveillance, french president suffers another political blow. parties to his left bowing to unite to challenge him. emmanuel macron is calling for an election on july 7, and the french finance minister is warning that if they are successful, they will run toward leaving the eu. lisa: it is curious timing that they have this fiery rhetoric, weeks before the meeting of the north atlantic treaty meeting with nato. there was an article on the bloomberg this morning was off the record discussions with the g7 saying what was he thinking? this is terrible timing and an unnecessary faux pas. it seems like it is undermining an already international fragile order, and that seems to be the

moment we are in it at g7, where giorgia meloni is at the front. jonathan: that is where the strength is. if you would like to see the weakness, the french german tenure spread now has gapped out to 75 basis points. the widest sense 2017. the other point attention, the banks, bnp paribas down 13%, so often down by 16, some of the worst weeks for french bank stocks. lisa: and the question is why? because of the potential for more regulations? because this necessarily will not be the haven in france in paris that people argued would be versus london and breaks it? -- brexit? you wonder at what point are we talking about absolute levels and populous and he was more

populous than someone else? who has the biggest deficit? will have a harder time raising money? jonathan: let's talk about the japanese yen sliding after the boj told investors to wait until july. we have more details on buy bond cuts that without would be given at the meeting. the governor pushed back that hike isn't possible. so we have a hike on the table and we are really looking for currency on the balance sheet. lisa: and potentially the signaling of a rate hike now. people are pushing back their intentions for us of timber -- for a rate hike by the bank of japan. they said this morning that this does raise the prospect of stagflation because you will see a weaker yen that it seems like the bank of japan is willing to tolerate at the same time growth is slowing and those are other concerns. jonathan: the yen recovery in

just a little bit, 157, so just about unchanged. earlier, it got to 158.26, the high of the session. former president donald trump pitching tax cuts during a return trip to washington, telling republican lawmakers he may use tariffs to help pay for income tax cuts. according to people familiar with discussions, he's also floating the cut to corporate tax rates hours later. a long list of ceos mats with donald trump yesterday. can you give us an idea of what that went like? >> we are to weeks removed from the trump verdict when the president was "a convicted felon," yet, two weeks later, he has met with the prominent business leaders in the country. that is important. not a lot of them were out there

saying that we will stage a walkout because he is there, so the verdict did not impact their decision. not everyone attended. trump is out there pitching tax cuts. remember trump 1.0? tax cuts were a big reason that the business community loved him. gary cohn took for that tax proposal to make sure it was carried out in the corporate community loved him, and that administration had that vision. now he is talking about cutting it from 21% to 20% and his reasoning is it is a nice, round number, even though a 1% rate tax cut moves the needle for shiffer them. jonathan: can you explain the difference between 21 and 20? not 100 basis points. but, the big difference for the bottom line of some banks. sri: did you not like trump six clinician, a nice round number

-- trump's explanation? a nice, round number. these cost savings can be extracted out of the companies and could amount to the same savings as you get from a 1% tax cut, so it is a significant number, but more importantly, an indication that we will be is this friendly. this is a key around which we will try to bring forth four more years where corporations do not have to worry about anything from the trump administration. that is his pitch. that is important because under the biden administration, one of the frustrations for the business community has been the regulations. it is clear that everybody is focusing on the tax cuts, but he also made the pitch for deregulation. you cannot underestimate or even underscore enough how important that has been, especially the financial services community,

where they felt they are living in an era of overregulation. that is frustrating for them, coupled with the fact that they don't feel like they have a seat at the biden administration table, and that sends some of them gravitating towards trump. lisa: our tariffs business friendly for banks? sri: no. let me take that back, it is that they want predictability. you cannot have tariffs at a different level each day. before trump spoke with thyssenkrupp yesterday, the white house chief of staff address that, talking about maintaining u.s. reputation and maintain the point of predictability. and a lot of things happened and most were not predictable, and

the business community should be a little wary of that. lisa: you talked about how it was surprising to some people that some ceos did not go. we have talked extensively how they are essentially modern-day diplomats and pragmatists and care about their businesses. how much do you still see an appetite to work with and in the administration by some top executives at big banks, regardless of who ends up as president at a time when people have floated names, jamie dimon, brian moynihan potentially wanting to join the crowd, how much do you still hear about that? sri: there are some names i remember seeing in a trump administration. jamie dimon has been really clear that he is not very keen on joining the trump administration. there are a few others who would

never join, but, broadly speaking, is the interest to join the administration? yes. it is the same reason they joined the first administration. they had a clear agenda. so, i think that appetite does not go away. if you are told that you could be in the monetary role where you could make the changes you want and it will be seen to enhance corporate success, you would do that. jonathan: i would like to pick up something you talked about when it came to regulation. it is not just about financial, but one concern ceos have had is about mergers and acquisitions. they don't know what they would go through in the white house, and we don't even know if we can close a deal with the luxury

handbag maker. to be have a decent idea of how the trump administration would be? one person on board with the democrats is j.d. vance, and he's in line to be the vp. sri: it goes back to the predictability. they can talk about business practices, but it is very hard to believe that a trump 2.0 would guarantee predictability on january 1, 2021, if it is going to be another trump administration. i don't see one were business leaders can rejoice. at least the path is clear the next four years for us. jonathan: if i spent $20 and get something to shake my mouse repeatedly to keep the terminal and the green dot next to my name on throughout the day, is that wells fargo? sri: don't do that, it is $20. [laughter] mel stigler's -- mouse jigglers

is what they are called. jonathan: i have never heard of this. lisa: neither have i. sri: mouse jigglers, banks wanted to make sure that their employees were actually working, so they started tracking keyboard strokes and mouse movements, which is why technology came to the aid of wells fargo because they decided a $20 hack on amazon would eventually help. it hasn't worked out that well. wells fargo has fired a number of employees, and we continue to see more filings pop-up for the same activity. this simulation of keyboard activity. it is not clear if this was at home or in the office. let's assume it was at home. not a good idea, but at the same time, as bad as it sounds, i will look at the other side of the coin. do we really think that the best way to track productivity is

making sure your green dot is on? jonathan: i'm completely with you. i find the story bizarre. you either know what they are producing or you don't. if they have just been at home shaking their mouse for 12 months, which i did they haven't wells fargo? that is what i would like to know. lisa: i have a theory, i was thinking there were probably some people with no productivity, and the buses that we will find out if it is the jiggler, and then they saw the mouse movement was like this, they rated their homes, and they found the mouse jigglers and that was the justified cause for the firing. sri: i don't know if i buy wells fargo fbi level sophistication. [laughter] but the bigger point, would you rather make sure that he is green dotted or on tv when he is more productive? and that is my point, it is not about how much time you spend on your keyboard but what you ultimately produced. lisa: is he a lobbyist?

jonathan: yes. sridhar natarajan, thank you. let's get you an update with your bring bird -- with your bloomberg brief. dani: investors back to elon musk's 56 million -- $56 billion pay package and the move to texas. the announced the results at their annual meeting in austin on thursday, and 72% of the votes approved it. it was seen as a referendum on musk's leadership after slumping sales and a drop in the stock price. the defense department left its spacex blue origin and united launch alliance to compete for as much as $5.6 billion in contracts for defense lunches. the pentagon said the companies would be able to compete for contracts through june 2029 with the possible option to extend it another five years. previously, only spacex and ula were able to bid for national security missions. rory mcelroy is in a strong

position after the opening round of the u.s. open at pinehurst. his first round 65 leads him in a tie for the lead with patrick cantlay. scottie scheffler shot his worst opening round of a major in two years. tiger woods shot a four over par opening-round. jonathan: imagine what a beautiful love story this could be. mcelroy wins on sunday, beautiful. lisa: no. jonathan: not down with that? lisa: do you think this is a happy reunion? jonathan: i think this is a happy royal mcelroy. he is dialed in -- very mcliroy. he is dialed in. lisa: so he said, come back. jonathan: i don't know anything about people's private lives. do not want to get involved at all. very happy to see rory happy.

lisa: that is so sweet and genuine. jonathan: that's all i care about. next, divided fed starts to talk. >> the fact they are having this internal discussion and uncertainty i think the markets should know about. it is a very tenuous period. nobody knows for sure, and this reflects that. jonathan: that conversation next. live from new york, you are watching "lumber surveillance." ♪ -- you are watching "bloomberg surveillance." ♪ a lot of code. if an application needs to be modernized then you'll need time, resources... and caffeine. if this sounds daunting then use watsonx code assistant ai designed to multiply developer productivity so you can generate code quickly. let's create a more modern foundation for business, with watsonx code assistant. ibm. let's create.

jonathan: four days of gains on the s&p 500 this week. another record high the close thursday. we are down this morning by .50%. bonds are still rallying. the 10 year, 4.2016. i divided fed begins to talk

this morning. >> the fact that they are having this internal discussion and uncertainty i think the markets should know about. it is a very tenuous period, nobody knows for sure, and this kind of reflects that. i don't think that is necessarily bad. on the downside, it is a matter of when? will we be there sooner or later? they are going to ease eventually. jonathan: here's the latest fed speak, following a week of cooler inflation data and the fed dialing that great cap expectations. the chicago fed president, as well as the cleveland fed president sitting down with michael mckee later this afternoon. the team at barclays maintaining their cuts for one cut this year , continuing to say that they think the rate cut will take place in september. "our baseline is predicated on inflation gradually moderating

and the economy gradually slowing." pooja, i would like to summarize the data this week. ppi, downside supplies, and then what do you make of the claims print yesterday and how concerned should we all be? pooja: thank you. good morning. i think we really did take too much signal. the fact that it did tick up for the week, i think if that trend continues, it would have continued moderation with market conditions, which really is a welcome sign. i think we should all remember labor market conditions are very strong, whether you look at the three month moving average or even the latest payroll report. i think some moderation is welcome, particularly from the inflation standpoint. lisa: bny said the market is

more dovish than the fed. it seems like that based on the bond market rally. you can see that into some of the applied cuts. do you think the market is wrong to be so? or is the fed trying to have a hawkish tilt so they don't get it wrong to reverse what happened the end of last year when they indicated they would cut rates? pooja: i think the markets do not necessarily just try the baseline. they will price risks around that, so the pricing is what it is, and as far as what the fed signals, i think it is a balanced sort of message. you are right, they have been burned once, when there was a dovish tilt in december after week inflation, and then look at what happened this year. they do not want to make too much of one data point and the totality of the data they keep talking about, whether it is

activity and labor markets, has not relationally material easing. -- has not really shown a material easing. what they showed on wednesday was caution, and they would like to gain confidence that things are moving in the right direction. lisa: what you make that of people who say when you put it together, core pce, a key metric the fed looks at, is predictable if you have the endpoints of ppi, cpi, and other data that has come out? people are mapping out something akin to a 0.1 increase in course -- and core pce, which would bring get to 2.6%. how much do you see that is given a green light to the fed as early as september, even though that is in your base case? -- that is not your base case? pooja: our own forecast for core

is 1.3%, so a very soft looking court pce inflation print. with that, we like to say that the fed is not data point dependent, and it came off to us that clearly in general that they do not want to leave too much of one data point. he did say that he welcomes the inflation outcome and that is a step in the right direction. so, like we have written, should inflation outcomes continue to move in the right direction, i.e., soft, i think that would open the door to a rate cut, but it is the may pce alone. jonathan: somebody is here, i wonder how many agree, i'm more interested in how we end the year on unemployment that inflation. i sense from a lot of people on the program that they have far

less confidence by were the labor market will be by year end and how inflation will track. the fed came out and said we will end unemployment where it is right now, and i'm trying to work out how much confidence you have that it will stabilize at these levels for the next 12 months plus. pooja: that is a hard one. we work with the indicators that we have. clearly, we have not seen much by the way off of the unemployment rate. even at some point in time, we have ticked higher, but it is clearly not something that is weak by any standards. and i think this is a labor market that is still running strong. we look at the data as much as we can. of course, we have confidence that a lot of it is concentrated in the private sector. particularly education and

health care, hospitality, so we have heard the arguments that it is pretty narrow, but the fact that they continue month on month is one thing. second is we are looking at the jobs data. job openings have come down a bit but still quite elevated. if anything, it looks like the momentum is still there. so we are looking for any signs of tracks. we have not seen so much, so, you know, we don't see a big spike in the unemployment rate at the end of the year. jonathan: appreciate it. pooja sriram. coming up, tobin marcus, tosha keeney, and michael zezas.from

new york city , this is bloomberg. ♪

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can't believe that garbage is still coming in. that is so false. frustrated with your online search results? call reputationdefender today to join tens of thousands who have improved their online reputation. get your free reputation report card at reputationdefender. com or. call 1-877-866-8555. the u.s. exceptionalism story probably comes through most clearly in this ai boom that we're seeing. you can see investors moving out of cash again, we think, to high quality equities. if you look at the comprehensive look at the economy, it's still relatively strong. it begs the question why even project rate cuts at all. the markets effectively have priced in a permanent of this higher growth higher inflation and higher rate world where we're headed just looks like there are more positives to offset the challenges. and the negatives that appear. this is bloomberg surveillance

all-time highs on the s&p 500 coming into friday and the s&p slightly pulling back by .60%. we continue with the rally. the two-year and tenure, down by 20 basis points. it is the data, and other dots. lisa: it has to do with u.s. exceptionalism. it is quite the opposite, and that is interesting, given the fact that a lot of people thought people would have a put on markets. this is not lifting votes, not bonds, this is in the u.s. and non-us tech. jonathan: bonds over stocks. the fed dots look off-site

relative to the incoming inflation data, and the hope is that the fed rhetoric shifts quickly on the risk is that it does not. lisa: niel is on -- neil is onto something. he has been highlighting that this is not a good kind of trend. and he doesn't see a lot of the weakness being linear, so if you get a weakness like this, it is a lagging indicator and there more coming down the pipe. i would argue that stock markets are sniffing that out. it is not this we are boring kind of excitement like let's get to the party, jay powell is there with the keg. this is not the same market we talked about six months ago. jonathan: i said it was that a number dots, a direct quote from citi, this is what andrew says about the labor market, labor market reports to businesses

trying to reduce labor costs. i sense from the people we speak to that they have more confidence about where inflation is going to be year-round, and when you asked them about the labor market, that is when the are split. we have had a series of fix on that data point, i know, but when the federal reserve is still forecasting unemployment year-round from where it is right now, that is where there are some real gaps. lisa: especially given the fact that the fed chair doubted the only data that came out. it was probably overstated. people made sense of the fact that the two surveys were different, can you make sense of it? he said, no, i cannot. we are not data point dependent but data dependent. right now in markets, there is a bigger risk on the margins tilting toward may be we are underestimating how much weakness there is in an economy

that has so far held up but is showing signs of slowing down a touch. jonathan: that is just 2024. let's talk 2025. the former president talking up a corporate tax rates coming down from 21 to 20. talking about paying for income tax cuts with the income from tariffs, which is an interesting report we've had the last day. lisa: so what will he go through with? you asked if this will be a business friendly republican party? is this a business friendly donald trump? tax cuts and less regulation might be, tariffs absolutely not. some increasing geopolitical tensions, fewer immigrants, given that a lot of people said that they need them to keep growing at the pace they have been. this is a soup, and when we talk about what happens in france, you have to wonder if the u.s. is six-month behind with policy uncertainty at the ultimate realization that there are no plans to pay down the deficit,

zero, so what kind of rumors there to make additional stimulus? jonathan: in europe, deficits matter. on the s&p 500, equity futures negative by 0.60%. there is your euro weakness, 1.0697. down by 0.40%. tracking the french 10 year, german tenure spread, capping out to 76 basis points. we were close to 20 not so long ago. that is the week so far, the widest level cap back to 2017 -- gap 2017. lisa: it is the biggest move we have seen going back to late 2011 during the height of the european debt crisis. there is a whiff of that underpinning this with the idea that maybe there is a threat to the eu and the idea that these nations will pay back their debt and be ok with that. jonathan: the misplaced sense of french superiority getting

smoked. lisa: really?since verse the food, then superiority? jonathan: those are not my words. that was the world bank president. lisa: do even know what the differences between a nationalist? or a chauvinistic nationalist? jonathan: i've never heard of chauvinistic nationalism before. lisa: i kind of like it. like you don't want potatoes? chauvinistic nationalism. jonathan: ok, coming up on why this is a strong economy. term pictures -- trump pitches lowering the tax rate, and we catch up with tasha keeney. four days of gains, four days of all-time highs. optimism driving stocks higher in bond yields lower. tom kennedy writing, "while our

outlook is constructive, we acknowledge two main sources of uncertainty, geopolitical risk, u.s. election." tom, good morning. some of the subjects we just discussed we will not throw your way. let's talk u.s. politics. why is that a big uncertainty and why does it matter so much? tom: you can look back at history and see that elections don't have lasting impacts that this time might be different. you can look at what you are talking about, what is going to happen? i don't see either party showing restrictions or inclinations that they will dial back deficits. he could have had the conversation five years ago. maybe it is too bullish of the statement, but is it possible to do this and say it next year? we need to talk about what can you do about it? what is in your control? jonathan: what can you do? tom: look at the deficit, either revenues have to go up, taxes,

or cut expenses. each one is more likely? for wealthy clients, taxes go up. that's the easy part. and with many ratios of normalizing, that is the place to be. the other risk is around tariffs and the decoupling from china and how it is handled. president biden and trump are converging a little bit with the tariff announcements from president biden recently, but those are symbolic. it is indicative of where the u.s. needs to be coupled over supply chain is so important, ev's, batteries, national security type infrastructure. it will take a lot of. where is it going echo, u.s., latin america, -- where is it going to go? u.s., latin america, canada. lisa: i love speaking to you, i about potential deficits, the loss of u.s. supremacy, bond yields surging, liz truss comment in the u.s., and you are

like, maybe just be more tax efficient because they could go up. there is the issue of people are overreacting at a time when we had a 30 year option yesterday that was incredibly strong following a tenure option on tuesday that was incredibly -- 10 year option on tuesday that was incredibly strong. people seem to be buying the debt. are you saying it will not affect yields? tom: the point is to acknowledge that the risk has been around a while and it is possible it will be around a while. as a citizen, just as worried as you are. it doesn't make sense, but we focus on how to invest and i don't see evidence it matters yet. bonds are still driven by fed outlook with high statistical formation. third, the global trade is still happening for the most part. i'm just giving you the checklist of what i would look for if this was not becoming a risk. if it does, we have to adjust. in the meantime, the path you need to insulate yourself with,

the path is higher taxes. lisa: jeff hughes started the show by saying that the market was more dovish than the fed. some people are looking for havens. what are they? u.s. government debt because it is better than other nations, and u.s. tech companies, which goes to the point of increased spending on the heels of rotting out. is that -- broadening out. are those dehaven trades? -- are those the haven trades? tom: haven trades are where i can feel confident that is this is should exist should rates stay higher for longer and then lastly, where are these long-term trends that are going to persist for multiple years? i think it is around ai, and a lot of people think they have exposure. i think the next leg of that is an ecosystem that is necessary for the computer power, the land

and infrastructure, so there is an industrial renaissance happening in the developed world. jonathan: french stocks on sale. down by 2.6%, the likes of tou thao having a difficult week, down 2% on the session. airbus at 2.5, cac 40 wiped out the gains for the year. i bring up those names are not the banks because they are full of companies people like. they are getting hammered because of french politics. does this make sense to you? tom: it makes since of the indication here, that the market will have to reprice assets without good, constructive growth. jonathan: is this sort of like the euro is getting price down again at a time when everybody thought that maybe it would get priced in for good reasons? tom: it is back to what lisa is talking about, you will flock to the place with the most confidence and safety.

are these good companies? absolutely. do i think they will drive asset prices? no. i think the fundamentals of economics will do that. our outlook is about a strong economy despite fragility's and we focus a lot on fragility's, but don't look to the fed not saying, i hear you, we are worried about the outlook, too. and if the outlook worsens, we will cut rates a lot. it is the flipside of what you said prior, i'm more concerned about where the unemployment rate is going to be, but the fed tells you that they will cut rates even if the labor market stays tight. so if it weakens, they will cut more. lisa: so there is the argument that is controversial, which is that fed rate hikes haven't had that quick or direct impact on the u.s. economy and that a lot of the decline has come from supply demand and rebalancing. what is to say that rate cuts

are really going to help all that much to really save the u.s. economy if we start to see a real material slowdown? tom: the notion that higher interest rates are constructed for the economy and that folks are saving the work to have more disposable income to spend doesn't hold much water. you can see that 5.5% cash trade just under is very attractive for safety nets in the country. any market is accumulating quickly, and at the same time, rarely do folks want to borrow. inquiring is up about 1%. we have seen it that low, historically in a recession, to say interest rates don't matter misses the bigger picture of what is happening. durable goods spending, housing spending all down. should you cut rates for average americans, you are going to support their biggest asset, crazy fact, the average american

has 70% home-equity at this point. all-time high. prices could come down or may rates come down and support the equity going forward, so i think interest rate cuts will be powerful to support the economy should this bigger risk happen. it happened at the fed last year and that is part of the reason why i think stocks have been so supportive. jonathan: tom, good to see you. thomas kennedy of j.p. morgan private bank equities. we are down by 0.60% on the s&p. here is your bloomberg brief with dani burger. dani: the yen weaker this morning after the boj made investors wait to get another month before getting details on the plan to cut bond purchases. some of that weakness paring. the boj cannot lay out a plan and hike at the same meeting, which means a hike will not happen until september. >> there is a danger, the more

the boj gets behind the curve, the danger is that they will have to tighten policy more aggressively at some point in 2025. dani: he went on to call the decision disappointment. he joined me this morning on bloomberg brief, which you can catch weekdays at 5:00 a.m. eastern. a settlement rejected between visa mastercard and retailers to cap slight fees. one of the merchants charge consumers more for transactions involving esa or mastercard. -- involving visa or mastercard. wells fargo fired over a dozen employees after investigating claims that they were faking work. a review found that they were simulating keyboard activity, creating the impression of active work with me last -- work with things like mouse jigglers. a company spokesperson said "wells fargo holds employees to the highest standards and is not tolerates unethical behavior."

jonathan: is it unethical if you would just like to leave the screen on? you have done your work. lisa: and then you would like to jiggle the mouse? jonathan: i've done my job. unproductive. lisa: if you have been productive -- jonathan: who are you speaking to? lisa: someone out there, are you going to be looking to see about jiggling the mouse? no. jonathan: i have never heard of them. i would like to see how they work. lisa: really? jonathan: i'm going to buy one. lisa: you think it is noisy? jonathan: we will find out and buy one. next, trump's pitch for a second term. >> i would like to say thank you to the republican senate and the house, as you know, with the full republican house today, we had a tremendous meeting, and there is great unity. jonathan: a serious conversation about policy, and a less serious

conversation -- you didn't see those comments? they happened, but apparently they did not. lisa: not a good look. jonathan: more on that next. beautiful morning in new york. some are really getting going. from new york, this is this is bloomberg. ♪ you know what's brilliant? boring. think about it. boring is the unsung catalyst for bold. what straps bold to a rocket and hurtles it into space? boring does. boring makes vacations happen, early retirements possible,

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jonathan: waking up to a tough session in euro, cac 40 down, down another 2.6%, french banks with losses of more than 10% this week. some of that is following through u.s. equities, down on the s&p. we did close at an all-time high yesterday on the s&p 500. the bond market rally continues. three or four basis points, 4.2074. lisa: people are looking at the potential for the fed to cut sooner. you raise the question, is this

because of inflation or the width of weakness in the labor market? ultimately, that will become the question. jonathan: we will continue to do that for you. under surveillance, trump's pitch for a second term. >> what is happening to our country is a great concern to the group of people standing alongside of me. we have great unity, great common sense, a lot of very smart people, and a lot of people who love this country. i would like to think the republican senate and the house movement. as you know, with the full house, republican house today, we had a tremendous meeting with them also, and there is great unity. jonathan: donald trump he will over the corporate tax rate to 20%, reportedly making the comments during a meeting in washington with around hundred u.s. ceos, including jamie dimon. with a trump win in november,

the good news for markets would be frontloaded and the bad news would come later in the year, tobin marcus writes. he joins us now. i will ask about policy. when you say frontloaded versus backloaded, what policies are you pointing to? tobin: first of all, i have nothing but good things to say about wisconsin, so ask away. in terms of the good news that we think is frontloaded for markets, largely we are thinking about deregulation. the clearest site of things that trump is proposing to do is rolling back a wide swath of writing regulations, particularly in the traditional energy complex, so those other sectors we look at as the likeliest media winners in the near term aftermath of a trump win, but when you look at the broader things he proposed, including things people are less certain he will do, like his aggressive tariff agenda, like some of the fallout from paying

for the tax cut extensions they would like to do, which could entail inflation reduction act, energy rollbacks could entail health care cuts, all of that will develop later in the year. that is really the biggest concern, and i don't think that is day one, put that stuff into effect kind of agenda. i think that is stuff where they will do investigations, threaten, negotiate, with tariffs not actually taking effect until late 2025. lisa: a lot of people think of immigration is more of a social issue but a lot of the ceos are probably concerned about that, in part because of how much this has helped support the labor market without maybe commensurate wage increases. rbc put out a report that said if some proposals went through that had been floating out there, 50% decline in immigration as possible.

how much is this factored into discussions you have with different executives and people in the industry as a likelihood, not just a possibility? tobin: it is something we have talked about a lot. i agree there has been growing market focus over the year to the extent to which immigration changes bidens policies at the border and has reinforced growth and raised the breakeven number for what we can have in terms of payrolls without having strong inflationary impact. that is largely the exception to the overall idea that we are arguing that the good news is frontloaded because we do think that in the first 100 days, we will see an expansive agenda. the thing that is most concerning that trump can do is to end the humanitarian programs biden has put in place on a quasilegal basis, people who are eligible for work visas after

that, that is a direct flow into the labor force. the broader swath of things, including policies that are most concerning to corporate leaders in terms of visas, immigration, some of that stuff is more subject to litigation. throughout the first trump term, there was huge amounts of litigation on what he attempted to do on immigration. i think we will see that this time around. i think we will see a lot of proposals the first 100 days, but i think a lot of that will end up in courts for quite a while. you saw the most concerning stuff in terms of promises they are making around internal enforcement and deportation, trying to round up millions and deport them. that is operationally challenging, in addition to legalities. jonathan: i wanted to finish on the deficit, in europe, there is a conversation that takes place that doesn't happen in the u.s., people come up with the proposal

and then places like the u.k. say how is it funded? france will have the same experience based on their bond market. the u.s. has always had the privilege of they don't have to worry too much about that. something interesting happened the last 24 hours. the president suggested cutting the corporate tax rate -- the former president suggested cutting the corporate tax rate from 21 to 20, talked about earnings from federal taxes, as well. we understand that, but he talked about how to pay for it, which i think is pretty new. he talked about maybe using tariffs. can you give us an idea of how much money you could raise from ramping up tariffs on u.s. imports? tobin: absolutely. and i think for markets, this is a lot of what we are worried about around the fiscal debate. we talk about extending expiring tax cuts, and most of that, high income marginal tax cuts is not going to be relevant to markets,

but we think the conversation about how to pay for it is relevant. we think there need to be some offsets, and even in unified republican governance, they need to get that for trillion down to 2%. i do say that at some level, it is a recognition of the challenge they will have. they have had lower numbers in the past, and what percentage point cut is not president. that is saying i would like to get it lower but i know it will be challenging to pay for this. the tariffs on a static basis with the policies could each raise about $2 trillion. jonathan: tobin marcus, i have got to go. ♪ i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar.

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jonathan: equity futures on the s&p 500 are negative by 0.5%. nasdaq 100 down a quarter of 1%. the vessel is struggling down by 1.2 percent even with the screen looking like this. get to the bond market, the two-year is rallying, the yields are lower, down by four basis points on the 10 year. the small caps are not getting a bite at all this morning. lisa: i love that you point out that the russell 2000 isn't getting any love despite the rally and bond markets. there was a discussion how the first a fed rate cut would be a rallying cry to go to small caps since they were so leveraged. that is not the case and you have to ask why. i think you've answered it by

saying we need to focus more on the labor market to really understand how fragile, what is behind some of the disinflation we've seen? jonathan: one take away from the news conference with chairman powell is that he thought that payrolls was overstating the strength of the u.s. economy. to what extent, he can share that himself, but we all have the view. to see claims pop out to nine month highs, it gets you more focused on what really matters. i think it's ultimately the labor market. lisa: we just why you're not seeing a broadening out and the rally is dominated by big tech thought of as the safe haven in the equity market. to me, that's significant because this is getting more fragile in terms of the rally, held up by fewer prongs. what point can i continue? maybe indefinitely, but we are looking at an economy that says u.s. exceptionalism with exceptionally strong growth this may be u.s. exceptionalism because everyone else is flat on their backs.

jonathan: the euro, 1.07 and briefly in the 1.0 six's. you can thank this spread, french-german gapping out to six basis points. the widest since 2017. the new concerns, a new one, the parties on the left forming an alliance making it even more confusing what will happen in the elections in a month or so. lisa: looking likely that emmanuel macron won't get a majority like he was hoping for. a lot of people are shaking their heads at the timing because it is coming not only ahead of the g7 where leaders are ahead of a nato meeting that will be focused on ukraine. a lot of this reminds everyone that this is not necessarily a world where the u.s. can really decline against so many other people. tonk kennedy, i said to him after our hit, you are seeing

the dollar strengthen. yeah, what else will counter it? jonathan: the euro struggling to counter it. 16% on socgen. 13% on bnp paribas. french banks have had a difficult week this week. lisa: we should bring in jay polaski. he needs a rallying cry. he is all in on european banks. jay, tell us what you think and why they will come roaring back when we shouldn't leave them for dead and one election won't necessarily shake the confidence. jonathan: somewhere with a tin this morning bartending that is not happening on the screen. continuing at the g7 in italy, by then meeting with the pope and the italian prime minister today coming after he signed a new security agreement with ukraine. at the same time, the former president is making headlines on this side of the atlantic on what he may or may not do in the next 12 months. lisa: domestically, which has been a distinction we've talked

about. this is foreign relations. domestic will get peoples attention. you are right to keep bringing up, we are hearing these proposals, what does this do for the deficit, for the ability to spend, for the u.s.'s relation. talk about increasing tariffs the paper tax cuts that president trump proposed. could you've and create a model for that? you don't understand what the retaliation will look like, let alone what kind of trade will get through. jonathan: you are assuming that the imports remain consistent and people don't back away from those imports if they get too expensive. i know that there's always a risk trying to read the tea leaves around the reporting around the former president that there is a tell. the fact that the former president is reportedly aware enough that you need to focus on this as an issue going into november tells you everything that you need to know about november. i won't say that the days where america could behave recklessly

with its deficit are over, but i think that we are getting closer. i know that this is stating the obvious, but were getting to a point where it's closer that that's coming to an end and you are hearing it hearing how the leaders are talking about the future. lisa: that the deficit is a campaign issue is a throwback to the past and that says a lot. that they give not to the deficit but then give -- nod to the deficit we give no way of paying it back gives you a sense of jonathan: where we are. governor away to saying the boj could hike interest rates in july defending on the economic data. dollar-yen is back down to 157, 21. talk about being dazed and confused around the federal reserve, dazed and confused around the boj later this month. lisa: everyone was expecting them to saying no more they near-term move. the likely hike from the bank of

japan. i wonder what the pushback is like domestically. they are keeping the yen awake and there are concerns about stagflation. two people welcome tourists? not really. we've heard a lot of pushback. it's good for the economy but other than that not great. it is kind of head scratching why they are not more concerned and looking for moves, talking about the bank of japan, that could offset some of the weakening that a lot of the intervention hasn't staved off. jonathan: talking about foreign-exchange and tourists, i was looking at the euro at 1.06 and thinking something similar. lisa: i want to talk to resorts at the u.s. losing customers to europe. i actually think that that's interesting. how they are trying to lure them back, like french night. jonathan: french night at a u.s. resort? ok. green lighting the company's move to texas, the stock is having a decent 24 hours.

constructive on the name writing that our confidence in tesla's ability to launch a robotaxi network within the next five years has increased considerably. we can catch up with the tesla bull now. i want to start with the shareholder votes that have been going on for a number of days. do think that we can leave this issue in the past and move on? >> well, i am not a legal expert. we know what investors want and it can now be up to the courts again. what i will say is that i think it is positive we saw investors considering the proxy and putting in their own votes in voting for themselves. when we look at tesla we want elon musk to be at the helm, especially when you consider the transition to fully a thomas driving -- fully autonomous driving which we think will drive the value of the company over the next five years. jonathan: can you say why you

think that is the real deal and we will see it quickly over the next five years? tasha: we already have robotaxis, waymo, alphabet's company, is in phoenix, l.a., san francisco. but we don't have them at scale. tesla could be one of the first to offer a service like this at scale because they have a massive data advantage. they are collecting information from customer cars that helps them train models. they have more cars on the road than any other autonomous effort i know of in the u.s.. this is their plan. they are layering on software updates incrementally. right now it is the full self-driving software available to customers and eventually customers will be able to take their hands off of the wheel. last night, we heard elon musk extensively talk about the robotaxi effort where as a customer you can sign up your car when you are not using it. likely, i think it will be a

fleet model. you will have perhaps another company that owns and maintains the fleet and tesla collects a take rate off of the per mile revenue. i think that this could have a very attractive margin, higher margins than the current business model today which is mainly selling vehicles. this will be a recurring revenue. again, we think it's very attractive from an economic perspective to tesla, but more importantly it will change all of our lives. i think this is one of the greatest ai projects in our time, and we are so lucky we get to witness it. lisa: are real questions about elon musk's leadership and whether he is focused enough on tesla and diverting some of the chips that have honestly gone to some of his other companies to get some of the robotaxi efforts fully underway. why do you think that that's not a concern? tasha: i actually think that it's a positive that elon musk runs a number of companies.

we've heard them talk about this. it is great for talent acquisition. we have seen employees move between his companies. if you are a top ai engineer, you're not going to get bored working for elon musk. the chip story, automakers actually negotiate on behalf of their suppliers because of the economies at scale. they have better negotiating leverage. having these companies, many of which may use products, are actually a positive. we have seen manufacturing innovations come from spacex that bleed into tesla. you have to look at the tesla results. when you're talking about the pay package, the stock has risen over 1000% over that time period, so he has delivered shareholder value. i'm so excited for the future because we are on the cusp of autonomous driving today. lisa: is there anything that could happen that is a potential

event in the next year that could shake your confidence in tesla? tasha: really, what i'm looking for is for tesla to cross the threshold into fully autonomous driving. we have seen them tease the robotaxi service in the past earnings call and in the event last night. i'm looking for the launch so that we have an event in august from tesla that is going to look at the purpose-built robotaxi, the next-generation car. i don't think they need the car to launch the service because the current fleet is capable, but i'm looking for details at the event about what the business model will look like. we heard some of that last night, so we know that they are thinking through the backend logistics of how this could work. they could cross this rush holt in the next year or two and that's the catalyst i am -- this threshold in the next year or two and that's the catalyst i'm looking for from tesla.

jonathan: it gets attention for sure. can you tell me the biggest risk factor associated with your call? what could change your mind? tasha: certainly, i think that solving autonomous driving is very difficult. it's hard to time that exactly. as you mentioned, in our blog, on the ark invest website, we think that this could happen in the next five years and our confidence has increased with the advancements in ai and the tesla improvements they rolled out the customers who own vehicles, the software. that is a risk. we are confident they can do it, but it's a difficult problem to solve. what gives us confidence from last night is if the pay package gets totally approved, we know the elon musk will be at the helm of this company for at least five more years. he has limits on when he can exercise his options. i think that that's another key piece. we want elon musk to stay, to be

incentivized. i think that that's ultimately a good thing. jonathan: who do you think controls the fate of this call? tesla and their ability to execute or the regulator, local authorities, who will ultimately have the decision to give this the green light or not? tasha: great question. i was going to touch on that. often people are concerned about regulation. i actually think the more difficult problem is making the technology work and scaling this type of service. the u.s. has been surprisingly lenient with a thomas driving because it has been up to the states. we have seen -- lenient with autonomous driving because it is up to the state. we have seen the software suite driven. we think they will be able to statistically prove to regulators that this is safer than humans. we have done research. if you look at the full self-driving software suite, the last time they gave us a statistic a year ago, it looks like it was five times safer

than human-driven tesla's and safer than the average car on the road. we are already seeing proof points. it could get even better and elon musk has hinted that they have line of sight to maybe a 4x movement on that and that will matter to regulators. we all already are seeing those -- we are already seeing those safety points. jonathan: you know how this works. you can go through the stats and make the case that technology is safer than human being behind the steering wheel but unfortunately what happens when you have the one single fatal accident it is the front page of the newspaper and it sets everything back a long time. lisa: people like to think that even if they can be distracted, look at their phone, text, have an extra beer, that they are somehow better off than a robot who has a better track record but can sometimes malfunction which is why we've seen trials band particularly in the southwest united states. jonathan: it is a massive call coming from ark on the

particular name. your bloomberg brief with dani burger. dani: luxury labels are discounting products like never before in china with concerns growing over unsold inventory. this month, chinese shoppers can snap up a small beige crocodile pattern version of the balenciaga iconic hourglass handbag for 35% off. other labels are doing something similar. some have slashed prices by more than half on domestic platforms. microsoft is withdrawing a new ai feature on the windows software for new pcs. recall creates a record of everything that people do on their computers. microsoft says that it will only be available in the windows insider program is set of all new computers. researchers had criticized recall almost immediately after it was introduced saying that bad actors could access records gathered by the tool and stored locally on a user's pc

the faa is investigating counterfeit titanium used for parts for boeing and airbus aircrafts. a report from the new york times says that it was sold using falsified documentation claiming to verify the authenticity. the claims came from aircraft manufacturer spirit aerosystems. the investigation was launched after small holes were found in the material. as of now, it is unclear how many planes have parts made from the material in question. jonathan: more from dani in about 30 minutes. next, it is the data not the dots. >> inflation, which we are all focused on, has eased considerably. i certainly expect further progress to be made on especially rents and other critical price pressures receipt over time. -- recede over time. jonathan: i don't know about these cozy fireside chats. i would preference it to be a

journalist with hard pressing questions to hold them to account. lisa: what is the goal? we can discuss. you can raise your hand for it. jonathan: i'm not sure they want that to happen. lisa: i would. jonathan: i know you would. from new york city it's beautiful outside. let's wrap up this weekend go home. [laughter]

jonathan: equity futures, staging a little bit of a recovery this morning. we were down by eight tens of 1%. we are negative by about .4%. it is a break of 420. it is 4.1997, down by four basis points on the u.s. 10-year. the euro is weaker, break of 1.07 this morning. 1.0698. the concerns about france are still very much front and center when it comes to the european story. this morning, it's the data not the dots.

>> inflation, which we are all focused on, has eased considerably. headline inflation is down almost two thirds from its peak and core inflation has also trended down. i certainly expect further progress to be made, especially as rents and other critical price pressures receipt over time. jonathan: inflation data boosts optimism that the fed will be able to cut rates later this year. "our economists see three cuts this year. the cpi number helped. we see treasury yields turning lower towards 4% into year end. marco, good morning -- michael, good morning. shouldn't inflation being self to be the big takeaway? or is it jobless claims at an all-time high? does that spook you? michael: no, inflation should be

the focus and credit to the morgan stanley economists who have been consistent all year. there is a lot of data earlier in the year. a lot of confidence that inflation will be coming down. we are seeing that in the data. it is consistent with the idea that we will get a cut in september and more to follow after that. that should keep treasury yields moving lower. that should drive a lot of confidence for fixed income investors overall. jonathan: i want to play with the word confidence. a lot of people talking to us at the moment don't have a lot of confidence in the forecast for unemployment. what is interesting is that we used to call the forecast aspirational and they materialized in a favorable way. that isn't to say that it can't happen, but how probable is it that we end with unemployment at the end of the year where it is right now? mike: it is more likely that you see it tick up consistent with our economics forecast, but there is a lot under that number

in terms of the size of the labor force.we have seen the size of the labor force go up quite a bit with immigration. as long as inflation is coming down i think that the broader narrative for fixed income investors will be that we feel more confidence that the next move from the fed is not rates higher, it will probably be rates lower. if it is one cut or three cuts, we think it will be three cuts, the total return tailwinds are pretty substantial in that environment. it isn't just government bonds. we like corporate credit in that environment. you are cutting not just because the economy is weak, because you are getting from restrictive territory, solid credit fundamentals because the economic backdrop is good. even though you have tight spread you can earn the extra spread and get better total returns. lisa: i can understand the logic and am synthetic to it, but other people say by the end of the year there will be other issues. you wear a couple of hats at morgan stanley and one is professional deficit worrier, i

wonder how to counteract that 4% call on benchmark yields? mike: the potential delta in deficits is probably more than 2026 story or late 2025 story. that is because the mean conduit for deficit expansion or contraction is whether or not the provisions inside of the tax cuts and jobs act expiring at the end of 2025, if those get extended. a lot of that will be a function of the election outcome. we think that it is base case that there will be an extension of a lot of those provisions. so, it shouldn't be surprising that the deficit will look higher than the government is projecting right now. again, that comes into play 12 months from now after we've collected a lot of other economic data that will interact with markets. lisa: to sum up what we are seeing in markets and conversations we are having today, it is like u.s. exceptionalism is being reinforced by dysfunction in

france. is that what we are seeing? the worries are put to bed by everybody else being a lot worse? we are looking at a scenario where the u.s. will be just fine? mike: i don't know that i would go that far, right. i think that we have a broad story where the economic fundamentals look good. the growth story is pretty good. inflation is coming down. we have a major variable, a political variable of our own to deal with, the u.s. election at the end of this year.that could change the perception in terms of the economic trajectory in 2025. beyond that, the story through the end of the year, which is a more reliable one, is in terms of the economy broadly supportive of the fixed income market. jonathan: i need your thoughts on the tax proposals floated in the last 24 hours. we saw putting numbers together, but if the former president said that we can fund income tax cuts

on the revenue from tariffs, how would you think about the numbers around that issue? mike: the third-party estimates for a broad 10% tariff come you get something like $350 billion of revenue. but, that is making a very big assumption that the actual price level of imports wouldn't change, which most economists would tell you is a bad assumption to make. you don't know how much money you would actually generate from that. could you use it as an offset? in a situation where republicans win the presidency and are looking to extend those provisions of the tcja, and the court of public opinion they will make the argument there is some offset. if you look at what it does to the deficit on an official basis it will be less of an offset. the way that we have it sized up is republican outcome scenarios, particularly a republican sweep, probably lead to bigger deficit

outcomes in 2026 and beyond. the more that you skew towards democratic sweep the smaller the deficit increase. we have deficit increases across the board marked in no matter what the election outcome is. jonathan: if you get one sweep, it doesn't matter the color, it's not great for economic outcome? lisa: maybe 2026. jonathan: we are getting closer to that moment. lisa: the deficit. we have been doing it for 30 years. it's true except how much is u.s. exceptionalism being kept alive by french fragility? jonathan: coming up, -- from new york, this is bloomberg. ♪

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>> the theme is still patients. the fed wants to see more data to make sure inflation is convincingly moving lower. >> there is no clear indication they will need to rush into cuts. >> they are trying to tell us

they are keeping all optionality open. >> even if there was a shift in the pace to get there the direction of travel is still towards a rate cutting cycle. >> it is a very tenuous period, no one knows for sure. this reflects that. i don't think that's necessarily bad. >> this is "bloomberg surveillance" with the jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: did you ever play odd one out as a kid? spot the odd one out? a list of things and you spot the odd one out? lisa: we called it something different. it was just two pictures and you had to figure out what was different or missing? jonathan: for conversations, the sophisticated market-based version of that. i will read headlines and you can say, which one doesn't make sense. jobless claims rose to the highest level in nine months. number two, ppi delivered the biggest decline so far this year. number three, cpi stepped down for a second month in may. number four, the fed reduced the

median dot from three cuts to one. which one stands out? lisa: this is the financial version of an s.a.t.. why with the fed cut their expectations for how much they will reduce rates if you see disinflation, potential weakness in the labor market, etc.? is that correct? jonathan: i am saying that something doesn't add up and that is the piece that doesn't add up. lisa: except if you look at the end of last year conditioned by experience and in the first quarter of this year there was hotter inflation than many expected, but i get your point. we seem to be at a tipping point which is why markets are in a different place than the fed seems to be and are looking past the hawkish tone saying that you guys are just getting us. -- just kidding us. jonathan: the fed dots will look increasingly offside. the hope is that the fed's rhetoric shifts quickly and the risk is that it doesn't. lisa: it seems like the market is moving with or without the

fed. right now the fed has no edge and it's unclear exactly what will tip the balance. what i find interesting in this week's market move is that it is not unabated strength, an unabated cheer rising through wall street saying that if the fed cuts rates this will be a rally that ignites another wave of this recovery. this is something different with an underperformance a lot of the consumer-facing sectors and outperformance -- outperformance of a lot of the winners to date. this is a market rallying around the idea that the winners can keep winning but the losers are not going to win that much in a time of great uncertainty. jonathan: you have your finger on the pulse because i don't since the -- sense the hubris this week. even with the encouraging inflation data that we've had over the past couple of days. lisa: if you look at the performance, equal weight on the s&p is down. the nasdaq 100, it's up.

you can see more broadly that the market weighted s&p is up 1.6 percent. we had a couple of big tech names that reported winning from ai and that drove a lot of the gains yesterday. under the hood, small caps are underperforming again. these indicate sensitivity to what you've been pointing out, a weakness in the labor market. that's a jay powell that said perhaps what we saw last friday overstated how strong the u.s. labor market is. jonathan: equity futures, negative by 0.5% in the bond market. the rally continues which speaks to some of the themes that lisa was laying out yields lower by another five basis points. 10 year a break of 4.20, 4.1958. lisa pointing out that the euro is making everyone else look good. the fx market at 1.0691. lisa: i wonder if today is u.s. exceptionalism by default. people can worry about the deficit, but then you look at france and say, what a mess.what

level of message do you want ? additional threats to emmanuel macron, additional difficult concerns, etc., and then you have dollar strength again and everyone is going to europe for vacation. jonathan: everyone. everyone is going to europe. lisa: everyone around this table. jonathan: it is either there or tokyo. the euro 1.6 and the dollar-yen close to 1.6. we will catch up with wells fargo with stocks on track for five straight days of gains. we will catch up with the impact of ev's and ai on the electric grid, and on why there is a notable economic slowdown in the second half. our top story is stocks on track for the fifth straight day of gains following a week of softer than expected data. saying the following, as the s&p 500 makes new highs, it's important for investors to rebalance, to avoid portfolio

equity concentration risk. trim tech and communication services to neutral weightings. what did you make of the opening exchange? >> i am with you 100%. everyone knows the concentrated returns. if you look at the top five names and not the top 10, the top five are driving about 82% of the index. strip that out and you are up and may be 2%, 3% year-to-date on the broad level. maybe what is more important is when you look at the top five to 10 names, the correlations are as high as they've been since august 1997. that tells you that people are chasing. they are chasing the winners and continuing to feed into it. to lisa's very good point, if you take the nasdaq 100 against the russell 2000, tech against small-cap, five-year wides.

small-cap continues to underperform, not surprisingly. i get asked, when is it time to buy small-cap? i keep saying, not yet, not yet, not yet. jonathan: when is the time? darrell: the russell two needs to be even in the 1700s before you get a compelling risk/reward flip that makes sense but nowhere above 2000. lisa: why do you have the argument you should be more concerned about concentration and more interested in some of the others that keep lagging behind? darrell: because eventually you end up with this -- think of it as a teflon market. nothing seems to stick to it. every risk, whether it is france and this morning, anything like that seems to bounce off of it and the same thing place through. ai and tech wins. it is seven months into that. if you run a marathon or a race

and you sprint for seven months, which we have sprinted, let's be honest, you will be tired. i think the market is tired. when you look at the top concentrated names to the point they are doing extraordinarily well, and i will take it, but you get under the surface, equal weighted small-cap and other sectors, they are not participating at the same level. lisa: do you sell your big tech or buy everything else? it's a big distinction. bullish on other sectors or getting more skeptical of how much further tech can run? darrell: yes to the former. when you get underneath -- we raised our outlook this week. one thing that we did in the mid-your outlook is that we took energy to the most favorable we could take it to in the portfolios. a big pullback, obviously, in oil prices. we have taken all of the political risk premium out of oil prices which shocks me given

the global landscape. i am getting the integrated energy names and expression companies at 12, 14 times pes with a dividend, i will take that all day. we like materials. we think that health care is a good value play. we would fade places like the consumer and even financials look overbought. lisa: consumer weights and financials interesting when the fed will be cutting rates soon. at one point this was supposed to fuel the next consumer spending wave in the sense of consumer strength and ability to borrow. why is it not playing out that way? darrell: i'm not sure the consumer is as strong as people want to give them credit for. everyone, including us, does the top five quintiles of income. we know the bifurcation of the high end is doing well and the low ins is not. what people are missing is the creep up into the middle income levels of where people are trading down

for value and not spending as robustly as they want to. we have seen consumer confidence numbers in a downtrend. small business numbers are still pretty ugly when you get below the surface.there is not a lot of reason to believe -- to us, it looks like the consumer is running that last mile. they have been able to stay durable and spend. i'm just not sure how much gas is left in the tank. jonathan: and we ran out the payrolls number you didn't hear 272,000, you heard something else? darrell: i think payrolls and the labor market in general are being skewed heavily by some of the lag effects of what is happening with immigration and everything else. weran the numbers again . if you just take immigration from pre-covid levels, 3.3 million people higher in the labor force than coming into 2020. that is having real impacts on

the labor force numbers. the labor market is still strong , we will take a 4% unemployment rate all day long, but i'm not sure that it's as strong -- the numbers may be sending false echoes to us. jonathan: chairman powell said in the news conference, one of my biggest takeaways from the polls is this one. it came out in the last month or so. it reads as follows. 55% believe the economy is shrinking. 56 percent believe the u.s. is experiencing a recession. 49% believe that unemployment is at a 50-year high. 49% is the poll that came from guardian harris in the last month or so. lisa: it is why consumer sentiment has been low. people don't feel good. can you say people's feelings are wrong or are they feeling something the numbers are showing at the same level? people explain a k-shaped

recovery. stay tuned for the michigan poll in an hour. jonathan: maybe we are not measuring things correctly. darrell: i think that you are spot on. i think that you have to -- you cannot just take the headline numbers as they stand. you have to dig under the surface and take the second and third derivative and understand what the numbers are telling you. i am a firm believer that liquidity is masking so many things around the economic -- i mean, we went back and ran the numbers from the 20 20's. we are now in 2024, obviously. financial markets are up $46 trillion. government debt is up $12 trillion. think of the liquidity that that pushes into the engine and the ability for consumers to stay longer, for businesses to feel better. all of that has had a long-lasting marathon affect.

but wall street isn't main street. the s&p isn't what people are feeling if you walk up and down main street to the point of the survey. jonathan: 49% believe the s&p is down for the year. lisa: a lot of the companies are down. it speaks to the non-ai members. jonathan: it is good to see you, sir. thank you for sharing your thoughts. let's get it update on stories elsewhere with your bloomberg brief. dani: a check on adobe this morning, shares are up 14.3% in the premarket. they predicted strong sales for the suite of creative product suggesting that customers are adopting adobe's ai-based tools. they have been integrating ai into their most popular products like photoshop. the ceo said that is helping the company attract an expanding universe of users. a judge set to reject a 30 billion dollars settlement between visa mastercard and

retailers that would have kept credit card fees. -- capped credit card fees. it would have let merchants charge more for transactions involving visa or mastercard. spokespeople for both firms say that they were disappointed by the developments. germany will meet scotland in the opening match of the european football championships in munich. the host will go in is one of the favorites alongside england and france. the defending champions italy face a tough task in winning the tournament again. they are in the group of death with top rivals spain and croatia. only two teams from each group advanced to the knockout rounds. jonathan: try not to talk too much about that going into the weekend. good luck to everyone participating. lisa: happy weekend. jonathan: happy weekend, and all of that. going on vacation coincides with three games -- no, i'm not. i will try to watch them. at the dinner table streaming them.

lisa: that is going to go great with the fam. jonathan: the morning calls and the pg&e ceo patty poppy joining us next. ♪ (♪♪) ♪ 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.

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jonathan: equities on the s&p 500 are negative by 0.5% following four days of all-time highs, record after record for the whole of this week. we could make it five for five. it will be a struggle based on the screen. yields are lower by five basis points. 4.19 on 10's. lisa: how much of this is sympathy in europe and how much is a realization that the internals look weak and the

consumer may be on the back foot mark? jonathan: the french 10 year, 77 basis points, getting wider on the session. evercore is upgrading shopify to outperform. the analysts expecting better profitability long-term saying that this is an attractive entry point on the stock. kbw upgrading bank of america to outperform with a price target of 46. backed by a higher forecast for net interest income, down by 1%. jp morgan is upgrading adobe to overweight. the firm missing better growth the second half of the year. new products with artificial intelligence. of course, the rise in ai services is driving the electricity with looking for ways to invest in the energy grid. patti poppe a pg&e is joining us around the table. good morning. it is fantastic to catch up with you.

we will see potentially massive demand. ev's and data centers. how big will this be over the next few years? patti: we forecast and factory share with investors a doubling of demand between now and 2040. that is about 4% year-over-year. we think that that's a great opportunity. we see ways of serving that while reducing costs for all customers on the grid. jonathan: help us understand how you will meet that challenge. patti: our grid today is underutilized. the utilization factor of the grid today is about 45%. we see that growing to 60%, 70%, even 80%. imagine more fully utilizing existing assets lowers the unit costs. that happens in every business but energy. we built the grid big decades ago and now we get to utilize it and make it smarter. with modern computing we can utilize resources on the grid

and utilize them more efficiently. lisa: utilities have been the hot that. it has been the way for people to go into ai in a new way to represent the power usage that will be necessary. pg&e has lagged behind a little of the broader rally and utilities. what are you telling shareholders in terms of how you will close the gap? what pieces you are going to lean on to catch up? patti: what we share with investors is that we have -- we are on track. pg&e has been through difficult times in the last decade. we have put the company on a new, solid footing over the last four years. we have implemented a safety and financial safety, physical and financial safety framework for the company that has now given investors confidence to come back in. we have both the benefit of the new demand and closing our discount at the same time, which makes us both one of the growthiest utilities and the

ability to reap the benefits of our turnaround. lisa: what will be the contours of the utility companies that benefit the most from the ai boom? you've talked about apple, you've talked about the california tech companies in your state, but there is a question of what it takes to win. patti: we are proud to serve silicon valley, the bay area of california, northern and central california. all of the great tech companies are our customers so we are tightly knitted with them helping to deliver on their demands. we think that we conserve serve their load with mainly transmission and distribution. they will be some new generation, but the utilities who win own and operate transmission and distribution systems where there is data center and ev demand. it might surprise you that in santa clara county specifically 43% of new vehicles sold last year were electric. that is flexible demand. the first form of flexible demand on the grid.

the lights come on when it is dark, air conditioning when it is hot, ev's can charge any time. we have excess power in the middle of the day because we have distributed solar. we can fill the belly of the duck with ev demand and that costs nothing. that is the utilization of existing assets to the benefit of all customers. not just a ev driver, but all on the grid get a lower unit cost of energy. jonathan: someone told me california had the second-most most expensive power rates in the u.s., can you help me understand why that's the case? patti: rates are a reflection of how much energy you use. we have a grid that has to be built for a peak day. if you have a grid like ours in california it doesn't get stressed versus a southeast utility where they have heat every day, we have to build the grid for the peak day. that is why ev's and dynamic demand are such a benefit, especially for pg&e customers. we have an underutilized grid that drives up the rate, but the

actual average bill isn't as high as much of the country. jonathan: can we talk about power plants? how easy is it to build and connect power plans in places like california? patti: in california, we think of clean energy. last year, in the california independent operator zone we added nine gigawatts of new power supply. nine gigawatts added in california last year. that serves nine million customers. nine gigawatts was mainly renewables with storage. storage is the game changer. april 16, storage was the number one resource utilized in california. matched with solar, we have great solar penetration matched with storage, that is a new kind of energy supply. 100% of the energy pg&e delivered last year was carbon free. we have a modern energy system in california. so proud to serve california

where i think it is the golden era of energy are all energy providers, but particularly in the golden state. we get to power the golden state and are proud of that. lisa: how much time are you spending in washington, d.c. and how much do washington, d.c. policies change how you approach this in terms of what the different potential subsidies are for green energy or not? also, where solar panels are coming from and where the -- and what they cost given the most of them come from china. patti: i don't spend much time in washington, d.c. eyewear boots and a hard hat. i had to do my hair special to be with you today. we are building the grid of the future. a lot of that depends on us. we say performances power. when we perform, and as we perform we can deliver the power that people need. lisa: how much is your business model challenge to depending on what comes out of tariffs on solar panels that you will need to deploy for some of the energy purposes? patti: because again our grid is

underutilized, we have a lot of the resources we need. we need to use them smarter. i need to be with tech companies because we are building a digital grid, resources that are technical that are small bets. not big deployments but leveraging the grid and serving customers in a more dynamic way. it is a smarter, faster, more affordable grid and we don't need much help from out of state to do that. jonathan: fantastic to see you in person without the hard hat. patti: anytime i will come back. lisa: you should bring it. patti: next time i am wearing it. jonathan: some people in financial markets are wearing tin hats, but that is a different reference. that is a lisa abramowicz thing to do. lisa: a tin hat? one day i will show up with a hard hat. today is going to be rough. jonathan: donald trump promising to lower the corporate tax rate by -- to 20% from 21% if he gets

a second term in office. equity futures on the s&p 500 negative by 0.4% on the s&p. the bond market rally continues, yields lower by five basis points. the 10 year, about 4.19. lisa: it is amazing despite the deficit worries and long-term inflation going up, front and center is the possibility of the fed cutting rates and a weakening in the u.s. economy. jonathan: we will catch up with amory on the ground in the south -- with annmarie hordern on the south of italy when we return. this is bloomberg. ♪

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in= -- jonathan: the most feedback i have had this morning, good luck to everyone. this is football, jon. i just want attention about football going into the weekend. it will arguing about it. lisa: what are you talking about people? jonathan: everyone. it is a very international program. lisa: no one is buying it. i'm sorry, no one is buying it. jonathan: the most diplomatic person i know is mohamed el-erian. evie noticed what mohamed has done what sports? congratulations to everyone who participated. every time. lisa: then i get the message, come on, why do the mets suck?

jonathan: the mets and jets, which i have always found to be the combination -- loser combination. lisa: i'm more of a mets and giants fan, so i don't understand. maybe there is a feeling of virtue in following a losing team. jonathan: got it. never really understood that, but all right. we are one hour away from that opening bell. we are down by .2% on the nasdaq 100. we have had quite a run of gains, four days of gains. looking to do some more later, but at the moment it is a struggle. on the russell, small caps down 1.2%. even with this move in the bond market. here are the scores. 4.6643. we are down two basis points on a two-year. we are down four on a 10 year. we had a brief break in the session. lisa: you really raised the point, at what point do we start talking about the labor market

and how strong it really is? at a time when the fed might not be having any dovish speak the market is saying, we don't believe you. you're looking at other things and they are pointing to some sort of not only disinflation, but also a slowdown. that is where the focus is this week. jonathan: i have always said smartest audience on the planet. the mets and jets played at the same stadium from the 1960's to the 1980's. david, thank you. lisa: david, thank you for correcting my completely butchering the whole thing with making up some reason. jonathan: there could be another dimension to it. whatever. it's get to the euro. foreign exchange, something we might know something about. a breakdown of the single currency. we are down .5%. that is a touch point. want to talk about the french 10 year versus the german 10-year. briefly as wide as 77 basis points. why does that matter? 77 is the widest we have seen not only this year, but going back to 2017.

from there, the tension of 2011, 2012. lisa: it is the pace too. the pace of the expansion we have seen in terms of the spread. the gap between french bond yields and german bond yields has been the fastest going back to that timeframe, that 2011 european debt crisis. i really keep going back to the conversation. he said, keep looking at the potential to whiten out more. and what that signifies about the fragility of a region that at one point provided a counterpoint to the dollar and increasingly maybe less so. jonathan: the bank searche -- the banks are picking up on the tension. we have the np parent bow down. socgen on the week is down 16.5%, which would be the biggest weekly loss on that particular name on the cac 40 going back to march 23 -- 2023,

which is when we had real tension in the banking system's side of the atlantic. lisa: we should explore exactly why they are so vulnerable to some of the potential shifts in the government. is it a bond call in terms of evaluation shifting or regulatory uncertainty given some of the threats about the euro he and region? jonathan: -- the european region? jonathan: i joked about the superior -- superiority of the french bond market. they have been grouped in with germany for a long time and there is real questions as to why. it was a budget deficit last year of 5.5%. they closely aligned with germany or more closely aligned with what has been developing in italy. you could make the argument that maloney's government is more stable than emmanuel macron's. lisa: the reason why people could say could go further, arguably this move began when the france government rating was

downgraded. that put them on risk to not be able to play -- to pay back their deficit and that could potentially lead to this existential fear that france is not germany and that credit risk does matter once again. jonathan: deficits matter in places like france, the u.k., and keep coming back to this point. will they matter in the united states? a couple of stories for you. keith gill is exiting his entire options position in gamestop. a screenshot of his portfolio no longer includes the call, set to expire next week. his position dipping to $6.3 million from nearly $30 million on monday. quick stock check. we are up by about 2% in the premarket. lisa: he's moving out of his options, however he has increased his stake in gamestop. his cash stake in shares, to become one of the biggest investors in this name he is up there. there are only three other

investors that own more. that include blackrock, vanguard, and rc ventures. it raises this question of what his influence is going to be and what will roaring katie do next? jonathan: has it ever happened? lisa: you're going to start this rumor? jonathan: i'm not the only one saying that. no conspiracy theories. really weird conspiracy theory yesterday i will talk about another time. not now. let's get to this one. likely to strike down a settlement between visa, mastercard, and retailers. the deal would let merchants charge consumers extra in payments using visa or mastercard credit cards. the new coming in a filing yesterday. an official ruling is expected in the coming days. there was all of this talk about maybe retailers charging more depending on which credit card you were going to use when you paid for all of your items. lisa: is the issue here -- and

this is what has yet to be determined -- that the fees have to be bigger? that they have to charge lower fees? is it that the convenience stores cannot charge -- pass it along to the consumer? is it that it has to be a business model thing? this raises questions about how to remedy this and if this is more friendly to some of the charge cards or whether this is more friendly to retailers. i read a number of different articles and cannot get a sense. jonathan: i had the same questions. another thing we have brought up is how different things are going to be under a different administration around issues like this. this goes for the courts and this could continue going through the courts, but i mean more about mergers and acquisitions. his mis-friendly regular -- business friendly-regulation. what that is going to look like. lisa: you raised j.d. vance. he has been for antitrust efforts. it is really a black box. good luck for 2025. jonathan: flying blind for 2025

is the catchphrase of this program at the moment. former president donald trump returning to washington, floating tax cuts to business leaders. trump telling ceo's he would cut the corporate tax rate to 20% from 21%. trump also saying he would like to extend income tax cuts and use tariffs to help pay for them. joining us now to discuss is eugenio aleman of raymond james and zachary griffiths of creditsights. we have learned that deficits matter with liz truss. you're learning that deficits matter for emmanuel macron. how quickly before we learn that deficits matter for this bond market in the u.s.? zachary: we don't think it is that soon, and the dollar has the privilege of being the world's reserve currency, so that is a big driver. if we do get a red wave at the end of this year and some of these more expensive mary --

expansionary fiscal policies, i think that changes the calculus of that. in terms of, do deficits matter? are yields going to retest the highs of last year? we are circling the election as a key litmus test as to how that comes into market pricing over the next 12 months. but our base case is we have a little more wiggle room in the u.s. than in other nations. jonathan: we keep saying we are flying blind into 2025. how much visibility do you have on next year? never mind 2024. eugenio: oh, nothing. i don't see anything going forward, but i want to say hi to zack. we worked together at wells fargo. it is very difficult. as you were talking before, there was a lot of signs that are pointing to a slowdown in economic activity. so, the decision by the fed i

think is overkill. they raised inflation to 2.6 percent this year from 2.4%, so 20 basis point difference between march and today, but at the same time they took away 50 basis point decline in interest rates. so, in real terms if we are correct with inflation continuing to come down, that means that they are tightening monetary policy because the real funds rate is going to continue to go higher. lisa: we keep talking this morning about how the response in markets has been very interesting. to not only concerns about the deficit, but concerns about the fed being a bit hawkish or, if cutting rates, why that is not just an i'm mitigating positive. from your vantage point, given all of the concerns swirling, where are you focusing in markets to understand what the risk appetite is at a time where

lower yields are supposed to help risk assets? what you saw yesterday were high-yield bonds -- bond spreads widening. zachary: that is an interesting point. when we look at what we are seeing in the market today, and something we have not seen in a long time is your traditional risk-off move, but you have equities falling and government bond yields rallying. that is not a relationship we have observed recently. to the extent we see more of that, perhaps some of these geopolitical pressures, of which there has been plenty over the past even couple of years, yet there has been a very calm market backdrop, that would signal to was that there is a shift in risk appetite, and during client readings we have done more recently i don't think there is a lot of concerns necessarily about u.s. economy going into recession. perhaps too few concerns. but that -- but at the same time we are hearing more caution in the way portfolio managers are positioning. it does feel like there is caution around how much markets

could be prized to perfection as the fed has taken additional rate hikes off the table, but also reduced the amount of rate cuts they expect in the near term. from our perspective we are looking for a consumer slowdown, and emmanuel makes a great point about adjustments to inflation and expectations for the nominal policy rate. don't think we are in an environment where they need to be tightening the real policy rate. we are more dovish than the market and we are more concerned about a modest repricing of credit risk in terms of spreads across investment-grade and high-yield. lisa: i'm curious from your perspective, that type of repricing of risk, does that include a repricing of u.s. risk? that is what we are seeing in france. credit risk at a time where the u.s. has exceptionalism by default. zachary: that is an important distinction. we prefer duration risk over credit risk, so we would say not a wholesale repricing of u.s. credit risk in terms of treasury

yields. we prefer being overweight duration opposed to overweight credit when we look at the yields and tightness of spreads today. lisa: what you make of that? this idea that there is more caution under the hood than some people are realizing, and may be markets are sniffing out at a time where it does seem like the economy is just beginning to soft and -- soften more than some expect? eugenio: i think markets are correct in pricing two rate caps for this year. i'm not concerned with u.s. we were looking at numbers from france the other day, what they risk rating was, change. tax revenues as a percent of gdp is 46%. vis-a-vis the u.s., which is 18%. for us to get out of these

issues is not very easy. some economists are saying that it is a two percentage point increase in taxes or expenditures, or an increase in both well stabilize the growth of the debt. so, the reason mark -- i don't think we are exceptional. i think that there were real differences between what could be done in france to bring down, or to pay back, versus what we have to do here. it is very, very different. i think our social contract is open. we no longer agree on how to do it. but if we can do it, if the political system can do it, then it will be very easy. jonathan: i was very happy to be a part of the wells fargo reunion. invite me next time.

[laughter] zach, before you go, was it a thing to jiggle the mouse at wells fargo? is that a thing? is that what people were buying? do you have any insight on that? zachary: i never saw it. never saw anything like it in the corporate investment bank. i don't know what could have been going on in other parts of the business. jonathan: thank you, sir. zach with ruth's -- zach griffis alongside eugenio aleman of raymond james. one of the most-read stories on the bloomberg terminal. lisa: i looked at the reviews of mouse ticklers on amazon, and people who put their name on mouse ticklers. i'm thinking to myself, why would you do that? there is only one reason to use a mouse-jiggle or or finger-jiggle or, whatever it is. people put their names down. jonathan: what we should do would be a great story. you should apply for a job -- lisa: anywhere else but here?

jonathan: remote work, go through the interview process, see if you can get clear from management. hopefully you will pass the interview test. we will do some work together. i will do some tests with you. lisa: thanks. jonathan: then when you get one of the jobs you will do the mouse thing and see how long you -- you last. but never do any work. lisa: rachel, i am on it. i expect approval. jonathan: very cool story. see how much you can get away with working from home. maybe we do -- donate the income to charity? it is a great plan. let's get you an update on real news elsewhere. dani: the faa is investigating counterfeit titanium that was used in parts for going and airbus planes. a report from the new york times says the material was sold using falsified documents. those of parts came from spirit aerosystems. the investigation was launched after small holes were found in the material.

it is unclear how many planes have parts made with the questionable interior. let's get back to that story you were just talking about. you mentioned the mouse jiggle or -- jiggler. investigations lead to claims they were faking work. they were simulating keyboard activity, creating an impression of active work. a spokesperson said, wells fargo holds employees to the highest standards and does not tolerate unethical behavior. the newest franchise in the nhl has been given a name. utah hockey club is the name, and they will take the ice in salt lake city starting this fall. team owner ryan smith unveiled the name, logo, and uniforms, which are black and white jerseys with a little bit of blue. a fan vote for the official name and mascot is still ongoing. those in contention include mammoth, daddy, and keeping it simply as the utah hockey club. jonathan: thanks for this

morning and the way. just on sport, i have had so many messages on mets-jets. lisa: i have gotten a lot of corrections as well. thank you, mark. jonathan: the list goes on and on. up next, we will set you up for the day ahead going into the week ahead and catch up with annemarie on the g7. all of that up next. ♪

i can't believe you corporate types are still at it. just stop calling each other rock stars. 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. jonathan: counting you down to the opening bell. equities negative on the session. a bit softer today, but on the week much firmer. four days of gains on the s&p. he said week of gains, best in about a month on the s&p 500. in the bond market this rally keeps continuing. had a break at 4.20 early this morning.

back up to about 4.213 two. down three basis points on the session, but it is the story in europe we are focused on. this was the surprise of last weekend. emmanuel macron responded to the eu elections. snap elections domestically. this is a big issue for france. you have the french equity market erasing all of the gains for 20. you have this french-german spread blowing out to wives we have not seen since 2017 and the single currency with real weakness in the fx market. lisa: you underscored one of the most important points of the week. even as you see a flight to quality you see the opposite in a lot of european bonds. the flows verify that. you see huge flows into u.s. government bond markets. and you have the biggest outflow, fourth-largest weekly outflow in years from government bonds. it gives you a sense of relief. jonathan: what is quality in

europe right now? there is a question mark over french debt at the moment. here is the trading diary. at 10:00 a.m. we will get the consumer sentiment data. last big data point for you going into the weekend. at 11:30 eastern time president biden meeting with pope francis. monday patrick harker speaking. retail sales plus they have -- plus a host of fed speak over the next week or so. cap for that. tuesday, another round of jobless claims. we will find out if this week was a head fake or not. that is going to be a big data point for us next thursday morning. joining us to wrap up the g7 is annemarie in the south of italy. we have been talking about the domestic difficulties the sitting president is having in the united states. but emmanuel macron -- that emmanuel macron is having. summarize what you have been taking away from the meetings this week. annmarie: they were able to get over the finish line some of these deliverables when it comes to supporting ukraine. today there is going to be a focus on going after china, its

economic clout, anti-dumping issues. but all of this has been overshadowed and has really played out into the forefront of these discussions. the domestic issues these leaders are facing at home. most notably when it comes to emmanuel macron you have meloni saying he is using this form for electioneering purposes. rishi sunak has found it very hard to get a date at this g7, to have an official bilateral on the agenda with a g7 leader, because they know in three weeks time he is likely not going to be leading the country. as well as all of shorts -- olaf scholz, who is dealing with strong poll numbers and a strong showing from the right. see this cap, and i asked the world bank president about this. has it been difficult, this attack on multi-nationalism, when you see a rise in national? he talked about how it is chauvinistic. take a listen.

>> one of the biggest things that bothers me is chauvinistic nationalism, because it tends to create the absence of conductivity. but if you look at the last few months itself we managed to get capital and hybrid capital and portfolio guarantees and -- into our institution and we are the one working with this multilateralism. annmarie: that capital going into the global south and places like africa is a point that the united states wants to counter china, but also individuals like the prime minister of italy. to try to stem the flow of migration they are seeing from the continent. lisa: as you suffer on the southern coast of italy there, what is chauvinistic nationalism? [laughter] annmarie: i think the point he was trying to make was that people thinking that this nationalistic approach, that only their country and issues matter, i think what the world bank president was trying to get at was the fact he thinks it is

shortsighted. when you look at putting capital to work in places that are in need, like africa with food security, energy security, he could benefit individuals at home when they are dealing with things like going migration, because people from some parts of the global south are suffering from things like trying to get a job. i did ask him about what trump 2.0 would mean, because this world bank has also wanted to tank -- take a look at not just countries in poverty, but focusing on things like climate change. with that kind of approach -- with that kind of approach be difficult with a trump presidency checkup he was quick to say it was under trump's first term that they saw capital injection. he is not concerned and thinks the world bank will continue with u.s. support, whether or not it is going to be biden or trump 2.0. jonathan: what is on the menu today? annmarie: the menu for me is going to be a gluten-free gelato. we will have to see what the

leaders are going to eat this evening. biden did not attend last night, but tonight is g7 dinner. he's not going to be going to the peace forum on ukraine in switzerland and said biden is in campaign mode. he's going to los angeles at a campaign fundraiser and will be with the likes of george clooney, jimmy campbell, and those celebrities. jonathan: i'm looking forward to this. a wake-up cappuccino. coronado. you get it and you dip it in. lisa: i'm not going to talk for the rest of the show. this is ridiculous, all of you. jonathan: fantastic work. i will see you in italy in the next week or so. she is staying. lisa: she is going to jiggle her mouth? [laughter] jonathan: that's good. from new york city, have a fantastic weekend. this was "bloomberg surveillance." ♪

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>> from new york city, i'm katie greifeld. you just taking a breather after another in record the countdown to the open starts right now. coming up, stocks lower after closing another all-time high. fed speak picking back up after cooling inflation data and investors voting in favor of elon musk's 56 billion dollar pay package. we begin with the big issue, the s&p 500 notching record highs every day this week. >> if you run a marathon or race and you spring for seven months, you're going t b