>> the market once to see the economy is coming back into balance. >> the economy is moderating, but very slowly. >> there is a risk the economy worsens more because of the self reflective interdependence between the fed and financial markets. >> higher for lung earnings allows markets to stay here even though we are going to get higher for longer rates. >> a real push and pull in stocks over the next few months. >> this is "bloomberg surveillance." >> good morning. are we there yet?

this is "bloomberg surveillance." are we there yet? i'm not talking about the end of the week although you can interpret it however you like. i'm talking about this elusive rate cutting cycle that sensibly we're supposed to be kicking off, starting in europe, then goes nowhere? there are some questions of how slow can we go? the swiss national bank tries to get it underway and the norwegian central bank says, i don't know. annmarie: the s&p would differ from we are not there yet. the strong dollar b damned. the cutting cycle is only starting for those who have the chutzpah to have their currency weekend. everyone else needs to wait from the fed. a lot of fed speak saying it could take quarters before he is confident that the data. >> than a widgeon central bank are also talking about that. jjon would say, where you talk

about that? it is about the federal reserve. there is this idea percolating under the surface which is political risk is making it a whole lot harder for some of the central banks to go at a time where deficits and physical spending are offsetting to such a great degree some of the auditory restrictions. >> the latest cedia reports, sounding the alarm once again about the deficits, about 400 billion higher for this year than they were projecting in february. he is saying this is the biggest complaint he gets what he talks to clients because their concern is deficits fuel inflation. he said can you imagine this year we had this uptick in this deficit, uptick in spending when we have great growth and no pandemic? what would it look like if we were in a downturn? >> this is why people are concerned about the fiscal response to that. people of been talking about this for quite a while and suddenly the french issue that came up seems to really be bringing it more to the fore and this is one of the tensions we see throughout the next couple

of weeks. have we priced in too much political risk? do we go into french assets, which a number of guests basically are going to say? or is it, wait a second, this is a playbook for what could play out other places? >> get the city view that is we are going to downgrade those assets but also others are saying now is the time to get in because people think it is way overblown. if we get a hung parliament, basically will be status quo for a while. maybe people want to wait to see what the politics will dictate but others are saying now is the time to buy. >> i didn't interesting conversation yesterday from someone who said basically every leader once to avoid a liz truss moment. because of that reason, they are likely to be more moderate. le pen is likely to be more moderate when she comes into office because she does a politician's career could be short-lived if the bond. >> vigilantes come out for them. >> look at what liz truss has done.

dvd. there is an issue about whether any of this matters if a chipmaker going to keep on chip making an nvidia can keep on creating record highs. becoming the biggest, most highly valued name in this nation. dani, i don't to say i'm hearing more bubble talk because that seems histrionic, but more people are starting to question it. >> it is uncomfortable. when you've had an s&p rally in the majority of the market has been down, that is only happen four times since 1990. the superlatives coming out make it uncomfortable. you need to look at cisco if you want a longer example of where goes wrong or even intel. ai plans are not panning out. if you get this a little wrong, the market will punish you. >> you about it is uncomfortable. barclays talking about reluctant longs. it doesn't comfortable to be long. >> a story saying basically the

last time a big provider of computing infrastructure was the most valuable company was march 2000, pretty uncomfortable year, and that was cisco at the hite of the dot-com bubble. are we headed for 32 in terms of record highs this year on the s&p, try to get that bob up -- bump up. to think people were overly bullish, we are past that. there would be talking about the clients by year end of their target for the s&p is 5500. euro weakening a touch. 10-year gilts up marginally. -- 10 year yields up marginally. crude up marginally with a real question heading into the busiest travel july 4 ever and what that means for crude into

the driving season. coming up, jonathan stubbs. and ryan peterson on the latest disruptions in the red sea and possible the just six challenges coming up. we begin with our top story, big tech yet again driving u.s. stocks to two days of gains. jonathan stubbs writing "despite the recent dominance of u.s. mega caps stocks, european equities have outperformed u.s. equities on a median basis so far this year." jonathan, i want to start with the idea despite some of the expectation that u.s. exceptionalism can continue, you and others are saying this dip is viable in europe on the heels of some french turmoil. what gives you the confidence? >> on the u.s. versus you up, u.s. equities have outperformed europe on a market cap-weighted basis. but when you break down the large, middle to small-cap indices on immediate return

basis, europe has outperformed the u.s. significantly and large caps, mid-caps, small caps. what is driving that is the distortion you have talked about from nvidia. the case for europe still seems one where you don't have to have anything but modest expectations to get a reasonable outcome in 12 months time. if you see a modest rewriting back toward long-run average, after lengthy stagnation, modest improvement in earnings growth single-digit earnings growth, good a reasonable case in 10 months time. that is the attraction in your post of the hurdle is so low. when you can go in with modest expectations and have a reasonable outlook 12 months later. >> there is the issue of political risk. i'm looking at the spread between french and determine --

and german 10 year bonds. going back to 2012, the hide of the debt crisis. real concerns, french bond option, concerns there. there is an overlying fear of some of the deficits that have incurred post-pandemic and what that means for just how much more money and physical response any kind of weakness. what is that not worry you? >> it does worry me a lot. i start every meeting with investors in the u.s. and europe and other parts of the world with a resume we've been writing for 2, 3 years now. the primary pillar of that is what we see is disruption globally, embedded, extending a structural and disruption from political and geopolitical risks. that is at the center of everything we see in markets. from a european, french perspective, we have seen a flareup in local risk which is also significant. from an equity market perspective, interesting to see

the fridge equity market now carries -- french equity market now carries 7%. in previous macro crisis in the last 15 markets, the sovereign debt crisis, covid, that free cash flow yield peaked 8%. look at the insurance sector, 6% dividend yield. that is reflecting some previous macro crisis. one of the points is there's a lot of bad news already priced in. for the price action from here to be significantly negative, we need to see a new macro shock compared to what we have already and play in front of us. we think that is unlikely to play out. we see this as an opportunity. 12 months time come reasonable case for french equities with double-digit returns. we prefer it in spain because it is cheaper. less political risk. but europe looks pretty well-placed with low expectations, low hurdles to reasonable returns. >> that is quite bullish on the

french markets. visit your understanding you think politically there could be a hung parliament that is basically status quo? >> sometimes political paralysis, which at this point are likely outcome with macron as president but very little control and the house, that paralysis historically, again, does not tend to lead automatically to a negative macro outcome. we think the damage can be done economically from what will play out in front of us the next few weeks in france politically, quite limited and does not change the improvement story we expect. modest recovery from 18 months, two years of stagnation in france and the rest of europe. politics carries risks. we have to engage with it for sure. but i don't think it derails the modest improvement path and that is all european equities need to give them a chance of delivering these reasonable returns for

investors over the next 12 months. the ems has higher hurdles to perform given the 21 times multiple. the u.s. looks stretch. we think that is harder to achieve on a 12 month basis. >> i want to take the other side of this trade because a lot of investors have said because of the political instability of europe that it strengthens american exceptionalism. are we too sanguine on american equity? nvidia? being a haven right now? >> what do we have as the pillars of investments of toolkits? we have valuation, technicals, fundamentals. valuation, whether it is nvidia or the mac seven group, technology group, the u.s. market itself -- we're not necessarily at peak bubble levels but a whiff of bubble about it. technicals briefly, look at

nasdaq rsi, but 80, the highest level it has been in over five years. it was at 30 in april. we got this trading technical bicycle in april before we had this. perhaps we should respect the technicals as well. we're not pricing much for risk. pretty full valuation. technicals at risk. we are not pricing risk to the market more particular stocks, so i think this is a time we like to get consolidation. we have to try and protect what we have. we would be looking to run broader exposure and some protection strategies at this point. >> just to put a bow on that, is nvidia a reason not to buy the u.s.? >> well, the incredible thing i think about u.s. equity market since 2007 is it has received $30 trillion of policy support

via central bank balance sheet expansion and government debt. the u.s. equity market has increased by $30 trillion come the same number. the u.s. has led the way over the last years providing support into the market and is expected to do so the next five years. the government debt in the u.s. is running $2.5 trillion up every year. another $10 trillion to $15 trillion of support coming through that channel. i think it is hard to bet against the was longer-term but over the next 12 months, i can see why investors should look to have a more balanced portfolio between u.s. and north u.s. equity markets. that is what we are seeing when you strip out the nvidia and max 7 market. the exceptional performance we are seeing at the top end of the market cap skill in the u.s. >> jonathan stubbs, thank you for being with his was the -- being with us.

let's get you an update on stories elsewhere. >> u.s. intelligence agencies say china's leaders have no clear preference between president joe biden or former president donald trump in the upcoming election and say ties will continue to deteriorate no matter who wins. that's according to u.s. officials who asked not be identified. chinese officials guess second trump administration could mean unpredictable policymaking into anti-china measures. pres. biden: look to strengthen partnerships to push back against chinese influence in the region. swiss national bank cut interest rates at a second straight meeting as it battles low-inflation and a strengthening frank. officials in zurich reducing the benchmark rate by 25 basis points. it now stands at 1.25%. the move highlighting divergence among major central banks with the federal reserve paring back rate cut excitations and the european central bank showing reluctance to move.

a record nearly 71 million americans are expected to travel over the independence day holiday according to aaa. about 60 million are expected to drive 50 miles between june 2 -- june 29 and july 7, an increase of nearly 5% from year ago. nearly 6 million are expected to fly during that time, up almost 7% from last year. that is your bloomberg brief. >> basically, a lot of traffic and long tsa lines. bowen's moment of reckoning. >> much has been said about boeing's culture. our culture is far from perfect that we are taking action and we are making progress. >> this is "bloomberg." ♪ [introspective music] recipes.

recipes that are more than their ingredients. ♪ [smoke alarm] recipes written by hand and lost to time... can now be analyzed and restored using the power of dell ai. preserving memories and helping to write new ones. ♪ 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.

>> look and back. this is "bloomberg surveillance."

we look at futures poised up. i've got to say, tuesday we got another record high but it felt like it was a cheat. kind of limping across the line with nvidia basically pulling everyone along with that. does that count? >> a doesn't seem like a particularly bullish bullish market. we kinda by nvidia a little bit. i'm worried about the robots. if this is a market that is just builds on momentum strategies, is that a house of cards ready to fall if it is just the computer traders who are fueling this rally ahead that are fickle and can revert quickly? >> maybe the bots know something we don't. a little bit of retracement after yields of declines we saw last week as people reassess just how much and how quickly we are to get down to regular or a fed target for inflation. this morning, boeing's moment of

reckoning. >> much has been said about boeing's culture. we have heard those concerns lab and clear. how culture is far from perfect, but we are taking action and we are making progress. we understand the gravity and we are can -- moving forward with transparency and accountability. >> families of the victims of two boeing 737 max crashes asking the justice department defined boeing almost $25 million, calling it "the deadliest corporate crime in u.s. history." it comes after the company ceo calhoun faced grilling from your senators over boeing's safety culture. sheila, before we get into the boeing issues, we just talked about how there's going to be record amount of travel coming up july 4 weekend. are you concerned about the safety of some of these planes that are older, that are being used as all of these questions swirl on capitol hill? we wonder

about air traffic controllers being up to speed and some of the long-term scars of the pandemic euro? >> i'm not concerned. aircraft are so say. i'm still concerned about flying older aircraft longer. we are seeing delays with the max and 77 from boeing. i'm not worried about safety overall, i'm just worried about aircraft staying in the fleet longer and that is been our call . >> it seems like it will be ongoing, especially as dave calhoun did not really point to a road forward. there is a discovery process. however months later rather than say, hey, this is our plan for how we are going to evolve out of this. do you think it is feasible for this government to find going $25 billion given that the nation needs this company to revive and can't punish at that harshly if it threatens fiscal sustainability? >> boeing needs capital to

survive to begin with, working capital to support its employees. each 787 has two point finally parts. yep to support a whole supply chain. to fine and $25 billion does not really make sense. it implies this fine could be about $1 billion. alaska was smaller and that there was no fatal incident involved. we can't fine boeing because they are already in trouble themselves. that is exasperated and the fact that can't find a new ceo. it is been about three months since dave calhoun said he is stepping down and we don't have any successor. >> what you make of the ceo search? where do you think they're going to look? it seems like the people they're trying to tap are not interested in the job. >> i think there is a search firm out so it is official. we brought it down to two can a

-- candidates who are both internally involved. somebody internal or has touched boeing and someone needs to become involved because an outsider can't fix it right away. then you have the next successor come in three years after the interim period. >> when dave calhoun was talking to lawmakers, he was asked, have you spoken to these whistleblowers? which is why we know so much information of the chaos happening in the company. he said, no, but maybe it is a good idea. do you think as a deal with all these issues that they are leaving no rock unturned? it feels like they almost are. >> i found the testimony dispiriting. it is a broken culture and beating down on it won't help. i do see his point he can necessarily speak to everyone of his employees, but i think that was an ongoing theme that there needs to be some element of personal touch with the employee base. whether it is monthly meetings or eating whistleblowers one-off

-- meeting whistleblowers one-off. we get that at jefferies. i think that persico indication with employees builds a great culture. i am not the ceo of boeing, but i think some of the commons were helpful but also impossible when you have such a big employee base, supplier base, a muster -- customer base you are facing. >> do you see a clear path forward when it is day after day of issue of old parts, something going to miss? dave calhoun doesn't seem to be communicating what it is. is there a clear way to fix this? >> less bureaucracy as well. i don't know more paperwork would necessarily help. i think some of it could be that personalization, where people feel responsible, where they are invested in the stock. they have shares. we will see what happens with the union agreement. 20% to 30% of employees are up for contract negotiation in

september. maybe the best ways to motivate people with funds forward and investing in their business. that was one of the recurring themes, post-pandemic, labor force is much younger. to have them not have that rework element, maybe incentivize them to stay a year, three years, five years. >> what degree is it too late that talent has fled boeing en mass? you don't have the people you once did. you don't have those veterans who have been around really address some of the issues. >> the supply chain is still struggling. we are hearing that across the supply chain. i was down to see another aircraft manufacturer, general dynamics, so i do think it is not impossible to have the aerospace manufacturing supply chain work. other companies seem to be doing it. boeing is on a larger scale, but there are cultural incentives you can put in place to fix

this. >> before you go, i'm curious about the travel season and whether it will get more miserable and whether people are just going to stay home more. are we seeing a turn in the cycle for flying as people get 50 by some of the lines, if you don't have preapproval, or other things of that nature? >> what is going to incentivize people, and porcelain for the airlines, a lot of airlines are pouring lower pricing into the latin american, mammy, caribbean markets. although capacity is up, pricing is down. elliot put a 2 billion-dollar stake into southwest. we don't think that is the right move. i think people are going to keep traveling, especially with these low fares. >> to the caribbean and south america, especially if they have preapproval tsa. >> coming, ryan peterson of flex port will be a fascinating

interview to me just because we're talking about logistics of the ongoing tensions. we're still talking about the red sea disruptions and what that could potentially mean. >> it has been a concern for businesses who have had to find everett routes, especially to europe. this has been an entire story in europe and the boe has said this could be and is inflationary. interesting to see where he sees this going. >> prolonged again and again in terms of when people see potential resolution. we are headed for another gains, possibly, 32nd record high on the s&p for 2024, building on those. bond yields up marginally about three basis points. this is "bloomberg." ♪

lisa: coming into potentially a 32nd record high day for the year on the s&p 500 as we look at we could drive us higher given what has basically been the engine behind all of this, nvidia and a couple of other big tech spots. s&p at about .40 percent, nasdaq outperforming again, up almost .70% and the russell 2000 lagging behind, up about .30%, raising the key question, can it continue, even without broader

participation? talk about robots, algorithms, and what kind of bubble feeling there is, i can to cisco in 2000. that is the anxiety underpinning the trades. dani: it is because it isn't that nvidia is on a good company to rally. they offer good contribution as a whole, but how have we overdone it? not necessarily is nvidia going to crash but how much do valuations need to come down by to be more in line with reality and what does that do to sentiment? lisa: what is reality? existential, but there is the question of what is it when people talk about political risk and bond yields being a problem. bond yields coming up a couple of basis points. but marginally so, and after a pretty big rally, 10 year yield, 4.25% and the two-year down from

a high of 5%, 4.73%, political risk and then a bond sale in france that was fine. that raises the issue of people can job own all they would like saying it will be a huge problem and everybody will be new the -- will be the new bond vigilante of 2004 but yet -- annmarie: it was solid demand, the first action we saw since emmanuel macron called that snap election. in reality, people are starting to say maybe it will not be as bad. lionel called it triple cohabitation in his opinion piece and that is what we potentially will see with the french government. lisa: what is the obsession with cohabitation? annmarie: that is the new model. lisa: you heard it first. when you look at what is going on, window 7.28, under surveillance, counting down to

the bank of england rate decision. the central bank expected to keep rates on hold as the u.k. prepares for a general election on july 4, which is why we began with the idea, are we there yet? the rate cutting cycle that was supposed to be. how far are we delayed? are we on central-bank land? dani: probably more norwegian central-bank land, but this cutting cycle is coming head-to-head with the political cycle and the boe is an explicit example of where they have come together. the boe will not say anything because they are in a blackout period until elections in the u.k. they will not deliver a cut until they can talk to the market. politics, whether central banks would like to say it or not, is interfering with their decisions. annmarie: and the elections are called on the same day as the april cpi print, so we have not even seen how that has been indicative on where they feel

inflation is going. is it too hot after those last two prints? politics is getting in the way to understand the thinking. lisa: we get plenty of fed speak, so maybe we get a better understanding of what people think in the u.s. fed speak at 8:30 eastern on the way and initial jobless claims and housing starts. here is the fed speak, all coming out at different times to get there latest iteration. there is a question of how much clarity we could get at a time when they don't have that much clarity. so far, we've gotten quite a bit of pushback. you talk about possibly waiting longer. hasn't that been the theme? dani: i would say that he's in out lighter -- he is an outlier. either he is totally off base or we have a new hawk in town. people say we need to see more

progress, despite the fact that i will said we had not incorporated the dots yet, and then they said, well, there stale. i'm not so sure they are stale given what we have heard. lisa: maybe the dots is something that robots can handle. the report from citigroup said an additional 12% of roles could be augmented by ai, citing that ai may not lead to a drop in headcount as the need to hire more ai managers and compliance officers gross to make sure there is not bacon on your m youc take away when childrenflurry. annmarie: -- take away your mc flurry. we have heard this. annmarie: we have heard the shifting of where the jobs go or shortening the weeks for humans, and that is what jamie dimon talked about. that may mean workers may have a

3.5 day workweek instead of a five or seven day. dani: that sounds lovely. robots can come for my job. who gets the short end? it is the analyst, staying up however late in putting together power points. it probably is a good thing because culture has been an issue for a while, but if they are hired into that new entry class, this is the pipeline for finance. you either move up, go to hedge fund, private equity, but what happens if the whole swath of people are not there? annmarie: robot managers. lisa: what happens to all the people enter into the workforce? how do they get the experience if it is high skilled people who have the consolidation of work? i don't believe in the 3.5 day workweek. we can talk about this all day, but we do want to turn to

shipping. the sinking of a ship in the red sea by yemen who the militants, underscore problems that shipping companies have navigating the region. evan brown is the asset managemer at ubs. we don't talk about this enough. they suggest that some supply chain issues have been resolved post-pandemic. how much of a not been resolved due to the conflicts we have seen, particularly in the red sea? >> great to be here. it seem like we got things result in 2023, but ever since houthis disrupted shipping through the red sea, it has linkedin the time to deliver cargo, -- linked in the time to deliver cargo. right now, if you would like to shipping container from china to the u.k. where i now, it costs

$10,000 unless you have a contract. by the way, most of the contracts signed at lowered prices are not being honored and are adding extra charges to them, so we are right back to where we almost were in the peak covert situation. lisa: that is profound, we are almost were we were in peak covid. are you saying that we have not seen the bulk of price increases on goods tied to supply chain disruptions akin to what we saw back then because people have not internalized some of the delays? ryan: i'm not making a prediction about the future, and during covid, we got where we are now and we kept going and going. right now, there are a lot of extra ships, the container side ordered a ton of work container ship of the 30% increase in the shipping capacity for the world, and that will come online throughout the balance of this year and into 2026.

because there's so much more supply, people feel that once we get through the current demand surge, then there will be enough supply and prices will come back down. we are in the early days of covid, $10,000 containers is something we never saw until covid since the invention of the container. annmarie: how concerned is the should world with the red sea right now? ryan: it is on everybody's mind. it is causing delays, getting cargo delivered, and in addition, that means you lose sales. you lose holiday season, planning, and not just christmas, but we have mother's day and if you're cargo doesn't arrive on time, you may not sell it. you have customers waiting for an order and you may lose it to somebody else who did a better job planning or understood better, and this is what technology has given people visibility. annmarie: when you see a morning like today and a cool carrier

sunk -- coal carrier sunk in the red sea and rates go higher, can you predict how much higher they will go? ryan: i cannot. if you could, you probably work on wall street on hedge fund doing something else. we try to be ready with whatever the world throws at us. it is crazy to see the video of that should getting sunk. most of the container ships are not braving the red sea as that shifted, so we have a little more predictability about what will happen, but it is hard to know. you are talking demand and supply, and a lot of factors are pooling demand forward, people buying more stuff now to get it in before tariffs heads, a potential strike on the east coast in the u.s. and companies are trying to get cargo in before that hits. and if prices are going up, you should try to ship as soon as you can, and that causes prices to go up, so compound factors

make prediction hard. dani: we are nearing some of the levels we saw during covid, what scars do we still have from that time? is there anything that shippers and importers have learned that change this time around in a time of tension? ryan: during covid, it was unprecedented and never happened for. people were not prepared. when the price went way up, and carrier said i'm not honoring the contract and you have to pay a higher price, people got emotional and upset. now they just remember, that is how this works. a lot of ocean carriers signed long-term deals, 23 years at a price somewhere -- two to three years at a price somewhere around 5000, and they had to agree to pay for two to five years, and almost every company came back and said we want to pay at the lower market price.

the carriers remember that, and ocean carriers said you were not willing to pay above market price, so now you have to pay at the market price and i will not give you a discount. and i think that is fair. dani: so some of that is ongoing from covid, but you talk about other disruptions that shippers are trying to get ahead of, and i know you are likely to tell us you are not in the business of making predictions, but i would like you to try, should we get continued red sea attacks and labor disruptions, how bad could it get? ryan: yeah, the one that could get really bad is the ila, the union that operates the ports on the east coast of the u.s., their contract ends september 21, so if they were not to strike a deal, and a couple of weeks ago, they called off negotiations to learn more about the autumn's asian of port autoy

do not want that, if you could not support the carrier through the east coast, it would create enough chaos. and it is not just the east coast but the gulf close that they operate on, and you cannot just reroute a ship from the east coast to the west coast. they will not unload a ship on the west coast that was supposed to go to the east coast out of solidarity. so that is probably the big outlier, worst case scenario. september 31 is 30 days before the election or something, so, hopefully, the biden administration would at least want to hold off until after the election. it seems like it could be a real problem. the other things, tariffs, we've seen that before. it may reduce demand. i'm not sure it would be bad for

the price of shipping, it would probably help companies that are moving goods, especially if they're not hit by the tariffs. lisa: brian peterson, thank you so much. -- ryan peterson, thank you some much. we will have that conversation about inflation and why it may remain sticky. that's a crucial part of the story. let's get you an update on your bloomberg brief. >> china is loosening its group on the yuan, setting its daily reference rates at its weakest since november as lending rates are held steady. it comes as the dollar was closer to this year's peak with traders betting on higher for longer rates in the u.s., the bank of china's governor said there is more room to ease policy as policies. to cut rates this year. a tense week between angela netanyahu and the white house. he released a video criticizing the u.s. for withholding

deliveries of weapons and ammunition. the white house reportedly canceled a meeting with israel scheduled for today where they were meant to discuss iran. the u.s. ambassador to israel told netanyahu that the weapons are in the process of being delivered to israel. and a cyberattack shut down thousands of dealerships across the u.s. over the juneteenth holiday, targeting tdk global, a provider that many dealers rely on for almost all business. the outage left some dealers unable to function at all and some had to switch to paper for routine services like oil changes. the firm says that some cdk functions were restored but the service is still not fully operational. that is your bloomberg brief. lisa: next, decision day for the bank of england. >> inflation is likely to pick back up, and, therefore, it is

unlikely to go on a big cutting cycle. lisa: that is coming up next. this is bloomberg. ♪ (traffic noises) (♪♪) the road to opportunity. is often the road overlooked. (♪♪) at enterprise mobility,

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lisa: are we there yet when it comes to the rate cutting cycle? i surveillance this morning, decision date for the bank of england. >> what you have is temporary inflation looks in-line with the target, but it is heavily influenced by goods and deflation. that is likely to persist into the end of the year, so the bank has to say that inflation is likely to get backed up and, therefore, it is unlikely to go on a cutting cycle. lisa: the bank of england rate

decision duet 7:00 a.m. eastern sticky services inflation in the upcoming u.k. election likely to keep the bank on hold, even though cpi fell to the 2% target for the first time in three years. in a paper for the brookings institution, a professor at the columbia business school writing that three trends will make it harder for central banks across the world to keep inflation low and steady, deglobalization, fiscal pressures and rising long run interest rates. i'm so glad that pierre yared joins us now. this will look like a different inflation cycle than the past. how physical is it that what we are seeing with rates -- how feasible is it that what we are seeing now with rates as temporary and we could see that inflation retests with recent highs? pierre: our view is that even though inclusion will come down the cycle, it is likely to be higher on average and much more volatile.

lisa: how much higher and how much more volatile at a time when people wonder if our stories the right way to think about it or if a completely different inflation cycle is a better way to think about it? pierre: i would say it is a combination of r-star, meaning the real interest rate, and in terms of expectations and volatility, and we see that getting baked into longer-term rates, even as short-term rates come down. dani: this is not something fed speakers are talking about. the languages, let's wait and see but what would it sound like to have fed speakers acknowledge this and how should they be talking and thinking about the problem? pierre: i think what fed speakers need to do was to double down on their commitment to inflation stability and targeting inflation. we are talking about the difficulty of the job of not just the fed but central banks broadly across the world in dealing with the pressures. they have had a tailwind that

has made their jobs easier, and in the next five to 10 years, we see a lot of headwinds that will make their job harder and some central banks will do it better than others. dani: what is the anecdote to that? because you could have quickdraw reactions are somebody hikes and then you cut because of the volatility, so what is the right framework and reaction? pierre: that is a very good question. we do not want to be in a world where interest rates are also volatile because central banks become trigger-happy. what we would like to see is stability and good communication. the fed is engaging in another strategic review, and i recommendation is to double down on the importance of maintaining stable inflation and to clarify what the mandate also is, which is that it is a level of employment consistent with inflation stability. annmarie: about a month ago, they said that the fed should

lay groundwork for hikes in 2025. you agree? pierre: i think we do not know what will happen in 2025. there are a lot of shots to the economy. i believe the fled -- said should remain flexible and it should make it clear that it could cut or hike, and that depends on the data that it sees. annmarie: when you say 2025 is unpredictable, is that because of politics? pierre: in part because of politics, and because of the reasons we saw inflation changes was because of the supply chain, which he talked about previously, as well as other issues involving trade policy, which can also lead to spikes in inflation. lisa: harvard professor was singing your praises, saying that you were the primary author on the study that i believe is going to be heavily discussed at jackson hole in august at a time

when central bankers are trying to communicate well but they don't know what they are trying to communicate because they are not sure of the parameters. what you expect some discussions to look like at a time when there is great uncertainty? you can see it in all of the iterations from the federal reserve, trying to provide guidance, but it is becoming kind of noise. pierre: that is a really good question to think about about how the fed communicates. my view is that they should be communicating that they are watching all the possible different shocks that could occur, not just domestically, but internationally, and they should be ready to react if there are pressures. lisa: but what kind of reaction? how much do they have to start talking about reaction function and what it looks like in terms of scenario analysis, more so than say we will cut once or twice or just be data-dependent, which could mean anything depending on who you are?

pierre: i think the functional approach is the right way to go. i preference is to have a scenario view, where if this happens, this is what we do. that is my preferred approach. dani: i would like to take that idea of the volatility of inflation and how you price it in and with that does to long-term yields. when you look at the economic impact of an uncertain market, how does that play out? for type do things look with the factor of knowingness and volatility of inflation? pierre: it should show up in the levels and uncertainty, and both of those could show up in risk premiums. long-term, you see higher borrowing costs for corporate's and given the cba report from yesterday, higher costs for governments. there is a lot of uncertainty that comes from that. annmarie: when you look at the

higher wiring costs and the u.s. deficit, this is a time when we are having economic growth, where we are not in the pandemic. what would this look like if we actually needed the fiscal impulse to solve something like a recession? pierre: my concern when it comes to the fiscal trajectory is the problem that could arise if a government and perhaps the u.s. government, doesn't feel it has the fiscal space to react to an emergency situation. lisa: thank you for being with us, and to your points, that cbo report came out tuesday, showing that debt would equal about 122% of the u.s.' economic out but by 2034 and that surpasses the high set in the aftermath of world war ii. annmarie: and from february to now, the upgraded $400 billion added to this. a lot has to do with fed spending and also biden's path

for student loans. a lot is added, and next year, regardless of who will be president, there will be more added to the fiscal debt. dani: it is a good point on what happens when there is a downturn, not just because you don't have the fiscal firepower, but you have more when you pay with unemployment benefits, so what does that do to deficit spending? sure, rates are coming down, but other issues arise. lisa: all i can say is that steve eisman successfully got into my head when i hear him saying, why are you worried so much and the u.s. has been growing faster than everybody else. we are four minutes away from the bank of england decision where they are trying to thread a different needle. coming up, evan brown of ubs, jonathan miller, ed mills, and terry wiseman -- thierry wizman.

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>> the economy seems to be doing well, the data, while next, seems to be showing strong enough. >> i think the bull trend continues and we make a deposit the early summer months. >> clearly, there is real concentration risks. >> we have to realize what extreme optimism is built in to the economic outlook that market c. >> we are beginning to see a series of potter data prince and

that would cause the market to have concern -- series of hotter data prince, and that would cause the market to have concern. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. lisa: this is "bloomberg surveillance," jonathan ferro will be back next week. we are looking at a rate cutting cycle delayed, if not deferred. we talk about the bank of england just now decided, not unexpectedly, to hold rates where they were at 5.25%, hammering home the point we talk about, which is we keep thinking this will get started and the swiss national bank is saying let's go, and others are just not sure. dani: some of the confusion is from the language from actual central bankers. we will not hear from the boe today, but they note upside news on service inflation, but in the same breath, they say they downplayed the threat from services cpi and the wage hikes, so even they cannot get it

together and don't have a clear message and that makes us wonder, when is the cutting cycle beginning? lisa: and andrew bailey said they need to be sure if inflation will stay low. we will get to as a burden in a moment to break down -- to lizzie to break down the headlines, when it came in as a split vote, which is what people probably look for, but this comes at a time, and this is the key issue that the bank of england grapples with, we are staring into the sun when it comes to geopolitical risk and that internal political risk. central bankers would like to say it doesn't matter, but it is hard to say that when ultimately who gets elected has a big influence on the fiscal overhang and with the deficit looks like. annmarie: absolutely, and they are saying that the timing of the u.k. election on july 4 did not interfere with their decision today. they said it wasn't relevant. i think that is hard to believe because to say that that political election is not going to take up space in the debate

and done the trajectory of the country feels fraught and difficult, but it is the same debate in the u.s., with some saying we potentially will get a rate cut a day after the election. lisa: which goes into with the unknown czar. we are looking at markets that were expecting the decision, and we are looking that the pound is a little weaker, s&p futures up .40% in the euro around the same were it was before, 107.28 -- 1.0728 and crude marginally higher as we head into driving season. coming up, evan brown of ubs on the bank of england decision and why he may like england and the european union more than the u.s. ed mills with raymond james, and jonathan miller with miller samuel on the state of the u.s. housing market.

we have been parsing through the headlines. with the bank of england, what stood out? lizzie: well, it is interesting as annmarie commented that they felt the need to say this had nothing to do with politics. we have not heard any speakers from the monetary policy committee since the snap election was called and you can imagine the optics of cutting for the first time since the election campaign. it would look like the old lady was giving her to sunak a helping hand. whether it would work or not is another question, but i would look back at history. in 2019 during the campaign, you had two of the monetary policy devoted to cut regardless of the campaign, and there is the argument that opting not to cut would be a decision, but let's put other factors in play. we have that services inflation reading coming in unexpectedly

hot, and there is a vision on the committee on how to interpret that. you had some members actually seeing a risk from second-round effects from services inflation and others play down the threat from services cpi, so that's interesting. and the final thing, you have the same split as last time, 7-2, the two dissenters. but i'm looking ahead to the next meeting, the deputy governor voted today for the last time and next time, he will be replaced by someone who is thought to be more hawkish. so did we get a different dynamic on the mpc? dani: this market is interpreting it is a fish. i'm not sure how since we got only a few statements and some contradictory. traders are adding on to the rate cut bets, pricing under 50 basis points of cuts this year, but we are a long way away from the andrew bailey of the start

of the year, who said we are turning a corner but it never came. when you talk about 7-2, how far away does it seem that they are willing to cut? lizzy: you say 7-2, but don't think of the members as individuals because you have that big block of internal members who move as a pack, so wait for the likes of the governor himself to go for a cut, and it could be more rapid than at the moment but traders off the back of the services print yesterday pared their bets on august cut, so it is interesting that now having seen the decision and the guidance around it, as you say, looking a bit more dovish. lisa: thank you. great work. we will catch up with you as we parse through this because it matters. the bank of england is dealing with a lot of issues that the fed is and other central banks and it raises the question of

how much do they have to basically say we will not let politics affect us? because they have to factor that in, and how much are we looking at a split decision with the confusing result in markets. evan brown joins us now. what do you make more broadly on the tensions right now among central banks? evan: a lot of tensions, services with the u.k. the u.s. remain sticky, but you are also seeing employment is weak. in the end, it will come down to concerns about the labor market and they will see that is first and inflation were is a lagging indicator, so they will hold off a little bit, say with the fed. but, ultimately, their next up may happen in august or november and i think the global markets, that doesn't matter that much but at least we know that we are

heading in the right direction on the inflation and i think that is a decent environment going forward. lisa: the rate cutting cycle strikes me as an old car that has been left out for too long, and it never quite gets there as quickly as you would like. how can you be bullish on assets in europe after a lot said that the argument would be a rate cutting cycle that would be more aggressive in the u.s. and now people are questioning if that is the case, given the challenges you are talking about? evan: our optimism on europe is less based on the rate cutting cycle. i think that is a positive, but it is more of the organic things happening in europe. you do have real incomes improving, gold and manufacturing picking up, and the rate cuts are the icing on the cake. i think that is still the case. we have political noise, and

micron -- emmanuel macron calling for an election was not on my bingo card ahead of the eu elections, but i think the macro fundamentals went out and were positive. dani: you called it election ways, are the politics just noise at this point? evan: when we take a step back and work backward, what are we really worried about when we look at these more extreme parties taking hold? this is not 2011 or 2012. whatever the outcome is, france is not leaving the euro zone. that is not happening under any scenario. there might be more fiscal spending and that may create issues for business confidence, but it doesn't stop the underlying picture of improving the economy. i think the french people and businesses are more worried about their star player being injured that they are -- as we

all are -- then they are about the election and in terms of what it means for the economy itself and confidence. annmarie: can you look at the noise the same way you are in europe as in the u.s.? evan: the u.s. election is very tricky, and as asset managers, we have to think of it in terms of risk management as opposed to trying to pitch for a different outcome. i don't know that the election is going to have a meaningful impact on the fed's decision-making. there is a lot of data between now and september, if we see the market continue to cool, they will go in september, and the election will not stop that. i think after that, seeing what the fiscal situation is and where tariffs are, then they will have to take a step back and maybe it means that they don't cut as much as they

originally planned, independent of the election. annmarie: if you don't position for the horserace, how do you hedge for all the risks you are concerned about? evan: i think the dollar it has been remains the best risk hedge for a lot of scenarios, and if you think of a broad equity bond portfolio, those moments where you get an inflation surprise or concerns about yields rising too much in the u.s., we are now concerned about trump, tariffs, broader political uncertainty. the dollar has always been the most dependable hedge, and you would just like that overly whether you are trading fx or a u.s.-based investor hedging your international exposure. dani: when we talk about the huge expansion over the next 10 years, more than had been assumed yesterday, there is the idea that essentially it means duration becomes less attractive and yields have to go up to absorb the supply, but it is

also a time where there is demand for duration because we see the economy weakening. how do you see these two opposing forces? evan: you can count me among one of the people more relaxed about the fiscal deficit. nobody feels great about the trajectory we are on, but when it comes to markets, in q3 when yields were surging and everyone was worried about the fiscal situation, auctions and everything, all it took was a hint of a slowdown in inflation and growth, and all of a sudden, bonds are rallying like crazy, so as much as we talk about supply, and it matters, there is still so much demand for u.s. duration and it is still the safe haven asset for the global economy and global markets, and that is what people will come back to. we are the reserve currency of the world and there are not many alternatives that are attractive. i think about the fiscal

deficit. i am aware that it is unsustainable, but in terms of thinking that bonds will selloff like crazy, i'm not on that band. lisa: i love it, as people talking about i'm not that concerned, i care, everybody cares, but it hasn't proven to be that much of an issue. you talk relative expectations, and you talk outperformance in europe because expectations are lower. one of the reasons why some are more positive on europe than the u.s. is because nvidia. there seems to be runaway trends that are making him nervous. do you agree that nvidia kind of makes the u.s. less appealing given where valuations have gotten? evan: i would not say i like europe more than the u.s., i would say that i like them both. you cannot stand in the way that

freight train. you cannot do it. it is a major structural theme, ai, these companies, the earnings power, the potential, nobody really knows how transformative the technology will be, and i'm not smart enough to perfectly time when a certain mega cap company absolutely hates is point where that is too much and it needs to correct, so i think you have to own u.s. equities and that they met. u.s. equities just broadens you out, and it is playing another theme which is a broader improvement but let's keep things in perspective. we have the magnificent seven in market cap, larger than msci europe and japan combined. that just tells you the scale of these companies and the power of these companies. i'm not trying to fade that. that is not something -- that is

something i respect as opposed to trying to stand in the way. lisa: you are painting a portrait of somebody standing in front of a couple of texts, and it creates this existential question. evan brown of ubs, we appreciate your time. it's get you an update on other stories with your bluebird brief. >> the british navy said a greek owned cool ship was destroyed by an unmanned vessel in the red sea, the latest sign that houthis militants are showing no signs of slowing attacks on international shipping vessels. it sent insurance costs to nearly double the prior rates. families of the victims of two fatal 737 max crashes are asking the justice department to fine bowie nearly $25 million, saying that the company committed "the deadliest corporate crime in u.s. history."

15 victims families suggested that 14 to $22 billion of the total amount could be suspended of boeing puts the funds to an independent monitor and improvements to the safety program. this comes one day after dave calhoun-based public grilling by u.s. senators, and more than half of all banking jobs are likely to be displaced by ai, according to research from citi , saying 12% of roles could be augmented by the technology, adding that ai may not lead to a drop in headcount as the need to hire more compliance officers and ai managers grows. lisa: evan, are you being replaced by ai? evan: hopefully not. unless you will have nai person talking -- ai people talking to you, i think they will still need me to interpret what is going on while the machines are

under control. lisa: under repair. evan brown, thank you, under surveillance, setting the debate stage. >> it is really populism without any anchor to principles. i'm a big believer that you would like your party pledging fidelity to a set of principles and policies versus a person, and i don't think a personality type politics is durable. lisa: that is coming up next. this is bloomberg. ♪

lisa: a little bit more than one hour -- two hours until the opening trade. we did get the bank of england rate decision that was widely expected, 7-2 to keep rates on hold at 5.25%. markets little changed in the u.s., up .40% on the s&p.

yields at 4.24 in the u.s. over in england, this is treated as a dovish interpretation as the bank of england hints at the potential readiness to cut later this year. or on that throughout the day. under surveillance this morning, a focus on the u.s. setting the debate stage. paul: i think trump has taken over the republican party, it is a populism without anchors to principles. i'm a big believer that you would like your party pledging fidelity to a set of principles and policies that solves problems versus a person, and i don't think a personality type politics is durable, so i do think at the end of the day, our party, like in the past, will have a big discussion about what we stand for, what are our ideas and principles? and who are the best people capable of carrying them forward? lisa: the first debate between

president biden and former president trump is a week away as people speculate on who trump will announce as his running mate. writing this, we have seen details on the future path of tax policy, immigration, and response to deliver -- geopolitical events that we are watching for 2025 policy outcomes, and ed mills joins us now. that is what i would like to talk about more than the parlor game of who might do what ahead of the debate to prepare. when it comes to policy, we talked about the bank of england and the fact that they did not cut rates but they felt the need to say, we do not want to take politics into consideration. how much are your clients taking politics into consideration with respect to deficits and what that means for the rate path going forward? ed: this is a huge issue because there are a lot of knee-jerk reactions to who might be better for certain policies, but one thing we have highlighted are

these twin fiscal cliff that start as soon as january 1 next year with the return of the debt limit and then the expiration of $4.6 trillion worth of taxes on december 31. i certainly think the market would have a reaction that if a trump victory were to occur, it is more likely those taxes get extended, but when we talk about the bank of england, one question i get a lot is does the u.s. have a liz truss moment? were there is a desire to do these things but is there the ability if there is the movement and treasuries? a growing question and getting his who is more inflationary? when we look at some of the trump policies on taxes, tariffs, immigration, and continuation of the fiscal under biden, are we going to see a second wave or will there be a debate about it? does that stop the fed from cutting, and is it higher for

longer there? these will be huge debates this year and next year. annmarie: the president of the united states is not a king and will have to deal with congress, whoever it is. it looks like we could have a divided government. what does that mean for the rate of inflation? ed: i think that is probably where we get the least amount of policy changes, but one thing we have highlighted is that of preparation for a potential sweep is what the clients need to do, so if i told you one thing the day after the election, you might know the rest of the story. if you woke up the day after the election and i told you, kratz maintain control of the senate, that is probably a democratic sweep because especially with the tiebreaker, the democrats have probably taken over the house. if i told you the day after election that republicans defied odds and kept the house of representatives, that is probably a republican sweep, 40%

odds, so those two together is a two thirds probability, so preparing for the sweep and reconciliation may be changes to the filibuster are the most prudent thing you could be doing right now as you think about the election and the impact on the market. annmarie: fox news had a national survey out for the first time ever and biden is seen beating trump head-to-head since october. what do you think the biden administration needs to do to maintain a polling number like that, especially as they prepare for him to take the debate stage next week? ed: i think what the biden campaign would say is what joe biden has said for years, do not compare me to the almighty, compare me to the alternative. as we look to the debate next week with the biden campaign, they would like to make this a referendum about donald trump. if this is a referendum on joe biden, he is underwater and favorability ratings, only 25% of the country believes we are

on the right track, lashing warning signs for an incumbent seeking reelection, so the more that they can move it over to the referendum, and then, secondly, make sure that hyden can win in the sweepstakes of wisconsin, michigan and pennsylvania because biden can lose georgia, nevada, and arizona and still have 270 electoral college votes, so it is the focus on the blue wall but also make sure that this is a shift over to donald trump. lisa: ed mills, of raymond james, thank you. this will be one of the key issues, how this plays out. to this point, even if you know who will be the candidate and who will win, how do you understand the policy trajectory from that? dani: we are in a vicious cycle where you have a republican president who cuts taxes, and then a democrat one leaves those cuts in place, and then it is a cycle that keeps going on and on.

the question is, what stops it? is it a liz truss moment? is it an economic downturn? distancing like the moment of reckoning is on its way. annmarie: it is all a small sliver of the pie, until they decide to deal with entitlements, the fiscal trajectory will be where we are now, which some say is a dangerous path forward. lisa: steve eisman is coming on next week. a lot of people agree with him and they are hoping for this liz truss moment to inject discipline, and a lot of bond investors are saying, it is my job because it hasn't worked. coming up, we look at u.s. housing with jonathan miller of miller samuel, and we are looking ahead to other guests. this is bloomberg. ♪

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lisa: about two hours to the open of the trading day as we look at markets to have a 30-second record high in the united states. we are almost at 5600. when you think about where we were at the beginning of the year, anyone who said 5600 would have been left out of school. lots of people convalescing around him. nvidia should be its own index, up .6%. the russell 2000, guess what, is

underperforming yet again. growth problematic, that is not good even if yields are lower. in the yield space, this is what i'm watching. basically coming off some of the earlier highs after the bank of england decision. they want to cut rates, everyone wants to cut rates, dani. 2-year yield's up just about a basis point at 4.72. how long can it be before this is like lucy with the football, the rate hike that wasn't, the expectation that everyone has been stringing along with all the central banks from month to month. dani: central banks specifically in the u.s. are not helping. we need more data. how many of these central banks will be willing to cut when the fed is not doing it?

the ecb went ahead with it, snb has gone ahead with it twice. but there are consequences. the swissie is down this morning. we can kindly and it will not be horrible or do you have to say we have to wait for the fed? lisa: the swissie, they were excited to see a weaker currency. let's see how long that works. you can see the euro softening a touch versus the dollar. potentially less volatile than last week one political risk got reinjected. people take a look at the idea of the dollar still remaining preeminent despite promises on rate cuts that seem to be delayed. under surveillance this morning, the bank of england keeping rates on hold, hitting policy makers be close to backing interest rate cuts. this was the most interesting aspect of this. despite the stickiness in inflation, they are still ready

to go. annmarie: this really was dovish when it came out david no one thought they were going to make a move today especially given in a week and a half time we will have a fresh u.k. election. what you see is traders piling in, the bets for august are starting to ramp up. potentially before the summer is over, we will see this cut from the boe. lisa: meanwhile, does it even matter? dani, framing it, the ai rally powering on led by nvidia. clinching the title of the world's most valuable company after overtaking microsoft and apple. shares rising in premarket trading. blink an eye and you get another $100 billion. who is going to stand in the way of this freight train? danny, at a certain point, how much does this diverge

completely from the u.s. market, from all rate cutting discussions? dani: it is not the u.s. market, it is literally nvidia diverging from everything. the only problem is if you have other companies looking at this and say that they have to become an ai company. you see this with dell. not specifically for dell, but if you have all of these companies spending a huge amount of money on literally the same thing, they might discover they don't have the moat that they have around their core businesses as they do with ai if they are all doing the same thing. annmarie: he writes, the party is just getting started. it is not :00 p.m. -- 9:00 p.m. going until 4:00 a.m. with the rest of the techs starting. the question is what happens when the cops come to the party? lisa: again, we go back to some

of the parallels. the wall street journal putting this out yesterday, was telling. the last time we saw this opera performance, computer infrastructure company taking the helm like with cisco in march of 2000, we know what happened. press u.s. data coming out, jobless claims, housing starts, and building permits. this comes after u.s. mortgage rates fell below 7% for the first time since march. jonathan miller writing this. many would-be buyers have been waiting to and a years to see easing rates. this to me is one of the most interesting questions. there is this belief that when you cut rates, you can do so in

a way that will not reignite animal spirits. only 25 basis points on a rate cut reigniting interest in the housing market. how does that factor into pricing, this idea that we can get a soft landing with rate cuts given the backdrop we have now? jonathan: outside to respond through the 25 basis point cut, modest cut of some sort, you have to think of the last two and a half years has been this era of pent-up demand. suddenly the legs are cut out from under the housing market and people that were in the process of thinking about it were stopped in their tracks. the problem with the waiting part is that when you have, if you have a rate cut and surge in activity, you'll see prices rise again. the reason we have at such price

growth, inventory has been lacking. we are seeing inventory come in, but we have not seen the same amount of demand respond to it because of rates. when you see rates cut, and the short run, you will see a surgeon demand. that will keep prices elevated which has broken all the rules of economics where we are talking about record prices and mortgage rates are more than double where they were. lisa: there was a theory that when the fed cuts rates, that will cause more volume to come into the markets, you'll see more houses go out there, which will actually cause prices to fall. you will get price discovery in a way that we have not had for four years. why don't you believe that? jonathan: let's take a market like miami. lots of discussion about inventories coming in. over the last year, inventory has risen about 38%.

wow, prices will be challenged. but that inventory result after that increase is still 25% below pre-pandemic. when you look at the percentage of inventory growth -- and we are seeing it and it is good for consumers in the long run -- but it is not enough yet. there was such an incredible deficit of supply. whatever the local market number increase in inventory, is still coming from a record low. i won't say it is not even close but it is still well below long-term norms. that is the dilemma. everyone is waiting for rates to become more affordable, but in the meantime, i think we will see price growth. someone waiting for a lower

rate, another 50 basis or more, they will be disappointed. i think two or three years from now, prices will be higher than they are now even with more supply coming into the market. for example, in a lot of suburbs we track, bidding wars, especially in the new york metro area, are 40% to 50% of the closing. what does that tell you about supply? it is extremely low. it is not the same in every market. some markets have more supply than others. but it is still a challenge in housing right now with supply. if you look at what happened this spring, this is a very underwhelming spring market. i think consumers were expecting , rates are going to come down, we will see this sonic boom on demand, but until the last few

weeks, rates have been stuck at an elevated level. you are not going to see -- you didn't see the surge that everyone was expecting this spring. now the consumers, i don't know if anyone is taking the forecast seriously because we keep setting the rate cut date two or three months from now. dani: if you were one of those people hoping for that 25 basis point cut, hoping to ignite things, makes housing prices go down. asking for a friend, when does that moment come, where you actually see some relief? jonathan: i think three or more years. not a couple quarters. it is a long process because rates were too low for too long during the pandemic. literally, existing inventory was wiped clean off the earth

basically and we are basically coming from a very low point. that is the challenge. in this period, new construction , which is only 10% of supply, is where we can see faster supply coming into the market. but that is only 10% of the market. the other 90% is based on organic growth and it is starting from a very low point. and that's the challenge. annmarie: can we talk about the rental market in new york? manhattan prices are actually decreasing. why? jonathan: the way to think about pricing in manhattan in the rental market, it is almost like a choppy -- i don't know if you call it a bottom, but one month it is up, one month it is down. it's been like this six or seven months, but still remaining at very elevated levels.

rents right now are about ponies -- 20% higher than before the pandemic. lisa: altogether this is kind of counter to what the fed is saying. when they cut rates, they'll just be adjusting things and inflation will continue to go down and rent is a lagging indicator, coming down much faster. from what you are saying, it sounds like that is not the case. it will reignite the price increases. is that true, is that how you see things? jonathan: that is how i see it, but the bigger question mark for me is that initial burst in activity of a modest rate cut, how long does that surge or pent-up demand last? is this a six-month phenomenon, longer phenomenon? that is the question in my mind, how long will this hold up? lisa: jonathan miller, always

wonderful to see you. jonathan miller of miller samuel, at a time when people around the table are inquiring about rents and homes. two out of three are. some have a mortgage around 3%. here is your bloomberg green with yahaira jacquez. yahaira: north korea and russia are deepening their ties. both sides pledging to provide immediate military assistance to one another if one is attacked. the pack revives an agreement dating back to the cold war. it materialized during vladimir putin's first visit to north korea in nearly a quarter century. manchester united co-owner jim radcliffe says it will take time to rebuild the famed english football club. united finished eighth in this year's premier league and have not won since 2013. he told bloomberg it will take time to return to the top. >> we will improve everything

because we want to be at the top of -- we want to be competing for the premiership every year, champions league every year. we need to be aware real madrid is today. we are not there at the moment. yahaira: get ready for busy roads and long tsa lines. a record 71 million americans are expected to travel over the independence day holiday. according to aaa, 60 million are expected to drive 50 miles between june 29 and july 7. that would be an increase of nearly 5% from a year ago. nearly 6 million are expected to fly during that time, that is up 7% from last year. that is your bloomberg briefs. lisa: next, and even cutting cycle for banks. >> they hold off a little bit, same with the fed. they are not jumping in like the ecb did. ultimately, next up is an ease. lisa: it was supposed to be next

a while ago, it may be next in three months. this is bloomberg. ♪

lisa: about 45 minutes until some key u.s. economic data. jobless claims we have not talked much. we should talk about it more as people are looking at potential high-frequency data showing a potential turn in the labor market. equity still up 5580 on the s&p. if this holds, a 32nd record high. 4.25 on the 10-year. crude up .1%. under surveillance this morning, an uneven cutting cycle for

central banks. >> they hold off a little bit, same with the fed. they are not jumping right in like the ecb did. ultimately, next up is an ease, but it is more about integrating recovery happening in europe. you have some political noise, macron calling for an election was not on my bingo card. in general, macro fundamentals went out and we are still positive on europe. lisa: the bank of england holding rates steady following the swiss national bank's decision to cut borrowing costs. investors weighing the u.s. and u.k. elections. political turmoil in france when charting the global central bank cutting cycle. put it all together, go figure. thierry wizman writes, the proposals of france's left-wing and right-wing coalitions both diverge sharply from pro-market principles and fiscal responsibility and could undermine france's relationship

with the eu. euro-dollar may settle around 1.05 and linger there. great to get your thoughts. we had two european bulls on earlier in the show. you are going to take the other side, you think this is more than noise, could have a protracted weakening impulse at least through the currency channels. ? thierry: this is not a story about growth, this is about investor confidence, especially in these countries which have had very high deficit ratios. we have seen in the past episodes where the market gets concerned about sovereign credit risk issues in europe and you also see the euro decline in those instances. the case we are facing now is very interesting because it's a major power in the case of france that is now at the center of these concerns. i have to say, i read on not -- a lot of analysis suggesting

that if there national rally win the election, takes control of domestic policy in france, it will not be so bad because they are market disciplined. but let's keep in mind the starting point is not a good one. 5.5% gdp to deficit ratio. even if you take the most conservative estimates of how much they want to spend, it will add to the deficit, not reduce it. so the trajectory is not going the right way. that is the concern i have. lisa: we are all terrible when it comes to deficits. law is one worse when you consider with the u.s. is facing, what the world is facing? thierry: fantastic point here in the u.s. as a high gdp to ratio. i would say the problem is different in europe because, first of all, the euro is not the world's reserve currency. certainly it is a reserve

currency but not the reserve currency. for that reason, you can make the case, as long as there is something safer, treated more favorably by official reserve allocators, the dollar will still be the place to go if there is a problem with the euro or sovereign debt in the euro area. the other reason is france is a country in a union. it is facing brussels and the ecb. it is not really at liberty to do whatever it wants. if he tries, it risks disruption of the political unit. we don't really have that situation here. those are two major points that are different with regard to europe and the u.s.. annmarie: giorgia meloni was a euro skeptic. now she is the queen maker in brussels. has she set out a new path for the right wing? thierry: i'm not saying the national rally of rentable want to leave.

they have had a change of heart over the last few years, too. they know this is not the most popular tack to take if you are trying to join power -- gain power in any of these countries. at the same time, they are going on a path that is in controversial to the euro area and this is where the concern lies. you can be pro-euro and still try to press brussels to meet your demands, as opposed to eu meeting brussels demands. annmarie: when is your base case going into the snap election? thierry: in france? [laughter] a lot of elections going on. i think the national rally will be able to cobble together a coalition. certainly not out of the question. if that happens, they can effectively appoint a prime minister. emmanuel macron has no choice but to agree to that. then you will see domestic policy potentially shift in the direction i discussed, toward more spending, some tax cuts. it will be the government.

we may see more tariffs put in place for goods coming in from outside the eu. that is what we are facing. not a market brownlee situation but also a modicum of irresponsibility when it comes to fiscal management. dani: a lot of what you're describing were known knowns. we knew that for the european parliamentary election, the right wing would gain a lot of seats. we knew from mexico who would likely be elected. in india, likely how the election would have been. yet, it's a market that continues to react in a big way to all of these things. thierry: i would push back on the idea that we knew what would happen with european parliamentary elections. granted, i was discussing this, flag this as a risk, said that despite the fact that the euro is rallying, we should avoid it because we still face this

risk. specifically, a change in the government in france. it was not too much of a surprise to me, i can see why it was a surprise to the market. the market tends to ignore political changes until it is staring them in the face. in the case of mexico, the prospect that we would get a super majority in congress was not anticipated, neither by me nor by the markets. i think that was a bit of a surprise. dani: can i throw another one and you? in the u.k., the polls show they will have 500 seats, conservatives get 53 seats. labor has been talking about things like double the carry tax. they are a party who will perhaps end up spending more. are we prepared for this? something that we know will be a wipeout. thierry: hard to say.

on the extremes, not just left or right wing, have been somewhat a burst in details on their policy agenda when they take power. there is a reason for that. with regard to the u.k., that might not be the most important issue. things like deficits and taxes and spending might be the most important issues in france. in the u.k., if labour wins, may be putting a line under the brexit project. over half a generation, maybe the u.k. integrates. labour would have to hold onto power. they are the pro-europe party in the u.k. that might be more important from an optimistic perspective, from how the market sees it, rather than what they do with setting policy in the u.k. lisa: is this fun? thierry: no, it is grueling. politics is not something that economists are particularly well-trained to analyze.

there are plenty of economists that have applied methods to predict political scenes. it has not always worked out well. it is not just mexico and the u.k., france. we saw a surprise in india. we saw a near miss in south africa. the only thing that is not a surprise, this year would be a highly political year because of the number of elections. but the direction they have taken has come as a surprise to many people and that is frustrating. lisa: sounds like it will be a good year. thierry wizman, thank you. people talking about range bound markets, difficulty of staring into the sun. coming up, anastasia amoroso, seth carpenter. everybody is watching the freight train that is nvidia. can and blind us all to all the surface? this is bloomberg. ♪

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>> with just what the market want to see is the economy is coming back into balance.

>> the economy is moderating but very slowly and i think that will be music to the feds here. >> there is a risk the economy works more because of the interdependence between the fed and financial markets. >> higher for longer earnings allows markets to stay here even though we will get higher for longer rates. >> gift will be a real push and pull in stocks over the next few months. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. lisa: nvidia shares are up another 3.2 percent in premarket trading so what else do you need to know? this is bloomberg surveillance. jonathan ferro will be back next week at a time when we can talk all about politics and all about interest rate policies. everyone is looking at the fact that nvidia shares keep surging to record highs as that becomes the biggest company in the united states. dani: i love the idea that you come in and you don't talk about the rest of the market. it's 35% of the index gains this

year? we are writing on one stock. nvidia doesn't have huge earnings power but can this continue is uncomfortable. lisa: it creates attention when the data matters and when the politics matter and we are about to have initial jobless claims and all these other macro features that get washed over when it comes to what we see with nvidia. annmarie: we will get stockpiles in the oil market because they moved up in the last two weeks. nvidia overshadows everything and potentially, we will see that again today. lisa: that's why we keep watching small caps in terms of the broadening and their ability to keep going. a number of guest have said this is making them nervous and they want to broaden out in our next guest will probably say stop worrying so much because when something is a winner, it keeps

winning but there is a feeling that if you don't get that broadening out, does that push people further into this stock 100%? dani: i struggle to see how you get that broadening out. it's a problem for margins. for the rest of us pseudo-have a n in their stock game, how do you get the earnings power where feels like we are at an inflection point. we have a labor market inflection point in the spending inflection point, where is the jews come from? lisa: we've been waiting for that for quite a while when it comes to the labor market rolling over only come to inflation rolling over. i was struck by what jonathan miller had to say that a 25 basis point rate cut would reignite demand for the housing market with housing prices and rents to go up. that's underscoring this fear of where the biggest risk is right

now for the fed and central banks globally? dani: annmarie: annmarie: we will get that housing starts numbers today. everyone will come into the market and potentially there might not be enough supply but the prices are going to go even higher. is it better to go in now and take a hit on the rate but get in or you will be dealing with housing. you might have to wait two or three years on the sideline. lisa: housing starts and permits are coming up in 27 minutes. everyone is continuing to buy, the s&p is up slightly. so far this year, gain of more than 15% and this would be the 30 second record high of 2024 of it sticks. the euro versus the dollars $1.07. a significant weakening but the dollar remains supreme.

crude is up just marginally up zero point 2% as people look at some of the shipping delays but more demand ahead of a busy travel weekend. coming up, anastasia amoroso, we are already talking about beyond what's -- will talk about what's beyond the s&p 500. we will also have high -- housing data on tech -- on deck. i capital says this -- she joins us now so are you bearish or just acknowledging

that things feel pretty heady so things could happen? >> you have to trade this market and take it week to week. if i look at nvidia now and i look at the nasdaq roy look at the relative strength, it's been screaming for probably the last week or longer and when you have this condition, something will inevitably happen and you will have some consolidation and you will have some pullback. i do think trades like nvidia and the nasdaq or overstress but that's why i emphasize the word near term. i think there are fundamental catalysts that are propping up this rally whether it's in semiconductors or something else. i don't think those fundamentals will dissipate. too much exuberance near-term for sure. lisa: the problem that fundamentals are good but how do you price out the kind of gains we are seeing? how do you price and 1.5 trillion dollars of market cap gains in less than a year for a company with a business model

that seems to be hinged to the future but is not necessarily tested in terms of longevity? >> you can see it in the data. you can seat in the spending intentions from hyper scalars and other companies and other governments trying to build artificial intelligence. i don't think it's a coincidence the stock is rallies much as it did when you have in the last quarter eight 427 data centers spending on nvidia chips. that's what i mean by fundamentals. i don't think that's a one off. it might still be into 2025 that we see this surgeon spending on artificial intelligence because this is the biggest megatrend we had today and you will either implement artificial intelligence or you will be left behind. that's why everybody are figuring out how to embed ai and you cannot do that without those chips.

dani: if i wanted to build a successful trading strategy, i get all my best friends together which i have many but not really and put together an equity momentum strategy. that strategy has done so well that is the best year for 2007 -- since 2007. i'm worried about the bots, should i be? >> if the trend is your friend, you should be but what's going to derail this? this is something we think about as we ponder the second half of the year. what are the risks? maybe growth is too weak and the other one is too strong. the third one is maybe nvidia or artificial intelligence doesn't deliver near term. there is politics in the elections in france in the united states or of any of those things present a hiccup, that's when you worry about the unwind of those trends. i think the comfort level in the market now is that those are

peripheral risks. we are in the sweet spot right now because growth is strong and has great formant all sorts of trays but it trade is weak, the fed will cut interest rates. that's why i think so many investors have been sticking trades that are working. annmarie: dani: even if growth is strong and you look at the earnings estimates for next year, we are at 14% is the latest consensus which would make of the strongest year for s&p earnings since 2008 if you get rid of the covid weariness. does that make sense to you or do we need to reckon with something different? >> this make sense to me because one of things i am in courage by beyond artificial intelligence momentum is i think there is a fair bit of economic momentum globally. it was all about the u.s. consumer and the global economy and we still have the u.s. consumer but we now also have the global economy that is facing something like or percent

growth versus .8% we saw a few months ago. we also have the global manufacturer momentum that is really picking up in the united states and china and korea and taiwan and europe. that's a whole lot of broadening out that i think is playing out beneath the surface. annmarie: based off of retail sales earlier this week, are you concerned about cracks in the u.s. consumer? >> it's the story of the bifurcation that continues to play out. when we look at the spending intentions in the perception of prices of us the consumer cohorts, the low income consumer is seeing the price pressure and is therefore lowering the spending intentions. you don't actually see the same dynamic in the higher income consumer. the other thing that's happening when you look at credit or default rates is the same dichotomy. we see some of the normalization and the low income cohort and those delinquencies rising but

that's not the case when you look at american express or those default rates. retail sales are important but it's not the entire consumption basket. it's what you spend at some of the online shops and brick-and-mortar and gas stations but when you think about what the cohorts will be spending on, it's entertainment, travel and you see strong momentum in those parts of the economy. annmarie: do you think now is the time to pile into europe? >> i do. we wrote a piece that we call the summer of europe and i don't think is just a summer trade. beyond the politics, i think there is a lot of strong economic momentum playing out in europe. if you think about europe and the last couple of years, you had a spike in natural gas prices, you had a spike in mortgage rates because 53% of those mortgage rates are adjustable. there is a lot of pain that has occurred for the european consumer but fast-forward to today and we have one rate cut

already in place with more to come. i think the peak came from mortgage rates is now behind us in europe. when i look at the real disposable income and the forecast we have for this year, they are supposed to pick up relative to where they were last year. that's why business confidence is recovering in europe i think there is a lot to like. when you look at prior election cycles like in 2017, we did see the volatility pick up into the election. it likely subsides thereafter so i think there is enough to say that election volatility should be bought. lisa: do you think the u.s. traveler will single-handedly support the u.s. he -- the european economy? >> i don't know about you but everybody i talk to seems to be heading to europe for the summer. there is data to support that as well. lisa: i'm wondering how much this will help. it seems as though you are not

bearish on nvidia but you're not bullish at this point to see a massive surge. don't get out but it might be late to get in and right now the gains are being had elsewhere. is that the way you would frame at that independent of the uncertainties of rate cutting cycles and elections that right now, just follow the economics and things are not that bad and they will not get that bad in broadening out will work in some of the expensive trades might need to pause? >> that's right, there is some rebalancing that can be done right now i don't think you should wholesale get out of nvidia or the nasdaq trade but maybe you want to pare back some of those gains you have had in the position and maybe you want to reallocate some of those parts of the market that could consolidate over the next couple of months. things i would be looking to his partially consumer discretionary, consumer finance with delinquencies rising but they are pretty well normal. you may want to look at the

industrial sector as well. the manufacturing momentum is rising in manufacturing upswing typically lasts about nine months. i'm not saying get wholesale out of the winners but peel back a little and reallocate to the broadening out trade. lisa: have a great time on your vacation. always wonderful to get your thoughts a let's get you an update on stories elsewhere this morning. here is your bloomberg brief. >> it's been a tense week between is really prime mr. benjamin netanyahu and the white house. netanyahu released a video criticizing the u.s. for withholding deliveries of weapons and ammunition. in response, the white house reportedly canceled a meeting with israel scheduled for today where they were going to discuss iran. the u.s. investor to israel to an just told netanyahu that that weapons are in the process of being delivered. dutch prime minister is on the verge of becoming the next nato

chief after the president of romania dropped his bid. the outgoing debts leader now has the support of nato's 32 members to succeed -- to secede secretary-general whose term is set to expire and i tober. allies had hoped to select the next head of the military alliance before a nato leader summit in washington next month. mcdonald's is going all in on the value meal. it will launch a marketing let's and a new five dollar meal deal next week, bringing back diners or by inflation. the five dollar meal includes less-expensive items and comes as other fast food chains prepare similar programs. that's your bloomberg brief. lisa: up next, the morning calls plus we will talk about nvidia surging again. bloomberg. ♪

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♪ lisa: welcome back, another morning of nvidia with potential gains. on tuesday, 3.5% increase nvidia added $113 billion to that market cap. to give you that perspective, that's equal to most s&p 500 companies in one day. williams down grading nike to a cell with a street low price target of $75. they sate nike's loyal customers like the brand but are unwilling to pay full price for most of the product. p bank raising its price on meta-. the firm maintaining an overweight rating on the shares setting progress with ai across engagement and advertise returns.

the price target was raised on nvidia to $165. there was a 10-1 stock split projecting continued growth into 2027 and the need to power ai lifting nvidia to the world's most valuable company. you look at these statistics about how much nvidia has gained whether it's one and a half filling dollars of market cap over eight months or whether you look at the fact that 3.5% gains tuesday at it mcdonald's to the market cap capitalization. when does it get too far and how do we measure this? >> in the case of ai, we've seen the fundamentals for nvidia have improved over the course of this year from where we started. that's a positive revision and the question investors are asking now is how big does this

market get? what we appearing is the model sizes will get bigger and bigger. it could be 5x so if you have to train a bigger model, you need more chips and the other aspect of this is if you have more chips in a cluster, you can train it faster. that's what driving that euphoria is everyone thinks a i is a big deal but what driving the upward revisions is the fact that the models keep getting bigger. your existing model providers will have to spend more so google, microsoft, all the hyper scalars will have to raise their capex. i want to see how investors react to the earnings. what we saw in the q1 earnings when meta-raise their capex was a negative reaction lisa: this is from thomas thorton at hedge fund telemetry. he said today's premarket move

is equal to 2025 full-year revenue guidance of $125 billion. you start taking into effect as revenue implication that the company is putting out there with the implications from the market moves. how many years does nvidia have to continue this kind of explosive growth to justify valuations? >> at the beginning of the year, they were trading at 25 and there they are close to 50 times pe. despite numbers going out. a lot of the goodness is priced in and they have executed to perfection. they are always raising their guidance but i'm surprised by the lack of competition. you would have thought that given the high prices, given the fact that everyone recognizes it's a big market, there should be more competition and now there is no competition. nvidia is moving up the stack. they are doing chips and also

complete systems. it will be interesting to see how those revenue streams evolve because that -- that's what will drive the multiple. we had a conversation with the apollo copresident a few weeks ago that gave intel a way to fund their chip manufacturing plant. at least intel is attempting but will it be someone else who does the same? are you saying there is no one there? you bring up a great point. right now, the market is supplied can straight because cmc can only make so many chip. even though they are expanding capacity, they can only do it at a pace where it allows their shareholders to fund the capex. there are constraints around expanding capacity. once intel gets to a point where it has the capacity to manufacture maybe not their own but someone else's, that's where you will see rationalization.

we haven't seen that yet because there is no capacity. the market is focused on the next two-four quarters but if you look ahead, i believe there should be capacity for rationalization. are they in line with reality in the sense that the census bureau set only 5% of u.s. companies have been using ai, that's not a lot. it's an early trend but where it's most visible is hyper scalars of the ones that have gone all in. they spend the most $200 billion in capex last year and all incremental capex went to buy gp use. if they can translate that into revenue, the number needs to keep growing -- going up. if it's flatlining, that's a sign that ai is in translating into revenue. there is a lot of investment for the place where we will show for his the hyper scalars.

what's the timeline of that? quarter after quarter coming want to see fundamentals. don't want to see flatlining because the hyper scalars talk about copilots and workloads being deployed on their cloud. you want to see that number keep going up and then application revenue will show up but that's out technology always plays out. first its infrastructure that is the software and now hyper scalars are in the best position to determine how much of this is getting adopted. is anyone bearish on nvidia right now? there is the aspect of holding nvidia in the portfolio because it will make you look good and it's summertime so you could argue there is a lot of windowdressing going on. at the same time, the fundamentals are still strong. it comes down to whether the fundamentals keep accelerating or you start to see flatlining. there is a concern around margins is when you look at the

next year's revenue, even though the growth tapers 33%, the margin is flat. until now, nvidia has shown margin expansion so once margins start to flatline, there is the next catalyst. if it's software, that's what you want to see in the numbers. do the numbers even matter? we appreciate the insight. it seems like something people need to have in their portfolios. we are about five and its away from the latest round of economic data in the u.s. for both of you, what will be more important, initial jobless claims or some of the housing data especially given what we've heard from jonathan miller? dani: for me personally the housing data but for the economy as a whole, initial jobless claims are more interesting. we talked about the household survey shows declining jobs and non-arm payrolls shows gaining

jobs even though it's high-frequency and volatile data, it goes away to solving the mystery. annmarie: they've moved up the last couple of weeks. maybe personally, i'm interested in housing starts but for the economy going into an election, you saw biden last night winning and this had to had paul from fox news. it's not great on the economy but he's doing a little better. this sort of data is important. lisa: that's coming up in a couple of minutes. in markets right now, you see a lift to the s&p 500, giving away state of play. there is about a 65% chance of a september rate cut being priced into the market. people looking for a softening. coming up next, set carpenter of morgan stanley. ♪

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lisa: just moments away from u.s. economic data with initial jobless claims. they have been coming in at an elevated pace. what that says about the potential weakening and tipping point we are at. s&p futures are up 0.4% and the nasdaq outperforming about half a percent. yields are marginally higher as we prepare for u.s. initial jobless claims and housing starts and building permits all coming in. michael make he with us. what do you see? mike: i don't have great news or

bad news either in jobless claims. 238,000 after 242 in the unrevised number from last week. it is down but not down a whole lot. does it tell us anything? continuing claims, over 1 million and that would be a rise of 8000 if we did not have an updated number. we will get to those as soon as they come through. it is a significantly -- it's higher but not significantly jobless claims. they were revised up to 242,000. looking at the housing industry, housing starts are down 5.5% this month or in may after 5.7% gain in april. the forecast was for a slight gain for housing starts and building permits are down 3.8% following a 3% decline last month.

not good news on the housing side and this continues questions about what is happening in housing. we have a crisis shortage building and housing with not enough housing is housing formations continue to rise. the reason for this drop off i'm not really sure whether it's employees or running out of land or construction companies being cautious. lisa: stay close and thank you for that. it's being read in markets on the margins giving more of a green light for a federal reserve to potentially cut rates but not a significant move in equity markets. we are retracing some earlier gains. higher than initial jobless claims and higher revisions. it's marginal but clearly an elevated pattern of initial jobless claims of you believe that three make the trend. the russell is up about 0.1%.

yields are higher in the bond space. yields on the two-year are lower marginally but the direction of travel is on the margins, this gives more of a green light to a federal reserve looking for reasons to cut. the 10 year yield is around 4.23 and 30 year yields at 4.37. it's confusing with foreign exchanges. there is ongoing euro weakness as people look at the dollar being a haven regardless. this really does raise the question if we are starting to see a trend. you pointed to the fact that we've seen elevated jobless claims. it's higher the we expected to 35 in the revision is 235,000 from the prior week, up from 242,000 reported. dani: i think housing starts is more interesting and the fact that it is so much lower than what we expected with the

decline of 3.8%. the expectation was there is not a lot of supply and there will be more houses being built. maybe the homebuilders are trying to keep 11 prices. how will a cut impact housing jacket will it have the impact the fed wants which is not too big? does it reawaken animal spirits? this housing market is not playing out the way we thought it would. mike: it's odd we are not keeping up and usually markets clear and they find a reason to do so. according to the census bureau, housing completions are down significantly. they are down 8.4% from april. that doesn't give you a lot of confidence that things will get better. we saw the national association of homebuilders drop to their confidence down as well so there's something going on

housing beyond what we've seen in recent months and whether the trend continues, we don't know that this is the time of year with the weather that her and people looking for housing, you would think maybe builders would see more reason for optimism. lisa: thank you so much but joining us now is set carpenter of morgan stanley. what stands out to you? initial jobless claims are having an upward trend or this idea that housing is flat on its back? >> if i take them together, i'm pretty constructive on the u.s. for this year as a whole. however, i think it's clear that we need to -- we will see slower growth over 2024 relative to last year. the incremental softening you were talking about when you talked about jobless claims, you always came back with an odd -- with an adverb to modify so it's not as though things are falling off of a cliff area in the housing sector, it's important because supply for single-family homes is clearly constrained

because anybody who's got 3.5 percent mortgage, they are staying put so the supply is constrained. a low -- monetary policy has always worked through the housing sector primarily and i think builders have to be cautious because they have to wonder where demand will be. i think it just means all together that we are getting that modest slowing in the economy and we think things should slow down and we think inflation is coming down as well which allows the fed to cut. for now, i don't see this data as being harbingers of going off a cliff anytime soon. lisa: we can find plenty of people who probably find it doomsday. the idea of tipping point has been thrown out there. some say this is the time to cut rates because you don't see a linear increase in unemployment. you don't see a weakening of the jobs picture. what gives you comfort we are not seeing the precipice of a

market increase in unemployment at a time when we see an inflection higher in jobless claims? >> we've also never seen an economic recovery from a global pandemic like right now. as we came out of the pandemic, there were lots of dislocations and things trying to figure out where to be. businesses were running shorthanded so now we are seeing them settling into this staffing closer to what we want in the long run so that readjustment from a truly unprecedented shock, i think we're starting to move into the more normal stage. to say we haven't seen this situation before is true. on the other hand, we haven't seen the situation before so that draws conclusions whether this pattern is telling us something. dani: not to draw a massive conclusion but can you add the retail data into this? is there price fatigue so you

have companies not as worried about labor shortages now their margins are starting to get squeezed? >> we think of this is going in the same direction. the full quarter for the first quarter where we have all the data, durable goods spending was negative, nondurable goods was flat. where the residual strength was for the consumer was in services and that's the sort of slow down we have been expecting area i think the retail sales data, overweight goods shows the consumers not did. that consumer has not stop spending entirely. what they said was we boarded but lots of furniture and lots of computer screens and a home office three times over. maybe it's time to cool down a bit. annmarie: you brought consumers and their concern about higher prices but also what's going on in the labor market. those are issues you say are the

biggest when it comes to the u.s. election. tariffs and immigration also. how are you looking at next year? >> with a lot of trepidation because lots of different things could happen. when clients ask us questions about the election, immigration tariffs are two important things. i would say if we've ever seen the situation where the unemployment rate drifts steadily over time, it's not common but neither is the kind of increase in the labor force we are seeing from immigration. k i'm old enough to remember when 4% was considered pretty good so we saw a rise on that but a big chunk has been coming over the past year from an increase in supply and immigration matters there. with the election, we put out research for our clients over the past week and you can see a range of outcomes on what

happens to the labor force depending on policies that get put in place. i think the range of outcomes in the election is vast and we had to be humble about what will happen. you can see big construction in the labor supply which could be inflationary or things status quote and a little bit of reduction in which case the economy gets turned on. annmarie: we have to be humble or the fed has to be humble? how do they think about these massive changes whether they will make a cut? >> humility is called for all-around particular for anyone in economics where we are not good at it on average. we need to practice humility a lot. for the fed, they will have to sit back and wait on the policies. if we listen to jay powell and where error analysis is an current monetary policies currently restrictive, they could come up the peak this year

and not have to having done too much in terms of easing policy. into 2025, they probably need to think more about what the election outcomes mean policy, fiscal policy, tariff policy and immigration policy before they can have any sort of conviction about which way they can go with policy. lisa: i asked terry wiseman if this is fun and he just said no. is it fun for you? >> this is one of the most challenging macro economic environments to do forecasting and it's a double edged sword. it's very hard to do forecasting when there is so many crosscurrents and situations you haven't seen before but maybe it's a good time to be a forecaster because nobody else knows what's going on. lisa: i asked this because when i tried to put together even the teams to hook into, i'm not sure which takes preeminence whether it's a rate cutting cycle or the weakening or the disruptions

causing inflationary increases. i don't have a sense of where the balance of risks are. i can make a good argument for any of these and i believe it. how do you plan with any kind of long-term forecast when the likes of those saying if you don't have that long-term forecast, you will have a mistake and you will have volatile markets and they will essentially break. >> i think that's fair. lots of volatility, the time horizon matters and our clients are short-term focus. i feel pretty constructive where the rest of this year where i don't see.the u.s. falling off a cliff i see inflation coming down substantially the rest of this year and i see the fed cutting. beyond that to the medium-term outlook, the uncertainty absolutely goes up. the elections are a huge

component to which way things go. i think it is impossible to have high conviction so the best thing investors can do and policymakers can do is to think about all of the outcomes contingently and try to come up with your best scenario and then you will end up in one of the scenarios over time. this is one of the reasons why we talked where clients, we say we will not tell you or predict what will happen with the election. however, we think across the different scenarios and here with the key out comes would be for fiscal and tariffs and immigration and here's how you should think about planning for that. dani: this has been a criticism of the fed that they are not being more clear in their outlook and they say we are waiting for more data and people are saying give us something concrete and a clear direction. what you and lisa was describing is one where there is not a clear direction. how would you rate fed communication in this environment?

should they be giving us scenario analysis? >> especially the way you framed it when some of the fomc members were asking questions about how they are doing, under the circumstances, the doing a pretty good job. i like to say be as clear as you can be but by all means come been no more clear than that. i think they would be doing themselves a does for us just a disservice if they tried to be precise when you can't be precise. that would be false confidence so when the world turns out different than expected and they to change course which is what they should do, everyone will complain that you told us you will do one thing and now you're doing something else. lisa: so justbuy nvidia. thank you so much. people just look at this. let's go for it.

let's get you an update on stories elsewhere this morning. >> the british navy said a greek owned coast ship was completely destroyed by an unmanned vessel in the red sea. if the latest indicator that houthi militants are showing no signs of slowing their attacks. it marked the first time ship was successfully hit by what the military calls a surface vessel packed with explosive. it sent an assurance cost surging credit dishes 20 sources in the market. ai is coming for your finance job. city says artificial intelligence is likely to displace more jobs across the banking industry than any other sector. more than half of jobs in banking have a high potential to be automated but even if ai replaces some rules, city says the technology might not lead to a drop in headcount. nvidia shares are rising yet

again toward the opening bell. the latest rally comes after michael dell posted that his company is building an ai factory with nvidia to power the elon musk supercomputer. the surge extends its lead is the world's most valuable company and nvidia shares have rallied more than 170% this year, adding around $2 trillion in market cap. that's your bloomberg brief. lisa: thank you for everything. up next, setting you up for the day ahead. you are watching bloomberg. ♪

this is our future, ma. godaddy airo. creates a logo, website, even social posts... in minutes! -how? -a.i. (impressed) ay i like it! who wants to come see the future?! get your business online in minutes with godaddy airo lisa: 45 minutes to the opening bell and we can look at what's going on in markets.

it's positive but off the earlier highs. s&p futures are up 0.2% over 5500 but on the heels of initial jobless claims coming in higher-than-expected. euro-dollar is $1.07. the 10-year treasury yield is up 0.4%. it's moving in the opposite direction of two-year yields in crude is up 0.3%. the fed's neel kashkari speaking this morning and we will hear from the fed presidents tom barkan and mary daly of the san francisco fed later today. global pmi data move the needle quite significantly at a time when people are wondering if everyone can keep spending. they can keep spending on summer travel which is the theme we keep hearing. we are looking ahead to that with the shareholders meeting at delta underway. what do you expect to hear from

some of these investment meetings, the latest from delta at a time where it seems there is an ongoing diversions between people going cross atlantic versus domestic? >> even in the domestic market, things are really strong. there is a little bit of oversupply in the market. we're still kind of getting back to 2019 levels in the transatlantic market where as capacity in the domestic market has surpassed that. demand is strong but there is still strong demand despite what we looked at last summer as being pent-up demand. dani: annmarie: do you think domestically you can get cheaper airfares the way you cannot get transatlantic this summer? >> i do believe so. we see pricing a little softer and airlines in the first

quarter pulled back the growth a little bit. as we got into the second quarter heading into the summer, you are seeing mid to high single digit growth in the domestic market. that's creating, especially if you have flexibility in off-peak times, there are better pricing available out there. as we are heading into july, we're definitely seeing strength. annmarie: when you look at the domestic market, who is winning this space with cheaper airfares? >> the consumer wins. there is a lot of optionality out there in the bears are coming in better. you hear a lot of things that we are seeing record revenue and that's true. this is probably the highest revenue this industry has seen. we also are having record costs like fuel which is stable but it still higher than it was in 2019.

there are airlines that are struggling a bit more. i think those airlines exposed to corporate demand that is starting to see recovery here, i think they will stand out better into the summer season. dani: we've been talking about how we are expecting a record travel season around fourth of july. the ability of airlines whether they are having updated plans and with the airports will look like, can you contextualize chaos we should expect from planning to travel this summer? >> always be ready. the thing with summer is you have these thunderstorms that just pop up from nowhere. in winter storms, you see them coming and you can prepare for it and that's the issue. air traffic control centers especially in the northeast and in florida are so understaffed. the risk of disruption is greater when there are events. summer means there will be

storms somewhere. be flexible but i think airlines have done a lot to help address that. some airlines change the way they build their network from -- and some airlines take advantage of what the faa has allowed them to do to break down capacity in the northeast to make sure there is reliability. i expect there to be a better summer than we've seen for a couple of years but it depends on the weather. i would say be prepared and flexible. you give me a little bit of confidence. spirit, united and jetblue are all delaying their analyst days, what's going on? they delayed it for very different reasons. united has the faa review and they didn't feel that was the right time to do it. if you look at. come it sounds like they are trying to come up with a standalone business plan and there are some initiatives they are trying to roll out to meet

that. maybe they think the bondholder discussions might take longer and they want that behind them. generally, there is a lot of uncertainty whether its supply chain looking at the economy. i think airlines are feeling more comfortable to do their investor days toward the end of the year when they have better clarity on 2025 even when it comes to what kind of aircraft deliveries they can expect. it's better to provide that toward the end of the year then closer to the summer. lisa: thank you so much for being with us. here is breaking news -- car dealers are again idle after yet another cyberattack. this transpired over the past 24 hours. the cyberattack is at cdk global which is a software provider and speaks to the question if you want to buy a car, mighty tough to do so considering the dealer

systems are not available in some of the transactions had to be done by paper. dani: car dealers really start to sell more cars during these holiday seasons and we are coming up on the long july 4 week in and there is usually ticket price sales that could be had and now you don't have the system to operate on and they said they don't have a timeline to fix it. lisa: we will update you as we get more news. looking at the big picture of the day ahead, i'm looking at the idea that maybe rate cuts are deferred and we continue to see that even though they are still on the table. this unprecedented moment where we could see a softening in the black box that is next year. what is your big takeaway given the fact that it seems like the confusion around the macro is leading everyone to focus on what they know which is nvidia. dani: debt, taxes and nvidia. i'm surprised how sensitive the markets are. yields are higher despite the

fact we had some softer data. i wonder if that's looking at the housing starts, less housing and prices are up and inflation goes higher. this is not star data come its housing starts and the fact that we are selling bonds and that shows how finicky this market is now. annmarie: they think the fed is data asked -- data obsessed. when you talk about things that will make inflation much worse, fiscal pressures which we saw in the cbo this week, deglobalization and rising long-run interest rates. the fed needs to start thinking about hiking in 2025. lisa: that's a complete unknown. we will probably get all sorts of projections and analysis is what stands out at a time when you have to have plans for a lot of different outcomes. tomorrow, barclays and alpha simplex and rbc and citibank.

this is bloomberg. ♪ her uncle's unhappy.

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

>> for the viewers worldwide, i'm katie greifeld. stock futures are broadly higher. count down to the open starts now. ♪ coming up, futures trading your record highs providing fresh gains in the tech sector. adding to the optimism. treasuries on the brink of breaking even after a roller coaster first half. ai optimism continuing to push the