♪ >> incoming data, in particular, the more important data still shows the economy doing well. >> even with further progress, it is still not enough to justify a topline move in terms of monetary policy. >> interest rates have done their jobs. they felt demand and output down. >> people want the fed to start asap and move quickly, be careful what you wish for. >> the more likely air is that the fed will not stop cutting early enough and then will overshoot on the way down yet again. announcer: this is "bloomberg surveillance" with jonathan ferro, the several more than annmarie hordern. jonathan: good morning, good morning. for the audience worldwide this is bloomberg surveillance coming into q3.

we are hitting the ground in week one absolutely running. chairman powell tomorrow, payrolls are friday and a ton of economic data sandwiched in between. lisa: it really kicks off today with the manufacturing data. has to do with this idea of whether we are seeing activities slow. a key question here, does this confirm the weakness that people have been coalescing around over the past few weeks or does this flight in the face of that impression the fed to stay on hold for a bit longer than people currently are expected? >> all it tics absolutely colliding with financial markets. a question, if the president have the mental and cognitive help to serve? this is the response. almost three quarters of the electorate expressed doubts, nearly half of his own party do not think he should be the nominee. lisa: 28% of restaurant voters belief that he should be running for president, meaning that more than 70% believe he should not

be running for president. this comes down to his question of doubt this more likely that donald trump is going to be president and morgan stanley for the put this to the test of the weekend saying that if donald trump were to become president you would expect a steeping in the yield curve. most people when they think about is are not thinking about the invitation for the yield curve. at the same time, the fact that you have bond strategists started to actively game out scenarios were donald trump is the more likely president tells you just how far things have shifted at this point. jonathan: i'm on board with you, this felt like they want to express some of those starts and start to. risks have skewed to the downside for growth under republican win scenarios to impart to immigration reform and tariffs. let's be clear these are things we've been talking about for a while but they take on some added importance after that debate. annmarie: if you just look at some of the production markets out there, they give donald trump about a 70% chance of winning at this very moment if he is running against joe biden.

this raises a real existential question. how much pressure at this internally within joe biden's camp to really get him to step down and allow somebody else to take its place? report after report this weekend saying a sickly his insider circle is saying no, just keep on going to come fight. defiance, that is the way to go. you wonder how far that will go given the fact that you have major publications traditionally skewed to the liberal side seeing joe biden, it is time. jonathan: we need to talk about french politics as well. the euro is rallying, french equities are doing nicely and if you look at the comparison between the ranch 10 year and the german 10 your, that spread is narrowing. a slightly less convincing win than expected for marine le pen's party. i think there is to a ton of uncertainty here going into the second round. lisa: that is an understatement given the people are rallying around the fact that her party got something like 32%.

it's not exactly as if she didn't just get something that looks more and more like the majority. the key question to me, can you get some sort of unity between emmanuel macron's party in the far left party? can you get unity, or does that fall when you start to actually deal with the nitty-gritty of policy? jonathan: can't believe it is july. the equity benchmark on the s&p 500, futures positive by just about 0.1%. yields with a little bit of a lift here. i don't know what you made of the friday session, but double-digit moves on a 10 year yield to close out the week, the quarter, and going to the weekend. lisa: i really don't know what to make of it other than people are taking a look at just how much we recalibrated some of the yield space. honestly cutting after this week it really is going to be dominated about to be get confirmation about the weakness? you are correct to focus on the yield space. tomorrow, we get the stated. the fact that jolts are going to

come out, job openings. do you still get the feeling of increasing slack in the labor market, and do people give more credence to that idea rather than some of the messy data that some people, even jay powell has frankly cast some doubt? we are also going to be hearing from john williams. wednesday we're going to get a crush of data at head of the long weekend that some people are going to have to put a pause on friday to get the jobs report. but really if we get some of the jobless claims, do we start to see that ongoing uptake that you pointed out last week, and i think we should sit on this for a hot second, has been creeping higher. can you shrug it off as normalization? it has never in history been a single line, there we go. it has always been something that has been a more protracted increase in jobless claims that has become something that is much more worrisome. jonathan: if we go through the

estimates, 190 the estimate for the headline payrolls read. there are people out there suggesting unemployment on friday might be more important what the fed is going to do here that headline payrolls given what chairman powell said to us in the last rest conference. annmarie: especially because we don't have an understanding of how many jobs need to be created every month to create a market is fully employed. we have a different labor dynamic, a different population of workers and that is something that we can't emphasize enough in our lack of understanding of what an, healthy labor market looks like in the numbers. jonathan: i know i say every monday morning the week is stacked, but the week is stacked. state street at the second half gets underway. terry haynes of pangea policy as president biden refuses to back down and following the first round of voting constraints. we begin with our top story kicking off the second half with comments from a chair jay powell tomorrow and the u.s. jobs report friday. marvin lowe of state street writing the base case remains

that the world is different this time it stickier inflation along with tight labor markets will keep nation higher than 2% in the intermediate term. we suspect the fed may be done with its cutting cycle by the third quarter of 2025. >> good morning. jonathan: we need to talk about the beginning. >> we've been saying december for a while so we will just stick to that number. to me, december vs. september is not related the story, it is where we land when we are done with this as "into the start of the cycle. jonathan: people suggesting the friday unemployment rate might be more important now than perhaps headline payrolls. we you agree? >> for sure, the whole employment aspect of the dual mandate is challenging for the fed. the number that they try to put on it is the unemployment rate. it really is cap a year-end target with inflation filling the right direction. that is going to really create a september vs. december type of discussion.

lisa: there is a question whether the fed is currently leading increasingly dovish. basically saying look to what jay powell says. expected to be much more dovish which evidently, nobody cares about this week. how much do you agree with that? is there this sense that the weakening in the market has sufficiently spooked fed officials to push them to maybe even consider an earlier rate cut? >> if you look at the commentary over the last six months, it really has surprised this dovish side of things beginning at the end of last year, confirming the early part of the first quarter when we are willing to overlook some of the hotter data. i think that this that has historically wanted to limit dovish. even though you've got important dovish voices, the whole board moves with the chair in my mind.

annmarie:annmarie: as john is mentioning, politics very much front and center in you see an increasing number estimates saying that either candidate -- for potential increase the deficit depending on the composition of congress. is that something you're coalescing around. the benchmark for >> all assets around the world. >>we have been indicated that we should be thinking of events that might not seem related, will come together in terms of just what the clearing price for yields are. one of the more interesting things to me this morning is that while we've got european assets rallying, you got yields higher in the u.s..

there is a sense the politics and pop this evolution around the world is going to affect the amount of debt that we all need to absorb. jonathan: yields are going to climb. can you point to a specific policy that is going to lead to that outcome? what is it that is on the table? >> if we are talking u.s., the discussion around a trump candidacy. so important for the jobs market as well as growth assets any amount of debt. easily get to that. effectively every of the more controversial policies that the trump administration is talking about is inflationary. so you get to that quite quickly. the amount of debt that we have is something that we've been talking about now for a while. we sound like the old bomb hawks at this point, but it is a concern with the amount of debt scheduled to be released. jonathan: you could make the

argument there would be a tailwind for inflation but a headwind to growth. i'm just wondering for your perspective heidi would push that through fixed income. >> the easiest is a bear steepening for sure. that growth aspect would require the fed to be more vigilant just because it is facing a restricted interest rate that is too high. what they did to try to control it, qt is still part of the process and a 7 trillion others plus balance sheet gives them much less flexibility. >> when the start thinking about the signals being sent from the divergences in the equity markets? at the same time that we seen yields creep higher. we've seen this massive divergence with small caps declining 3.6% in the second quarter vs. the overall index gain on the s&p. some are saying this could be a canary in a coal mine if it doesn't start to normalize soon. do you take some signal from

that to edify the idea that weakness is really the main story here, but just a lot of people are noticing it yet? >> it certainly creates concern when you have a market showing this degree of dispersion. you would hope that it would start to positively affect more companies for sure. having said that, liquidity in the markets is a very important thing. we still have a record size balance sheets that it is supporting these asset classes. it is stark to me that it is the stronger company that have valid deed that give them flexibility that are ultimately outperforming. still supportive of those risk assets. those concerns could be a potential in administered of changes but we are not really seeing now. i think we have to trade for earnings and the data coming out. jonathan: you strip down the

muscle of the cap tech. that is a massive outperformance. lisa: a time when a lot of people were wondering what we're overpricing some of the earnings that a lot of top companies. the top 10 companies in the s&p 500 make up 35% of the market cap but only 23% of earnings. this is gaming out ongoing gangbusters type of growth from the likes of nvidia. jonathan: good to see you. equity futures right now by 0.1% on the s&p with an update on stories elsewhere this morning. here's your bloomberg brief. >> israeli prime minister bennett netanyahu's valley once again to continue fighting a mosque until the militant group is -- hamas until the militant group is eliminated. around amended language for its cease-fire proposal between israel and hamas. that report also goes on to say that the u.s. is working with qatari and egyptian mediators to change what is in the first

stage of a three-part deal. china data was mixed and continues to fuel worries about the country's economy. manufacturing the estimate that have the strongest reading 2021. but a gauge of manager expectations for output fell to the lowest since 2019. chinese bond markets responded with a rally that sent yields to a record low and the pboc has hinted it might sell some of its own holdings. the doj has told boeing is charging the plane maker with fraud in connection with two fatal crashes involving the 730 seven mac plane which leave the company to choose between pleading guilty or taking the risk of going to trial. the company has until the end of the week to make the decision. the doj has also told boeing it will need to pay a fine and higher a corporate monitor and measure bloomberg brief. jonathan: more from her in about 30 minutes time. the president fighting back. find: i know how to do this job.

i know how to get things done. and i know like millions of americans know that you get knocked down, you get back out. jonathan: a very different president biden from that campaign event. from new york city this morning, good morning.

♪ jonathan: welcome to the program. equity futures positive 501% of the s&p 500. the bond market worldwide right now, yields drifting higher. small move in the u.s., up a single basis point. under surveillance this morning, the president fighting back. >> i don't walk as easy as i used to, i don't speak as they used to. i don't debate as well as i used to. but i know i'd do no. i know how to tell the truth.

i know how to do this job. i know how to get things done. and i know like millions of americans know, when you get knocked down, you get back out. jonathan: key democrats running behind president biden's reelection bid following a disastrous debate performance. the latest polling shows just 27% of voters believe i has the mental and cognitive help to serve as president, down from 35 percent already exceptionally low in early june. terry haynes joins us now for more. terry, i think you have been on the money. a lot of fake outrage obvious to everyone but providing media. thursday evening seems to be a wake-up call for those individuals. how much of this story is already in the price? >> probably most of it is. can politics in america these days on both sides, there's an awful lot of shame and lacking of humility to go around.

but voters were very much ahead of this. thank you for the compliment to me, this program is well ahead of this as well. but the bottom-line is the voters have been well ahead of this all along and at the end of the day what you're going to have is biden still running and you are still going to have a neck and neck race, and that is where we are. jonathan: what are you learning from the polls that we got since thursday evening going to the weekend? >> nothing so far. the usual rule of thumb on this, it was applied during the state of union address which i think with the last major public television event that was widely tuned into is that it is going to take almost 10 days to fully shake out. it doesn't surprise me a bit that a flash pole of a bunch of folks says well, there's more concern here, at the same time, i think what you're going to have is you're going to have a biden rescue effort going on over the next 7-10 days to try to mitigate that and they also

think they kept for months to turn this around. i've said before and i will say again, it's not ever going to be a case about whether biden makes the grade one time. he's going to have to make the grade every time between now and the election in order to put himself in the best position to win. now he is starting off in the behind. >> the new york times, the atlanta journal-constitution, a number of different newspapers have come out editorial pages saying joe, step down. pave the way for somebody else. it is unusual to have this kind of groundswell of a response in the media where the op-ed pages traditionally are known as skewing to the liberal side. is that significant? >> it is significant only in the sense that many of those same outlets are actually trying to cover their tracks on a lot of this stuff. they have been enablers for the president, they have among other things derided reporting that

wall street journal and others called into question biden's mental acuity and everything else. and the other shoe to drop from the new york times and that very same editorial is we think you should drop out but if you stay in, we still think you're the better choice over trump. that tells you everything you need to know about what is actually going on. >> at the same time, number of people are deeming out the idea that donald trump now has a better chance of winning. it gives joe biden about a 30% chance of winning down from something like 46% just a couple of days ago. do you agree that this is how much the out that shifted against joe biden given the performance, the debate, and frankly, the groundswell of outrage in his own already that he hasn't allowed someone younger and possibly more dynamic to take his place? >> absolutely not. i generally don't have much use for fitting markets but in this case, i have even less because the president uniquely is not

elected by popular vote. the president is elected in the electoral college. we all know this, and yet we want to go ascribed lots of significance to these things. the bottom line today and that the electoral college is where it was, which is essentially even race with about 77 electoral college vote up for grabs, the vast majority of which are skewing slightly to trump today but it is all still within the margin of error. that is a very different look for a president than a betting market, number one. number two, who the president is all by himself doesn't matter. what you have to mix into the president with congress in order to understand what is going to happen in 2025. if you do that, what you find out is that it is about 70% likely that you got a split government washington regardless of who the president is so betting markets can move all over the place if they want, i think that is actually the situation we are looking at

today. jonathan: how do you think he is going to manage his campaign? 2020 he was able to make it on donald trump. he could somewhat hide away from the campaign. covid was absolutely ripping through economies worldwide which meant he could take a real step back. he can't do that this time around. how does he prevent this becoming a referendum on him? >> i would say it's a referendum on him regardless. i was saying that before the events of last week. because he's got to show that he is up to the job that he has got to show use able to really talk about it and do more than just have the minimum acuity available. but now they are going to have to ramp up. he's going to have to be out there a lot more the waking was friday and over the weekend. i think what they are going to end up doing is putting him out there more and frankly i think they have no choice but to do that, number one. number two, they are still going to stick to the strategy of

calling donald trump a line, lying liar and that has been evident in press both before and their own emails both before and after the debate. what they think they've got their is a combination of convicted felons plus liar beats president with some concerns. the last thing i will say about this is this. larry sabado does some very good work last week before the debate showing that people are slightly further and slightly less. fighting is plus 28 over trump. people are slightly against what biden has been doing is residency were up biden over trump by 77. that is not a typo. the question is not in the electorate is at 54 trump, what

this is his biden with an advantage among onshore voters and those are voters having nowhere else to go. it is a very different rates than most people are seeing. jonathan: when you say the answer is to put him out but -- more, what you mean by that? are we talking about news conferences, actual sit-down interview's? >> you're going to see the white house do it they have done before. put him into candid environments. but they will try at they always do to control their environment absolutely is much as possible. as we talked about a little earlier, they've still got some willing people to help on that. jonathan: you just wonder if there is a second debate. the general public it already seem up we already been talking

about on this program for the last six months, that the president wasn't in a great state. this was june. that the president have the mental and cognitive help to service resident, 35% said he did. the update is 27. annmarie: the issue to me is what went wrong when all of these people were in denial and address this when still there was time left on the clock and ultimately is that what we're seeing right now, a reluctance to move on? jonathan: marine le pen's national rally. the opening round of voting in french elections. that conversation is up next.

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jonathan: welcome to july. equity futures positive .1%. on the nasdaq totally unchanged. on the quarter, the market cap weight s&p 500 advancing almost 4%. equal weight for q2, down 3%. lisa: it is an uncomfortable question. if you do not see some sort of broadening out in this rally everyone has been expecting and it is like waiting for gadot, is there a broader weakening type of signal that makes the rally unsustainable? that is the fear you see embedded in a lot of potential calls from wall street. jonathan: starting to see cracks

in the economic data. we'll see how this starts to affect markets. yield should big higher -- yields shifting higher. double digit basis on the 10 year. you 1010-year reit's it's at 4.4118 -- your 10 year resets at 4.4118. lisa: you asked me what'd i make of it and if i were honest there might be a political overtone. there seems to be an issue that if you get the chance of a donald trump presidency that that could be more inflationary and certain aspects and because the fed to counter that. you can argue that is not true. that is what is coming out in a love the wall street notes and you have to wonder whether that did infect the bond market a little bit on friday at a time where you're not seeing the data to support that. jonathan: friday was the first trading day of this election campaign. i think it is backed up by what

we are hearing from the south side. trade after trade. it is people saying the risks have gone up. lisa: that was matt hornbach's point from morgan stanley. if donald trump wins you start to see the yield steepening which goes to the point that either candidate is not going to counter the deficit. the unknown is what happens when you overlay tariffs and curbing immigration to a great degree. how much does that shift the economic picture in ways that is not in the trajectory. jonathan: on the other cited the atlantic, we need to talk about the single currency. the euro is firmer. the poles were saying one thing and ultimately marine le pen's party did well but not as well as the polls were suggesting. now between round one and round two you might get tactical voting, people to form a

coalition to prevent marine le pen's party from getting majority. lisa: emmanuel macron's party and the left party will join together to make sure the marine le pen party does not get some sort of majority. let's say that happens. to french assets go back to where they were before as if the election never took place? i don't know that is the answer. i see report saying that is what people are expecting. is that what we are doing? papering over the political dissent and populist upswing by little votes that can quiet it for a longer time? it is what has been going on for a long time. where does the breaking point happen? jonathan: spreads are narrower france versus germany but only because german yields are up more, it is not like french yields are down. lisa: it is not as if germany is facing a political stasis.

they are facing their own unrest. you have to wonder if the gap stays wide work it goes back to what it was before if there is a coalition between the macron party and the left. under surveillance, president biden's campaign fighting back in the face of rising doubts over his ability to serve. the latest cbs news poll fined 27% of voters believe ps the cognitive health to serve as president. far more instructive to me is the 35 and the 27. if you are surprised by thursday night, where have you been? 35% of the electorate are already saying this is a big problem. lisa: the fact it has not been addressed earlier is a big problem. why is it that there are democrats around joe biden that have not been discussing this in public and acknowledging what everyone else is seeing? i will add another twist. what about the adversaries of

the united states have been watching this. we heard concerns by european leaders who sought joe biden on the trip saying they were worried about him. now you have benjamin netanyahu, a very controversial figure. he is raising the specter of an emboldened iran as a result of the speech and the debate joe biden put on. this concern of who is running the country if he is not capable of being with it after a certain hour. these are the questions that are percolating. it is difficult to see how this will increase stability in the world. jonathan: these are legitimate questions. it is a question that will not be going away. the doj telling boeing it is charging the plane maker with fraud in connection with two fatal crashes in connection with the 737 max planes. the company has until the end of the week to decide whether to plead guilty, with the doj also telling boeing it will need to pay a fine and hiring corporate

monitor. lisa: if they get this find it would bring the penalties to around $500 million. the fact that boeing shares are only down 1.2% shows how much pain has been baked into the shares. it is one bad news after another and it seems like the department of justice cannot let this go from a moral and legal perspective. they have to take action at a time a lot of people are raising questions about the safety of their planes and the oversight by u.s. government officials. jonathan: are you checking the planes before you board? lisa: i don't want to know. i am not going to get off the plane. i'm going to do the ostrich mentality. stick my head in the sand, pray for the best. jonathan: i would do the same thing. i am not going to change but it would make me anxious and the fact that would make me anxious is a problem for the many

factoring. george ferguson of bloomberg intelligence joining us later on going. let's get to the final story. marine le pen's national rally dominating the first round of voting in french elections, locking up just over 33% of the vote. the popular front got 28% while emmanuel macron's coalition dropped up -- on the ground is caroline kinard. walk us through how we are setting through round two. caroline: the relief could be short-lived. there will be in tension campaigning between today and the second round on july 7. a lot will depend on alliances. a lot of the time you have duels , two candidates facing each other in the runoff. in this case because of the high participation that was at the highest level in three decades, you have more than half of the

constituencies across the country, you have a three-way contest. a lot will depend on how many candidates came in third position pull out of the race and decide to block the national rally in the second round of these elections. already the far left in the socialist moderate left wing have called for all of those who came in third to withdraw from the race. it is unclear for some of macron's candidates whether they will pull out. clearly calling for the snap election is a tragedy that could backfire for emmanuel macron. lisa: how comfortable is the alliance from the left and the progressive parties? we see that as something that has a lot of effect to try to keep marine le pen from attending the power it seems like is there in terms of the polls? caroline: this is a very interesting question.

a lot of people here are saying this union of the left, the new popular front could implode and the far left could potentially be sidelined. that would be a way for president macron to find some kind of fragile new majority with moderates from the right, the moderate from the left. even if it means a possible technocratic government like we had a few years ago in italy with mario draghi. there's also a slight chance of an absolute majority of the national rally. at the moment two pulls saying marine le pen's party could get an outright majority and in that case you end up in what we call it cohabitation or you have to share power with president macron. jonathan: caroline: nan in paris -- caroline connan in paris.

joining us to talk about the market consequences is the european rate strategist at td. what are you telling clients? >> i do not think we are anymore knowledgeable after the results we got. they were what we saw in the election polls and that is why you are seeing french spreads tightening. it is not that we are excited about the results. it is all about this rounds two we are going into and what will happen. a hung parliament with a majority or an absolute majority or a hung parliament which has a very bad split with the three parties. our base case is still for a hung parliament which is the main leading block which would see a cohabitation government. coming back to what it means for the rate space, the 10 year oed

versus bonds are around 75 compared to something like 40 five basis points we saw ahead of elections. i think we will be around the 60 to 70 basis point range. what markets need to note is what comes in terms of fiscal and that is likely to be in september when all the countries will have to submit their budget plans for the european commission. that is when you could see more rate reviews happening for france and the french linked assets. that is the big thing for europe. the uncertainty is likely to maintain. toward september focus will be on the u.s. fiscal versus the french fiscal. lisa: at this point is france alone? is france the outlier or is it one of the leaders? you are looking at italy, you're looking at france. the upswing of the far right in germany.

how much is this what will become the status quo in europe that will affect the rates market of a host of other european nations? pooja: that is a great question, especially the results in france as well as germany have been shocking. if you look at the european parliamentary elections, the entire movement right was not that compared -- was not that extreme compared to france and germany. what does the new right mean? maloney has done a job representing the new right and they are no longer than extreme. that is driven by the fact that everyone takes liz truss as an example. the u.k. election is getting no traction because everyone is scared going big on fiscal. we are shifting primarily because everyone wants a change. the new right in europe is more towards the center. we need to see how marine le pen

plays it but so far her views have not been as extreme. jonathan: you know there a problem in europe when we start talking about acronyms of the ecb, transmission protection instrument. what would activate that kind of impaction from an ecb? pooja: if we do see the spreads going above 100 basis points it could be activated, but to give you background on tpi, france needs to abide by fiscal rules to use this tool. if marine le pen comes back to her plate of spending we saw in 2019, i do not think the ecb will be ready to support spreads. that is something even france knows that if it wants to benefit from the money it is getting in terms of grants for the cpi tool, what is required

is abiding by the fiscal story. jonathan: something uniquely european about this bond market development. lisa: essentially that you have to be appropriate and if you are not appropriate you're not going to be on the receiving end of these programs. you have to be within our rules and otherwise you do not get the benefits. otherwise you wonder if things widen out enough. they are here to close spreads. jonathan: it is amazing how the liz truss scares teams to shape politicians not just in the u.k. but elsewhere. lisa: i wonder the degree to which it will. this is a faith being baked into markets we've been asking about. is there a market put on any of the fiscal proposals for whether it is donald trump or marine le pen? this is the ultimate question we do not have the answer to. it is a belief baked into markets that they will respond to a marketing trump. jonathan: yield spread between

germany and france a little bit narrower. that's get you an update on stories elsewhere. here is dani burger. dani: boeing has agreed to buy back spirit aerosystems. it is an all stock deal that values the company of $4.7 billion. boeing looks to fix manufacturing defects it also ends a two decorated separation of the two. -- a two decade separation. as part of the deal rival airbus will take over part of spirit. mercedes is boosting spending on gasoline engine models after a first generation of ev's fell short. the ceo said it needs flexibility for longer into 20 30's but will not impact the goal of going carbon neutral by 2039. eb demand has slowed in europe where bmw is facing similar issues. they also faced the threat of cheaper chinese eb's.

-- of cheaper chinese ev's. england somehow snuck through to the quarterfinals of euro 2024. england trailed for much of the match against the 45th right team but a last-minute equalizer set the match to extra time before harry keene found the decisive goal for england. they now meet switzerland in the next round. spain will meet host germany after their win over georgia. that is your brief. jonathan: a ridiculous weekend in sport. more to come. next, stuck in the rearview mirror. >> i worried the more likely error is the fed will not start cutting early enough and then we will be forced into cutting aggressively, a forward-looking fit would certainly have the possibility of a july cut on the table. jonathan: much more on that analysis in just a moment.

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jonathan: stocks just about positive .1% on the s&p. bond yields higher. on the 10 year in the u.s. 4.4099. stuck in the rearview mirror. >> i worry the more likely error right now is the fed will not stop -- will not start cutting early enough and then will be forced to cutting aggressively. it will not have the impact in terms of moderating the slow down and then would overshoot on the way down yet again. a forward-looking fit would certainly have the possibility of a july cut on the table. jonathan: investors looking ahead to a busy week headlined

by jay powell tomorrow and the u.s. jobs report on friday. michael darda light -- writing the mark of good central banking is to try to be forward-looking so the slippage between the neutral right and the policy rate is kept to a minimum. reacting belatedly is nothing more than the set up for rinse and repeat boom to bust set of cycles. michael joins us for more. you're one of the very best. can you tell me what is flashing red on your dashboard right now? michael: thank you for having me on. i just took a look at the bloomberg surprise index so i will give you that prop. it is rolling over. we have had a raft of wheat data. we will get additional manufacturing -- we have had a raft of week data. we will get additional manufacturing numbers. first-time claims look healthy but continuing claims are 35%

off the lows of the cycle. despite strong headlined payroll growth the unemployment rate is moving up. it is not jump drastically, but we are .6% off the lows. it is very unlikely you will see something like that without the beginning of a recession not far off or in it and you do not realize it. i agree with the quote you played earlier. i think the risk is because the fed is dealing with the aftermath of this two your inflation overshoot, once bitten, twice shy. i they they will be late and behind the curve. jonathan: when clients say we are normalizing, that is all this is. how do you counter that point? michael: i think normal depends on the state of the business cycle. the first mistake the fed made was a recency bias.

the previous cycle was very low inflation, very low growth and a long period of low rates. the fed acted aggressively, fiscal policy was much more aggressive and no one wanted to believe we were in a v-shaped recovery with high inflation. it took a while for the fed to acknowledge that and they were why -- they were way behind the curve. normalizing rates much more and holding them higher and now things are decelerating. we have not totally fallen off a cliff just yet, but if the cycle continues to weaken in the fed is just standing pat, you have a passive tightening in monetary conditions and that is the end of the cycle. business cycles do not last forever. the reason for that is it is difficult for the fed to be precise in tracking the neutral interest rate. paul talked about this in the last press conference -- powell

talked about this in the last press conference. normal is a relative term. 5.20 5% to 5.5 percent policy rates a year ago may have been appropriate but moving into the fall, that might be too high for the state of the labor market. lisa: given the data we have coming out this week, what is the most important you are looking at to gauge how urgent the fed should feel about cutting rates? michael: i think the labor market data on friday should be interesting, whether we end up seeing this divergence between the two labor market surveys being resolved any time soon. the unemployment rate comes from a separate survey of households. it is generally viewed as not as reliable but it does move and turning points in the unemployment rate is only revised once. as a singular statistic is a

super robust coincident to slightly lagging indicator and can at least confirm what is happening to the business cycle. are you growing at trend, above trend, below trend? if the our employment rate is a strong signal the economy is growing below the growth rate of potential. that should potentially be setting off some alarms at the federal reserve. they are watching. other data has looked more robust. there is a debate. lisa: what is the signal for markets right now? we talk about the divergence between the benchmark index level, the s&p, of almost 4% in the second quarter. is this a feature of the market strength or a bug of that market strength? michael: i think it is both. it is a feature of the ai frenzy. the s&p 500 has had tremendous

gains and those have been driven by six or seven stocks. on year to date basis the small caps are sucking wind, transports are week. those areas might tell us more about the state of the u.s. business cycle than the s&p 500, which is so ai driven. the transports have been underperforming the s&p 500 and the way you see the end of business cycles. that is definitely something to keep an ion. if we think over a multi-year horizon, few can do that. there is more upside on the 10

year than some of the areas that are performed so well. i'm not saying step out and start shorting tech stocks. anyone trying to do that has been run over. the old quote is they go much further than you think but they do not correct by going sideways. a dangerous game there. if we are thinking longer-term we have to pull in the expectations for the s&p 500 and then may be be more optimistic about some of the areas that have lagged. jonathan: that is what we call trade for the brave. michael darda, good to catch up. chairman powell speaking tomorrow. july 31 the next fed decision, then you have to wait until december 18. september -- until september 18. september is what they're focused on now will -- lisa: they wish to join michael darda with his surfing poster. that documentary, the endless summer. ♪

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>> after two years of essentially no earnings growth we are back to an earnings growth pattern. >> you have to play the game. a momentum market is like standing in front of a freight train. >> that weakness breeds opportunity. at some point you start to see improvement. >> what goes up will come down. >> when death rings brought announced? we think it -- when do things brought announced? wait think it has to get worse before it gets better.

>> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, the second hour bloomberg surveillance begins right now. payrolls on friday. next thursday cpi. stuart kaiser with this to say, payrolls more important than cpi in july. lisa: i would agree with that statement because we have seen the federal reserve shift their focus to weakening. on the pendulum of fed priority, the idea of labor and jobs is more important. cpi is coming down but has not reached their target. jonathan: within the payrolls report is the unemployment rate on friday more important? the unemployment rate for percent. if that keeps drifting does the fed have to move? lisa: two things will be important. understanding whether we get merging of these surveys that have been different in terms of the household versus payrolls. the other question is the idea

of what kind of unemployment rate we see at a time where it is unclear how many jobs need to get greeted every single month to have an equal erbium -- to have an equal erbium -- to heaven equilibrium an economy that has changed. jonathan: we are making the case that friday was the first trading day of the election campaign for 2024. yield started to break out, you see more notes from individuals talking up various trades connected with a trump win. lisa: terry haines shrugged off the idea of production markets and shrugged off the idea of a higher likelihood of donald trump winning the presidency. nonetheless, wall street analysts notes seem to agree that on the margins donald trump had a better chance of becoming president after the debate we saw thursday night, at a time when a groundswell of democratic voices are calling on joe biden to step out of the race. we are running out of time for

that to happen. the question is if he stays in what does that do to the election come on the national stage at a time were a lot of people are watching? jonathan: none of this is straightforward. if u.s. the former president he was progrowth, he would say without a doubt. if you asked research banks they might come up with a different answer. mike wilson saying risks are spewed to a downside risk for growth under republican win scenarios due to immigration reform in tariffs. lisa: the reason we have seen labor market growth into labor market that has allowed this kind of job creation without an increase in wages is because of immigration. you can say whatever you want in the political sphere but that has been one of the main driving thoughts. if donald trump is serious about curtailing and deporting certain people who have come to this country, what does that do to the labor market and the potential productivity? what does it do with tariffs? there is the ultimate question

of is the former president going to be a checked by a market that might selloff in response to that? jonathan: somewhere the chairman of the federal reserve has to set monetary policy for everything you just described. a lot of work. equities positive .2%. bond yields shifting higher following the selloff on friday in the treasury market. yields up just a little bit. in the fx market, the euro stronger after round one of the elections in france. lisa: evidently marine le pen did not win by as much as people thought. what is interesting to me is there could be a coalition between the left party and emmanuel macron party that could potentially limit the control that marine le pen has after the second round next weekend. jonathan: spreads narrower, the euro stronger. elsewhere, we will catch up with david kelly of jp morgan as stocks kick off the second half

of the year. ed mills of raymond james as biden loyalists defend his campaign and krishna memani on the bond market risks of another trump presidency. stocks looking to keep up momentum in the second half after getting almost 15% this year. david kelly writing neither consumers nor investors are behaving as if they are scared. investors have pushed the s&p to an all-time record high 33 times already this year while consumers have maintained a personal savings rate of 3.6%. david is with us around the table. a lot of people coming on the program and talking up a consumer slow down. why should we be fearful of that? david: i do not think we should be fearful right now. we are seeing a small downshift in growth. we have a problem as lower and middle income consumers and if you look at consumer nondurable spending, things like food and clothing, that was lower in may that it was in december.

we could see that slow down. at the same time we have seen tremendous wealth gains. we have seen tremendous wealth gains, we have seen a lot of payroll job growth. consumer spending will grow more slowly in the 1.5 percent range as opposed to 2%. that is still enough. a little under 2% in terms of growth, over 2% in terms of inflation. jonathan: for you tell me the difference between normalization and something more sinister? what would change your mind? david: it is a very stable machine that pumps out two's in terms of growth and inflation. what could change that? a shock or a big policy change. i think what happened on thursday meaningfully increases

the likelihood of republican sweep in november. if joe biden is the candidate is quite possible a lot of independents will stay at home and republicans will sweep. if they sweep, if you take donald trump at his word you have much higher tariffs. tariffs are an elixir for stagflation. tariffs slow growth and push up inflation at the same time. if you take him on his word on immigration you have the economy come to a halt after the deportation of unregistered immigrants or illegal immigrants . i'm not sure if we can take him at his word. history suggests it would be bullish to take him at his word -- it would be foolish and take him at his word. some policy shop could tip this economy into recession. lisa: john said friday was the first day of this election cycle for markets.

how much do you rearrange what you think about as a response to this idea you think there is a greater likelihood a very republican sweep? -- of a republican sweep? david: it makes a difference. the 2017 tax cuts. if joe biden is reelected then some of those tax cuts will end in 2025 but not all of them. if donald trump is elected i expect all of them to go through. if you add that to the debt as the share of gdp by the early 20 30's will be 135% as opposed to 122%. you will have significantly more debt if we extend all of these tax cuts. that means a higher level of long-term interest rates. lisa: are you more bearish on long-term bonds right now than you were thursday morning? david: i think it would be a rational thing to be that way. jonathan: if that is how you've

responded to thursday night, how should chairman powell respond to this? surely he has to factor this into the equations for monetary policy. david: to be honest i think that is too cute. he should make policy for the economy he has got. we can change our views a little bit but he always takes monetary policy as a given. right now markets are pricing in about a 70% chance of a rate cut in september and that makes sense. what i'm saying about a downshift in growth -- that is what we've got right now. what happens after the election depends on how policies are implemented. you cannot really make policy on how the election might turn out and what it could -- and what a particular configuration in washington might be for policies. jonathan: can we think back to 2017 when we got the tax cuts, how the federal reserve adapted given they had to wait for the policy and what it would do to

the economy? david: there were also getting a lot of income from the administration. the administration was trying to bully them into easy monetary policy. we did end up in 2019 with very easy monetary policy in an economy in which inflation was going to build. there is a real question if donald trump was elected and has the republican senate, does he simply want to replace chairman powell? i am not a psychologist. what with the priorities be for donald trump if he found himself in the white house again? lisa: there is another question on top of all of this. how much leverage that's president will have with pushing different levers given the economic fragility's we started this conversation talking about. we begin talking about the second quarter and the idea if the underperformance of the people wait was a sign, almost a

canary in the coal mine of weakness under the hood that is pervasive and on a tipping point. do you believe that to be the case? what would you have to see this week in the dated to give you that kind of sense? david: i don't expect to see rational signals coming out of the markets. when i look at the concentration in the u.s. equity market it speaks to the euphoria at the top, not rational at the bottom. and if you look at the u.s. share of global equity, the same thing. you should not be 65% of global stock market cap. it does not tell me markets are rationally discounting an oncoming economic slowdown. what it tells me is people are doubling down on insisting bets because they think this party will keep going. lisa: do you believe some people are investing in big tech simply because they have all of this uncertainty, including the election, including the

uncertainty around the economy, that the one haven has been these tech names that keep delivering and if we get certainty that could encourage people to leave those names and go elsewhere. david: we were talking about our granddaughter and we took her to the park recently and she was blowing bubbles for the first time but it did not work well because it was windy at all the bubbles were bursting. if you had a calm day the bubbles go great. the problem is we have a calm economy that grows bubbles. people look at it and say it is fine and they double down on make a cap tech, they double down on the u.s.. none of these bets will get reversed unless something shocks the system. right now the economic climate is too long -- is too calm. jonathan: we will see in november. you headed on the margins, the changes people are starting to think of. lisa: it seems like you are correct in saying friday was day one of the election cycle and people are rethinking the

playbook for donald trump winning the election. jonathan: this is the first trading day of q3. let's get you an update on stories elsewhere with dani burger. dani: president biden is asking donors to stay following last week's disastrous debate. biden told the ground that a hamptons fundraiser that he did lose a step on the debate stage and found to work harder. yet it he would not be running if he could win. biden's performance does risk's ability to raise as much as trump. the campaign downplayed those concerns. shares of chewy surging more than 15.5%. meme stock investor keeps skill disclosed -- meme stock investor keith gill disclosed a passive stake in the company. both chewy and petco soared after gill posted a cartoon image of a dog on ask.

the founder of chewy had been involved in the meme stock trend , buying up large stairs of gamestop and becoming its ceo. people familiar with the matter say doj has told boeing it is charging the plane maker with fraud in connection with two fatal crashes involving the 737 max planes. that leaves the company to choose between pleading guilty or taking the risk to take the company to trial. the doj has told boeing it will need to pay a fine and hiring corporate monitor. that is your brief. jonathan: thank you. up next, president biden's path forward. >> he should stay in this race and demonstrate going forward his capacity to lead the country. jonathan: a rallying cry around the sitting president. that conversation up next. from new york city, good morning. ♪

jonathan: the equity market just about positive .25 percent on the s&p 500. treasuries a little bit lower in the bond market, yields a little bit higher. on the 10 year 4.4099. lots of talk around one of the french elections. euro stronger. under surveillance, president biden's path forward. >> joe biden is the nominee and i will do everything i can to make sure we elect joe biden and kamala harris in november. >> he should stay in this race and demonstrate his capacity to lead the country. >> joe biden is not going to take himself out of the race nor should he. jonathan: president biden supporters defending his campaign after last week's disappointing debate performance. concerns about bidens campaign

are growing. it mills of raymond james writing "there is concern among democrats that biden will lose but biden is trying to argue that poland suggests is still the best person to beat former president donald trump." it mills joins us more. the question of friday night, we are still asking this morning, how does thursday evening change this race? ed: it was a game changer. ntc people with power want to keep power and that is on a collision course. it is very clear that joe biden and his team want him to be the nominee. he has enough delegates to become the nominee. if he stays in this race he will be the nominee. however, when i was talking about is other democrats are concerned about losing to donald trump and are concerned about losing the house of representatives and the senate majority. if there were to be a republican sweep, huge policy and market

implications. the people who have power in congress, those other elected democrats are concerned that donald trump not only could be reelected, but there is an increasing likelihood of that republican sweep. that collision course will play itself out throughout this month. jonathan: let's pick up on your point. the president and the team around him are trying to argue he is still the best person to be donald trump. does the polling still back that up? ed: the polling prior to debate absently does. we are starting to get some pulls out that do not show that much of a change. if the polling situation for president biden starts to deteriorate, look for those voices to grow louder. one thing i say about d.c. frequently is things are impossible until the moment it is inevitable. if we still get more polling that suggests he could be donald trump, than the biden team will keep him in this race.

if the his polling position deteriorates, that is when the swell from other elected democrats comes in and tries to find him a graceful exit. lisa: some people are calling him joe bader-ginsberg. is there a deadline where he cannot choose somebody else, where he cannot step down because the ballots are printed in the election has gotten too far underway? ed: i think a lot of people are looking at the deadline of the convention. i am looking at an earlier deadline. i am looking at the fact that ohio, you need to have a virtual convention to select the nominee , to have a presidential candidate for democrats on that ballot. if there is no democratic candidate on the ballot in ohio, not only do you give away those electoral college votes that more likely than not are going to former president trump, but there is a key senate seat that is keyed to keeping the majority in the senate for democrats.

that deadline is august 7. before the convention. after the convention, if there is an emergency, you can have a meeting of the executive committee of the democratic national committee to select a new candidate. because it is so out front now that gets much more difficult later on. this is a democracy, people are supposed to have a choice in who the candidates for president are. lisa: you started out by saying it was a game changer last week and you are seeing that and a lot of wall street notes were people are saying we have to game out what a donald trump presidency would look like in terms of the deficit and in terms of growth. do you agree there will be some sort of check on any sort of republican sweep and the policies that ensue by a market that could get spooked, whether it is yields going up significantly or certain more immigration sensitive sectors getting hit harder in the stock market? ed: i was in europe with meeting

with clients all last week and one of the first questions is is the policies donald trump would be pursuing, are they inflationary? would that be the second wave of inflation. we look at $5 trillion worth of tax cuts, we look at an immigration policy that would impact labor force, there might be popular support for this, but then you add on tariffs and a trade fight with china, with europe. clients in europe were very concerned about that. against the reality of their is sometimes what you want to do in life and what you can do in life and there are a lot of questions does the united states did a u.k. or liz truss moment where you want to extend 4.62 in dollars worth of tax cuts but the bond market does not let you do that. people i'm talking to and all of the claimants -- and all of the clients at raymond james are preparing for contingencies if

there were to be a spike in yield after this election. jonathan: forgive me for being a guy about to change the subject. what got lost going into the weekend are the decisions from the supreme court. can you walk us through what you think we should be focusing on and how much has changed? ed: the other game changer from last week was the supreme court position on chevron deference. it is a thing that gets batted around. the chevron deference is what has allowed regulators in the united states to decide what congress made as a law. all of the deference went to the regulator. that is gone. going forward, the difference will be to the business community and put pressure on congress to clarify law. tech regulation, bank regulation , all of the work the epa does is now in doubt going forward.

that is a fundamental shift to the regulatory state that has existed in the united states. something that was the friday news dump of all freddie news dumps coming from the supreme court. thank you for changing the subject. if we look back to this week we will probably point to the supreme court is the biggest long-term market mover. jonathan: you think that decision would pour gasoline over any trump agenda? ed: absolutely. if you look at the regulation, is not only pouring gasoline over trump or a republican agenda, it is also permanently impairing the ability of democrats when they pass a new law in future governments for them to go in put forward new regulations. a lot of the tech regulations are on laws that pass before certain technology exists. can the regulator regulate

something that congress did not contemplate? that is so much in question. either agenda, the regulatory estate in this country has been ratcheted back because of the supreme court decision. jonathan: ed mills of raymond james. thank you. lisa, i know you have thoughts. lisa: this was one of the biggest shifts and your right to bring this up because this undercuts regulators ability to create rules for the energy industry, the health care industry, the insurance industry. does this give a boost to the industries? does this undercut existing proposals? tech is fascinating at a time people are having great deal of anxiety about how we will regulate ai. jonathan: the much going on in d.c.. coming up, we turn to tesla. that conversation is just around the corner. equities positive .25% on the s&p.

guest after guest starting to take a trump presidency that much more seriously after thursday night. lisa: say what everyone about the predictive poles. it does seem like there is a shifting pendulum away from joe biden in the wake of his performance in that debate and not something people can ignore in the market. jonathan: will this treasury market regulate any ambitions of any particular government? lisa: people believe the ghost of the liz truss moment will rule this market. will it? jonathan: yields up a couple of basis points. live from new york, this is bloomberg. ♪

jonathan: stocks are positive on the s&p. s&p 500 futures positive .2%. a similar move on the nasdaq. for june the s&p 500 up 3.5%. nasdaq up more than 6%. it will wait s&p. the underperformance on the month, on the quarter. lisa: one of the biggest divergences we have seen going back to the 1990's between equal weight and market weight. what we see right now is this question of how long can the magnificent seven continue to generate these return? 17% gains for the magnificent seven. the video with a 37% increase.

-- nvidia with a 37% increase. these have been the powerhouses. that is making torsten slok queasy. jonathan: at the start of the year we were talking about the magnificent seven breaking down. apple started to struggle. then the performance story started to shift. for a moment alphabet was done and dusted come everything wrong with ai, then alphabet started to pick up. lisa: there was this belief there would be the most interest rate sensitive stocks. remember that they would be the ones -- their trash piles give them a benefit from higher rates because they are generating an incredible mental interest income from that cash. there is an issue of what could sink these stocks? would have to be broad-based weakness according to white bills -- according to mike wilson. it is unclear. that is the reason the week ahead will be important. jonathan: let's get to the bond

market. basis point higher on the 10 year. up two basis on the 30 year. at the front end of the yield curve, the two year at 4.7577. you talk about the weekend. over last month the labor market cracks starting to feed that conversation. maybe this federal reserve chat feels a bit stale. lisa: that is a reason people think jay powell coming out tomorrow at the conference in portugal will be more instructive than the meeting minutes. if you look at the meeting minutes from the fomc last meeting they are stale and it speaks to a different tone we have heard from mary daly and fed chair powell recognizing this weakness more than the inflation rate. jonathan: the dollar coming off the back the week of four weeks of dollar strength. stronger euro, 1.0 747 of the

back of the results. we will talk about the results in just a moment. traders preparing for a busy week of economic data and a lot more fed speak. u.s. pmi and fed minutes coming before the latest payroll report. we'll hear from jay powell tomorrow. wednesday is super busy. for good reason, we are off on thursday, most of us. thursday we will get jobless claims. lisa: even though we state -- even though we see stability in jobless claims initial claims have crept higher. there is a feeling there has been a steady or weakening at a time when it is unusual to see a linear move. to me it will be key to see whether we see a breakdown and that in tandem with jolts and the ism factor. remember when we used to say tertiary data? that it comes out with a surprise to the downside and suddenly people are wringing

their hands and sing the sky is falling. ism manufacturing today and on wednesday we get ism services. for that overwhelm other data as being a forward indicator? jonathan: two economists this morning, mike darda, jp morgan, david kelly, two completely different views on where we are going. mike darda is talking about a week does fed has to respond to. lisa: the tension is there is a cohort of individuals of households and companies on the higher income level they're doing just fine, that are doing great, that are able to spend in significant portions that are holding the overall general economic activity. then you have lower income households, more leveraged companies, and we see that all the data. you can make an argument for a stronger economy, you can make a

case for an economy going off a cliff. where does it come together in fed policy? it is hard for me to understand how you put these things together. jonathan: let's talk about the weekend. french president emmanuel macron and his left-wing rivals are talking about whether to pull candidates for the second election after marine le pen dominated the first round of elections. we can compare the french 10-year to the german. german 10 year higher by six basis points, the french only a couple of basis points up. the spread is around 75 to 80 basis points. before this mess it was about 40. whatever happens over the next week or so, do we go back to where we were before? the answer from td was no. lisa: that is because you have this inherent risk implied by the groundswell of support for marine le pen. how that factors that will be

interesting and whether french is a harbinger of what is to come in other governments including in germany is an important question at a time people are seeing the same types of groundswell's in populist sentiment elsewhere and that is what we have to grapple with. jonathan: what is your response to the market reaction off the back of the results over the weekend? lisa: wishful thinking in people hoping for an opportunity to get in and get a discount. didn't we hear that already? people looking to opportunistically collect extra basis points. jonathan: not as good as it has been for marine le pen. all of this 3d chess about certain candidates offering support for others? the government issues and france will not go away. they will get worse. lisa: there was a quote by a former ambassador to france basically saying the french nightmare is just beginning and i think that is a good way to characterize this. jonathan: tesla investors

bracing for a crucial six week stretch. the company said to report second-quarter deliveries tomorrow ahead of earnings later this month in its robotaxi event in august. the stock is up 1.8%. bloomberg's craig trudell joins us with more. what he focused on over the next one month? craig: it is remarkable to see the stock move in the way it has in the last week or two weeks because we have seen consistently analysts coming out and bearing their forecasts for vehicle deliveries for the second quarter. the expectation is the company will have its second year-over-year decline. the last time they had back-to-back quarters where they were down was in 2012 when they were phasing out the roadster, their first vehicle ever. you have to go back a long ways to find the last time this

growth company was not growing. in spite of that trend you are seeing more emphasis on that august 8 date. the idea elon musk will pull a rabbit out of a hat and unveil a robotaxi -- there is reason to be bullish on the business plan, the prospects. executing it has been another matter for every company trying to bring those to market. jonathan: give us more color on that. august 8 has been circled on the calendar since april. this is been the carrot over the stock ever since that we will get this big announcement. how much caution should we have? craig: that is the big question. whether or not you can bring up a robotaxi that is able to generate any revenue from any

meaningful revenue anytime soon is going to be crucial. you can put a vehicle on a stage for people and get them excited about something new -- assuage concerns that you will not have a steeper model to offer. there are questions about whether this robotaxi has taken questions over a model 2. there -- that is what the street would like to hear from elon musk. lisa: we have not heard much from elon musk in terms of his traditional role as a lightning rod for a host of a number of things. is that by design or because he has been so busy with issues? craig: he is posting on x 10's

of times a day. the number of them that have made headlines like we got used to for a stretch may has dissipated someone. he has weighed in on topics from climate change over the weekend and downplaying the extent that there is a crisis, which has been uses it lately and very contrary to what people were used to hearing from mosque for years. i do not think he has shed his lightning rod status. it may just be the case we are all a little bit tired of this at this point. lisa: the logical question is how much does this create less noise around elon musk that has both supported and created volatility in the kessler -- in the tesla stock.

craig: to the extent he can stop stepping in it it is for the best for the company. there is concern about whether his compensation package would be reapproved and whether or not, if that vote to not go his way would he walk? there were some folks who are of the view -- he is still the biggest shareholder of the company. you need to give him 56 billion dollars worth of stock options to keep them motivated? maybe not. their questions on how much of that was a symbolic vote as appeared to legal merit. that will be another important thing to watch in the coming weeks is the donor transfer -- the delaware transfer court and their determination -- jonathan: a lot to talk about

over the next six weeks. craig trudell with bloomberg out of london. let's get you an update on stories elsewhere. here is dani burger. dani: morgan stanley is ending bonus caps for its bankers in london. an ongoing shift towards paychecks that looked more like the bonus heavy once in new york . the bank says it continues to pay competitively and reward strong performance as a joins jp morgan and goldman sachs to implement the new pay structures. baking pay -- big tech companies are looking towards nuclear energy to power the data centers needed to support ai. amazon is moving towards a deal with constellation energy which is the u.s.'s largest owner of nuclear power plant's. the deal would support aws. amazon also purchased a nuclear

data center in pennsylvania. the numbers keep coming in strong for pixar's inside out ii. it has pulled in nearly $470 million in north america in well over $500 million in a nationally. that pushes its total globally to -- a new record for an animated film. jonathan: those pictures actually made bramo smile. did you watch this movie? lisa: there was an article about how barbie in inside out ii have disk it have different messages, barbie says it is the outside world grading problems and inside out ii says it is your own world. jonathan: therapy for adults. lisa: post-pandemic everyone is anxious so they made anxiety the main character. jonathan: and the barbie camper

the inside-out camp? lisa: you think i am more in the anxiety camp? jonathan: next on the program, beginning to price a trump win. >> if it is trump we will have a hawkish foreign policy, more protectionist. all of that is interest rate upward mobility. jonathan: that conversation just around the corner. live from new york, this is bloomberg. ♪

jonathan: therapy in the commercial break with bramo. equities on the s&p positive. yields on the tenure up a single basis point. a little bit less. under surveillance this morning, beginning to price a trump win. >> if it is trump we are going

to have a hawkish foreign policy, more protectionist. if it is a republican sweep, the extension of the trump tax cuts. all of that is interest rate upward mobility and we will see some of that. on the other hand if we get more economic slowdown, that can work in the other direction. jonathan: investors bracing for the chance of a second trump term. krishna memani writing "the bigger risk for the bond market is the policy risk of a trump administration. tariffs, tax cut, immigration, and deregulation. that adds a lot of volatility and that the outcomes can be inflationary in the short-term and growth depressing in the long term." krishna memani is with us around the table. you think it is time to start thinking about this more seriously? krishna: as an investor it is

early but you cannot ignore what happened on thursday. probabilities have gone up. if that was not the case on friday after the pce rates were not going up. we are incrementally moving that way. our we there fully? not just yet. jonathan: your view come inflationary the short run, growth depressing in the long run. krishna: certain policies, such as a renewal of tax cuts and tariffs, the curtailment of immigration, all of those things end up being inflationary. it is also quite possible that these tariff policies after the initial inflationary rise in inflation end up being growth depressing in the long run. if those tariffs are substantial the impact of that on overall growth will be meaningful. lisa: this type of outlook is

not something we have faced since covid, it ended up being a regime change or. krishna: when the market changes it will cause volatility. if it ends up being growth depressing as the likelihood is not insignificant, i think overall probably the year of the bond we have been looking for for so long which never arrived may arrive in late 2025 if the outcome is what it is. lisa: you think there'll be a huge rally and long-term bonds? krishna: eventually there'll be a huge rally as people become more concerned about growth than they are the moment. jonathan: are we saying selloff, long-term buy? krishna: yes. it is being cute because it is very unclear as to what exact policies would be implemented.

simply thinking in terms of inflationary pressures is probably not the right take. it may end up being growth depressing and that may have a bigger impact on long bonds that it is having today. jonathan: of people are fearful of trump volume one and in november 16 they change their mind. what is different about the backdrop? krishna: the fact we had one administration before. at that time there was confusion on how it would play out. we accepted there may be good policy outcomes. if tariffs are the front of the agenda i think it is difficult to see how that ends up in growth supported in the long run. lisa: there is a belief underpinning a lot of the commentary, the ghost of a liz truss moment han solo these governments and says you behave, otherwise the market will push

back and say absolutely not. -- a liz truss moment that haunts all of these governments. do you buy that line of thought? krishna: it is entirely possible. i think whether that is a high likelihood outcome, i am not so sure. i'm am not a political commentator. for that you will need congress to be a different place than what it is right now and what it is looking like it will be in november. lisa: how much do you have to be a political commentator at this point? how much do you have to rearrange and hedge versus different political outcomes and how much are you starting to do that? krishna: i take a step back. i think the outlook -- if thursday had not come out the way it came out i think the outlook for markets would have

been materially different, positive. in the sense the fed may cut and that would have a positive impact on the market and all of those things. the risk to that scenario and the fit going into the background is increasing as things move this way. jonathan: you brought up the fed. what do they do? krishna: we should take them at face value. they said they are waiting for the dat ey expect supportive data and down the road they will cut. that is how it is going to play out. talking about bringing it forward to july, i think that is just a bit of nonsense. jonathan: given everything you've just told us, does that not apply to chairman powell when he sets monetary policy at the fomc? krishna: he has told us he is not in the political arena, repeatedly. the driver for them has to be the real-time data. they have told us that in i think we have to take them at

face value. jonathan: there is also a sense that once they start they do not want to go the other way a few months later. krishna: 100%, and that is the reason why they will wait. that is the primary reason. jonathan: wait until after november? krishna: perhaps. if the data for the core pce does not end up being as soft as it was in may over the next few months, they have all of the reasons for them to wait. the likelihood of not doing anything in 2024 is significantly higher than zero. lisa: where you stand now? t-bill and chill? krishna: i do not think that thesis has changed much. equity markets have done much better. from a risk management perspective that is not a bad strategy. lisa: what would you have to see the shift that? krishna: if thursday had not

happened i think the driver would have been the fit to get a lot more comfortable with valuations then growth. it is a reality. lisa: are you saying that because of president biden's performance the fed will be less likely to cut rates before november? krishna: no. i am saying the fed will do what it will do. the impact of what the fed does on the market would be less because of what happened on thursday. jonathan: you think the treasury move was off the back of thursday night? krishna: yes. otherwise with the pce data we got the likelihood you have a bond selloff would been very unlikely. jonathan: the short-term risk of this bond market selloff? krishna: as policy uncertainty increases i think the curve steepen's rather than flattening. jonathan: fascinating. this is what we heard from morgan stanley. lisa: is what matt hornbach was staying -- was saying and david kelly as well.

it was a game changer. we saw a shift in market expectations and political expectations. jonathan: doesn't start this early to be starting election cycles in june or july? krishna: i think this is extraordinary. you had some level of political, if not certainty, likelihood, then that getting demolished in one day. that is very unique in u.s. elections. lisa: is there more to this trade in anticipation of what could happen? krishna: if the fed acts the way the market expects it to, the likelihood of that been supporting for bonds in the short run is significantly less now that was before. jonathan: good to see you. krishna memani of lafayette college. thinking about trades for the election on july 1. lisa: give raises this question

of game theory. at a certain point we start talking about whether joe biden will step down. what if the market provides a check on him? i am serious. it sounds far-fetched but we are at a point where i don't know. anything is possible. jonathan: my head is spinning. coming up, cameron dawson will be joining us. we catch up with george ferguson a bloomberg intelligence. looking ahead to a week of economic data in a speech with chairman powell tomorrow. equity futures positive .25%. from new york, this is bloomberg. ♪

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>> the more important data still shows the economy. >> even with further progress welcome, it is not enough to justify a topline move in terms of monetary policy. >> they brought demand and

output down from the peaks that we saw. >> people want the fed to start asap and move quickly. >> the fed will not start cutting early enough. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: interesting start to quarter three. gas after guest for the presidency and what it means for financial markets. lisa: thursday night was a game changer as people think about a trump presidency and also a republican sweep for the deficit as well as immigration policy. jonathan: what i've been surprised about his hearing a series of guest talking, you saw

that from morgan stanley. the risk is key for the downside of the growth. make sense of that. lisa: it is the face of the bond market tantrum. it would typically indicate some sort of flight into treasuries. this raises the question, initially it is a knee-jerk reaction with inflationary pressure, longer-term growth would come into question. the larger issue is, at what point does the market act as a check? we heard that from france. they keep saying this, is the ghost really hanging over some of the political shifts we are seeing? jonathan: hovering over bond markets now. lisa: it's a big influence. jonathan: these are hypotheticals or but gets --

baguettes depending on what's happening in france. we will get jobless claims, payrolls on friday. chairman, -- chairman powell commentary as well. lisa: a time when the fed seems to be focused on weakness in the job sphere rather than any kind of ongoing stickiness with inflation. jay powell himself saying he doesn't really understand the diversions between the household survey saying it does seem like it's overstating the actual data. do we see an increase with skepticism resulting in a decrease in potential available job openings? jonathan: we get into all of that. s&p 500, futures up one quarter of 1%. yields up a bit higher, double digits on friday.

foreign exchange, we talked lots already, a little bit stronger here by one third of 1%. lisa: wasn't as big of a win as it could've whip -- been. people shrugging off how much of a political shift this could be. so many people looking for opportunities to buy. whether it sticks and how far it will go will be a key question. jonathan: we've done this once, want to do it twice. whatever happens over the next week, the spreads, the difference between the french 10-year and german tenure go back to where they were -- german 10 year go back to where they were. not going back to the 40's anytime soon. lisa: you still have this shift in the political sphere, france, germany is in some bastion of

stability. at what point does that become part of the equation? you see increased deals in both sectors. i love that description. jonathan: this is the lineup, cameron dawson of new age wealth , george ferguson of bloomberg intelligence on why the doj is said to charge boeing. why he's sticking with his call for no rate cuts in 2024. we begin with positioning for the second half. cameron dawson saying the trend is your friend. be aware that the market could shift quickly if growth forecast begin to get trimmed. we see that already, our growth estimates being trimmed? >> it happened friday. it revised lower, it is slightly and one data point. that is a big shift from the

last 18 months where we've had rising gdp forecast pretty much every month, providing a boost to equities, credit markets, that's what you could trade at such high valuations. if that starts to change, that's when you could have a more risk off move. jonathan: that has been a theme with the data, could you walk us through what you are looking for? are you in the camp where we need to respond or david kelly where things are slowing but they are slow? cameron: we are not at the point where we are heading deep into a recession. we are coming off the boil. we have two very different stories about the labor market. it is somewhere in between. the real jobs number is somewhere around 100,000. what that means is more

important for the unemployment rate. if that continues to creep higher, if you see this moderation, it does give the degree of freedom to give one rate cut, maybe two this year. the question is what happens in 2025 if they ease policy? we start thinking about the republican sweep. lisa: it is important to keep going because it is so powerful. the top 10 companies make up 35% of the market cap. only 23% of earnings. we are basically pricing in a much more significant boost to earnings. does that concern you at all that if we do get a reality check it will be a painful one? cameron: we are shifting from a world where stocks were going up , the market was chasing the

earnings. now we are at a point where it is multiple expansion boosting names like nvidia and amazon. how much could that sustain mostly from the earnings growth rate? it decelerate significantly into 2025 and into the back half of this year. going to about 15% by the time we get to the fourth quarter. the market has priced in that the rest of the 493 will have the same amount of growth. that is a really high bar for this for 93 to see mid single digits or midteens kind of growth. there is room for downsize surprise and earnings. lisa: that earnings bar is highest going back to 2021. you are still bullish.

based on an earnings report versus just go with momentum because that is what's working. lisa: the liquidity hat -- cameron: the liquidity has been so supportive. we do think 25 estimates are too high. you have revenue starting to accelerate and 100 basis points of margin expansion. that is a world where it will decelerate. you don't get revenue accelerations in a moderating gdp kind of economy. we think it is firmly too high. tom: there is a phrase you used and then, followed by republican wave. is it too early? cameron: it is comparing the starting point with a trump presidency today versus 2016.

that is different than today. wage growth is growing at 4%. what is the risk that you see a more pernicious kind of wage inflation cycle if you lose that bottom tier of workers coming in that will keep wages in check? we could do a similar thing on tariffs where you have the deflation of durable goods inflation, how much could you see tariffs and immigration contribute to this outlook? i think the risk is yields move higher. neither party is considering austerity whatsoever. lisa: you basically agree with what christian said that thursday night on some levels was a game changer in terms of your market views and the increasing certainty?

cameron: the best output for this economy will be gridlock. don't change it, if it's not broke, don't fix it. does that raise the odds of a republican sweep? where you could see more sweeping policies. that would be the risk for the market is you get this inflation, higher deficit spending. to point out the tax cuts you would want to get going into a second round, we had those tax cuts. 1%-2% lower, you don't get nearly as much sugar as you get with the spinach of things like tariff immigration. tom: cameron dawson of new age wealth. friday on the back of thursday evening. lisa: i like finish by the way.

this to me is probably the biggest take away of this morning. thursday night was a game changer for markets, not just politics. you have to really contemplate some of these policies going into effect without any barriers whatsoever. jonathan: yields creeping just a little north of 441. here is your bloomberg brief with dani burger. dani: hurricane beryl is said to cause damage, it is moving west as a category three hurricane towards barbados. the national hurricane center says fluctuations are expected within the next day or so. it will potentially threaten haiti, jamaica, before possibly making landfall in mexico on friday. a $2.5 million deal, that

according to people with knowledge of the matter. it may be announced as soon as today. it would make the founder richer than his new boss. after taxes, he will net roughly $2 billion. it competes with bloomberg lp, the president of bloomberg television. in austria, george russell clenched mercedes first win of the formula one season. a late crash between lando norris and max verstapen. the crash forced him to retire from the race. ultimately finishing in fifth. that is your brief. jonathan: haven't seen an end to a race like that in a long time. toto wolf was almost

celebrating that he could win and george russell said he almost crashed because of it. jonathan: the end of that race was ridiculous. they are actually friends off the track, i wonder if they will kiss and makeup after what happened saturday. lisa: that's the only way for max verstapen not to win. tom: the morning call -- jonathan: the morning call with george ferguson and by the doj is prepping criminal for boeing. the latest report is just around the corner. from new york as we kick off quarter three. ridiculous, equity futures positive by one quarter of 1%. this is bloomberg. ♪

jonathan: a little more than an

hour away from the opening bell. futures positive by about one quarter of 1%. 4.41, the euro stronger. time now for some morning calls. wells fargo adding kroger to its third-quarter idealist. seeing strong potential for earnings. the stock is up by a couple of tenths of 1%. morgan stanley rising its price target on nvidia. raising 2025 estimates but saying it is lower than it once was. we are down about three quarters of 1% on that stock. lisa: must mean it is time to buy. if they could increase earnings expectations, i get it. jonathan: the third and final call.

highlighting the ev makers monumental partnership with volkswagen calling it a game changer. the transaction went down on that stock by about half of 1%. bloomberg reporting the doj plans to slam criminal charges reporting to two fatal crashes. boeing is said to buyback spirit aerosystems in a $4.7 billion all stop deal -- stock deal. reports of the doj criminal fines and the story that ultimately they will get back together with spirit aerosystems. could you walk us through the second story? george: the second story is extremely important to boeing. this will give them the opportunity to streamline the manufacturing boeing 737. that is the big moneymaker for the company. it generates a lot of the cash

flow and a lot of the profits. really the path for the recovery for blowing -- boeing flows through getting deliveries up into the 40's and 50's at least, even better numbers than that. given the streamlining, it will give boeing the opportunity to get things done that they need to stabilize the manufacturing process. things are interesting as well this morning, airbus announced it was not a purchase, the taking away of the airbus portion of spirit aerosystems. they got paid $559 million to take that business back. sort of another confirmation to us that spirit had given airbus a pretty nice deal on a320

manufacturing. that will take that pain that they would've had if they haven't got it. jonathan: you related to the underlying hope of many investors as the production starts to ramp higher again. set to charge boeing. some of the options here, the doj is telling boeing to pay a fine. i wonder how constrained they will be going forward even with this combination? george: from what i'm reading, the information coming out over the weekend, to me it does not sound terribly constraining. i don't totally understand how much influence that will have. it should have a lot of boeing production. quality slipped so hard for so long, there are so many problems i feel like they should almost

just welcome that and bring it in-house. i think fighting over monitoring right now at boeing looks bad. the fine doesn't look that material to me. it feels to me like they don't want a fraud conviction against the company. i'm not an attorney. it seems to me with a fraud conviction they could have problems with government contracts. it seems very doable to put that aside at this point. lisa: is there a sense that dave calhoun could write the ship at a time when leadership is set to end? there are questions about his credibility given they are yet to solidify what exactly went wrong? george: i don't know that i see

dave calhoun as the ship righter. there's no delaying these doj issues and the spirit air issues. you can't accelerate and shortcut that whole thing. it would've been nice to have these situations fall to the next ceo. you cannot wait around. maybe help clean up some of the mess as he goes out the door. a mess that is not all his. this is the beginning of a longer process and it goes through the manufacturing plants, improving builds. it is the beginning. lisa: i'm thinking out loud here. it feels like a time where the united states and other countries are trying to emphasize industrial prowess and

industrial production. boeing acts as a cautionary tale , but also for this industrial ability at a time where a lot of industrial centers were hollowed out during the pandemic. where it hasn't been a skill since it has been prioritized in a lot of communities. how much is the ambition of becoming an industrial behemoth challenged by the shifts in labor markets as well as post-pandemic realities? george: there is a bit of that going on over the last couple of decades. there has been a heavy focus on financials and did not focus you push things out into lower-cost locales and let other people do the engineering. i do think it has been going on for decades. we are seeing it now manifesting itself all at one time. because of the stress of the

pandemic, because the indicator prior. i do think it is a little bit of a cautionary tale for manufacturing. i think you have to be prepared to control the important portions of manufacturing process, especially the engineering. talk about pushing some of the design. i think if you are going to be a great manufacturer, you want to keep those skill sets in-house and not be so financially focused. i guess we will see but i think it is a cautionary tale. jonathan: george, good to hear from you here. let's go through the numbers. they will have to pay an additional criminal fines of 240 $3 million on top of the $243 million already paid in 2021. bring the total amount of the fine closer to $500 million.

maybe the stock, boeing is down by just 4/10 of 1% in the premarket. lisa: how much the cost is for an average plane and how much -- how many planes that accounts two. if they are able to ramp up production, the question is whether they could ramp up production percentagewise? not only the competitive edge but their ability to attract the talent they need to come out of this period. jonathan: that stock is down in the premarket. we will catch up with bnp paribas. we will talk about what is still to come this week. chairman powell tomorrow beginning your get together. his estimate friday, they are looking for 155 thousand new jobs and a 4% unemployment rate. lisa: they've been looking for a

general weakening. not to go backwards, the cost is $250 million. that is one plane that would be the fine. i think andrew holland's is an interesting one. whether the market data will be the cap on a lot of the agency. jonathan: looking for payrolls to drop, is that what we are looking for? lisa: we are both off and we will both be checking i'm sure. jonathan: bloomberg, anywhere. ♪

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jonathan: 60 minutes away from the opening bell, equity futures positive by a quarter of 1%. the small-cap up by 4/10 of 1%. could the rest of this market do something after tech it leads big gains? lisa: some people say that's the ultimate test, the question is whether some of the other performance is a warning sign for what is to come? a sense of the weakening in the data. jonathan: the treasury market, we are down here, yields higher across the curve. on the 10 year up for basis points. just after guest this morning talking about the yield curve on

the prospect of a trump win in november. lisa: just after guest saying thursday night was a game changer for politics and markets were a chance for a republican sweep becomes much more in office. longer term yield significantly higher. jonathan: let's get to paige, the euro-dollar looks like this, that exchange rate at about 1.0741. positive by about one quarter of 1% off the back of the french election. a tough story, french president emmanuel macron weighing whether to pull candidates from the second round of the election. the discussion coming after the national rally dominated the first round. spreads a little bit tighter, germany versus france, the euro is a bit stronger. huge question mark of the

future. lisa: it doesn't take away from the fact that she dominated and her party came in first. the key question depends, is there a shifting tone and what the far right looks like? we talk about what we saw in italy. whether this is the exact same kind of threat that some people thought opposed as it was in the past. that is key to understanding whether the left and center make some correlation to counter that threat? jonathan: what we are seeing on the right is they are trying to prove they could govern and govern without crisis. that will ultimately be the path to long-term success. it is a recognition that they can't go as far as maybe they would've liked to. lisa: is that ultimately what we are talking about? jonathan: you want to be the

populace game changer. you have to be one and the other. you do not want to be the crisis candidate. lisa: you do not want to be liz truss, that is why her ghost is hanging there. jonathan: later this year in this country, will the treasury market act as a regulator for some of the ambitions of whoever gets in power? trouble continuing for boeing, here is a summary. bloomberg reported the doj plans to slap the plane maker with two previous fatal crashes. the deal expected to improve manufacturing. that stock is down by three quarters of 1%. lisa: you just wonder where the story will end. that $240 million fine is about one plane sale. it will not cripple said company.

there is this feeling when will this end and develop the prowess to make planes the pace that a lot of the airline companies would like? jonathan: longer than they would like. week ahead is packed. looking ahead, fed chair jay powell speaking tomorrow. new york president on wednesday. we get jobs, jobless claims, june payroll on friday. mike, yields week is a busy one. mike: politics hanging over all of it. i get to break the manufacturing numbers at 10:00 this morning. the supreme court rules on donald trump's immunity. you have to have a very wide brain to take this all in. ism would be interested. the narrative is the economy is slowing and manufacturing has been below 50 for quite some time.

does it disturb that narrative? powell and the french president of the ecb are essentially together on a panel. you could bet what some of the questions will be. a lot of job stuff on wednesday because we get jobless claims. everything packed in. thursday you will all be at the beach. friday, june jobs. jonathan: you will be here, i hope. mike: i will be here. i'm hearing not everybody will be here. jonathan: i'm a loyal listener, i will be listening and watching. lisa: it's so emotional, i'm sure he's appreciative of that. jonathan: i think you should wear a tie on friday. how will you navigate these numbers when chairman powell comes out and suggests that maybe that we are understating the true strength of the economy? jonathan: will he?

that's an interesting question. we did ask about the difference between the household and the establishment services. nobody could explain the household survey. we will see what we get here. again, we are looking at 188 thousand as the consensus forecast. that is way down. last month was way up from what was expected. we are still running fairly strong. the kind of amazing thing this month is we get so much power -- powell. we get powell tomorrow, the following week with his humphrey hawkins testimony. the week after that he's at the economic club of washington. the final week, he gives his news conference. more powell in a month than we have perhaps ever seen. lisa: july going full powell. what data will move the needle the most? people talking about the unemployment rate as being maybe one of the key aspects.

tomorrow front and focus, what will you look at most importantly? mike: unemployment. the fed is looking at unemployment as an indicator that the economy is slowing down. it is a little bit of a radar gun for speed, how fast the economy is dropping if we got a big rise in unemployment rate, that would change the narrative. on the 11th as everybody keeps track of what is going on. jonathan: just one week away. mike mckee working so we don't need to. thank you for everything you do. great to have the both of them with us. i want to come to you first. this is something you said, attributed to you. i said someone says this. you look at the jobless rate on friday, just walk us through that. >> i think the range of payrolls

will be pretty wide that could set aside the gradual normalization rather than dissertation in the labor market. we could see payrolls as low as 150 or as high as 250. that will be just fine. what is really important is the unemployment rate. it increased in the last two reports. again it could potentially trigger it. if it goes to 4.2 percent, that could trigger the sound rule. that is a big question and could spooked the market. the change on the unemployment rate because the previous number was driven higher by young adults. i don't think that is sustainable. jonathan: let's bring you into

the conversation, would you agree? steve: the unemployment rate is clearly an indicator. people understand what it means. it does have importance in terms of the dynamics. it is still a very low unemployment rate. well below the natural rate of unemployment. i think saying 4.1%, 4.2% will trigger a recession. you have payroll that will be a very healthy number. all kind of arguments that we are making mountains out of mole hills. the economy is doing well. lisa: you are one who talked about the resurgence in inflation than anything else. you still think these concerns about growth are a little

overdone. what are you pointing to? what you think will give that sense to the data this week or what is under the hood? steve: the jobs numbers themselves are critical to the underlying pace of activity. jobs create income. they create job, -- wage compensation. you have inflection in consumer spending relative to the first quarter. we have been anticipating an inflection point in the economy shifting down from 3.3% well above trend. you are going to see some flexibility in the data. people are over reading it. the fed tells you they want to cut rates. you read every number as this will get the fed to move. they want to move, they are itching to move. the fed has repeatedly pushed out the timing of rate cuts and

as a result, they have a winning hand. they are getting an interest rate environment that fits their scenario without doing anything. this is the number that will make them cut rates. nobody could short this market. mike: -- yelena: i agree with steve on consumer spending and income. last friday we got numbers that are pointing to a very strong growth in consumer income. we did see some moderation in consumer spending, particularly on discretionary services categories. i think we are fine in terms of deteriorating and growing slower. that is the key point. the numbers i will be watching this week include jolts. are we going to see a slowdown in the decline of openings? that is a key point for me.

we are at the point of the beverage curve where further declines in vacancies lead to high unemployment rates. that goes back to the point i made. it is much more important over this period. that will be a warning sign. jonathan: the floor is still very low. when you creep towards 4.2%, how rare is it to stabilize at these levels? yelena: it is very rare. i think everything in this business cycle is very rare. we haven't seen much of what is going on if we see a rapid increase to 4.2% or 4.5% going forward, that will be very

warning signal. if we gradually rise to that level, say 4.2% by year end, that will be just fine. it will not be triggered. jonathan: how much daylight is there between deterioration and normalization? yelena: -- steve: there isn't that much. the fed has been told they want to cut rates. the market is skewed. there is a lot of gray area in the data. this is one of the risks that the federal reserve takes in here because if they were to cut interest rates without having data on their side, you could wind up with an overreaction in the market. jerome powell indicated this, they were worried about an overreaction. overreaction could lead to re-acceleration in growth and put them in a real political

bind with their own analysis. the federal reserve has to move very cautiously here. they need to see clear evidence before they move monetary policy. i don't think they will get it in any of the data coming out here in the next few months. lisa: the discussion we are having now, we could've had last week. at a time where it was pre-debate. ppd, pre-presidential debate. we talked to a number of different people talking about how it was really a game changer, how we saw a shift that the likelihood of republicans became greater and the implications of that. does it change things for you and your economic forecasts when you take a look at all of these competing factors in the labor market and the overall economy? you factor in what will higher tariffs do? what will lower immigration do? yelena: that makes 2025 more

inflationary. the probability of more inflation next year has risen after the events. it is really important to look at tariff policies, tax policy, all of them. all of it, our team put it in the model on the inflationary outcome for 2025. it doesn't affect growth that much. the initial round of the model. if you factor in the fed policy and how they will react to inflationary environment, that could really push them down and that will be a bad outcome. lisa: do you agree with that? is it a game changer in your view what we saw thursday night? steve: not really. i think either one of them would lead to inflationary tendency. we will spend money in a different way. we both will have inflationary

implications from policies. we choose to pick on some versus others. we have a $2 trillion structural deficit. we are heading to a 2.5 trillion dollar deficit or $3 trillion deficit. the reality is, monetary policy is not as restrictive as the federal reserve thinks, one of the reasons we have been saying they shouldn't be cutting interest rates or even considering it. monetary policy is not that tight. with the forward structure of interest rates anticipated 3, 3 point 25 by the end of 2026, forward rates are regressive. the reality is we will have a stronger economy from government spending in 2025, 2026, no matter who is in the white house. jonathan: steve, thank you sir. yelena as well. what we heard from christian, it

is in the near term. lisa: really the key question, how much do people have to start factoring that in at a time where it's looking more likely based on the poles that you could reject or you could say these policies will shift or there will be the ghost of someone hanging over the idea that there might be pushback against some of these proposals. person after person has said this was a game changer and it will be more inflationary. jonathan: when will we get past this liz truss nonsense? lisa: if it's up to me, we are not getting past it for a long time. jonathan: let's get you an update on the stories elsewhere. dani: israeli prime minister benjamin netanyahu is vowing to continue to fight thomas until the military group is eliminated. he spoke after a report that claim the biden administration sent out amended language for its cease-fire proposal between israel and hamas.

the u.s. is working with qatari and egyptian mediators in a three-part deal. big tech companies are looking to nuclear energy to power the next generation of data centers needed to support ai. amazon moving towards a deal with constellation energy, the largest owner of nuclear power plant's. according to a report from the journal. amazon also purchased a nuclear data center in pennsylvania back in march. shares of two we this morning about 11 .33%, the stock gaining a boost after they disclosed a 6.6 percent passive stake in the online pet retailer. the stake is about $245 million. chewy and petco soared last week after a cartoon image of a dog on x. jonathan: thank you. we will catch up with you tomorrow morning.

up next, setting you up for the day ahead from new york. you are watching "bloomberg surveillance." ♪

jonathan: counting you down to the opening bell. about 40 minutes away. equity futures just about positive. manufacturing coming up at 10:00 a.m. eastern. tuesday, jobs data plus fed chair jay powell speaking from the ecb forum in central portugal. wednesday, another round of jobless claims. u.s. markets were closed for the fourth of july holiday. the u.k. holding its first natural -- national election.

before we get to the end of the week, president joe biden looking to ease donor concerns. bloomberg's mario powell set to join us. could you walk us through what we are hearing from people at these campaigns versus what we heard after thursday night? mario: right now, you are seeing a little bit, i use the term little relatively. a little bit more calm after a few more days of voters and the party being able to digest what happened. an aggressive campaign from president joe biden's camp. breaking down these vocal calls from the party for him to step aside. jonathan: the polling is pretty dreadful. does the president have the cognitive health to service? for every 27% of registered

voters to say yes, i wonder how they respond. that number has gotten worse, not better. mario: absolutely. it is pretty brutal. one of the first poles that is outpost debate. we expect an avalanche of polling later on this week. we are not sure what it will look like. there's a good chance it will look pretty brutal. some of these deafening calls from the parties that will push aside president joe biden. the campaign has been very defiant. it hasn't changed course, which might be questionable on its nose as well. the writing, public comments that the president should step aside. taking aim at former trump epistles -- officials trying to hit this off on social media as well and then said the family is

starkly in the president's corner and calling for him to continue on. lisa: is there a sense of how it would work or who would be chosen if president biden does choose to step aside given that there is a real feeling that maybe kamala harris has to be the person put in there even though there is an understanding that it's highly unlikely she would ever win the election? hannah: this is the can of worms it faces the party right now. procedurally, parliamentarian rules say it is very hard. it is not impossible but hard to move the president off the ballot. the democrats convention is in chicago next month. he has the delegates from the primaries. it is a tough pathway. the other track is just the wounds and the can of worms it would open within the democratic

party, the infighting much before the election. the polls show kamala harris wouldn't be as strong against former president donald trump as much as other candidates. they are jockeying to see who would have the torch. all of these things would lead to some embarrassing infighting within the party. as they need to gain momentum heading to november. jonathan: it will take some time to shake this off. thank you. as for the week ahead, absolutely stacked. tomorrow, here is the lineup. former fed economist, looking forward to that. matt miskin of john hancock. we have to talk about this bond market call coming out of this program this morning. lisa: the fact that people are saying yields are headed higher regardless of what the fed does. essentially saying the faded --

fed is being deemphasized. you have to prepare for a republican sweep and the policies it could add. jonathan: shorting inflation despite the long time hit to growth? lisa: it makes sense logically. this is something they are wrapping their heads around, if the bond market sells off, does it prompt a policy response? does it have a self-fulfilling feature? there's a lot of unknowns. more volatility and potentially higher yields seems to be the most likely call going forward. jonathan: quite a finish to quarter to, quite a stop to quarter three. the second half is still to come. this was bloomberg surveillance.

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♪ >> coming off a busy week ahead with powell speaking tomorrow and the jobs report on friday, politics propelling markets with results out of france and uncertainty here in the u.s., boeing buying back spirit aerosystems in an all stock deal after two decades of separation. stocks kicking off the second half of the year on a positive note. >> now we are at a point where it is multiple