>> the way i'm describing the evolution of the economy is an incremental slowdown. i don't see this as actual weakness. >> i think for balance of investors concerns have changed. >> you're going to see weakness but you're also going to see areas of strength. >> when you look at the underlying fundamentals, yes, the economy is slowing but in a good way. >> this is "bloomberg surveillance." >> this is what a week in august should feel like. good morning. this is "bloomberg surveillance."

jon still on his disney cruise. what a difference a week makes. last week started with fireworks on monday. this week, not so much. yesterday, a pretty quiet day which was refreshing for a lot of people. >> is it return to normalcy or the eye of the storm? i think a lot of people are concerned markets are back where they started this morning with a huge rally in the nikkei. japanese stocks are back where they were before the cello. maybe the same set up as last week. >> going into a slew of economic data. starting with ppi at 8:30 a.m. eastern. later, we get home depot at some point this morning. a whole number of indicators that potentially could really disrupt their we are. >> thinking about what demons we have exercised over the past week. the one that lingers all of us is where we are in this economy. it has been tear to data that has been what song the market,

real robust data followed by tomorrow's cpi and retail sales. >> we did just get home depot numbers. you can check that out because it is a pretty big disappointment. in the meantime, the geopolitics front and center. this very much is the center of the vocus. home depot seeing a full year sales down 3% to 4% versus the expectation around 1%. dani, take a look at that. right now i want to set you up, and marie, with a sense of the oil markets and how this is playing out. yesterday with brent singh the biggest one-day pop -- saying the biggest one-day pop. >> i think yesterday what a lot of people are really looking at is what the what said. john kirby said israel believes it is "increasingly likely there will be an attack by iran, its proxies" and then said "we share

those concerns." they are sending more weapons into the guylf. -- gulf. preparing for this potential retaliation by iran. >> which is why people are looking at this as some sort of disruption. home depot, what do you see? >> i will reiterate they see the full year sales down 3% to 4%, about a 1% -- this quarter was that, 2, 3 .6% decline. the estimate was 2.6%. i want to read the quote from the ceo ted dekker sing "higher interest rates and greater macro uncertainty pressured consumer demand more broadly was building in wicker spin across home improvement projects." it is not even just the weaker consumer which we knew about for a lot of these home related goods. it is higher rates having an issue putting pressure on the housing market any turnover is low, people are not shopping at home depot.

these other housing related stocks because they don't need to. they don't have new homes. >> people parsing through this. is a good or bad? a little bit of a lift to start the day. in the s&p 500, a mild gain. yesterday that faded as the day went on. euro dipping a touch. question of how much some of the rate cuts have been overpriced in the market. 10 year yields, this is the place to watch. dipping slightly yesterday after the new york fed inflation expectations came out with a three year coming out at the lowest since the series began. crude, a touch softer after the huge rally we saw yesterday. coming up, we have mark mccormick on why the u.s. dollar looks cheap. and rita said -- amrita sen and

kathy bostjancic. let's begin with the top story counting down to the u.s. ppi. mark mccormick writing "the u.s. dollar look cheap to the global risk events piling up and the steep fed cut pricing seems excessive. closer to the rate cuts but not urgently close as markets are pricing it to be and we are cautious of a correction." mark, you're not in consensus which is a good and beautiful thing. it is great to hear a counter argument. you see dollar strength ahead. why? >> you put together some of the pieces. the global economy is not that strong. talking about geopolitical tensions. if we take ourselves back to 2020 why was a euro weaker? why did the yen we can? currency step report energy and commodity prices do not like the uncertainty.

what is very, very, very important and something we have been highlighting for months is the goldilocks scenario we have been in has been tipped over. maybe it was the u.s. employment report was the straw that broke the camels back but if you look at high frequency data in china, if you look at data surprises, data trends, data and the growth story is weaker in china than the u.s.. if you look at europe, it has peach from a low level coming to a modest level -- it has peaked from a low level coming to a modest level. there's no country that can offset the slowdown in the u.s. if you estate is slowing, this is where we moved to the part of the world where the u.s. rallies, the swiss franc rallies largely as a safe haven. at is what worries me, everyone is looking at the u.s. in a vacuum but we should be looking at the global picture which is the world is moving into a slower place which reinforces more volatility and also more

safe haven demand. >> we see that with respect to china's demand with oil, for example. i find this interesting, you think market risks are asymmetric right now, that the u.s. dollar should rally on good and bad surprises here. which is exactly the opposite of the bad sort of response to good news or bad news that people were seeing and saying yesterday and last week. how do you rationalize this? >> it is like what the consensus is, especially the inflation number, and that we are thinking , four fed cuts priced in this year and more than that priced in next year. number one, we don't expect more fed cuts or emergency cut or think the fed needs to cut 50. you talked about the atlanta downcast which is running over to percent. tactically coming into the data come if we get a strong member in terms of inflation, .3%, the

dollar will rally because we will price out a fed cut. we're going to price out the 50 for september. we will be back to something that is probably in-line with expectations which is maybe three cuts. if you get low inflation, lower end of the range, i think the market gets spooked about the uncertainties of global growth, of u.s. growth. are we heading into recession? we titled our weekly narrative "whiplash." the stories keep changing, the vibes keep changing. i would think both of those extreme numbers are good for the dollar. one, it prices out the fed and the delegates a recovery -- and the dollar gets a recovery. the other is we move into the uncertainty around the global recession, the slowdown, and the narrative changes to that. that is where i think the most boring outcome will be on consensus. we probably won't get much reaction. any of the extremes i think are bullish for the dollar.

>> that is not necessarily what we saw after the weak jobs report. people pointed to too many carry trade's built up. did your view assume a lot of that is washed out? >> i was a tactically. we have to think about flows, especially from the japanese perspective and the carry trade perspective. along with the employment report, we got -- it was not a surprise because we were calling for the vo j hike. the boj will be much more aggressive because japan, as a country, the the government, pension funds, the central bank all had to move in a direction that moved into a stronger -- i think a lot of this had to do with where we were in the prior election cycle before everything changed. i think a big piece of what happened here is you have all of these things that -- we don't know the trigger is but the conditions were that goldilocks

was unsustainable. we needed more macro volatility whether it was equity, fixed income, or currency. all the employment report did is it worked with the surprise made by the boj that the market wasn't priced for. you got a very weak number that was quite distorted. the market kind of implodes. this is exactly the definition of a complex system trying to figure out what it needs. you don't know exactly what the combination of triggers will be but we got those triggers in a smaller time when people are away for summer. the tactical trading site has been completely washed out. our models show on positioning, the yen is quite long but i was a structurally, you have to think about the amount of money the japanese pension funds and other institutions in japan, the amount of money they have leveraged the rest of the world, particularly u.s. technology stocks -- that is something that is not going to get washed out over a order or month. these are positions set on an

asset allocation base. those decisions are decided once a year. those targets are met and those are conditions that take a long time to trade. tactically, all of the stuff that is been washed out, the carry trade is probably washed out from hedge funds or leveraged money but i think when we think about the capital flows, we haven't even started to see a reversal in some of the carry trade's that have been on for years now. >> i wonder how that plays out because presumably, these are people who hold longer-term contracts and probably won't even know the losses they saw last week for some time. what does that look like as those realizations pop up? >> i think a piece of it is people are going to sit around and think about the investment profile for the next year. obviously, awoke at the targets from a lot of -- again, there is a lot of investors that are worried about shoulder tap on a monthly or weekly basis. they will sit down and strategically think about how they view the world, what is the

asset allocation. pension plan allocation about 10 years ago was about 60% of their fixed income and now it is about 20%. a big piece is pension funds will sit around and they will make a decision is a we need to have a higher allocation and the boj will say we need to get the pension funds a reason to repatriate this money home so we are going to continue to do quantitative tightening, let the curve steepen, or we're going to raise interest rates or have a profile that allows that mix over time to make more sense for the pension funds. it will not be ripping off the band-aid or knee-jerk. it will be more strategically thought out. the other big pieces even if you look at the balance of payments, probably at least $1.5 trillion outstanding in yen based on 50% hedging target from some of the allocation to see in the international investment position. you cannot capture any of that data. you don't know where it goes. a lot of it is residuals.

much of it is unhedged. he will realize a much stronger yen of japanese pension funds have a higher allocation is that we are going to buy more domestically driven stocks and were domestically driven jgb's leading to a stronger yen because of the lack of hedging they have had. they are unhedged because it has cost him much money of the last four or five years. >> mark mccormick, thank you for being with us. i want to go back to home depot that came out with disappointing results, looking at same-store sales in particular. though shares lower by almost 3%. they were expected to be negative but this was worse than expected. dani did a good job looking at the commentary from the ceo during the quarter, high interest rates, greater macro economic uncertainty pressured consumer demand broadly.

the cfo in a separate interview said this, "pros tell us for the first time their customers aren't just deferring because of higher financing costs, they're different because of a greater intern team in the economy. -- greater uncertainty in the economy." we will talk about that whether this is idiosyncratic story about a company, industry, or something much more broad. let's get to other stories. here's your bloomberg brief. >> investor confidence in germany's economy slumped the lowest since january and expectations zew fell to 19.2% in august, far below the 34 expected in the bloomberg survey. the recent figures have painted -- recent figures have painted a gloomy picture for europe's largest economy. output shrinking. private sector providing little optimism.

general motors is struggling and china. the u.s. automaker has been laying off staff and will soon meet with local partner fcic to plan a larger structural overhaul of its operations. -- saic to plan a larger structural overhaul of its operations. gm is not alone. many foreign brands are struggling to keep up with local competitors and the world's largest car market which is now facing massive overcapacity. the nfl is meeting with a handful of private equity groups this week. it is a step toward opening the leagues ownership ranks to institutional money. the meetings are intended for the league to conduct more due diligence and talk through potential policy preferences. it does not allow institutional investors. it is spent more than your observing other leagues in discussing what it might do differently. that is your bloomberg brief. >> next, israel preparing for

response. >> we share the same concerns and expectations our israeli counterparts have but we have to be prepared for what could be a significant set of attacks. we have increased our capabilities in the region even in the last few days. >> that is coming up next. this is "bloomberg." ♪ ♪ (upbeat music) ♪ an ever-changing landscape comes with challenges. from our vantage point, we see opportunities. as a top-ten real estate manager, principal asset management harnesses the power of a 360° perspective, delivering local insights and global expertise across public and private equity and debt. our experienced teams are uniquely positioned to uncover

compelling opportunities in today's market, giving our clients an exclusive advantage. principal asset management actively invested. you have to make it. and if you want a successful business, all it takes is an idea, and now becomes the future. a future where you grew a dream into a reality. it's waiting for you. mere minutes away.

the future is nothing but power and it's all yours. the all new godaddy airo. get your business online in minutes with the power of ai. >> if you want to be confused, here you go. we just got home depot earnings. consumers really withholding some of their funding simply because of geopolitical concerns and macro economic concerns. then u.s. small business optimism comes outcome increasing to more than a

two-year high over in july. welcome back. a mild lift to the s&p after the pullback of last week that was quickly reversed. you can see yields just marginally higher. not some knowledge in oil. that is where we want to focus. israel preparing for response. >> we share the same concerns and expectations our israeli, parts have with respect to potential timing here. could be this week. we have to be prepared for what could be a significant set of attacks, which is why, again, we have increased our capabilities in the region even in the last few days. >> the white house warning iran may launch an attack against israel soon as this week following days of threats. markets a bit softer after yesterday, brent singh the

biggest one-day rally since november driven in part by tension in the middle east. it does seem to be percolating to the surface. joining us now, amrita sen. how significant could be for the energy market? >> i actually don't think the increase in middle eastern tensions, even at that were to transpire into attacks, will lead to prices significantly higher. in the past, we've seen traders cell. we aren't actually going to see prices move up materially. in the short term, of course there is a risk premium coming back into the price. it hasn't been in there for most of last week i would say. yes, you could get a dollar or two here or there but generally speaking, if you and the market, including ours, is we do not expect outright supply losses from these at circulating -- is laden tensions. >> do you think yesterday's response in crude markets was

tied to what we heard with the u.s. moving nuclear capabilities to the mediterranean to backup israel? >> i think there is definitely a part of the price move that can be attributed to that because tensions are rising and even recently israel has sent warning signs by attacking saint oil facilities are not off the target. again, not the best case they will attack all facilities but that can't be ruled out. i will say the underlying impact or the underlying driver of oil prices has been discontinued tightness in the atlantic basin post of u.s. production growth is lower. we actually are staring at very, very potentially record low utilization in u.s. stocks by the end of this month. that is why report we put out yesterday called stopped out. that is underlined this trend in the market. you've seen the wti closing in

on two dollars. i think that is separate from the middle eastern tensions. >> when you look at the report today, it says global oil markets are going to go from deficit to surplus. where does that leave the big producers? do you think they're going to have to ratchet back some supply? >> our balances have been showing that for some time now that we have a huge draw in q3. opec gradually starts to unwind. what i will say in terms of opec policy, they always have mentioned are maintained rather all the policy is dependent on market conditions. should inventories build too much and we've seen a bit of a macro scare recently as well, then they will reconsider their decision. no decision has been taken yet. it is still a couple of weeks before that to do so. i think they will remain vigilant. as of now, our balances show their bringing back arrows. >> what is the floor?

we see the risk premium coming back into the price because of what is happening geopolitically in the middle east. we see -- does opec-plus want to hold $75 for brent? >> i think, again, opec-plus is not targeting a pricer, they're looking at the metals. where we see the floor for crude is around $80 for brent. yes, fundamentals in q4 do not look bullish but right here, right now, stocks -- when you're building from record low stocks, you automatically provide yourself with a significant buffer or rather you are able to build a lot more before the market becomes oversupply. it is a nuanced point but in important point. where we start from building because that mix different. we have seen satellite imagery that is been off-line as well. if that continues come in exit easier for opec to bring barrels

back and still have $80 brent as the floor. >> you mentioned the macro scare. how much does that change things at the macro scare goes from a scare into reality? >> one of the things i found fascinating with the macro scare last week is the fact oil has been sending the signals for a few months now are pretty much since may. stuck in a range. lackluster demand numbers. pretty much every signal from the oil market has been global growth is slowing, it is not doing great, especially china. but suddenly now the equity markets have woken up. it is just a delayed reaction. what i will say is by no means is anything suggesting we are stepping into a deep recession. i think the markets overshot. i think this is why oil managed to remain pretty unscathed and recover his losses because it

had already been pricing in the slow down in global growth. i think it is just the other asset classes have woken up to the reality. >> are we going to see $100 a barrel again? >> of course, as some point, i'm just not sure it will be this year or next year barring an outright geopolitical event. that could be u.s. elections and impact on iran and so on. right now, given where demand is with the chinese weakness, it is still growing globally, but you don't have china and opec-plus managing this market, i think you'll see stable prices but more likely in the 80's and $100. >> thank you so much. we talked about china weakness. on a broader scale, what are whether we will be worrying about u.s. weakness if home depot is listed in craddick -- idiosyncratic. >> in a roundabout way you could say maybe people are traveling less, they are in their cars

more, so the oil usage is up in the air may be in that regard. it is true. we know china is weak stop the oil market is reflecting that. what does it need to reflect american weakness in the market, too? >> right now we are peek driving season in the u.s. but the u.s. is making up for that chinese weakness. if the u.s. has a real growth scare, that will be difficult. >> which is the reason why a lot of people are currently out spending a lot of fossil fuels. coming up, stocks edging higher ahead of key u.s. economic data. that conversation coming up next with michael o'rourke. this is "bloomberg." ♪

♪♪ ♪♪ relax into a caribbean state of mind. visit sandals.com or call 1-800-sandals. when people come, they say they've tried vlots of diets,om nothing's worked or they've lost the same 10, 20, 50 pounds

over and over again. they need a real solution. i've always fought with 5-10 pounds all the time. eating all these different things and nothing's ever working. i've done the diets, all the diets. before golo, i was barely eating but the weight wasn't going anywhere. the secret to losing weight and keeping it off is managing insulin and glucose. golo takes a systematic approach to eating that focuses on optimizing insulin levels. we tackle the cause of weight gain, not just the symptom. when you have good metabolic health, weight loss is easy. i always thought it would be so difficult to lose weight, but with golo, it wasn't. the weight just fell off. i have people come up to me all the time and ask me, "does it really work?" and all i have to say is, "here i am. it works." my advice for everyone is to go with golo. it will release your fat and it will release you.

>> what a difference a week makes. we were talking about turmoil and up shock. right now what you're seeing in the equity indexes across the board. we are tracing gains from earlier in the session 5378. s&p futures up, nasdaq up about 3/10 of 1% but i want to sit on the russell 2000, underperforming trade a reversal of the trade we saw building up. one question of how this is tied to true growth concerns into the picture. dani: maybe the money into the russell 2000 is with weaker hands.

a lot of the outflows $2.6 billion was pulled and at least for the last couple of days -- lisa: yesterday, the guests came on the show and said this is a technical issue not a fundamental one and then we hear home depot, out talking about how the consumer is showing a weakening appetite. annmarie: we got the new york fed survey and inflation expectations of the one year are lower and did the feed -- the cleveland fed came out with what executives are feeling. they are feeling more optimistic where inflation is going so you would think we would see more of a pickup on the earnings. lisa: what you can see his yields are not doing much. just a touch higher on the longer end and a touch lower on the front end but basically flat

compared to what we saw last week. the key question will be and this is one curious throughout the morning, how poised is this market for a selloff or a rally if we get a cpi print that shows disinflation. that's good to be one of the key questions at a time when we are looking at a two year yield 4%. much lower than the 4.5% people were talking about. dani: michael o'rourke causes a double edge sword. we've been in this bad news is bad news market consensus right now. what if there is a deceleration or if inflation accelerates so much that the fomc aggressive easing is the labor market slows. he said on the other side of the sword the fed's greater fear that risk inflation deceleration to quickly. >> it's a different set up because for the entirety of this year it's been an asymmetric skew to cpi beating to the upside.

we pricing more fed cuts and then cpi surprises to the upside which undoes a lot of of the market has done. you get the feeling it that set up again if we priced 200 basis points worth of cuts through the next year maybe we aren't ready for a cpi pickup and the market is brace for downside which is lisa: what we're hearing from mark mccormick. if you push that through our -- the existential thanks as the dollar weakness trade gone too far and hinged and following on the rate cut story this morning. you're seeing a bit of an increase in the dollar. lower versus the dollar albeit pretty quiet this morning. under surveillance, donald trump and elon musk holding a friendly but delayed interviewed -- glitch delayed interview. elon musk singh is a lot of opposition to hearing from trump. the tesla ceo calling for a government commission to ensure taxpayer money pitching himself for the role.

>> i'd be happy to help out. i struggled listening to this entire thing once i was able to get on. if this was about trump pitching viewers and listeners to vote for him or elon musk pitching trump not just about joining this commission but also stop demonizing eeev's, the electric vehicle space. lisa: i would love your thoughts on this from this interview, what level will his friendship with donald trump potentially should donald trump get elected make it better for other auto manufacturers want to sell electric vehicles. >> not just the policy but more conservative audience. more skeptical of eeev's and him just a wholesale talking about climate change is an issue is by donald trump coming back and saying will allow for more oceanfront property. you have this weird dynamic where the talking with the same issues but talking past each other. i wonder how much was a pitch to

trump and how much was a pitch to trump voters. >> that's the reason why people trying to listen in a question about some of the technologies is the greatest header and what that potentially could mean. home depot and this is important, a question if this is idiosyncratic or indicative of what we will see from others as well. cutting its full-year sales outlook. the company except in consumer spending to remain soft in the coming months as interest rates and uncertainty weighs on shoppers. idiosyncratic or something that's deeper? dani: unfortunately it's so hard to tell. they've done a really fantastic job of tracking these consumer companies so home depot is the latest in the negative category. a near record amount of companies are talking about the consumer on their earnings call they are completely split down the middle on the things the consumer is healthy and those saying it's unhealthy. the unhealthy ones are people

like home depot, tied to the housing market. luxury companies a little bit more healthy but within those dichotomies it's not so straightforward. you come out with a confused picture of the consumer. >> home depot's talking about these higher interest rates which feels like more of an issue for home depot's, lows if you want to have these bigger more re-installments of your homes. mohamed el-erian says this is an underlying issue for the housing market. affordability is being undermined by still sluggish supply highlighting critical importance of labor income for continued u.s. economic growth so home depot feels like it's highlighting what's going on underneath the surface but i want to see what walmart says at the end of the week. >> this is the first salvo in a week of key data points. at 8:30 eastern. michael o'rourke of jones trading writing this. this number of key economic releases this week and the economic market is highly sensitive to the major ones.

due to the bad is bad market consensus. the report has the potential to be a double-edged sword. we were talking with mark mccormick about how things were set up to the negative in terms of how many fed rate cuts were being priced in and the growth concerns that have dominated and fueled potentially some of the turmoil from last week. do you think actually people are not pricing in what it could mean if one of these indicators surprises significant lisa the upside or downside. michael: talking about the conference calls and whether the consumer is slowing and the mixed message out there i think that's what's going on in the market right now. you're seeing a situation where if this was a month ago you would have this home depot numbers and you look through them and say it's a high interest rate environment we've rate cuts before the end of the year and that's going to improve. now that you're seeing some weakness out there and it's not

small patches that you're seeing some investors getting concerned and i think people aren't fully positioned for this and that's why you're seeing multiple contraction and the correction we saw last week. lisa: you called the trading pattern the market is reacting to noise. if last week was noise surely this week is something more concrete with the data. what does that mean for what we should brace for is ppi, retail sales hit the tape. >> that's the problem. markets can react every one of those numbers. i would say the most important numbers are good to the jobs report, initial jobless claims in the cpi report. but because we are reacting to everything it just shows the lack of confidence investors have out there. it just shows a little bit more heightened risk to the environment. lisa: if i wanted to find a direction of these markets, that i cannot do it? i need to be tactical short-term

and watch it bounce up and down? michael: what you need to do is figure out what positions you wanted where you want to be. that's how you need to position yourself. you need to take this noise and use it as an opportunity to reposition the biggest shift in the past month, we've been in this environment where everyone's looking at this goldilocks type economy that's about to see fed rate cuts and i think that's why multiples are so high-end everyone is so optimistic coming into july. now we are seeing it's not quite goldilocks and there's a little bit of risk out there, so what you have to do is reposition yourself that there should be more risk in the back half of the year and then we get earnings reports like home depot that just reinforces the need to reposition yourself. i think that's what we see going on here is the wen yu of downdraft it's hard to sell

individual stocks. what a lot of guys will do is sell futures to hedge their portfolios and then when it bounces like we've seen they will start selling stocks into it and cover the futures hedges. that's what were looking at in this environment. annmarie: what do you look at when you get a home depot and see concerns on the consumer. you get the cleveland fed survey when it looks like consumers and ceos are more optimistic about inflation expectations. michael: that is very consistent in the sense that inflation expectations are slowing down with the economy. so if they slow expectations coming down and they get that big back to the risk we have with a double-edged sword on the cpi report tomorrow. whereas we spent the past several years just hoping for cooler than expected inflation, but prior to the pandemic for two decades the fed's fears the disinflation. so if you get a number that

contracts to quickly, all of a sudden fears come out that the cpi report is showing us the economy is slowing down too much and then the fed really gets worried about the situation because that's where you have to get aggressive if that were to pick up momentum. michael: if we get any -- annmarie: if we get anything besides that number what you expecting in the market reacting? how big does the upside or downside surprise need to be? michael: if we get adjust standard month over month, we are right in target with the fed. so those are great numbers if you can get them. if we get 1/10 that's fine. if we get 3/10 that's fine as well. anything beyond those numbers you should see reaction. where we've had three months cpi is annualized rate of just below 2% and although the six-month rate is annualized retire.

january was .5 so in the .5 rate is in the fed's wheelhouse as well. we need to see this trend continue but you're really trying to hit the middle instead of doing better or worse which becomes a little more challenging. >> since 6:00 one home depot earnings came out s&p 500 futures have a most reverse the gains from earlier this morning. the russell 2000 falling further negative about 4/10 of 1%. how skittish is this market that anyone economic data point or earnings report no matter how big or small with the government. >> we are coming from extremely high values historically. those magnificent seven members were trading 45 times earnings now there down. 35 times lower. they are the biggest stocks in the world. stocks don't grow that quickly

except for nvidia this year. so again there's a lot of optimism priced into this and i think there's actually a number of attractive stocks out there. if you going to small caps, the s&p 600 or the s&p 400 mid-caps, there are attractive groups out there but everyone so weighted to the mega caps and that drives up the s&p 500. again the environment is not this goldilocks outlook where we will have rate cuts. it's definitely more endowed and you have the pricing more risk right now. >> thank you so much for being with us. we see a bit of a reversal from the earlier rally as people take a look frankly at home depot. >> they look at home depot and michael rourke put it great every time you get a home depot you have to reposition. it still bracing for goldilocks, the latest fund manager survey underlined that perfectly.

76% of respondents think there will be a soft landing. the most crowded trade is still big cap tech. lisa: right now let's get you an update on stories elsewhere. here is yahaira. yahaira: the wall street journal is reporting china's huawei technologies and challenge nvidia in the chinese market. citing sources report said chinese internet companies and telecommunications operators have already been testing the latest processor and the company told potential clients the new chip is comparable to invidious h 100 which was introduced last year and isn't directly available in china. a bloomberg analysis of government data showing u.s. retailers including walmart and target are selling generic versions of a cold medicine mucinex that contained a cancer-causing chemical benzene. the chemicals unlisted and found inside of a cheaper version of

an active ingredient in the storebrand option. u.s. regulates of order the ingredient phased out with the deadline pushed to 2026 after industry complaints. stay on health care, johnson & johnson has cleared a key hurdle for advancing a $6.5 billion plan to resolve thousands of lawsuits by people who say it's baby powder gave them cancer. according to be familiar more than 75% of the groups signed off on j&j's proposal through secret balloting. the offer includes claims that the version of its other gynecological cancers. under the current offer it would leave payments for current and future claims over 25 years. that your bloomberg brief. >> fighting for a soft landing. >> to look at the economy in totality juergen is see some weakness and are also good to see some areas of strength. what were seeing is a market of investors and speculators that

are overreacting to economic weakness and ignoring economic strength in the economy. >> that's coming up next, the picture that really has not left many with a clear sense of what's ahead. this is bloomberg. ♪ so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management.

lisa: coming into a different week than last week this one's quiet we are seeing the s&p almost flat after a disappointing earnings report seemed to temper some of the early optimism across the board. a sleepiness we saw similar on yesterday. under surveillance fighting for a soft landing. >> to look at the economy and totality yes to see some weakness what your also good to see some areas of strength. what we are seeing is a market of investors and speculators

that are overreacting to economic weakness and ignoring economic strength and the minister -- in the economy. this is so incredibly important because not only will you see financial market indicators you'll get a sense of how mainstreet is doing, that's due to all this data that the market is following so closely. >> u.s. ppi data at 8:30 eastern. the first in a series of key data points which may shed more light on the picture. we did get home depot earnings coming out which also shed some light and if this is mainstreet it's looking a little less rosy. kathy of nationwide mutual writing this economic growth slowing, the labor market cooling and monetary policy restrictive should see inflation trends moderate through the second half of this year. kathy joins us now. inflation will be important. we get ppi in less than two hours spread cpi tomorrow. how much is the focus on growth concerns. >> good morning, happy to be

with you. i think the concerns are pretty high and i think they should be. our base case is we have a softer soft landing and we got before. i think recession odds are high and being part of the reason is the fed has been holding monetary policy restrictive if you look at their own fed taylor rules, as of february about 100 basis points, that made sense when you're worried about inflation running high and i understand we had the inflation scare in q1 but now when you have concerns about the labor market and that can have an impact on the consumer. that really cries to the fed to get going and cutting rates. so there may be too slow and that is something we have to watch. >> how do you understand the muddied indicators talking but home depot and real question is it idiosyncratic when it cuts

its forecast to talk about how consumers are increasingly deferring their purchases. is this a housing specific issue, a home depot issue or is this something broader you are seeing in other metrics as well? >> it is broader when you look at the earnings announcements and the guidance that comes with it, the companies by and large that are sensitive to the consumer related, they really get a picture of the households are becoming more frugal and cautious with their spending and that's again tying in with what we are seeing in the real economic data that employment growth is moderating. in the consumer is still facing even though inflation is moderating that's a growth rate where you look at price levels especially in the service side. so as you know, many consumers are tapped out on credit.

this is a consumer it's hitting constraints and the tail end behind them are just not there. >> how should we think about the difference between a picky consumer that is stretched versus a consumer that's deteriorating rapidly. something that would eventually lead to a recession? >> we will be watching closely is the labor market. because i think now you have consumer spending in sync with incoming income. before consumers could tap into the pandemic related savings read we saw that and they can rely incredible -- on credit cards. those tailwinds have diminished so that really points to labor market and as long as we get job growth around one hundred thousand i am not good to be calling recession around the corner but if we start to get lower than that, closer to zero when it turns negative.

the game is over and we are very much likely heading into recession. >> fed officials over the weekend giving yourself comfort on the labor market saying hiring has slowed down or even stopped, but layoffs haven't started. should the fed be taking comfort in that or is the very fact hiring has stopped enough to damage this labor market. >> i think they have to be careful about looking at lagging indicators like layoffs and the unemployment rate and also remember that they have policy restrictors. if they say the risk amount inflation and employment are getting more in line or more balanced, they have a policy rate that's probably 125 basis points at least two tight. not even a neutral right now. they have to be careful, things are still strong now and i do not want -- i think what happened last week was an

overreaction, but it should be a motivator for the fed to look and start to be more open to larger rate cuts. annmarie: they are still spending just not as much. you talk about some of those pandemic funds have dried up. how will we know consumers are seriously concerned about a deterioration in the labor market. kathy: there are measures in some of the conference boards, they have measures, job start to get plentiful, those are good measures to watch, they line up well with some of the employment data and i think initially jobless claims take on increased importance here and continued inflation. and what we've seen is this steady erosion, so so far it looks to be in line with the soft landing and indeed that's our own forecast. i would feel a lot more

comfortable again if the fed starts to lower rates and they have a lot of room to do that. that's the good news with rates over 5% but these high-frequency labor market indicators like jobless claims take on increased importance right now. >> i heard you say perhaps a bigger rate cut is warranted. are you calling for 50 basis points of a rate cut. kathy: we are not. we start cautious. we think by the soft landing if they entertain or actually went 50 basis points following up with another 50 basis points, we look for 75 basis points by the end of the year but again i think we have room to cut rates over 100 basis points by year-end. >> thank you so much for being with us paid 100 basis points of rate cuts, more than that, that's being priced into the market. dani: 100 for the year, 200 for

the next ended such a divide between what fed officials and market participants think. fed officials sink -- think they do have luxury and time where kathy is saying the opposite. annmarie: would that be a tactical -- admission that they got it wrong and they were too slow so another doubling down on how much they're going to go? lisa: this is the reason inflation data will matter more this week. it will show whether inflation really still has to be the preeminent concern akin to growth worries which really have taken center stage. henrietta of veda partners, alejandro of four seasons and matt brill of invesco. this is bloomberg surveillance. ♪

♪♪ ♪♪ more smiles per hour at the ultimate caribbean playground. visit beaches.com or call 1-800-beaches

>> the way i'm describing the evolution of the economy is an incremental slowdown. i do not see this is actual weakness. >> as long as it's moving at a different point of the balance of investors concerns have changed. >> you are going to see some weakness but you'll also see some areas of strength. >> the odds of a soft landing a much higher and it's becoming more balanced. >> when you look at the underlying fundamentals the economy is slowing in a good way. >> this is bloomberg

surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> welcome back to bloomberg surveillance as we see increasing clouds over the consumer alongside annmarie hordern with dani burger i'm lisa abramowicz. john is out cruising for the remainder of this week. very much looking at consumer concerns pulling back some of the earlier gains in the session. home depot driving the charge fueling those concerns. >> the ceo and the commentary that is a two-pronged issue they are facing its higher rates keeping this housing market frozen but the change and you pointed to this that it's now a consumer under pressure it's not just about higher rates to pull back in their spending. >> is this a home depot problem or larger problem. annmarie: with home depot the ceo saying it's a deferral so the not spending right now but we do expect consumers to come back. shaken not stirred, the fact core investor optimism shaken not stirred.

76% still expected soft landing. people are deferring the next few months and then we can see a pickup. lisa: the key is the balance of risks and it's a reason why people are watching ppi today in about 90 minutes time and then cpi tomorrow. they are looking at this saying is inflation coming down enough to be written off as a main concern by the federal reserve. right now markets are saying yes almost as a given in the fed will have room to cut by 100 basis points later this year. >> i wonder if this'll make things worse in september because it's acknowledging that there is such a big risk. if they flipped from saying we are waiting for inflation to come down to we will do a jumbo 50 basis point cut, some market participants might have this idea. that they feel this need not to do it intra-meeting emergency cut but something that looks like an emergency cut of 50 basis points. lisa: that's a great point and something we have pointed to as why they won't do it because they haven't signaled.

that said, there is a lack of clarity in terms of what the economy is doing in terms of how much it slowing down. on one hand small business confidence coming in at the highest level in more than two years. on the flipside, the oil discussion talking about geopolitical risk to a potential oil surge. it's reflecting weakness. annmarie: weakness in china which hits the fact the u.s. is using more fossil fuels. making up for some of the slowing demand. it's been a big concern for the oil market. what you're seeing this is just geopolitical risk. the supply in the market is not being touched which is why she thinks maybe 80 is the floor. >> it's the reason why people are necessarily using as much as a signal about geopolitical risk and may be more of a muddied signal when it comes to growth. coming up we have troy as well

as key inflation data. henrietta following a conversation between donald trump and elon musk and matt brill of invesco on why you still expect soft landing in markets. we've retraced some of the gains we had seen earlier in the s&p futures basically flat and we are taking a look at yields pretty much flat. across-the-board pretty quiet. stocks looking for direction as traders await ppi, cpi and retail sales still to come this week, try writing this. significant weakness in the lower end consumer son to show up last quarter. have we stepped down from excess consumption driven by excess savings to the new normal work consumption is dependent on the labor market or is there something more sinister going on? troy i will ask you your own question paid what's the answer? troy: we think it's a logical

rational slowdown from a time when the consumer just consumed like crazy. when you step back we had all the excess savings built up during the pandemic. we had white-hot labor market. and so you've seen a continued cooling of that to somewhere between warm and closer to hot which is where the labor market is today. that no one in particular was referring to earnings. we think in this earnings season there were two real questions. would america cap tech continue to spend on ai aggressively and allow the margins to compress. and were there other signals in earnings that were incredibly disastrous like we had that signal the consumer was going from strife and acute weakness very rapidly and we just don't see that in the data. we see slower growth which is a

necessity to: flight -- core inflation and a lot of fed to cut by the end >> of the year. >>what is this mean in terms of strategy. it's unclear what the markets position for. isn't that kind of describing the model of the market is pricing out. the not following by any means but that we are seeing a slowdown that's going to be bumpy. >> i think it depends on the asset class. if you think of strategies like private equity or private credit, we have been fearful of a hard landing at some point. we always thought those odds were low but now they appear to be even lower now that a lot of recession indicators have gone from red light to something more normal. because anytime you're in equity whether it's public equity or private equity. it's much harder to grow earnings in a contraction and one to 2% real economic expansion. in terms of private credit when you think about this they been able to earn excess income for quite some time and we didn't

want to give some of that income back through a recession driven default angle. we are happy to concede a little bit of income from the front and coming down in order to keep those recession not slow which we think they still are. >> what indicators are you looking at that have gone from red to normal because most of the folks we've been speaking to her saying quite frankly exactly the opposite. troy: i think when you look at bank lending for instance, this is one of the last indicators to flash red light. we had the yield curve, supply contracting. we had a recession in 2022, because the consumer was so strong, of the consumption pattern went through no problem. ankle lending started to contract and stagnate for several quarters coming out of the failures and now you're starting to see blending pick back up albeit with tighter underwriting standards. the yield curve we consider massively inverted.

and that started to normalize to some extent and importantly again you get back the gdp contributors, there's incredible amount of spends built into the future through business fixed investment not only mega cap tech but also on the energy side. and then furthermore government spending for the most part federal and state and local with the exception of california which is a wildcard continues to spend a healthy rate and we know that's criticized by some but growth is growth and jobs are jobs and as long as the labor department continues we should be able to avoid a recession, some of the darker indicators are now yellow to even flash -- green as we expected cut fed to cut later this year. >> this is a bond market that's pricing in a level of cut that looks something like a recession. is it short bonds, load up on risk then. >> let's not get carried away

with loading up on risk. we are northwest quadrant, so we like lower risk to low 10's returns whenever the try to hit home runs or grand slams. when you think of fixed income our biggest criticism of bonds has been this expectation that the fed would gradually take the fun out of the 3%. in that environment the 10 year yield would continue to drop and that would mean not only would we have the longest inverted yield curve really in a non-recession environment but we have a yield curve inverted as the fed cuts. so when you think of fixed income, the risk-adjusted returns are much better today than they were at the end of 21 when fixed income was the definition of return free risk. however it's hard to argue a material upside in the back end of the curve right now but the front-end should drop slowly over the next several years. if you think of different strategies and alternatives it's

a great time to be a private lender if you have dry powder to lend into liquidity vacuum partially driven by the pullback partially driven by a massive growth in nominal gdp and the fact that there's a big shortfall in actual lending. versus lending capacity. if you look at private equity you want to be in strategies where you don't need financial engineering, you don't need balance sheet leverage to generate returns and that brings us back to the market where it's about organic growth as opposed to financial engineering in multiple expansions. >> you say the only thing that matters is mega cap tech stocks. can these companies continue to maintain or even grow their margins? troy: that was one of the key answers to this earnings season. the question we had two or three quarters where despite massive growth in business fixed investment ai spends there was enough ancillary or core business growth i should say to drive margin expansion.

what we see in this earnings season is that is over and across the board and mega caps tech to spend for growth we have seen margin compression. it's not a zero-sum game but to some extent we thing about what it means for semiconductor stocks, it means those spends will be more persistent and mega cap tech will look past margin compression to continue to spend aggressively. and this which we certainly don't have an answer for yet is what is going to be that key growth driver whether it's a return on investment capital but for the time being markets are given those companies a pass even their treatment -- drummond does free cash flow. >> the key driver will be ai. are you seeing anywhere in the space you like in terms of all this massive spend on artificial intelligence. >> again the expectation is the key driver will.

but you've yet to see companies like meta or google or others a clear return on investment capital. starting to see growth driven by that but it's not like you've had this revolutionary moment quite yet. the expectation is that will come and that would arguably be the biggest risk if we get about two or three quarters and there still wasn't an investor capital. then that margin compression will be viewed more dimly and we -- the magnificent seven i've only gone from 36 times forward earnings to 34. so we had a correction where we certainly haven't had something that looks like 22 or what we used to consider a pronounced correction in the 10 to 15% range for the broader market. >> i love the substitutions people are trying to redefine what magnificent seven means to them. troy, thank you so much.

have a wonderful rest of your summer. let's get you an update to stories elsewhere. here's your bloomberg brief. yahaira: u.s. officials believe in a iranian attack on israel has grown more likely and could come as soon as this week. leaders are seeking to head off all our war and the pentagon deployed more forces to the region. white house spokesman john kirby said the u.s. and its allies have to be prepared for what could be a significant set of attacks. iran has threatened for days to retaliate after the assassination of hamas leader in tehran. israel has neither acknowledged nor denied responsibility for the killing. according to a global survey by bank of america the volatility in global financial markets hasn't railed investors optimism around tech giants or expectations of a soft landing. the poll was conducted during the height of last week's turmoil and showed defensive rotation into bonds and cash and

out of equities. long bets on the natives and seven remain the most crowded trade. all that after the selloff. home depot lowered its full-year sales outlook signaling it expects consumer spending to remain soft in the coming months. the company sees comparable sales falling for the year versus the previous expectation for a 1% decline. the disappointing results as consumers held off buying homes or pursuing big renovations with high interest rate and economic uncertainty. comparable sales came in worse than expected falling for the seventh straight quarter. shares are falling 2% in the free market -- in the premarket. lisa: lisa: people really looked through what the team leaves actually are and how idiosyncratic the long-term term this could be. trying to stop the harris surge. >> if we have her as a president, if we have a democrat

as a president i don't think our country can survive. >> i think it is essential you win for the good of the country. lisa: this is bloomberg. ♪ ere ya headed? susan: where am i headed? am i just gonna take what the markees no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management why do couples a sleep number smart bed? i need help with her snoring. when you want to invest with more confidence... sleep number does that. thank you. during our biggest sale of the year, save 50% on the sleep number limited edition smart bed and free delivery when you add any base. [introspective music]

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

>> taking a look at the market seeking direction as we look at a host of economic data points including the earnings. we get ppi in about one hour 15 minutes and then cpi tomorrow with walmart capping it all off with retail sales on thursday. trying to counter the harris surge. >> they say she is far worse than bernie sanders pretty if we have her as a president, if we have a democrat at this moment as a president, i don't think

our country >> can survive. >>it's essential you win for the good of the country. >> donald trump taking aim at vice president kamala harris in a wide-ranging conversation on x with elon musk for the conversation after musk endorsed trump with trump's campaign look into curb a wave of momentum for harris. henrietta joins us. a lot to talk through about this particular discussion. what was your main takeaway? henrietta: this was a great opportunity for x to promote spaces paid over a million listeners at some point. it was sort of 2.5 hours of two guys in a room agreeing with each other. i wouldn't call it an interview but more of a conversation. touching on what you hear from a trump rally or other press briefings that the president -- former president puts on. there was a whole lot of new information there.

the main takeaway for me was elon musk is interested in getting further involved in the federal government, being part of a federal sort of task force to take on government spending and efficiency as he calls it but that was really the news that was part of the interview to me. annmarie: he was advocating for two key things. to stop this demonization which i think somewhat of u.s. coming from the far right when it comes to sustainability and ev's. but also deregulation. he brought up a number of times. do you think he was successful in convincing trump potentially on that call? >> i think that there has been a history of him being able to move former president trump specifically, electric vehicles, government subsidies of that industry in particular. when it comes to deregulation that's already a big part of the flat -- of the platform rate that's always a refrain so i think there a primed audience

for that conversation but can certainly be receptive to that. what's obviously interesting is you've simultaneously don't have the votes to repeal the federal subsidies or cash for all those infrastructure -- industries. 18 house republicans just sent a letter to speaker johnson saying we need those subsidies to continue going. they are promoting research and development, they are countering china. i think they are going to have a lot of trouble governing on that agenda next year if former president trump is reelected. >> last night was pretty light on substance. but potentially from the harris camp we will get some policies on thursday. we have not seen a policy proposal yet from the harris walz campaign and they will come out with this economic plan. what are you expecting? henrietta: we are expecting it to be rolled out thursday. obviously there are not a lot of heavy hitting interviews happening right now. last night being an example. i don't know if the harris team

needs to get two -- too in the weeds paid my advice is to focus on the bill the house ways and means committee put out in 2021 which received widespread support from the democratic conference including top corporate tax rate of 26.5%. it's graduated in and i think over what harris does put out on thursday take that as a high watermark. when you going to congress next year in the off chance it's not a republican-controlled senate you are going to have to thread the needle very closely to get 218 votes on anything in the house and 51 or 60 in the senate. it's good to be more lenient than it -- whenever a democratic proposal comes out looking like. >> we are about one month away from early voting starting and by all accounts this will be a lot of early voting compared with historical references. is donald trump more or less out of time in trying to define kamala harris? henrietta: i have two things to

say on that. the most important thing that happened was arizona put the abortion issue on the ballot. that's something that got doubled the number of signatures they need pray they didn't bring abortion up once. if democrats hold onto arizona and pick up nevada and keep it in the blue camp that seriously undermines trump's electoral college strategy so they should be focusing on that and time has run out on trump being able to find himself in a way that's favorable to the majority of americans. secondarily, early voting, 72% of early mail-in ballot request in pennsylvania came from the democratic party. what the republican conference led by trump and the concerns over election fraud have driven is a material tactical disadvantage in denigrating mail-in ballot inc. which allows the campaign to bank voters and focus on the people you need to turn out on election day.

it's a tactical disadvantage i think there republicans have been screaming about for several years. >> it also brings this possibility republicans can continue the line in the last election. that there was rigged and there were issues. that they weren't genuine. how concerned are you about a peaceful hand over -- peaceful continuation of power if kamala harris is the president. >> what's really interesting and i heard this from republican staff as long as a year ago keep in mind why there was a delay in 2020 and why there was a delay in nevada and upending the arizona turnout or decision-making process it's because of who was in office at the time. when biden is in office it's going to be a much more orderly process that adheres to what's happening on the ground. knowing sadiq khan the governor of georgia saying find me votes. materially who is in office impacts whether this will be a smooth transition. you can claim there was fraud

but it will be certified hopefully in the next day or two after november 5. >> given the fact we haven't gotten a lot of policy proposals but people are taking seriously wondering how much you do think the federal reserve is going to avoid cutting rates too much or too soon in order not to seem like political agent. in the absence of real policies we have heard a lot from the republican camp from j.d. vance as well as donald trump about having a more political hand in the fed whereas the harris camp is talking about not so much, how does that color your view of it? >> we have to focus on what's good to be happening next year. extending the 2017 tax cuts will cost $4.6 trillion. on whether there will be deficit reduction. there's no scenario where the deficit is reduced. there will be substantial federal spending. it will happen as soon as september 30 of this year. we -- it will continue to get

aid to ukraine in smaller amounts along with israel there will be federal spending on par with what we had in the past which is about $1.7 trillion just to keep functionality. we have to keep the tax bill extended and i suspect almost none of those tax cuts will expire. so the fed will have to contend with some of the political stuff but more importantly just the fiscal outlays coming through whether democrats or republicans next year. engaging with the fed and trying to metal from a political perspective. we did tarp on the auto bailout. you need the autonomy of the fed and i think they will fight tooth and nail for that. >> henrietta thank you so much. we are talking about the fed and the dynamic around it as there are some real questions about growth talking about home depot and what's going on there. pretty much on cue coming out with this, the media is full of anecdotes for calls about the economy slowing down.

but the reality is firms on the earnings call talk less and less about recession. in fact we've never had a recession the current level of recession talk. see again the chart below. >> they are talking about the consumer more than ever so maybe not concerned about recession but certainly consumer slowing down. annmarie: or citi publishing suggesting the u.s. economy may have already been in a recession. got that all clear. lisa: coming up the president and ceo four seasons as we look at the consumer particular the well-heeled consumer they have maintained even as you see weakness and some of the tears below.

lisa: a week of data kicks off of ppi coming in in about an hour's time. we are seeing not a lot. range bound as people parse through the economic data. s&p futures up almost .2%. nasdaq outperforming. the big tech event highlighting their status. the russell 2000 underperforming again. a question about whether people are getting over their skis was expected rate cuts and how weak the economy is. a 4% on the two-year yield. flirting with going south of that. ten-year lower as well. 389.97.

200 basis points by the end of next year. dani: that is something that would be consistent with the recession. most people are not saying recession, just the fed has room to cut by that amount. what signal does the scent if they cut 100 basis points this year where there is not a recession? going into data cpi, perhaps the risks are skewed. if it surprises to the upside there is only one direction for bonds to go if we are pricing in so many cuts. lisa: they have all been executed. looking at what that means for the dollar. does that mean dollar strength? mark mccormick talking earlier. he sees that over exuberance about rate cuts getting priced in today. more strengthen the dollar than we have seen over recent sessions. the euro falling a touch, basically flat as people try to reset the balance of risk. under surveillance, u.s. officials believe in iranian

attack against israel is more likely and may come as soon as this week. john kirby telling reporters yesterday the u.s. and allies have to be prepared for what can be a significant set of attacks. definitely keeping high alert pretty much across the world. annmarie: the u.s. is saying the israelis think it is coming. we agree with the assessment. in april, iran sent hundreds of ballistic missiles. most were intercepted and the nsa's and israel fended off. what is concerning is maybe it is not just going to be iran. iran plus iranian backed militias. how much harder to set defense but a standard of deterrents. the size, look at what the dod is doing. the movement of forces into the middle east, including uss georgia, a summer and equipped with 150 tomahawk missiles -- a

submarine equipped with 150 tomahawk missiles. lisa: that is why a lot of people keeping a clear focus on this. we will provide updates throughout the day. general motors cutting jobs in china. the company will meet with local partner saic in the coming weeks to plan a larger structural overhaul of its operations. a question about how much u.s. companies in general, multinational companies can continue expanding in china or how much they have to retrace with a lack of visibility. dani: exactly. how do you compete in a market that is flooding itself with not just dvds that them -- ev's that americans are keeping up with but cheap ones? something of a price war happened in china where you saw the likes of tesla having to cut their prices. how do carmakers keep up with that when you have to worry about geopolitics, local players, the cost, and a lot are behind on technology?

china is ahead with things like updates. it's almost an extension until -- existential crisis for gm. lisa: they are trying to parse out what they can do, where they can do quietly and say on the record. awaiting u.s. ppi. our survey expecting a headline producing price to increase .2%. basically in line with what we saw in june. core ppi growth likely slowed from june's .4%. the question is whether the inflation will come off enough to give the fed room to cut rates. turning to travel. this is why we wanted to highlight travel this week. we are seeing a discrepancy between high-end travelers and low-end travelers in terms of their position to spend. is there a change in that? alejandro reynal says his company has seen an strongest year ever. "given the current jubilant goal and macroeconomic pressures are

impacting traveler sentiment, but the luxury segment is more resilient." alejandra -- alejandro, thank you for being in studio. is it true you not seeing slowdown whatsoever in the luxury element? alejandro: good morning. it is a pleasure to be here. i love that we are talking about luxury hospitality. we have had a strong first of the year compared to last year when you look at booking trends. even going into 2025 they look very strong as well. i think there are two things happening. first, the luxury guests or consumer continues to be. resilient. they continue to spend. the desire for experiences, to explore continues to be there. i would say from a four seasons angle, we do offer a clear value

proposition to customers. we are proud to say we have the best hotels in the best locations. we provide the best service to our guests. when you have that as the brand proposition, there's a demand for that. this is not new this year. we have been operating for 60 years and that has been the constant offer. lisa: what has changed? not just for the consumer who can spend but from the employees and who you are able to recruit for a long time? there was a dearth of people willing to work in hospitality, the direct aftermath of the pandemic. do you see it as being much easier now to hire people and easier to retain them without massive price increases, wage increases? alejandro: yes. a key component is through our people. we are a service company in the important aspect is the people.

we place emphasis in making sure we are the employer of choice in every market we operate in. we spent a lot of time training people, developing them. employee engagement twice per year. we are in the top percent across employee and -- all angles of employee engagement. we do believe we need to have the most engaging employees with us. right up to the pandemic there was pressure from the labor point of view. we don't see that anymore. that's because of the effort we placed in making sure we are the employer of choice where we operate. dani: i want to know about your customer and the ultra, ultra luxury. you have a private jet service. something like $115,000 dollars a day.

-- alejandro: four seasons is now the leading hospitality company. that is where our guests experience the brand. what we saw over time because our second business is residential, guests stay with us. the experience the brand. they are willing to buy a residenc with use -- residence with us. the third piece is what you said. the journey, the experience-based travel we promote. if you think about the whole analogy, guests live with us and they travel with us. they develop such a comfort with the brand and the brand promise and the brand proposition that they are willing to spend that amount of money in traveling for 20 days, and africa, europe. for us it's been around creating

the luxury ecosystem for four seasons that are guesser eager to travel. all the itineraries are sold out for the rest of the year. it taps into that desire to experience, to explore that we find in our guests. dani: you're saying we have to wait for it? alejandro: 2025. dani: good to keep in mind. you're not the only one doing it this way. it's an exclusive space of those who can offer this. oman also trying to give experiences. what does competition look like right now? alejandro: because of the attractiveness of the luxury space there are a lot of competitors. we have the advantage of the brand. we are the most -- we continuously measure brand awareness. we continue to be the number one luxury hospitality brand.

that carries a lot of weight. we are able to deliver that value proposition to our guests. it's interesting. i interact with a lot of our guests. when i ask what they like about the four seasons the first thing to tell me as i know what to expect. i am able as a guest to explore remote destinations. i can go to bora-bora because of the four seasons because i know what to expect. to have that consistency and that brand power is very unique. we are well-positioned. annmarie: where d.c. demand in terms of the hotspots? -- where do you see demand in terms of the hotspots, the top five? alejandro: i will say something that the little contrarian. when i look to the history of four seasons in the last years, travel patterns have not changed much. 55% of our revenues come from the americas. the majority is the u.s.

four than 50% of guests are from the u.s. whether they travel to the u.s. -- right now it is summertime. they travel to south florida, hawaii. they go to mexico and then europe. this has happened for many years. americans are going to go to europe probably once a year every summer. we are seeing that again this summer. it happened the prior year and the prior year. americans represent 55% of revenues. europe and the middle east is 25%. there the dynamics are similar. europeans ventured to the middle east or africa. we have 20% of our business, 3% is china. that is mainly regional travel. annmarie: do you see the chinese consumer spending as much the way the u.s. consumer is? alejandro: no. they have not come back.

it is less. they are spending less in china. we still don't have the same rates we used to have prior to the pandemic in china. they are starting to spend more internationally but within the region. japan for the most part. because of these issues they have not come back to europe or the u.s., which is where we saw them prior to the pandemic. lisa: there's a question about how much. all you people in media -- i'm paraphrasing -- keep using everyone as an active to paint a macro picture. your company has been around for 60 years. how independent of the macro cycle is it? we are talking about something that is a complete microcosm unto itself of people who have disposable wealth and are going to travel no matter what versus a company that does have some sort of sensitivity to what is going on in the consumer sentiment. alejandro: i would be lying if i

said we are immune to any macroeconomic geopolitical impact, because we are. that uncertainty impacts sentiment and people don't travel because of that. we have been operating for 60 years. we have gone through these cycles. at the end of the day what we see is year-over-year the market continues to grow. travel luxury has been growing for years now. the desire to explore continues to be there. when you look at the luxury consumer, our composition of guests, 20% are boomers. 45% are gen x. 35% already are millennials. that transfer of wealth is starting to happen. we are not losing the boomers. it means the market is expanding. year-over-year they will be more demand, more growth. at the end of the day we

need to be at the forefront for creating amazing experiences so we can satisfy demand. we need to have a very special product, a special service proposition to our guests so they are eager to come to a four seasons. lisa: you are doing great with the baby class. paid actor? alejandro: no. it's asia minutes experience. sometimes you spend so much money on marketing that it does not provide any outcomes, but then the special authentic moments are the ones that the consumers value the most. this was a complete moment but completely authentic. we had nothing to do with it. we had more than 300 million views through various digital platforms of the four seasons baby. we believe we have a spy in orlando. it was good but very authentic,

which ultimately is what people like. lisa: i wonder how many board meetings there have been about the four seasons baby. alejandro reynal, thank you for being with us. here is your bloomberg brief. yahaira: israel's sovereign debt was cut as the continued military conflict ways on public finances. -- weighs on public finances. they cited continue geopolitical risk as drivers. the analysts said the conflict in gaza could last into 2025. there are risks of it broadening to other fronts. the nfl is meeting with a handful of private equity groups. according to people familiar with the process, gets a step towards opening the league's ownership brings to institutional money. the meeting is intended for more due diligence but also to talk through potential policy

preferences. the nfl is the only major u.s. league that does not allow institutional investors. they have spent more than your observing results from other weeks and discussing what might -- leagues and discussing what i do differently. alphabet investors are awaiting a hardware event today hoping new ai features will help stop a selloff that has wiped out more than $360 billion in market value in one month. google's unfailing one of the biggest redesigns in its pickle phones -- pixel phones. they are respected to reveal on phone ai. lisa: thank you. raising cash ahead of the data. >> we are looking at the curve but we have to be mindful about what economic scenarios we are taking into account when thinking about the yield curve. it is very much hard landing, soft landing, no landing dependent. lisa: this is bloomberg. ♪ ♪ where ya headed?

susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management investment opportunities are everywhere you turn. but at t. rowe price, we're letting curiosity light the way. asking smart questions about opportunities

like advances in healthcare. and how these innovations will create a healthier world tomorrow. better questions. better outcomes.

lisa: everyone still planning their vacations for the remaining couple of weeks of the summer. this is "bloomberg surveillance ." the market is reflecting that most people are on vacation. really going nowhere if you look at the currency markets and in the bond market. a little bit of retracement in crude after a five-day winning streak that led to yesterday's rally, one of the biggest going back to november. raising cash ahead of the data. >> we are looking at the curve to steepen but we have to be mindful about what economic scenarios we are taking into account when thinking about the yield curve. it is very much a hard landing, soft landing, no landing

dependent. we have greater conviction and the harder landing outcome there is no absence of demand for treasury securities. lisa: more than a dozen companies tapping the investment grade market hoping to raise over $18 billion, make in the office before key data this week. matt brill writing this. "after major volatility yields look reasonably attractive for bonds but spreads no longer look rich. it's been a wild ride for rates and credit spreads but the affectation of a soft landing still holds." matt joins us. great to see you. have you been who bring -- hoovering all the bonds? matt: really starting on wednesday of last week. you saw i continued issuer after issuer coming to the market. yields are still north of 5% for the investment-grade market. that's attractive. there were 70 complaints that

spreads were just so tight and nobody wanted to buy them. you have a little bit of a sale in the investment-grade market. lisa: we saw spreads blowout quite considerably in last week's turmoil. they don't look quite as rich. about one percentage point. does this raise the issue that if you get more weak data that can be reflected more than people were saying earlier this month? matt: yes. we are in the bad news is bad news market now. i year ago, ok, that means less inflation. now it does mean fundamental problems. we are not really seeing that. yes, they are not compensating for recession but we don't think there is a recession that's going to come. everyone waiting for the river card to go place my bets, that is not how the market works. we are trying to look ahead. even with the hiccup last week we still are preparing for

soft landing. dani: you have a high-yield market that is more quality than it once was. doesn't it look different this time around? -- does it look different this time around? matt: you have a lot of private credit that's taken away a certain portion of that market. what is left is generally the highest quality double be, knees -- double b companies. you are seeing that in the investment-grade market where the lowest portion of the market is only about 10% rated b-, on the verge of potentially going to high-yield. we think the market is better set up to handle that. that is partly reflected in spreads. we think the tail risk is significantly less than it probably was five or seven years ago. dani: the flows have had a high divergence. outflows for the first time in sometime. an amazing pace of strong inflows. do you expect that divergence to

continue? matt: high-yield will come back if you get more stability in the market given the shock you saw. overall, when you stabilize a look at high-yield where it is trading from a yield standpoint it will look good if you believe we are not heading into recession, which we need to see a few data points to get people to believe that. going back to investing great, it is mainly institutional buying for the last several months or really several years. in the last week or two we are starting to see the retail market pickup. we had an advisors meeting yesterday. we went investors out of cash and into term debt. we are afraid of doing it at high-yield but investing great at 5% is the number that's the holy grail we were looking for for so long. everyone said we are going to 6%. i don't know if i want to buy. if the next stop is 4%, i need to be earning up. annmarie: steering clear of anything inflation sensitive, is

that a trump trade? matt: its accredited version of just not having a disruption to the overall market. whether it is a kamala trade or trump trade, we are going to see growth in this economy. we think we will see growth. if you get a split government, that probably makes it better for the treasury market. for the credit market, both are setting up in that regard. it is a soft landing trade in the u.s. that will not be disrupted by politics. annmarie: you think either candidate will be good for credit going into 2025? matt: we do because the fundamentals are set up well. you see where balance sheets are. companies are not overstretched. if we are going back to 2008-20 09, companies have more leverage in the balance sheets. they have been preparing for

this recession. it never came so balance sheets work in order when they prepared for that. lisa: we did not talk about inflation at all. is that out of your picture right now as a concern? matt: i am concerned. it is the only thing that could really disrupt this fed put that's in play. if you see a .3% tomorrow with ppi, everyone will pull back and say the fed was going to have our back but maybe they won't. if it is .2 or .1, you have a trade. you have to be shorter on the curve and stay in t-bills, not the trade we have on but that would be the trade that would do better. lisa: that is why so many people are hooked into the data today and tomorrow. matt brill, wonderful to see was always. have fun hoovering up all those bonds.

coming up, keith lerner, craig trudell, and david rubenstein of the carlyle group as we parse through a sleepy week. it seems like there could be some sort of catalyst when it comes to the inflation data. dani: is it just calm for the eye of the storm? you could argue the latter. if it is a scenario where we went back around with everything from ponds to equities, leaving us once again vulnerable to big market shocks should the data surprise. lisa: that's why people expect more volatility ahead even if you're not seeing it this morning. a calm maybe ahead of the storm or maybe just calm. going nowhere in the bond and currency space. this is bloomberg. ♪ ♪ why do couples choose a sleep number smart bed?

can it keep me warm when i'm cold? wait, no, i'm always hot. sleep number does that. during our biggest sale of the year, save 50% on the sleep number limited edition smart bed and free delivery when you add any base. with so much entertainment out there wouldn't it be great... ...if you could find what you want, all in one place? show me paris. xfinity internet customers can enjoy the ultimate entertainment experience and save on some of the biggest names in streaming, all for just $15 a month. get the fastest connection to paris with xfinity.

>> you are at a point now or we need to take a breather. >> we are very much ready for volatility. >> i wouldn't be surprised if

continues even for the fall. >> a week ago, pricing into many fed interest rate cuts. >> this is a harder environment than markets were three months ago. announcer: this is "bloomberg serveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. lisa: let's get the data started. 30 minutes away from u.s. pdi kicking off a week that could potentially in a sense of how much ammunition that that has to cut rates. welcome back, this is bloomberg surveillance. jonathan ferro's office week on vacation which is well-deserved. i'm not going to call it a sabbatical and tease him as some other people might have done. markets quiet ad of 30 minutes time when we get u.s. pdi. dani: i'm also interested that the home depot earnings did not dent sentiment more than it did. this seems to be one of the things the market is craving, more evidence of how bad the consumer slowdown is and is

leading to the upper end, a wide breadth of consumers. maybe it goes to the point that we are assuming that this is just about housing and it is not a bigger weakness. lisa: the media is full of anecdotes about earnings calls slowing down, but earnings calls talk less and less about recession. to me, the question open of the becomes how do you price in a soft landing? how do you price in a weakening that is fully priced? is that a risk that has been overweighted at a time when there clearly are some other uncertainties? annmarie: when ceos come out and say we are seeing some softening, but we are not soft. basically, 76% of respondents are saying we still maintain there is going to be a soft landing, but we got a note from andrew hallman horse who says the rising unemployment rate and plunge in ism manufacturing test

the u.s. economy may already be in recession. they say serious debate right now about where we are in the economic cycle. lisa: here's the rub, it is going to be the crucial. we heard this just a second ago. essentially, he is betting on the soft landing, he is buying credit, buying some optimism. because inflation is the problem. for ppi coming hotter than expected? how much does that unravel some of the optimism we are seeing in markets? dani: many members saying we aren't there yet, not for 50 basis points, but just for 25. if ppi comes in hot, it doesn't need to be the pendulum swing, already having swung maybe 50 times in the last week. when you take a look at some of

the headlines, the ones that are dominating have to do with the consumer and basically offsetting the potential risk of a much deeper slowdown. it's not necessarily the geopolitics. geopolitics at peak this week when it feels like the uss georgia moving into the gulf, you see, missiles from the u.s., this defensive position almost. iran will be retaliating soon and they have those same concerns, but at the same time, supply hasn't actually been hidden. then it comes down to the basic fundamentals of the oil market of supply and demand. lisa: right now you see a bid into stocks, retracing some of the gains that we saw earlier

before home depot released earnings, up about 3/10 of 1%. the euro-dollar: basically nowhere, flat. in crude lower on the day, down 7/10 of 1% at the supply and demand dynamics trump some of the bigger geopolitical concerns then very much are looming. coming, keith lerner of truest. craig trudell as general motors shifts strategy, and matt was that he of deutsche bank on his continued call for three rate cuts through the end of the year once thought to be too much by the market participants, basically lower than what traders are pricing in. data that will help confirm potentially soft landing hopes. investors optimistic about the fed path forward and despite recent volatility, enthusiasm for mega cap tech remains. upgrading the sector back to overweight, improved the tech sector in a cool economic environment.

we inspect investors to combat the tech given some of the secular talent. keith joins us now. this was a dip that was viable, why? >> nice to see, that of calm for a change. with tech, we have been bullish all year long but towards the end of june, things got a bit more speculative. we saw mostly the last one up being more valuation expansion and we saw the greatest one-month outperformance relative to the s&p since 2002. so we said we think we have a better opportunity. we had the greatest one-month underperformance since 2002 at the same time as we dissected the pullback. it was all kind of repositioning and valuation contraction. earnings for the sector continue to make new highs. and we think the narrative a

shift back to the new iphone and potentially a new pc up cycle as well. all in all, we think investors will come back to tech. lisa: this is a compelling debate right now because we talked to some participants were arguing the opposite, that people wait has just started to rally and catch up to big tech and yourself saying maybe the opposite in the way of big tech will continue to lead. what is the economic backdrop that has you calling protect outperformance? >> we do think the economy is still growing but it certainly is slowing or cooling. in that environment we are thinking that more trend growth around 2%. we think the fed is by almost all measures still restrictive so we think they need to get going and in that environment, there was a lot of debate whether we have a slowdown or recession. we are in the slowdown camp but it feels different than the last five years.

we are still seeing that spending happening in tech on ai. more recently, look at small caps. i think we actually are going to start moving back from broadening to narrowing again. we think tech is going to be a good place to be for the remainder of the year. >> how much of these hyper scalars, amazon spending $600 billion in the year, how much of that is a cyclical or depends on a growing economy that can grow cash in other parts of the businesses? >> they are going to have to continue to spend money even if the economy slows down. i think that will continue. you are going to probably see these add-ons to the software

players were companies will tack on 3% or 4% to use their ai features as well. i think that will be a slower move but in general, you will see that. we will be proven right or wrong by the end of the month as we have the biggest report this month i think, nvidia at the end of the month. >> if you look at a corollary, super micro computer who is a b customer of nvidia, strong revenue, weak profit, and the shares were just destroyed. how sensitive will he be around a much bigger company, nvidia, at the end of the month? >> i think it will be a big report for all of tech and for the overall market because we know tech is such a big part of the s&p 500. one of the reasons why we had downgraded in june tech is that expectations that expectations were too high. semiconductors as a whole are down about 20% off the-the tech sector is down double digits.

at least the bar for positive surprises is somewhat lower. our expectation is that the overall report will come in reasonable. >> when you look at nvidia and big tech overall, you said you are overweight for the rest of this year. how concerned are you about 2025? i think of antitrust issues. a story from the wall street journal about how huawei is looking at a new chip because of sanctions with united states and potentially that new chip is going to mean less of an nvidia sale in china. >> i should probably provide a caveat. that is our base case as far as what we think now that we are going to follow the data.

one of the reasons why we had somewhat of confidence to upgrade the overall sector is that we saw the earning trends continue to make all-time highs in the last few weeks. if we saw those earning revisions to negative right now, they are positive. even if he slowed down, i think investors are going to look for where there is secular growth and where things can hold on a relative basis. obviously there's a lot of different parts of the industry, so we will look at the data and have that lead us but at this time we are not seeing any signs of cracking in the earnings picture. >> thank you so much for being with us. some breaking news actually, starbucks is replacing its ceo effective immediately, looking at naming brian nichol as chairman and ceo. he is currently the head of aaa. talking about starbucks naming cfo rachael ray sherry to service interim ceo.

meanwhile you are seeing their ceo stepping down effective immediately, chipotle shares down 8.7% on this news, given the surprise departure and you are seeing starbucks shares up more than 10.7% on what we are hearing. meanwhile this is coming as activist investors have been pushing for changes and we are talking about the potential for rejiggering a company that has really struggled in the face of geopolitical pushback as well as just people not buying maybe vanilla lattes. here is your bloomberg brief. >> johnson & johnson has cleared a key hurdle for a 6.5 billion dollars plan to resolve thousand of lawsuits by people who say it's baby powder gave them cancer. according to be the familiar with the matter, more than 75% of the group signed off on the proposal for secret balloting.

the settlement offer includes claims that the taft beta version of the powder cost of variant and other cancers. under their current offer it would make payments for current and future claims over 25 years. according to a global survey by bank of america, the volatility in global financial markets hasn't derailed investor -- optimism around tech giants or expectations of a soft landing. the poll was conducted during the height of last week's turmoil and showed a defensive rotation into bonds and cash and out of equities. but long bets on the negatives and seven remain the most crowded straight, albeit less so after the selloff. and home depot lowered its for your sales outlook, signaling that expects consumer spending to remain soft in the coming months. the company sees comparable sales falling 3% to 4% for the year vs. the previous expectation for a 1% decline. consumers have held off buying

homes or pursuing big renovations amid high interest rates and macro economic uncertainty. comparable sales also came in worth and expected, falling for the seventh straight quarter. we see? >> going back this breaking news that starbucks is replacing its ceo following activist investors pushing for changes. it also comes after the chairs of -- shares of starbucks have been down 19% this year. there are looking at aaa shares up more than 22%. >> i think it is really telling that they went to aaa to get the next ceo. former ceo ceo of aaa going to be serving at the next starbucks one because this is about a consumer that is getting more picky. potentially internally at starbucks they say this isn't a consumer problem, this is a strategy problem and we need to change something. >> have you convince people you're giving them value in the same way they can give them small luxuries without breaking the bank? we will discuss them more coming up. also, craig trudell as general motors overhauls and operation

in china. that is coming up next. this is bloomberg. this is bloomberg. where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence...

the answer is j.p. morgan wealth management

♪ >> still parsing through this story about the starbucks chipotle nexus given the fact that starbucks just replaced the ceo with the former ceo evidently of aaa, looking to reprise some of that. so to a similar customer base in terms of who they are trying to appeal to. >> but a customer that has become more picky. what can you appeal to them to give them the small luxuries? chipotle apparently it is filling your burrito bowl literally as high as possible so what sort of value proposition will starbucks offered to get those people to coming back? they've been trying a lot of stuff and a lot of different strange flavored drinks. >> the value proposition of the new ceo is a part in the shares this morning. time for the morning calls.

looking beyond starbucks enter public, downgrading warner bros. to market perform. the analyst pointing to disappointing q2 result in frustrated investors. next add, analysts seeing upside to earnings estimates due to strengthening retail trends and finally, raising its price target on walmart to $73. the firm citing positive consumer spending intentions, walmart increasing share since 2019. turning now to the auto space, we've got gm struggling in china like many other international companies. bloomberg reporting the automaker has been laying off staff in china and will soon meet with local partner saic to plan a larger structural overhaul to its operations. craig, just want to start with how idiosyncratic is gm bs. this broader economic company that make cars in china? >> i think this is really a broad story here.

if you are not a chinese manufacturer, you're not doing well in china. it is as simple as that. when you look at general motors and volkswagen in particular, these are two companies that have been in china is really long time and managed to relating traction in that market for decades. it's very quickly gone sideways for these companies, and manufacturers that have had smaller presence in china, they are not doing well. gm and volkswagen in particular have really significant presence in that market. a lot of and a lot of plants, and they are going to have to answer some hard questions in the coming months and maybe years. kind of undoing their presence in this market, assuming the trends hold, which if you take a step back and look at what has happened to these companies, it

certainly is not inspiring a lot of confidence. >> for so many of these companies realizing they couldn't go at it alone, gm being an example of them throwing this in 1997, the third year contract set to expire in just three years time. is it a matter of even a jv can't save you if you can't beat in this market alone or with a partner? >> i think it is a really great question and it is a case of you have local companies, a state-owned company starting from scratch and really could use the expertise, partners actually with both of these manufacturers. they don't necessarily need that expertise anymore. they've learned quite a bit from the company they partnered with and by the way, they also have

internationally recognized brands. mg, a british brand that collapsed decades ago and was kind of scooped up by saic and has really come to their credit, done a heck of a job building that brand backup. not only in china but here in the u.k. and in europe, one of the more successful brands owned by a chinese company in europe. it is the case that these chinese companies have really, over time, developed their own expertise and ability to manufacture and it really feels like they sort of surpassed the international companies that they partnered with for years. >> do you think this is the floor for laying off some staff? do you think we could see even more layoffs? >> the way that mary bar has been talking about this, she has

said that this is unsustainable, the state of the market in china is unsustainable. i guess the question really is how much longer can this price competition that she is referring to continue if gm is just counting on the idea that this pain is going to last and people leave the market. i think looking at what they've been saying they want to really calibrate, get much smaller than that market and sort of wait and see until this shakes out because they are looking at the way that companies are performing in that market as much as a lot of chinese companies are growing. not all of them are doing so profitably. do you see some consolidation and find a path while some of these companies that maybe can't play this game forever followed by the wayside? that seems to be the play here. >> thanks so much for being with us as always and for the insights. we are about eight minutes away from u.s. epi.

mike mckee, bloomberg economics editor and policy correspondent. i do want to start with just how the market is currently poised. it seems like everyone we are talking to is almost discounting inflation and inking that a hot ppi or cpi print is merely an inconvenience, but doesn't shake the trend. >> i think if we get a hot cpi it might change some minds or views about how soon the fed goes at this point we are not expecting that. the ppi is always a wildcard because it has a lot of different moving parts. mostly people think about it in terms of input into the pce indicator because it doesn't directly reflect what is going on. the interesting thing about last month is that the whole rise was in services and almost the whole rise in services was in trade services which is wholesaler and retailer margins. they went up almost 2%, which gives you some clue about what

we are seeing in the earnings this quarter. companies are reporting margins that are ok even if sales aren't good. and that is going to be an interesting thing to watch going forward. >> that is one of those things that feeds into pce, right? for those various metrics, what are the expectations for them? >> we don't know about financial services, we had a fairly quiet period during the month of july. airline fares went down a little bit during the month, so that could show up as a decline. and then there's always automobiles. that's going to be a funny category because we have the problems in june with a hack of the auto sales computer system and they couldn't sell as many cars, so did they discount in july? that will be interesting to look at. medical care services is one that everyone wants to look at.

>> you say the main takeaway, bottom-line this matters matter because of cpe. it is cpi that everyone is focused on. how much do you buy into this that if we get hotter than expected, even 1/10 of 1% higher, that the market surveys expecting, that that would be very difficult for the fed to potentially cut in september> ? >> it might make it more difficult. we heard the fed governors saying that she's not convinced yet that inflation is durably coming down, and that would feed into that narrative and anybody else who is sort of in that path and might agree with her and might put us behind. we are also getting into a time of year when they suspects are going to start affecting the year-over-year numbers, and so a small move in the month over month could mean that cpi goes up on a year-over-year basis

should be very hard to sell to the public or to congress. >> like mickey, please stay close because we are going to be didi into those medical expenses really closely coming up next as well as the other components of epi. expectation of the bloomberg survey is for a 0.2% gain in line with what we saw in the prior month. this comes ahead of cpi which also has a 2/10 of 1% gain expected for the month. coming up next, we will be breaking that down with matt rossetti of deutsche bank who will be here to react. this is bloomberg. ♪ say aloha to olukai golf. waterproof leather. breathable fabrics. spikeless traction. the most comfortable golf shoe in the game. grab your pair today at olukai.com.

♪♪ ♪♪ ♪♪ relax into a caribbean state of mind. visit sandals.com or call 1-800-sandals.

with so much entertainment out there wouldn't it be great... visit sandals.com ...if you could find what you want, all in one place? show me paris. xfinity internet customers can enjoy the ultimate entertainment experience and save on some of the biggest names in streaming, all for just $15 a month. get the fastest connection to paris with xfinity.

♪ >> 25 seconds until he the first round of the key economic data of the week. u.s. ppi. heading into that we see markets very quiet although building on the gains from earlier on s&p just up or tenths of 1%. bond markets also just starting to get basically complacent with the idea that inflation is coming off. two year yield solidly below 4% with that economic data here in the studio is mike mckee. >> producer prices are up less than anticipated, just 1/10 of 1% on the headline final demand number, and the core is flat. we had expected a 2/10 rise from

both of those categories, so overall that is good news and certainly a turnaround in the core number, which was up for tenths in the month of june. on a year-over-year basis that puts us at 2.2% for the headline, and big drop from 2.6%. the core is at 2.4%. the professional economist category likes to get rid of the trade services which is based on margins for retailers and wholesalers, and if you do that, that actually went up because it went of pretense instead of 1/10 last month, and more than anticipated, so that pushes the court to 3.3% instead of 3.1%. we will have to take a look at what it was that pushed that up, because last time it was basically the retailer margins that push it up and that wasn't considered as significant inflation compared with some of

the other things in here. >> take a minute to look through some of the numbers so you can break out some of the specifics. in the meantime what you can see in the markets is a pretty significant response. s&p futures of almost 7/10 of 1%. nasdaq up almost a full percent on the heels of this report. even the russell 2000. up about 8/10 of 1% in the bond market. yields markedly lower across the curve. you can really see a bit more of a bid into the bond market led by the two-year because essentially, this seems to be giving a green light to the federal reserve to come out and really cut rates, potentially even more aggressively. when you believe that the currency market, you can see dollar weakness vs. some of the earlier dollar strength. you had a couple minutes, what i be looking for? >> a complete flip-flop, 180 degrees from previous ppi in

that it was prices for goods that went up 6/10 during the month well final demand services failed -- fell to tens of 1%. the reason that we saw a big rise in goods was gasoline prices went up. that is the major issue there. 2.8% rise in gasoline prices. final demand, trade services which we talked about fell 1.3%. that is a contraction in margins, and that is having some implications for equities as we go forward, but it is a big change from what we saw in the prior month. >> this market tends to like use ppi as a way to position to cpi. whether that is successful is a different story. if there anything you see that would give you indication of data to come? >> obviously we have to take into account the idea that gasoline prices may have gone up. wholesale and retail prices don't match up on a regular basis.

that may not be the case. i will take a look and see whether we have anything in terms of things like airfare or cars that sometimes matchup. but you can't really take ppi as a precursor to cpi. basically, the easy way to say that is middleman. people from the producer side sell it to the middleman who marks up prices and then they send it on, so we don't know exactly what we are going to get. but this is only the second time this year we have had ppi before cpi. but most people are doing is just looking at ppi as an input into pce. >> one thing i love about you is you always parse deeper and deeper into the data. there are many lines, and has them all open in a huge pdf document. please stay close so we can come back to you afterwards. joining us as matt rossetti of deutsche bank. thank you so much for being here. i want to start with your impression of how predictive

this ppi print is for tomorrow's cpi. >> i would agree with mike, not very. usually what we look at are the few components that go into pce in the form that the fed focuses on. portfolio management, health fair. i would downplay what we are seeing in the headline just for that reason. we will have to go through some details. there are reasons to think some of those could have been stronger. portfolio management, inflation tends to lag the market. the strength of market should actually lift that inflation component. but ultimately, how we think about the cpi, it could be on this component that matter. i wouldn't change much of how we are thinking about cpi tomorrow but the market is leaning in a very dovish direction. the market pricing is around 0.1%. below what consensus is expecting. some market is kind of anticipating soft inflation numbers which allow the fed to

begin to cut rates. >> this is feeding into that coiled spring that we've got coming into tomorrow in terms of that dovish positioning. if there anything you are seeing in the data that should push back against that? at one point you are more dovish than the market in terms of rate cut calls. now you are more hawkish than the market with three rate cuts for the remainder of the year. does anything in this data give you pause before throwing her hat in the ring and saying you know what, market, you are right? >> things change quickly. about a month ago we shifted to three back to back cuts that were viewed as aggressive. from the fed, but we for a from them is wanting to take a step back and be able to see the data , my read on the data is you have a clear slowing including the labor market but is not recessionary. you still do have inflation about target but i think inflation risks have really dissipated. the fed should be very comfortable cutting rates. should they go by 50 basis points? the market has been priced 5050 for that at this point in time.

i think the data will determine it. if we get confirmation that the latest weakness was real, it could be like the fed cuts by 50 basis points. if you see a reversal of that weakness, the consumer continuing to come in resilience, i think that the fed could have a path of going by 25 basis points. >> can you break down the difference of 25 and 50 on impact? is it signaling or is there actual economic legs up that they get the economy going -- going by 5725. i think markets are reflecting at this point in time. yields will rise, maybe you would see equities come down a little bit. but i'm skeptical of the fed being a little bit more hawkish is going to tighten financial conditions aggressively, and the reason is the only way they would do that is if the economy is looking resilient. and i think the market is highly

leveraged to negative news on the economy. anything that looks like a downside risk. if we get resilient news on the labor market and consumer, financial conditions can remain easy even if the fed only goes by 25 basis. >> are you surprised or even concerned the fed has not given themselves that optionality of wing 50 basis points? that at the moment they are still discussing whether or not to do even 25? >> they make decisions at a meeting and it is only for that meeting. only furred from officials since the jobs report ensigns market volatility has been entirely appropriate, which has been yes, there was some weakness in the labor market data, but they are not overly worried about it, they are not worried that signaling recession. but they were seeing in markets they thought was being driven by technical and positioning. so far i think that has played out. the market went from pricing over 125 basis points this year down to less than 180 get good data, i think it will give them the optionality. i think they are in a fine place

and chair powell can help guide us on how they are thinking. >> do sadie consumer is resilient. what do you make of what home depot said, that they are in this deferral mindset, waiting to make big purchases? >> resilience is definitely different than robustness or strength. we are coming from a consumer environment where you just had a very robust consumer over the course of 2023 and it was across the income distribution, it was hard to find pockets of weakness. you now do have some pockets of weakness, some positive softness. it is more reflecting of a normal type of environment. that said, the labor market data does have some risks to it. job gains did slow, some of a few to hurricane effects, but they have. the unemployment rate has risen up to 4.3 percent, and job gains remain resilient because layoffs remain low. if there are risks that i am looking at, it is that a layoff picture changes and that would clearly undermine the consumer in a way that turns into a more negative dynamic.

>> if we are now at 4.3%, does that in the south signal that they are behind the curve? >> i think it signals that the dot plot in june is not appropriate at this point in time. when they set that forecast with the unemployment rate, they had one rate cut this year. that no longer is a reasonable view at this point. it is more likely that the debate is between going 25 or 50 basis points and i think that will be a real debate. i think it will be dictated by the data. i honestly think there are compelling argument on both sides. the inflation data is telling them that there is not as much upside ration risk and that it depends on whether or not the economy is as resilient as we think. if it is, they should go by 25 basis points and they probably will. if we get confirming evidence on the labor market front, that gives them scope to go more aggressive. >> if you are just joining us, we did just get that ppi number and it did come in softer than expected. not necessarily the concern open

the door to the fed to cut rates perhaps even more aggressively. 0.1% was ppi final demand versus the expectation of 0.2%. that leaves the year-over-year final demand at 2.2%. what we see in markets is pretty much a collective cheer. across the board you see stocks rally much more aggressively, led by the nasdaq. you also see bombs rallying as you see two-year yields fall below 4%, solidly so, although we are tracing some of the earlier rally that we saw. it is pretty much across the board. the biggest bit into the two-year and if he believed that for foreign-exchange, you see the dollar softer as you expect some sort of rate cutting cycle, the euro gaining vs. the dollar. michael mckee still with us here, our economics correspondent. what are you seeing in details

of this report? >> the big change was that services prices went down while goods prices went up largely because of gasoline, but we also saw passenger car prices fall to tenths. telecare prices basically flat, insurance prices basically flat. the big increase in the numbers came from portfolio management. collies causing inflation at this point. but fully a man rose 2.3%. one of the biggest moves in the whole ppi. the fact that he became either way. works out. >> matt is still with us and can respond. what do you make of the details? >> as i signaled, maybe the most important thing with health care being flat. health into the pcp is 20% of the core pce index, basically as important as rent and oer. we have been signaling some upside risk to that because it

tends to be leveraged on health care wage growth which has been restrung. as a read through, that is a very good indicator for the fed. >> i've been looking at the interest rate probability lower and lower. not a dramatic move but you are saying it is about 50-50. it is now more than a 50% chance that they got 50 basis points. are we putting too much weight on each individual data point at this market rolls on? >> the market is highly sensitive data point. dressing some big moves. it doesn't take much to move by 10% in terms of the pricing. but it makes sense. we are in a certain environment, and the fed is providing little for guidance, i think appropriate. if the fed is providing little forward guidance, it means the fed is data dependent and we should be sensitive to those. health care component here is important. that being flat rather than strong is a dovish signal for the core pce. >> really smart, thank u.s. always.

right now, let's get you an update on stories elsewhere this morning. here is your bloomberg brief. >> shares of starbucks surging in the premarket after the company announced it is refacing its ceo, effective immediately. the coffee giant naming current aaa cl as its next leader as the company is working to turn around its business as consumers pull back, plus as it faces growing pressure from activist investors. the seattle-based company said nicoll will start as ceo and executive chairman on september 9. the wall street journal is reporting that china's huawei technologies is close to introducing a new ai chip. the chip would allow china to overcome u.s. sanctions and challenge nvidia in the chinese market. according to the report, chinese internet companies and tele-communications operators have already been testing the latest processor. the company told potential clients according to the wall street journal that the new chip is comparable to nvidia's h-100

which was introduced last year and isn't directly available in china. in the nfl is meeting with a handful of private equity groups this week according to people familiar with the process. it is a step toward opening the ownership links to institutional money. the meetings are intended for the lead to conduct more due diligence but also to talk through potential policy preferences. the nfl is the only major u.s. have to leave that doesn't allow institutional investors. has spent more than a year observing results from other leagues and discussing what it might do differently. that is your bloomberg brief. >> up next, a with david rubenstein, the cofounder of carlisle. this is bloomberg. this is bloomberg.

so, what are you thinking?

i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. [introspective music] recipes. recipes written by hand and lost to time. are now being analyzed and restored using the power of dell ai. ♪

minutes away from fully got from ppi and it did come in later than expected. markets responding pretty much as you would expect, they are flying although we are tracing some of the earlier gains, s&p futures up about half of 1%. dollar weakness now as people price in a greater than 50% chance of a 50 basis point rate cut by the federal reserve. yields are markedly lower across the curve as people gauge just how much room the fed has cut rates. right now i want to turn to somebody typically joins us to talk about his various properties. he has many of them in all different aspects of the world a particularly with his bloomberg shows. david rubenstein, host of peer-to-peer conversations in the cofounder of the carlyle group also hosted bloomberg well

and who also owns a massive baseball franchise. before all of that i want to talk about your upcoming conversation with david solomon of goldman sachs who you spoke to amid some of the market turmoil that we saw last week. what was his take on it and potential he how much was stemming from uncertainty around the fed and around what we were seeing in the u.s. economy? >> he obviously recognize this going to be some turmoil in the market for a while. he said that in the interview which will air tomorrow night. david has been the ceo for about five years. i tried to recruit him to come to carlisle about three or four different times and i failed every time. every counter person. he obviously had some turmoil early on, but he now seems to be in really strong shape. the goldman stock is doing quite well. performance is strong. he is worried about the debt around the world, the amount of debt the u.s. government hands, now the debt the consumers have, the amount of debt about

countries have. but generally doesn't see a recession or a depression coming anytime soon. >> you didn't get him, but you did get harvey schwartz so you didn't do too badly in terms of recruitment. i and concerned about the divergence we are seeing with respect to what ceos are saying and then some of the data that is coming out that just seems kind of messy. from your report -- vantage point as an interview of david solomon and all of these other behemoths in the finance industry but also overseeing and really understanding consumer dynamics, where are we in this pendulum of weakening, but not yet week? >> i don't think most people think we are heading into a recession. obviously we have recessions typically every seven years. we haven't had one for a while. it wouldn't be a shock if there was a recession but i don't see it happening anytime soon. the economic data still pretty good. mostly next tech interest rates to be lowered probably in september, and i think when that happens the market will respond

favorably. >> do you think it would be prudent for the fed to cut by 50 basis points? >> i think it is prudent for them to combat interest rates, but it is unlikely that the fed will say because the election season we won't do it. i used to think that the fed would not do any cutting before the election, but i now think the signs are so strong that they should do so that i think that they will do a cut of 25 or 50 basis points in september and that is with david solomon thought as well. >> in the meantime, the market has been sought back and forth, probably a good example of who to talk to them one of those moments at the legendary energy trader john arnold we speak with fred upcoming of bloomberg wealth. you talk about this idea of his trading strategy. i wonder if any of that is applicable to today as people try to trade these market asked for the direction may be. >> john is a legendary trader at enron and then he started his own company and he had rates of return that were over 100 per year.

he did what most people don't do, he retired. a very impressive person, he is now on the meta board helping them decide what to do with the energy needs for artificial intelligence because his expertise is energy trading. very impressive person. i would say volatility in the energy markets will probably bait a bit sometime soon, he is not an energy trading right now for third parties. you may trade for his own account but he is mostly sending time on philanthropy. i would say dairy impressive young man. he became a multibillionaire well before the age of 40. >> what is the invite on the energy infrastructure to power these massive data centers is an ai? >> there's no doubt that ai requires a lot of energy and there's a lot of concern about whether that is going to be good for the environment or not of the big tech companies are now focused on that, so. but i think the problem of the sultan time. clearly alternative energy will

help mitigate the problem. right now one of the biggest thing that people are focused on is who is going to be the next president as you know, most people thought that there was a pretty good chain for donald trump when wind because he was running against joe biden, looked he was going to win. many people thought that. now it is a jump ball, nobody really knows was going to win and i think we are going to see a lot of turmoil in the markets. >> you just sat down with david solomon, john arnold. what are they thinking that u.s. politics right now? >> they try to avoid it just like i try to avoid it. they may be more involved in politics. >> you don't give money, but you talk to everyone. >> as a matter of i have a book coming out on the presidency. i interviewed donald trump and joe biden presidency and the importance of it. i need to say that private equity with the highest calling of mankind but i had to admit is

probably a higher calling than private equity, but is very close. >> i love that you say that he tried to stay away from it, but you are the one rotted out. there is a real question about how much turmoil they will actually be in some people i saying i'm not going to get into it. where you see the balance of risks? what is the harris trade? >> right now the markets are uncertain who is likely to be president. it's clear to me that she has gotten much more's written people thought she would have gotten because the member, as vice president she wasn't as visible a figure as some other vice president have been, and biting people thought that only biden could get elected. now they recognize that she could probably get elected. president trump has not yet figured out exactly how to attack her and i think the campaign is a little uncertain, but he is a smart man, he's gotten elected before and it is going to be a pretty close election either way. >> do you sleep, david? >> about five hours a night and that is enough. >> david rubenstein, always

impressive of the carlyle group in terms of the quality and scope of everything that you do. thank you so much. you can watch david's conversation with goldman sachs ceo david solomon tomorrow at 9:00 p.m. and of course, coming up as well on another of his properties, bloomberg wealth tonight, his interview with john arnold, arnold ventures co-founder and co-chair. coming up, here is the trading diary for the week ahead. we go from atlanta fed president raphael bostic weighing in on cpi. tomorrow, u.s. cpi. thursday, retail sales and another round of jobless claims as well as walmart reporting earnings after the bell. friday we will round out the week with chicago fed president austan goolsbee. coming up tomorrow, stuart kaiser, marriott ceo, former chicago fed president charles evans. as we march through what we got

today with ppi and look ahead to cpi. this was bloomberg surveillance. ♪

why do couples choose a sleep number smart bed? i need it a little cool and i need it a lot of cool. we're both cool like that. sleep number does that. actively cools and warms on each side. during our biggest sale of the year, save 50% on the sleep number limited edition smart bed and free delivery when you add any base. ♪♪ relax into a caribbean state of mind. visit sandals.com or call 1-800-sandals.

matt: futures are higher. i am matt miller. katie: "bloomberg open interest" starts right now. ♪ sonali: coming up, an abrupt shakeup at starbucks, surging after naming brian nickel is a new ceo and chairman. matt: u.s. producer prices in july rose by less than forecast, underscoring the moderation and inflationary pressures. katie: mike wilson warns of a challenging road ahead for stocks. he joins