>> i am not really concerned at all about inflation staying too high. >> inflation expectations are slowing down with the economy. >> we see slower growth which is a necessity. >> i don't see this as weakness. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: already back to -- lisa: already back to goldilocks. and head of a key inflation reading in the u.s.. we get cpi in about two point five hours, traders are heavily positioned to support the soft landing piece, the s&p 500 had its biggest four day rally since

november. apple is up 6%, and is up 10%. are we back -- are we back to complacency? dani: this huge powerful rally but maybe gets another leg overnight in today's session cpi in the u.k. being soft. the one good thing about yesterday's powerful rally even though it might've front run cpi is it happened when the yen was appreciating. maybe this dangerous cross asset link has been broken. whether this holds is a different question. lisa: a question of whether we've priced in the soft landing globally. getting the idea of it offered -- dollar that is weakening versus currency globally. the consumer can keep upholding spending even as inflation normalizes pride we've been talking about consumer appetite. a whole host of travel executives.

today we have the ceo of marriott on the same topic. annmarie: how resilient is the u.s. consumer and how bifurcated is it? talking about the ceo of marriott and their earnings, they have resilience on the upper end. while home depot was talking about this deferral mindset. potentially as consumers have the money to spend. they are waiting wanting to see where interest rates go before they make those big purchases. raphael bostic saying they need more data but politically it matters. it's the first of three prints we will get for the u.s. election and inflation been top of mind. lisa: it's one of the big conundrums for the federal reserve. consumers have plenty of money to spend as long as they are wealthy enough to have fat paychecks and bank accounts that have been bolstered by higher rates as they are. how does the fed take this at a time when two-year yields have fallen by some 30 basis points

over the past month in august alone. you look at the euro, the strongest going back to the beginning of january versus the dollar all hinging on a fed set to cut rates by more than 100 basis points year-end. dani: just on the market moves the fed look so offsides. if they cut more in line with the markets thinking. we want to be absolutely sure and i want to see more data. need to make sure the trend is real. it's not a fed debating between 25 and 50 basis points. that is a fed debating whether to cut at all. >> talking about how they have a three tense of a percent increase in their model and how that can be completely different for the fed and while everyone is so focused on this 25 or 50 on september right now there are still people in the camp talking about is it september, november or december. >> we have someone coming on the show sing real risk of inflation not the potential risk of the

consumer falling off a cliff. a great show coming up. and why the fed can remain patient to the point you were talking about. mike of bloomberg as the doj reportedly considers a bid to break up google. just on why he sees signs of a re-acceleration inflation. if you want the fed to cut rates for more than 100 basis points he thinks maybe you're looking at the wrong stuff. we begin with our top story, stocks on pause awaiting data, marvin writing this. every data point is alive and policy expectations will be volatile around each of these data points. by our estimation there's no reason for them to think about 50 basis points in september nor is there any reason to rush into a november cut. marvin, swimming against the tide joining us now we are back to goldilocks everyone's pricing and more than 100 basis points of rate cuts. why are you pushing against

that? >> we are not really seeing the degree of hysteria the market had thought we were in. to get four or five cuts which is how the markets moved in a very short order you got to see recession that's very clear to you and the fed. we don't see that data and certainly the volatility in the market was scary but it was isolated to parts that were overextended. >> that said we are seeing some really clear signs consumers, of those not of the upper echelons of income are struggling. they're stunning to push back. you hear this from pretty much everybody, no recession calls for the most part, not very many anyway. how do you sort of discount the idea the fed has an opening to really get ahead of material slowdown because inflation is coming off the boil so significantly. marvin: that's the eye of the

needle for sure. there are stretches in the economy. -- stressors in the economy. the restrictive aspect of policy is working. transmission is different this time. we have a lot of wealth, everything we talk about in terms of goldilocks and the rebound if you will and a lot of the stocks is creating wealth for parts of the economy. having said that it's not widespread so that's what gets me comfortable that the fed will start the process, but again the market is ahead of itself if it thinks it needs to really accelerate that. dani: we have to just be talking about bonds at this moment because stocks did a big rally back to where they were at the start of the selloff. overall the market sees a third of a chance that we will get a recession while equities are pricing in a one in five chance so if bonds are wrong, are stocks right?

marvin: equity investors took the opportunity to buy stocks that got cheap, there was a certain amount of momentum in the market. we took off some of that froth and maybe got a little bit overaggressive but again yesterday it was a bit more widespread that it was the same leaders driving the rebound if you will and those become the easiest names to own when you're worried about growth slowing, this is quality growth but once again is the story driving a lot of these valuations. dani: take me to this future were the fed starts his normalization process, they start talking about it at jackson hole. the bond market is already there and maybe past that. what's the reaction in the equity market trade is as a blueprint of what we should be expecting when that conversation begins? marvin: i do think the soft

landing which went by the wayside of the last couple weeks he comes part of the discussion again. i think we will see moderating inflation ppi, it may not be as aggressive of a disinflationary trend going into the fall. that's all fine for equities particularly companies that can demonstrate that they have got a mode they can defend from an earnings perspective. the fed will begin laying the brickwork that they will start normalizing rates but there are no rush, that's not necessarily bad for valuations. what we need to do is put intersections between liquidity and soft landing and politics whether it's geopolitics or u.s. election into the fall so i don't think it's good to be completely smooth sailing into the end of the year. risk is still somewhat supported and make sure you are buying the quality parts of that story you like. annmarie: what could upend your

belief we are headed to a soft landing? is it a data point or something like you just mentioned, a geopolitical event? marvin: i do not think we will get a data point it's going to change over the next few quarters. whether or not the data moves back towards 2% as convincingly as the market expected by the middle of next year that something we will debate in a couple of quarters. i do think geopolitics or something that in terms of how asset values are incorporating are telling different stories. i think some of the geopolitical concerns made their way yesterday but they didn't really show on the equity side of things so people are picking the best parts of the story they want to hear. annmarie: do you think the market is underpricing what we see? marvin: it's always hard to put evaluation valuation on what's going on. again i think the fact that rates could be showing some of those concerns while other risk

assets don't make me think there are certain parts that are underpricing. lisa: you started by saying the fed didn't have to cut so aggressively. you didn't really see a case for a 50 basis point rate cut. you talk about how there are some opportunities to buy the dips. eroding a in your note don't fight the valley in duration. it's a powerful one. do you think if the fed cuts rates more aggressively that that could disrupt the soft landing we are seeing right now? marvin: for sure. you and i have discussed this, why you cut rates are really important, if the fed starts to think there's 50 basis points are needed because the economy is much weaker than maybe some of the data i'm looking at. we have a concern with that. having said that if it's based simply on disinflation getting more aggressive, the market can interpret that. that's the offer based on what

we do. having said that we still don't think they need to rush everything we've heard from the fed is they are still patient around that. >> i want to get a better idea of what that feedback loop looks like if the fed cuts aggressively and could lead to the soft landing. if there is a recession as a corporate pulling back. is the mechanism for that playing out? >> i think the labor market is still front and center. that's what really drives are we still able to talk i'm still at my same street. that's an important part of the discussion. if we get confirmation that the weaker prince that we saw on the labor market last month leads to potential job losses, a larger job losses. but ultimate changes the psyche. companies will adjust quickly. we heard from the small business survey yesterday and there wasn't that concern. so again it is packaged well.

it's going to be labor market, companies that are responding to significantly weaker labor market. neither of those are within the data prince that we are looking at. >> always a pleasure to have you on. thank you so much for starting us off today. a key question of where the balance of risks is. we get some pretty aggressive views on both sides with some people pounding the table and saying we need to cut right now and others saying that would be the error. dani: especially when you look at small business confidence at a two-year high. atlanta gdp now tracker at 2.9%. payrolls above 100,000. economies having apache history. the recession odds at about 30% so you look at that list and say how can you get aggressive cuts. maybe the way you get cuts is something like the rbnz that says it's low risk to the cut right now and it's an easy

decision to do. lisa: i don't understand the response to the market though. think about what they were talking about in terms of consumer pulling back. those shares which are down some 5% in the market at the end -- ended the day up. annmarie: saying they are deferring, they will once the fed gets on with it and start cutting interest rates but it's difficult because you look across the landscape and what seems so apparent when you look at what corporations are saying is this bifurcation really exists. it's not just also bifurcation on the low-end. it's the bifurcation throughout the globe. we have seen constantly the u.s. consumer is the most resilient consumer out there. where's the weakness coming from right now. that's coming from china. lisa: here's your bloomberg brief. yahaira: the japanese prime minister won't run for a second term as leader of the liberal

democratic party in september braid he said he will devote himself to supporting the new leader selected for the presidential election. his successor will be japan's third prime minister since shinzo abe stepped down september of 2020. traders are bringing forward bets on the piece of the bank of england's interest rate cuts. that's after u.k. inflation increased less than economist and the boe expected with cpi rising 2.2% in july rather than 2.3 percent. services inflation posted its lowest rating in more than two years. the boe cut rates on august 1 for the first time since the pandemic. and, shares of ubs are on the rise as swiss banks smashed profit expectations of the second quarter with strong client inflows and investment banking revenue helping the ceos efforts to return capital to shareholders. the bank says it's on track for premerger levels of profitability just a year after

completing the takeover of credit suisse. >> i am proud we made very good progress and so we significant reduce the risk. we did that while staying close to clients. very good financial results which makes me comfortable that we are finding a good way to deliver on our 2026 financial markets. yahaira: despite her mahdi's opt -- ermotti's optimism they specter book operation expenses in the third quarter. >> up next, keeping big tech intro. >> the best ideas are supposed to win and we have sieves starkly seen it's the disruptors and entrepreneurs that of any key vector of innovation. >> that's coming up next, this is bloomberg. ♪

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lisa: coming off the biggest four-day rally in the stock market data last november this is bloomberg surveillance. we are completely flat, heading into cpi coming up in less than three hours. we do see that ongoing dollar weakness, people take a look at how much the fed can cut. keeping big tech in check. >> what i oftentimes hear from the business community they want markets to be more open and more fair and more competitive rather than incumbents being able to splash out nascent competitive threats. our free enterprise system is one with the best ideas are supposed to win and we have historically seen it is the disruptors and entrepreneurs that have been a key vector of innovation. lisa: bloomberg news reporting

the justice department is considering a bid to break up alphabets google. this following a landmark court ruling. it found the company illegally monopolize the research -- the online search market. on those grandsons ever to break up microsoft two decades ago. joining us is mike sheppard. a lot of people are calling this the most consequential case for the internet going back to the creation of the internet. can you play out the contours of what the government's argument is? >> you really touched on the theme here and that is the scale and consequence of this. it would be as we noted the first attempt by the government to break up a big company since it went after unsuccessfully microsoft more than two decades ago. here's what they're going after, they are weighing whether to force them to the vest its operating system, its chrome browser or its search text ads.

it's not just online search that was found to be a monopoly by google but also the search text at market. the judge in the case is asking the government to come up with potential remedies that it can present even as google is challenging the initial order the judge issued just a week ago. this scoop from our colleagues on the tech teams really advances the balance of how serious the government is in pursuing this case and what were finding from our reporting is just how serious and this signal is trying to send its pursuing on competition grounds. annmarie: over the weekend j.d. vance said it was the donald j trump presidency that started this antitrust lawsuit. in a lot of ways he said trump looks in the same ways. they want good work wages for the american people they also want to be able to speak their

own mind. sometimes that means you have to take on those monopolies. whether or not it is harris or trump, is this the direction of travel from here on out in washington dc. >> this is really written in the stars, it is a bipartisan view that big industry and especially big tech has acquired too much cloud not only for its own good but as we saw the ftc chair play out the good of innovators and the small tech in silicon valley the j.d. vance knows well is a former venture capitalist. they see the large tech companies, the incumbents crowding out the smaller players who can bring something in and they are seeing companies like google and apple which is facing antitrust case of its own brought under the biden administration in march. that the claim is these companies like google and apple is crowding out the innovators and also crossing consumers like

you and me that have to pay more for our goods and services. annmarie: google is just going to say they do what cereal companies you or any consumer brand in the market which is you pay for better eye level when you're in the grocery store shopping. if that's the case, what is -- what does the doj do with google when they take this appeal? michael: what the doj is saying in response is fair enough, you had a system that sounds like it works for you but what about the serial maker who is perpetually at the bottom of the shelf? they are never going to make it to the top tier because they do not have that kind of exclusive contract and relationship already established. so if the government ultimately does not pursue this drastic remedy is forcing them to do best interest, some of the exclusive contracts to require if your device maker on the operating system on the handset.

under the current contract that gmail and the chrome browser are on there and they are bolted on their and they are really hard to remove. what that means is if your competitor and have a different browser and a different email platform you are already a dissident -- a disadvantage. what the government is saying is there should be more access and more mobility and less restrictive causes and contingencies and contracts that crowd out through these means other competitors that might want to get in. once this might offer a better deal to consumer. >> unlike serial which can stretch this analogy and easier to put on, google is sticky. if this whole infrastructure

around her emails and the search they like so even if we get rid of these agreements that google has to pay for access to these phone platforms, how much of a difference would it make? michael: it's a great point. the whole issue and argument made by apple and google is our system works really well and it works well for consumers. there's a lot of ease in it. with apple once you're in the apple ecosystem, you find it easier to use as a consumer. the price is high and that's one of the things the government has gone after. what the government is seeking is also some interoperability. what they want is you have the functionality and everything about google but they want more entrants into the field and the platform that google has created and other brands have created as well. >> i'm looking at shares down about 1.1%, they are up about

18% year-to-date. how seriously are people taking this case in terms of its ability to win and affect real change. michael: they are in wait and see mode. ultimately what will be the impact on the business. when you talk about the company's search add business and the most recent quarter generated 46 billion in sales and that's out of 67 billion in total sales for alphabet. we are talking at a big chunk of change. moving the platform or forcing them to sell or make some changes will not drastically reduce revenue. still going to be able to sell those ads. it's more how they do it and what gets attached to it. there is also a wait and see aspect because of the appeals. google is going to fight this in court. investors are waiting to see whether ultimately there is some

sort of settlement here. lisa: thank you for being with us, just imagine the google lawyers versus lina khan. annmarie: google says they have competition, it's one click away. to use the grocery store analogy which they use, one eye movement of the way is serial, one click away you can go to bing. lisa: a click is important. fingers are limited. coming up, surging stock market driving returns for the sovereign wealth fund. don't miss the ceo joining us next, this is bloomberg. ♪

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annmarie: thanks lisa: a selloff. what selloff? we had the biggest, in the s&p 500. hard to know how to read things ahead of the cpi in two hours. routers on the nasdaq reflect but the nasdaq has been leading. the russell 2000 outperforming but has been underperforming as people go back to the ones they know best. dani: it will be interesting to see how the market reacts to because last time, the s&p 500 fell and small caps took off like a rocket. it is not a playbook that

usually does not happen if there is a softer cpi, so is this time going to be the same or different? lisa: this playbook seems simple, the fed is going to cut by 100 points and everybody wins. that is what is pressed into the market with almost a 40 race declining two-year yield. we are seeing ongoing of the trend, 3.9267. 10 year yields have not declined nearly as much, 3.83%, the 30 year 4.14%. does the fed have enough ammunition to really cut rates proactively before we see that pain? dani: the language suggests they are not there yet. i go back to bostick's comments, everything he said, we want to be sure and i would like to see more data. that suggests they are not there yet, so that cpi could be of crucial importance to changing them. i go back to the rbnz who cut

rates today and said we can do it because it is low risk and it is not a difficult decision. maybe the fed starts to sound more like that. annmarie: if you're looking for members of the fed would like to lean into the labor market and look at the labor data coming out in the prior report that was soft, they said there is no hiring or firing. it is basically flat. this reiterates the idea that they need more prints. it is not that they need better inflation prints, he said what they need is more. we talk about how they need to see a trend. we get that today? lisa: the currency market gets into the arrow pretty much of the highest level, the strongest level versus the dollar going back to the beginning of the year. under surveillance, uscp identity in two hours at 8:30 a.m. eastern. the median estimate seeks a modest gain of 0.2%. likely cementing expectations for a fed rate cut in september.

one of the most interesting aspects is how coiled markets are going into a soft print. dani: it is important to think of last month cpi print, it was the pekin dollar-yen to year yields -- you've talked about this -- go from 4.5% to hundred 4%, we had a big -- to under 4%. it has been a trend shift in the market. today serves as a referendum. will it continue or is it more volatile as we figure out where we are going for -- going from year? lisa: we have also wondered where the political influence has been and people have pushed aside what is there. kamala harris rolling out details of her economic plan on friday. the campaign announcement said she will speak in the swing state on her plan to "lower costs for middle-class families and take on corporate price gouging." it is a rather difficult needle to thread considering the fact she would like to distinguish yourself from president biden, who also basic supports the

plans he put out there. annmarie: she is going to be touting what they would call some of the winds from the biden administration. at the same time, look at the polling, inflation is top of mind. you ask voters, who does better with the economy? polling says they trust kamala harris with the economy more than trump. when you look under the hood and inflation, it seems voters think trump did a better job. it will be a hard needle to thread because she needs to talk about the wins and the continuation abided but put some distance there -- and fighting but put some distance -- and biden and put some distance there. lisa: i am very much looking forward to that discussion rather tit-for-tat. corporate's globally and investment firms, norway's one $.7 trillion sovereign wealth fund returning a .6% in the

first half of the surging stock market driving the games, revealing that a trip holdings in meta-, novo nordisk, and asml and microsoft were the three biggest investments at the end of june. the star of the podcast world, the ceo of biggest sovereign wealth fund, nicolai tangen joining us. i would like to start with idea of lightening up a little of the tech holdings and whether this is basically law review on the idea that leadership in equity market might normalize a little bit more away from the big tech leaders to the broader market in general. nicolai: it is difficult to say. we are in index fund, so large tech companies will automatic be some of the largest positions we have. it is interesting now that the seven is companies we have combined is 12% of the fund. the type of concentration risks we have never seen before. it is worrisome. dani: how do you think about

this moment more broadly? we are waiting for cpi in the u.s., but the rest of the developed world, rate have come back in, there is the fear of recession. is this the start of a paradigm shift for the economy and the markets? nicolai: i'm not so sure that is the case. we think inflation generally will pretty slow to compound. we have seen some inflationary pressures -- actually, from the time, it was in some fugue elements within the cpi such as olive oil and all these kinds of names. these prices are continuing to rise. that will be part of the offense that will keep inflation higher for longer. dani: big tech keeps getting more and more concentrated. you worry about the unholiness of an overall keeps contending with the central bank not doing a shift?

is a market that you worry has gone overleveraged and you can see volatility a kindle last week? nicolai: -- volatility akin to last week? nicolai: deficits continue to build at that level, so very hi, and that is the biggest worry we have. if you get this kind of trust moments, where people lose faith, that is the biggest issue today. lisa: you emphasize the fact that you are hinged to the index and you own the world essentially anywhere not susceptible to the different trends that come into play. one thing you have been vocal about his you are trying to use your position as the biggest sovereign wealth fund in the world to influence change. with respect to concentration, as an example, the doj and the u.s. is going after big tech funds to a is competition, do think that is a good thing?

are you arguing with inboard seats saying you should make efforts to try to open up the competitive field? nicolai: well, we owners are not advocating to speak for large tech companies. we think ai should be regulated and we need to have responsible use of ai. we are not really interfering in the debate on whether the tech companies -- whether one should go after them or not they are fantastic companies, well-run and they are important investments for us. lisa: it goes to the heart of the issue that comes up, how do you balance having a social overview for your find where you are trying to invest in renewable energies and argued for changes at the tops of companies while maximizing returns that are not cold here with some trends perfectly, like fossil fuels or the renewable

energy infrastructure, that did not perform as you have? nicolai: a couple of things. first of all, we think you have more influence as an owner compared to if you just sellout. we have continuous dialogues with these companies during the first half, we had more than 2000 conversations. to be an owner is the best and you can do in terms of impacting change. second, we think being a responsible company and delivering good returns goes hand-in-hand. if you are not responsible, you will not have people work for you, your market clients, loans. it goes hand-in-hand. you need to think long-term to generate. annmarie: how are you thinking about the u.s. election and the impact either trump 2.0 for the harris administration will have on investors? nicolai: you know what? you'd be surprised by how do think about the u.s. election because we are invested in the

u.s. companies, and both parties are in our mind pro-business, so we don't think that will have a huge impact. annmarie: you think both trump 2.0 and harris are pro-business? nicolai: we think generally speaking that large u.s. companies would have invested and will continue to do well. annmarie: we know you are a big holder of tesla and voted elon musk space package. what you make of corporate america? elon musk really tied himself to one camp, the trump cap, with his most recent conversation with the former president this week. nicolai: i think it is interesting. i think it is a new phenomena. of course, it is risky for companies to tie themselves too closely to one or the other. dani: can you expand?

when you look at companies, there are different tricks to look at. -- different metrics to look at. do you have to look at companies may be getting to political? nicolai: no, i don't think we need to do that. we do not want to sellout on the company if it is close to one political party or the other so i don't think that is relevant for the decision. you have to think about risk to people's businesses if their client base associates and with one party or the other. lisa: you talked earlier about some of the governance of corporations and the fact that we have a deficit surging and if that is your top concern going forward, and i think about your part past, and i wonder how much you are forced to do that yourself when you look at a picture that looks like a train wreck but there is very little

that an investor can do about it? nicolai: it is very little. this has been a development going on a long time. and when these kind of things, like budget deficits, it is ok until it is sent, and you don't know what is going to be the trigger. if you have a trust moment -- truss moment which were first of the u.k., it could be pretty dramatic and it happens quickly. lisa: for yourself, how do you hedge against that? you become a bond vigilantes or do you not have the luxury? nicolai: i don't think is a long-term investor you can hedge against the thing. you need to make a judgment. i don't think we have that insight or any view on exactly when it could happen. lisa: nicolai tangen, thank you for taking the time. we look forward to your next episode of the podcast. let's get you an update on

stories elsewhere. here's your bloomberg brief. yahaira: intel sold its stake in arm, according to regulatory filings and expected to raise $147 million for intel, which is facing losses and job cuts. earlier this month, they filed one of its worst earnings report in its 56 year history, causing the stock to lose one third of its value. the chipmaker announced it is cutting 15,000 jobs and has suspended its dividend. paramount began laying off staff yesterday after announcing it will cut acting percent of its u.s. workforce. the media company is closing its production television studios. all development projects will transition to the existing cbs studios production. according to an internal memo, job cuts take place in three phases this year with 90% coming by the end of september. new zealand central bank cut

interest -- sent interest rates on a cycle previously indicated. they said in may that it considered raising rates and would not cut until the second half of 2025. the bank's concerns over sticky inflation are being alleviated as the economy recovers on the brink of a third recession for less than two years and unemployment continues to rise. that is your bloomberg brief. lisa: i love new zealand and i think it is great. it is an aspirational bike to spend some time there. remaking too much about new zealand? dani: maybe that it is an interesting decision that they cut and they said because it was low risk. there are so many people who argued the fed should do the same. lisa: new zealand, the new trendsetter. credit spreads point to a soft landing. >> we are in the bad news is bad news type of market now. a year ago, if you got bad news, you think it be less inflation.

now it means fundamental problems. lisa: that is next. 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

lisa: markets are prepared for another goldilocks kind of day, range bound on the s&p 500. what you are seeing now is one dollar weaker, and this is the key story. the fed appears to have the ability to cut rates. that is what yesterday's ppi data seem to hint at. the strongest level, crossing through the 1.10 level for the euro, going back to the beginning of the year. under surveillance, credit spreads pointing to that soft landing. >> we are in the bad news is bad news type of market now.

a year or so if you got bad news, you think it meant less inflation. alex's mean problems -- now it does mean problems. we are not seeing that, so yes, they are not compensating you for a recession but we don't think will come. lisa: markets are seeing plenty of room for the fed to cut amid easing inflation concerns. the long-term head of part is fixed income syndicate says, "there is an expectation these higher rates are very restrict event we are waiting for the consumer should to dropping about the labor market. if that were to happen, it would have happened already." justin joins us now. i would like to start with why are you pushing back so aggressively on this? justin: the beauty of focusing on banks, which is what we do, we had a particularly strong lens into the economy. so what we are seeing is that

passive quality is actually trending better and that ultimately, we are going to get long and variable lags that get so much attention from the press and they would have happened already. it would be transmitted through the credit channel. and that just has not happened. so if i moving -- so if i am a bank, all of the large banks really are well-capitalized. their profitability is better than it has been since the global financial crisis, and their asset quality trends moderating. so you put all of those things together on the banks are going to lend. if they are willing to lend, ultimately, a consumer that is now getting used to these higher interest rate, you put all that together and overlay capital market environment that has been very favorable.

credit spreads have been year there tightness levels of the last 20 years going back a couple of weeks. we have had a little blip the last two weeks, but i put all of that together, and then i either turn on the tv, listen to the radio, read the press, listen dependence, and i really have no idea where people are getting this risk to the economy. lisa: i'm sure you hear a lot of those people here on "surveillance,," basically saying, what is the rush? what is the hold up? this is the time, what are they waiting for? let's go. how do you dismiss the concerns we are seeing from corporate executives that are coming out and saying the consumer is feeling weak? what do you see about home depot, waiting for rates to be lowered to make the purchases? justin: that's an important

point. the consumer has been waiting. if you look at loan growth, it has finally started to pick up. if you look at the fed's report that cannot last week, loans are picking up. what i would say is there are two dynamics. one is companies and ceos, if they are having issues, it is very easy for them to point to the consumer that is challenge and i do not want to say explain, but used to scratch to help them talk about the challenges. the reality is that -- and this last payroll report probably stands out to me the most as being so completely different than what the narrative oils. 200,000 were impacted by the weather. i don't know how the bls said

that it was a consideration. i did not get that and it made no sense to me. so there is almost certainly going to be get back in the next payroll report based on the weather effects, so here is what i would actually ask the ceos who are talking about a challenge consumer, the second-quarter group 2.8% and retail sales were strong in june. we are getting those sales tomorrow. the strength at the end of the second quarter means the third quarter is almost certain to get off to a strong start. goldman has a q3 gdp track that there already out with, and i think it is in the mid-tunes. atlanta fed -- mid-two's, and atlanta is now in the two's. so i really just do not get -- annmarie: we have heard from ceos -- if i can interrupt you -- there are two different types of consumers. what does the fed need to do for

those who are struggling on the lower end that are not impacted by the stock market? because they are not exposed to many markets and stock markets -- money markets and stock markets. justin: there is another issue there that is this connected from reality, so there is a report from barclays that came out after q1, so it is a little dated but relatively recent. if you look at the underlying spending trends, the lower end consumer was actually doing better in the first quarter from a consumption stand point than higher end consumers. what i would say is -- you know, i'm not sure that what you are hearing is reality. and let me try and put a fine point on that. if i'm a lower end consumer, wages are growing right now a higher rate than they did

pre-covid, certainly. and immediately post-covid. you have better wages, you have a growth -- rise in the unemployment rate because new entrants are coming in. some of it is immigration, but why are new entrants coming in? dani: can i ask another favor of this because you were talking about the strength of the consumer, that the wide and variable lags have arrived, what about inflation coming back down to the fed's target? justin: right, so therein is the interesting dynamic. if the neutral rate is higher, which i would say, and this is the point i think is most important, the neutral rate is higher, at some point, you have to reconcile that. otherwise, the market is taking down duration financing the deficit at the long levels, at two global yield and aggregate,

and that is a concern, so what i would say about it patient is that there is an expectation, every time inflation gets down here, that it will keep going straight down. i don't think that is realistic. most people agree. yet, the market does not want to trade it that way. it would like to assume it is going back to 2%. last point, in 1994 and 1995, there was a midcycle adjustment after a negative payroll print, the fed cut in 1995. we are nowhere close to that. you are running payrolls after we get this giveback. you are close to 200,000 a month. the narrative and reality disconnected. it is finally going to come home because at some point, the market will have to say, how are

we living with a 5% policy rates now for 12 months? we have data that supports the idea that the neutral rate is higher. lisa: justin d'ercole, thank you so much. we do not make it to what you are doing with all of that. we will have to leave that for another conversation. coming up next, mario parker, anthony capuano, and charles evans. i would like to issue a correction. i was ragging on new zealand and got this message that new zealand is where the 2% inflation target came from. so maybe there punch above their weight. dani: i feel vindicated. thank you to the viewer. lisa: so new zealand will still be present in our show. this is bloomberg. ♪

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>> we have been worked around on every single cyclical data release. >> i would sit there and say the most important numbers are the jobs report, initial jobless claims, and the cpi report. >> i think the world gets uncertainties of global growth. >> i would not be surprised if volatility continues for a while. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. lisa: 90 minutes until the moment of truth, and we are talking cpi.

welcome back. this is "bloomberg surveillance," with annmarie hordern, dani burger, lisa abramowicz. jonathan ferro is still off on his weeklong vacation. we are looking ahead to cpi in 90 minutes. the key question in my mind is how was the market positioned and how leveraged is it still to that goldilocks rally? dani: such a powerful rally. here we are with equities doing a round-trip on where they are at the start of august before the major selloff, so it is a market that deals ready for a stronger cpi, so there's a lot at stake today. lisa: which is a reason why people are trying to understand the dynamic between a soft landing and disinflation versus a consumer pushing back. it ignites people's emotions.we saw that with justin d'ercole saying, what are you talking about? this is not a fed that needs to cut rates. and then you have other same, cut rates.

you can feel the emotion. dani: data -- annmarie: data and commentary that we hold from our previous guests out of corporate america, the distinction is bifurcation. the ceos talk about the softening to the lower end consumer.the and continues to spend. it is the lower end consumer that is, to home depot's words,. deferring big purchases there waiting to see what the fed will do before they spend more money. lisa: talk about -- the key issue here is not what the data is but how the federal respond at a time when we have seen inflation come in. yesterday's ppi print was softer , health and particularly the downward. cpi is expected to come in 0.2% month over month versus the prior decline. key question in my mind, given the factory seen a huge rally in

two year yields, the euro is at its strongest level versus the dollar going back to the beginning of the year. how leveraged is the market to a perfect outcome that underscores the fed could cut rates by 100 basis points this year? dani: look at what we are pricing for, september 50% odds they go from 50 basis points, and the debate of has inflation come down enough to deliver 25 basis points? the reaction of the market will be interesting, but the reaction of the fed will be more telling. if they get a softer print, do they say, we will cut 25 basis points? even if that is the case, the market is offsides. lisa: raphael bostic tried to push back from the same camp we've heard from others. everything can change in 90 minutes time. we are also coming off the biggest true be rally going back to november last year. the euro really interesting, going north of 1.10 for the first time in months, seeing the

highest level since january. yields continue to decline, disproportionately on the front end. 10 year yields, 3.8276. crude coming off a touch after a big rally last week. it seems to be temporary as people worry about the growth aspects, down about .3%. stuart kaiser of citi called the s&p four biggest rally. anthony capuano on the travel demand, and former chicago fed president charles evans. let's begin with the big story with stocks on hold. traders are awaiting the cpi data at 8:30. stuart kaiser wrote, "sentiment is ags growth slows. cpi media modest positive but carries less weight this month. we are still cautious but i g-v calls screen while abounds." this is the biggest cpi print

since sliced bread, why do you think it is? stuart: they have shifted, and i think the fed, market are both comfortable, so inflation prints matters but if you had a high print, the market might say that this is normal data volatility. .1% to 2% is the sweet spot. below are print i think is where there is more uncertainty in terms of how the market will react. lisa: this is actually really interesting. a lot of people who come on say the reason they care so much is the fed can cut rates as long as inflation is coming down and there is not the inflation consent. you are saying that the bigger concern is people are not considering the downside risk to the economy? tim edwards, the upside surprise in relation would not stash and other words, you think the upside surprise in reaction to not disrupt the market that -- in other words, you don't think

it would disrupt the market that much? stuart: we don't needstuart: lower inflation data, which is a more of the same. i think in the context and the upside surprise does not change the calculus as much as a couple of months ago. if you print very low, the debate -- first off the market will react to th point. i think people may say, we just printed sub 10 basis points, what does that say about the underlying demand of the economy? i don't know how the market will react to a low print, but it would be interesting to see that real-time. dani: it was that print last month that was the starting gun for the volatility and this change in markets. one most is false donald small caps outperforming. you get a powerful rally as the rest of the market freaks out. if we get a little print, couldn't give another leg to the small-cap rotation? stuart: it could.

there is a window for small-cap work. the problem is it is hard for small-cap to work unless you have some finding data. what you had was small-cap responding initially, and then you had some choppy tech armies, which brought the market at large down. then you have a softer payrolls print. if you think of whited small-cap response of positively in july, as you back that up with six basis point sent or cpi. this time, your for 400 day -- your personal hundred k day, and you really need soft landing data for that to happen but we have not gotten out the last two weeks. dani: cpi cannot really tell us the soft and the data. is the market more coiled up for retail sales? stuart: you could argue thursday is more important than wednesday this week. not just retail but you get another claims number. i think the collection of data thursday might be important in cpi on a standalone basis.

retail sales is tricky. the market does not tend to trade retail sales that much but everything is context dependent. in the context now, retail sales claim walmart might be more important to cpi. dani: we have seen outsize -- annmarie: we have seen outsized data, do you think the correction is over? stuart: i hope it is over. we are watching applied volatility on mixed options that remains quite high. the reason our focus is on that is because the vix was center gravity for the selloff and we have not seen that risk pricing normalizing. until that, you have to be concerned that there are positioning issues on the market. annmarie: how are we supposed to see norma volatility when it is august and there is not a ton of liquidity, we have an important fed decision in september, u.s. election november, when does volatility calm down? stuart: hopefully this week because it is the end of summer. right now, you are in a weird

spot, jackson hole, dnc, a payrolls print the market is still digesting, and positioning stuff going on that will rush takers on the back foot. that will keep volatility elevated a little bit. work at sit-down, a vacation might help -- work will help sit it down, and a vacation might help. lisa: it sounds like you have not taking your vacation? stuart: i have not. lisa: all i can say is i try to take a vacation last week and it did not work. i'm wondering where the most susceptible aspects of the market are to a potential selloff? tech stocks reprice the haven last week, but chris montague said he sees tech stocks as being highly susceptible to a big selloff with any downside economic surprises. is this the area that you see? is excel what you can or are the

areas more susceptible to downside in the economy than people give them credit for? stuart: i break that into two categories. if , on the domestic the -- focus on small-cap and retail. tech to me is very interesting right now because that's egot hard landing data. typically would like to be in a safer balance sheet. that sounds an awful lot like large-cap tech. but the positioning is really long in tech. that is the rhythm you are trying -- riddle you are trying to solve. two people go higher in progrowth environment or do they have to sell? and that is what they own, so they sell to get the position they would like? we have to see how that plays out. i agree that the yen trade, which has talked about quite a bit, amtek, these are long over rates built up over multiple years.

you are not cleaning out that position in a week. it is just not happening. i think that is the risk to tech, you get a large enough selloff that people need to do gross positions and tech is what they own, so they sell. lisa: we have seen in the yen trade, we have seen ongoing strength, so it is not like it has come off the boil in terms of that particular carry trade. with big tech, we are back to where we began before turbulence of last week. stuart: i don't think 100%. i think sentiment did get dented around large-cap earnings with the idea that if you have core businesses at amazon and microsoft, if they are core businesses, we can omit, and the problem with the large-cap is that it is just a feedback. if you are spending on, you are buying from nvidia, and it goes in a circle. i do think there was a shout

across the positioning and interdependency of the stocks, so i don't think it is 100% yet. i do think there is a little worried about positioning sentiment in that space. if you look at nvidia, i think there is a four on the stock, talking to institutional investors i think people would like to be involved, but getting down there hurts. and that is why you didn't get that vacation. dani: i wonder when things like that are washed out. one criticism i hear is not that we overdeliver, which is the leverage and the fact that you can buy a three times levered nvidia etfs madness, so do you need to see the end of those types of products? it feels like people are happy to buy them. nothing has discouraged people from buying these products. do you foresee a washout of that to get back to normal? stuart: last monday, zero data

options were 26% of volumes, half their normal. technically, you saw that trade get put off old. the leverage products are not going away. people would like to use them. the leverage issue is interesting because there are certain investors. they have leverage because they would like to but when volume is low, they continue, but the street is aware of them. we know when overwriting etf's have to balance and what is getting traded at zero. they just are not going away, full stop. i think the question is discretionary leverage, with the hedge fund leveling themselves up. that leverage will get pulled out of the system of it that these products are not going anywhere anytime soon. lisa: stuart kaiser, thank you. let's get you an update on stories elsewhere.

here is your bloomberg brief. yahaira: up nearly eight percent in the premarket, mars agree to buy kellanova for consideration of near $36 billion.they make pringles and cheese its, and since 2020, mars, known for skittles, has also scooped up kinds north america and nature bakery as an expanse to their snack or folio. shares of also but are lower in the premarket. the justice department is considering forcing alphabet and google breakup after a landmark court ruling found the company not allies the online search market. the move would be washington's first push to dismantle a company for illegal monocle's asian since the unsuccessful efforts to break up microsoft two decades ago. it includes forcing rule to show

more data with competitors and measures to prevent it from gaining an unfair advantage in ai products. the u.k.'s wizz air is offering a deal for last-minute travelers. the airline is offering and all you can travel annual pass for $571 a year. passholders can only book to travel 72 hours before departure. it is worth noting that is there is u.k.'s most delayed airline last year. lisa: next, the harris policy platform. >> calls we are asking for is better wages, and if, lives, and dignity in the work that we do. lisa: that is coming up next. this is bloomberg. ♪

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lisa: coming into a day ahead of

cpi, which i'm told by the likes of money that it might not be the most important event, it might be tomorrow with retail sales and jobless claims. we are one hour and 15 minutes away from that cpi. s&p futures unchanged, fascinating market out there, not so much, this is the old summer. the euro climbing some highs we have not seen for months, 1.1024 versus the dollar, one of the highest levels to the beginning of the year. under surveillance, the harris polic platform. >> the only things those two guys know about working people is how to take advantage of them. every single test they have gotten, their ability to collectively bargain to take that away from the, always were asking for is better wages, benefits, lives, and dignity in the work that we do. lisa: kamala harris is set to

roll out details of her economic policy vision on friday in north carolina. the campaign source saying that she plans to pitch lowering costs for middle-class families and taking on corporate price gouging. mario parker joins us in washington. what details can we expect to get, or not, on friday? mario: we expect from our sources that she will hone in on health care, housing, and food costs. how to lower the costs and prices for middle america. part of the platform, we should note, is the fact that the democrat ticket she was on with president biden before she surpassed -- seceded him at the top of the ticket, the message on the economy was not getting through. it was not cutting through. a lot of that has to do with what voters felt was a lack of empathy. so what you will see, what we expect to see, is that she feels

the consumers feel as though the economy is not the rate. the message that the biden campaign priest was, hey, the economy is great, and it had been falling on american voters who had not heard the message. annmarie: if we have only seen her at massive rallies on teleprompter, how did she actually convey that empathy that they think biden was lacking, given the fact that she is tied to the biden-harris administration? mario: that is the irony. she has a new lease on political life in some ways, even though she was his vice president, this is to the frustration of the trump campaign, as well. based off of polls, voters appear to be giving her a fresh lifeline. they are not tying her to economic report card, if you will, of biden administration. she has a fresh slate to reintroduce herself now. you are seeing her take

advantage with the rallies. and we are seeing her take advantage with the rollout on friday. annmarie: are there concerns given the fact that bidenomics could mean something great if you are a democratic voter or negative if you are a republican or even independent voter, it's a concern within the harris campaign that joe biden should not go on the trail with her? mario: we have not saw that concern. that is a great point you raised. they will debut on the trail tomorrow for the first time since harris took the top of the ticket. they will be in maryland tomorrow. whether or not to what extent joe biden -- one of joe biden's favorite phrases is, however he can help you, either campaigning with you or against you, he understands the policy and politics of it all. dani: annmarie was great talking about yesterday we had small is this confidence at a two-year high. small businesses tend to skewed

not democrat. a group that is unhappy as long as a democrat is in power. when you look at these surveys around how people feel about the economy, how much faith should the harris camp taken them? -- take in them? mario: they should take some. two-year point, it is not necessary that they need to win the block, they just need to lose less. you will not necessarily turn a historical trend in one election, but you would like to decrease your losses there and increase some of your support within the troop. -- within the group. there is some good economic news that has come out for the harris campaign the last week. another was in a financial poll for the first time, she surpassed trump on the economy. that was his strongest topics on the campaign trail. dani: in the meantime, it benefits harris to have this classic democrat, nothing too controversial.

in the meantime, trump is trying to pin her down on many lines. one consistent one is she is not talking to the media and needs to sit down for an interview. do we have movement from the harris campaign in how they will thread the needle of not saying too much but getting back to the criticism, not just loved by the trump camp, but the media, as well? mario: and the irony that trump is pushing for more media access. the thing is they need content. they need -- the trump campaign, they need for her to sit down. she has a new lease on political life, so they need first father. there -- freshwater, and the hope it will be generated by media appearance. they are trying to earn out the clock as much as they can but they will not be able to outrun the topic. from what we understand from the campaign and she will do an interview at some point over the next month or so. we are not sure what that looks like or what is setting -- or

what the setting will be, but she will have to do that in the next month or so. lisa: i'm wondering about donald trump. we did see him have a rally after the assassination attempt on his life. i'm wondering why we have not seen more. is that something expected or do we have a sense of whether this is sorted connected to how he is getting his bearings given some of the changed landscape? mario: he will have a rally today in north carolina. this will be his first time in a swing state in about 11 days or so, nearly two weeks. before that, he had a press conference at mar-a-lago on friday. he had an appearance online with elon musk earlier this week, as well. some of it is he was fundraising, and then some of it also is a function of how much the race has changed over the last 3.5 weeks with harris epic ticket.

the trump -- harris at the ticket. the trump campaign has been caught flat-footed. he appeared in montana to appear against democratic senator, which was a vestige of the campaign from a month ago, where he was struggling to save everyone else around or at least attempt to save everyone else in the party. now with the polls showing that in some ways harris is drawing even or has surpassed them, it is time to get back out there on the swing state and show up his own prospects. lisa: mario parker, thank you. if you look at the bidding markets, which we are not supposed -- btting -- betting markets, what are you watching to parse through the noise? annmarie: it is fresh momentum, and her campaign has a new lease

on life. i would look at it as harris closing the race, but it is 50/50. the cook political report viewed it like this when they moved to arizona to a coin toss when it leaned republican before. he mentioned the tf poll, one in four registered voters say economic conditions are excellent or good. lisa: which is the reason why i think one of the polls that came out of the ft suggested that maybe was not the case. we will get of you on that next with the marriott president, anthony capuano. with travel season in full swing. this is bloomberg. ♪

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♪ > we're just here getting travel tips for stewart kaiser so that you knows where to go on vacation. pretty much nothing going on in terms of the index level head of the open and frankly ahead of about an hour away, cpi print. you are seeing a little bit about performance from the russell 2000. this goes to the question whether we can get disinflation without a growth scare. you look at where this is going on the bond world and you can see those lower yields sticky after a pretty riproaring rally last week. to your yields down some 30 basis points since the end of july. right now continuing that trend, although barely.

the 10 year, 30 year at 41.43. basically if you believe this through, what we see in the currency market is a strong euro, a weak dollar. the strongest euro we see back to the beginning of january which raises the question how much it is entirely a dollar story to the fed? axios reported that antony blinken has postponed his trip to the middle east over uncertainty about situation. he had been scheduled to leave for the middle east yesterday. what we know that where these negotiations are as well as some of the conversations about how the u.s. views some of the cease-fire talks to staving off some of the expected violence? >> biden was asked about this yesterday and he said that is my expectation in terms of the cease-fire agreement was reached, potentially with that mean that iran would hold off on its retaliation? so you see the u.s. will be flooding the gulf with not just

the weapons and security in case they do have to come to israel's defense, but also with people. brett mcgurk is coming from cairo to doha. my expectation would be that secretary blinken would go on that trip even if it was delayed. you see a lot of effort being placed in the region right now. >> to try to prevent some kind of altercation that has a pretty high chance of some sort of accident and unwitting escalation. meanwhile sources telling the bloomberg that the justice department is considering a rare bid to break up google. the android operating system and the web browser chrome are the units most likely impacted. this comes after a court ruling found that the company monopolized the online search market. real question about how much this is actually being taken seriously. the market isn't reflecting a massive selloff. still, this highlights something we've seen for a while, this desire to see in the competition at the top. >> even if google isn't told

they need to break up there are still bleeding ramifications. a great corollary for this is 2000, microsoft loses the antitrust case that doesn't have to break up. they can't exert their dominance in a once did. even if google doesn't break up, it is hemmed in its ability to assert dominance in things like ai, that does mean you could see some serious competition in other areas. >> and this is not going to end, this is a bipartisan issue. jd vance talked about it on a number of sunday shows and reminded everyone that the antitrust case on google started under the trump president. he thinks lina khan is one of the individuals doing a pretty good job. so it comes to antitrust and trying to break up some of the big players, this is going to be an r&d issue. >> rafael bostic saying he is looking for a little more data

before supporting a rate cut. he's added he's encouraged by recent inflation readings. question about the little more data in about one hour, where that given that confidence. we will also be speaking with him coming up in jackson hole. another modest increase last month. the consumer really is in focus here and it is a host of data earnings that really are coloring the picture. to growing list of companies are warning of a slowdown. marriott cutting its outlook expecting weaker demand in north america and china. marriott international president and ceo joins us now. always wonderful to see you, thanks for being in studio. i feel like the u.s. and chinese consumer are two completely different stories so i want to start with u.s. terms of the greater weakness. is it across-the-board or this bifurcation that we just keep seeing, low-end really crimped? >> there is certainly a

bifurcation across consumers. the lower and consumers feeling the pressure of economic headwinds. in fact, while we don't operate in the economy tear, and the economy tear, as you move up the chain scales, we are seeing continued strong growth really across segments and across geographies. in fact, the strongest growth we saw was in the luxury segment. so that luxury customer continues to spend, continues to have confidence and continues to prioritize spending on travel and experiences. >> can you give a sense in the non-luxury segment where consumers are pushing back, what they are not building to spend on in the same way that they were a year ago? >> if you look at our q2 numbers with the exception of greater china, we saw strong growth across every geography and across all three segments we operate in. business transient, group and

leisure. it's not that we are seeing a pullback in travel. we are seeing a little bit of a level of caution and somewhat a related discretionary spend. food and beverage spending, for instance, was down a bit. those consumers that appears are still prioritizing traveled may be being a little more judicious on their spending as they travel. >> youth and with marriott for a few cycles. i wonder when you look at some of that concern. how similar or how far away does it look from past downturns? >> from a macro perspective, not terribly dissimilar other than the trend i just mentioned to lisa, which is we have great credit card partners and american express and jpmorgan chase, so we have really rich consumer spending data to evaluate. pre-pandemic, you saw some of the younger demographic starting that shift away from purchases

of hard goods toward experiences. post-pandemic it really appears to be across demographics and that is a trend that seems to have the legs to endure long beyond the end of the pandemic. i think that is a distinction. for marriott, we are a different company than we were in different cycles. a higher percentage of our business is franchised, so you don't have that incentive management fee volatility. higher percentage of revenue comes from nonrevenue related sources like our branded residential business, our branded credit card business. we are much more international than we were in previous cycles. but there are certainly some similarities. >> and you have yachts now. >> our second yacht launches next month. >> i'm just curious about said the of investing in luxury. we want to have marriott private jets in the sky. what does it mean to either

continue on the trend or double down on it? >> the good news is we are not buying any of it. we have terrific partners were investing meaningfully in luxury. we want to lengthen the lead that we enjoy in luxury. we've got industry's largest luxury footprint, interviewed largest luxury pipeline. the industry's largest luxury branded residential business. and a goddess is a natural extension of that. we find that luxury customer wants to spend a higher and higher percentage of the traveled wallet with the brands that they really trust. we've only been in the water for two years. more than 50% of the passengers have never cruised before. i think they look at that brand as a little bit of a housekeeping seal of approval, and more than 75% of the passengers we've had our members. that 210 million members loyalty

platform really gives us a channel to talk to them about our expanded offers. >> i want to ask you about hawaii, and i know you have a lot of concern, you put a lot of effort into rebuilding what was going on in now we after the wildfires. his tourism coming back? >> it is. we just passed the one-year anniversary of those horrific fires. i had my whole leadership team and now we just last month. the great news is the army corps of engineers is to be applauded. the progress they've made in cleaning up lahaina, preparing lahaina for redevelopment is really encouraging. we have the commander who is running the effort give us a tour of lahaina. there is a house under construction which was really important symbolically. but the aloha spirit is as strong as it has ever been. our people are passionate, resilient, excited to see tourists coming back. but they are still operating in

occupancies in the 60% range. so if your viewers hear nothing else, go to hawaii. they need the business, it is as attractive a destination as ever. >> so who is traveling right now? we spoke to the four seasons ceo who said they are seen weakness with the chinese consumer. >> interestingly, the high-end chinese consumer is traveling a great deal but they are not traveling in china. when we reported our second quarter earnings, the highest market we had in terms of year-over-year was japan. in japan, up 21%, and a lot of that was driven certainly by american travelers, but by high-end chinese travelers. >> how much is that driven by the weakness we've seen in the end? travelers take advantage of that. >> certainly that is the case. that chinese traveler was locked down any of the significant way and you've see the chinese government create isa-free travel across the region.

>> as an american company based in america, doesn't give you pause to keep the footprint and the size that you have in china, given some of the overlay of tensions between the countries as well as the lack of appetite to go beyond that region by chinese wealthy travelers? >> i have an expectation eventually they will come back. if you think of pre-pandemic, the growing middle class in china and their appetite to explore the world was one of the things that drove a lot of optimism across our sector, and i think that will come back eventually. two your first question, we've got a little more than 500 hotels in china today, nearly the same number in the pipeline and almost the entirety of that portfolio was owned by chinese companies. and so i'm not sure we are necessarily viewed as an american company in china because the assets are owned by the chinese.

and they love global brands like marriott. some of course our business thrives in times of political stability, and when you have ratcheting up tension between the u.s. and china, that is not great for travel. but our demand levels and china are back to pre-pandemic levels. the reason we reported such weakness is because of rates, and rate is soft because a lot of the high-end chinese consumers are leaving china to travel across the region, and the booking window, because of weaker consumer confidence in china believe it or not is under three days. so they are making those decisions very close to travel for in country travel. >> to try this altogether, i know that marriott had a subdued outlook going forward in terms of how quickly you can see some sort of normalization or personal of what we've seen in the lower end can tumor. how deep do you think some of the weakness goes, the reluctance? is this a matter of economic uncertainty or something that

you are seeing escalate in a more significant way? >> i think your term normalization is the right one. remember, we saw our business dropped by more than 90% in the early days of the pandemic. for the last couple years we see demand come roaring back. the benefit of those really favorable comparisons has faded and we are settling into a more normalized demand environment. weakness in the consumer obviously hits our business. we operate in a cyclical industry, but i think everybody is waiting for september, and if the rate cuts materialize, that will be at least for the consumer. obviously i'm going to be watching you at 8:30 to see what the inflation numbers look like, but all of that factors into the mindset of the consumer. the thing that gives me confidence is this almost sociological shift we've seen with this appetite for travel, and i think that bodes well for the business. >> thank you so much. always wonderful to have you on the show.

but now let's get you an update on stories elsewhere this morning. here is your bloomberg brief. >> germany's public prosecutor has issued an arrest warrant for the suspect alleged to be involved in the 2022 attack on two and gas pipelines. german authorities have been unable to bring into custody the suspect was a ukrainian diving instructor currently living in poland. the suspect will the german media outlet he was surprised by the accusation and denied being involved in the attacks which damaged both strings of the pipeline and the waters near eastern denmark. japanese prime minister won't run for a second term as leader of the long ruling liberal democratic party in september. he said any news conference people he will devote himself to supporting the new leader selected to the presidential election. his successor will be japan's third prime minister since

shinzo abe stepped down in september of 2020. and apple's main manufacturing partner for the iphone said it expects revenue to grow in the current quarter and for the rest of the year. also reporting a 19% jump in revenue for the quarter, surpassing estimates. that boost helped in large part by its growing business of supplying data centers with service containing nvidia ai accelerators. plus a pickup in shipments of the iphone in china have reversed a slump in recent months, a boon for foxconn. >> up next, counting down to cpi. >> you still do have inflation above target but i think inflation risks have really dissipated. the fed should be really comfortable cutting rates. >> that's coming up next. this is "bloomberg surveillance." ♪

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 ♪♪

relax into a caribbean state of mind. visit sandals.com or call 1-800-sandals. 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. ♪ >> we are seeing a market that

is in deep wait for that cpi threat coming up in about 45 minutes time. you do see the real action today is on the currency front with the euro the strongest vs. the dollar going back to the beginning of this year. counting down to cpi. >> you still do have inflation above target but i think inflation risks have really dissipated. the fed should be very comfortable cutting rates. if the fed were to go by 25 basis point increments, yields rise. maybe you see equities come down a little bit. but i'm skeptical that the fed being a little the more hawkish is going to tighten financial conditions, 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 negative news on the economy. >> less than one hour from a crucial inflation report, the first of three key economic data points that will set the stage for the next rate decision on september 18. charles evans, former chicago fed president, i am so pleased

to say joining us now. thank you so much for being here. i want to start with the debate we've been having on the show this morning, which is if the fed behind or ahead of the curve if they cut rates in september? >> good morning. that is a great question. i think the fed is in an ok place right now. i think that they've spent a lot of their time indicating that they need confidence that inflation is going to be on a sustainable path to get to 2% inflation, and i think that is a stiff performance bar. back in january they were nervous that so many people thought that many rate cuts were ahead and the inflation path in the first quarter was bumpy, but they appeared to be much better. last press conference, jay powell the gave the inflation progress welcome. everybody is expecting a better number this morning. i think they are in a position where they can respond to the

improving inflation data, and the normalization in the labor market and a bit of nervousness. i think it is time for them to really start talking more about how they are going to act and then actually act. >> you have the luxury of not having to actually represent the federal reserve and you can talk about what your impression is, so let's go there. the fact that the market has pretty much full confidence that the fed is going to cut at least three times, probably four times this year. 100 basis points of rate cuts. justin cole was basically saying why? there is no sign that they should be cutting rates given the fact that the economy is still strong and the labor market hasn't turned over. what is the argument to go now, given that we are not seeing a negative print on jobs creations? >> it is a restrictive rate of 3%. they said that in july last year and inflation has gone down. by its real measure, it has only

gotten tighter since they took those actions. if you look at a bunch of benchmark policy rules that the fed looks at, they don't follow that necessarily. they certainly don't follow them in lockstep, but they are a guide as to where policy likely would be headed and they are far south of where we are right now. i think i saw something where john taylor said that his rule says that the fed should be about 4%. that is quite a long ways. jay powell has said that the labor market is normalizing and they seem to have more competent for the labor market is only normalizing and not doing worse than that. even though the unemployment rate has gone up. maybe the most recent increase was for some positive backers like increased labor force but it has increased substantially and the unemployment rate usually either goes up or it goes down. and when it is going up, it usually keeps going up. it would be quite sensible from

a risk management standpoint to sort of take the initial action and step down somewhat from the restrictive level of 5.3%. >> along with what they should be doing, there is also the matter of what they should be saying. at least from the more hawkish members, saying we need more evidence. charles, you take this view that your fellow peers are not guiding well at this moment. what would it look to be guiding better? what would you want to hear from the fomc at the moment? >> the fed is really relying on this rhetoric that they are not about to cut rates until they have confidence that inflation is going to come down sustainably, sustainably to 2%. the fed doesn't have a lot of experience maintaining a sustainable 2% inflation. we kept inflation under 2% for a number of years. if that is the definition of sustainable, i can understand why they need the restrictive

stance of policy in order to be confident. but i don't think that is what they really mean or they should mean. i think that the increased unemployment rate has got to make you a little bit nervous. at 5.3%, but that doesn't have a lot of history being able to cut the funds rate at a measured pace. at least 25 basis point increments on a quarterly pace. what you have more likely at a rate like this is january 2001 were all of a sudden they realized they needed to be nimble and cut by 100 basis points, and in january 2008 where we cut by 125 basis points in the course of two weeks as well. i think it is just risk management that you would want to step off of this really quite restrictive 5.3% stance, and as

nimbly as possible communicate that this is just sort of a readjustment and you've still got your eyes on getting inflation down. you just don't need as much restrictiveness as they have in place now. >> one of the criticisms is this idea of recency bias, that they were behind when it came to try to, inflation on the way up, so that fort of scars from that moment meeting they don't cut as soon. you've been in the room with these decisions being made. is there any credence to that argument? >> i think that people often say you need to be humble, the fed needs to be humble. there's a lot of uncertainty out there. i think part of humility is being embarrassed when things didn't go the way they thought they did. so when inflation went up to 7% of the pce, and i was part of this, and i was saying this looks like it is transitory, it's not going to last, it was persistent.

but it has come down. it has come down without unemployment going up. the platelet normally did you delete a downturn in order to get inflation down 7%. we are at 2.5% on the core pce. that is remarkable and it is because of ongoing supply factors. it is difficult to look past the fact that i think they had their eyes on the ball, i think jay powell was increasing the funds rate very quickly in 2022 and got ahead of the curve. certainly got on top of the curve better than other foreign central banks. but it is hard to give up on this idea that you let inflation get away from you in 2022. gosh darn it, you've just got to get it down to 2.0 and it has got to be sustainable. i think that's very aggressive but that seems to be what they are thinking about. i'm not in the room with them and trying to understand what they really need by a

sustainable 2%. i think they do some clarifying on that. >> charles evans, thank you. we will try to get some of that for you. up next, blackrock, jp morgan and mizuho as we do count you down 35 minutes away from cpi. you do wonder how much the cpi print could shakeup markets that are really attenuated to this idea that the fed can cut rates. >> 200 basis points worth of cuts preston for the next year. what happens if the number is hot and just a few moments time? >> the reason why some people are taking full right now. a weaker dollar as people anticipate regardless of what happens. this is a federal reserve that is going to cut rates.

♪ >> i'm not really concerned at all about inflation staying too high. >> we still do have inflation above target and i think risk severally dissipated. >> expectations of slowing down

with the economy. >> slower growth which is a necessity to cool inflation. >> the restrictive aspect of is working. i think we are going to see moderating inflation. announcer: this is "bloomberg serveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. >> 30 minutes until u.s. cpi, welcome back to bloomberg surveillance what we are counting down to one of the key data points that we get this week. annmarie hordern, dani burger. jonathan ferro will be returning on monday. we are about 30 minutes away from that key metric. a time when a lot of people are saying this is really the key question that we've been having all morning. is the bond market overpricing how much work the federal reserve has to do to keep the soft landing on track? i'm really interested in what the reaction is of this bond market. if it is 3%, 2.9%. do we get another leg higher in this rally, in this bond market?

if inflation is coming in it doesn't mean recession and the bond market is screaming -- maybe not screaming, loudly saying recession. is that in line with reality, regardless of what cpi does today? >> one thing that has been hard for almost a square is it sustainable to see the higher end, wealthier individuals continuing to do just fine and be able to travel and spend, when the lower income classes are increasingly having difficulty in pushing back in the consumer spending map? >> inflation is the number one issue going to alexion. this is the first of three cpi before november 5. when you hear from corporate earnings, mohamed el-erian police at listen to what corporations are saying. they're are saying they are still seeing that resilience from the upper and the resilience is really starting to crack on the lower end and i think that is why this dpi is really important. >> maybe not enough to bring

down inflation which is maybe the key metric. at a time when we've already seen it a move, and the two year yield we've seen 30 basis points of the clients in the end of july. we've seen a four-day winning streak on the essence -- s&p 500 that has been the biggest going back to november. we've seen some of the biggest tech names deliver incredible performances. and thinking of nvidia with a 70 -- 70% gain in the past week alone. this is than the other existential angst, how much are we right back to where we began before that volatility got kicked off? >> of volatility is kind of the point. you can see that clear shift in the markets from all comb, every day inching up to a new record. at south last month when we got the cpi report. through everything, kind of into the wind where you getting powerful small-cap rally that undoes itself. two year yields going under 4%.

so it was a change in this market as we try to grasp onto trends and there is this incredible stock. so does today help us find the direction? does today help us, or maybe distressed tomorrow. >> for many we just won't get direction tomorrow which is the unfortunate reality that we've been in for quite some number of months. coming up this hour, pleased to say we got blackrock as markets to hold steady ahead of that cpi print mizuho on why he think the u.s. economy is still healthy, david kelly of jp morgan on why the fed to percent inflation target is within reach. i love having them together because they kind of oppose each other with respect to where we are in this recovery story. we begin with our top story, cpi out in just under 30 minutes. the s&p 500 notching a four they winning streak. another soft data print on the back of ppi. the rest of the market remained

higher than expected inflation data, and weak retail sales that would put the federal reserve in a bind while growth risks have increased. we believe the market has overreacted to a small number of soft data points, not a drastic change to the macro outlook. i want to take into that a little bit. where is the biggest overreaction right now in markets? >> i think that the overreaction, especially in the beginning of last week was certainly in the massive repricing we saw and the bond markets with the work screen pricing and all of those 50 basis point cuts which just did not seem likely given just week before that, we had heard from a very resolute chair powell that they were going to be dependent on the totality of the data. obviously we've unwound some of the moves. we like fixed income for a while. even with us having like fixed income as much as we did, it felt like too much was getting

priced in. as you received earlier, the market screaming recession risks and frankly, when have we ever care that much about the ism number? i think that was a limited and overreaction. thankfully it has unwound. i think what we need to see his continuation in terms of that inflation using, and i think we continue to see that the labor market is moderating but not falling off a cliff. i think that is what is going to drive equities and bonds from here. >> what is the bigger risk considering how people opposition, that we get an upside or downside surprised to vision? >> i guess it depends a you are thinking about bigger risk. for the equity markets, if we get a very shocking print, that is obviously not the expectation across the street. everyone is expecting a soft 0.2, but if we meaningfully

overshoot that i think that is going to be a problem for the equity markets and bond markets. and then if you follow that with the retail sales, that is a little cooler than expected. if it is even weaker than what we've seen, that is a big risk markets. we are still in the midst of some geopolitical risk. we still have elections not that far away, which historically hasn't been good. i think there are a few risks out there. >> that's so many things to even just keep track of. in these moments where the pendulum swings so fast and there are other risks from the outside, geopolitical that could potentially impact thanks, what do you even do? is there somewhere you can hide during this noise? >> what we've been telling investors to do is sort of hide

and the highest quality parts of the market. one thing we saw after cpi was the siege bid to small caps. at that point we didn't feel it was appropriate. today we get a softer than expected cpi and the same thing happens, i would still say favor up in quality, and i would also say look for some downside protection especially over the next six to eight weeks, given how much we've rallied in equities. we talked a little but about volatility, we've also loved owning the belly of the curve. i think all of those still make sense. i would just say that between now and october, november, i think we might continue to see a little bit more volatility than we historically seen, especially the last eight months. >> at bond: i find particularly interesting. is this tension that made we are praised as big as we can be, but

people are still hiding out on bonds. how do you think about the interplay between the two? >> this is such an important question because on one hand i talked about have too much was priced in the very front end on the other hand, i've been on this show before and talked about how the long end of the curve doesn't have enough premium priced in. so where you want to be focused is some of the belly which is the three to seven your part of the curve, which is what we can telling investors and also focusing on active investment where you're putting your money with a portfolio manager they can rotate between high-yield and emerging markets and other parts of the market that are attractively priced in getting you a significant income. looking at investments in the belly of the curve still make sense. i think the front end with quite a bit and i also think some of that negative correlation to equities is coming back, and we

certainly saw that in the bond market last week. there's a lot of money on the sidelines. you are not going to keep getting that 5% they were getting in cash. it is time to step out into bonds. >> you mentioned the uncertainty at of the u.s. election. we had mixed reviews saying whether or not last week the actually saw the unwinding of the trump trade. do you think that was some of the? >> i think last week was all about the unwinding of the carry trade. i don't necessarily think it was an unwind of the trump trade. i do think as of right now when we look at with the yield curve has more or less been doing, the steepening is something that makes a lot of sense regardless of what happens in november. you can point that to trump, you can point that to kamala.

i don't think it matters one way or the other. i think he steepener is a trait that we like. broadly what we are telling investors to do is focus on areas of the market that are a little bit more bipartisan. things like infrastructure, tech independence. those we think are going to win in a variety of outcomes, and i think that we also need to tell investors that historically, going into elections, we've seen in the volatility, so stay invested to the volatility and in quality. >> when you walk in the room, is this the first, second, third question they ask you? >> it's definitely the first. maybe not last week. but usually it is one of the things that is top of mind, especially in a world where cash is yielding 5.3%. so when investors and clients are allocating to cash, that is an investment decision.

that is not i am so scared decision which was the case with covid when cash was zero. so i clients are asking is i'm doing so well in cash and we have election risk and we have geopolitical risks. so now what? it is all our responsibilities to make sure that they understand if you are investing in cash now, you might not get into one gear with greg today because we don't expect cash rates to be lower, and the other thing is you are giving up on these other really ripe opportunities, especially in the belly of the fixed income market . >> if we do get a soft cpi print and we do see that the fed does have a green light to cut rates in september, how much cash do you see floating away from money market funds into bonds, into the belly of the curve or corporate or even risk assets? >> july was a fantastic month

for fixed income etf. this list just the beginning, we think, of investors continuing to pour into fixed income. it can be the belly, it can be longer end, just moving away. in the u.s. right now there is around $5 trillion globally, some of that will remain that some of that will eventually recognize the opportunities. july gave a single bit of insight especially when the fed actually starts moving. i think this can continue to be a really great year for fixed income. >> thank you so much for being with us. right now this get you an update on stories elsewhere this morning. here is your bloomberg brief. yahaira: the world's biggest single owner of equity for reporting a strong performance in its investments the first half of the year with big banks to big tech. norway's one point $7 trillion

sovereign wealth fund reported returns of over 8% in staff as stocks surged. the fund said that -- during the first half of the year. a spokesman announced the fund will now release updates on what is in its portfolios twice per year. global oil prices are rising after an industry report found a sizable drop in u.s. crude stockpiles. inventories shrink by 5.2 million barrels last week according to people familiar. that would be the seventh straight weekly drop is confirmed. elsewhere, risks remain that a retaliatory strike by iran israel. u.s. and the probability of an attack has increased, and then i could come as soon as this week. an activist investors are pushing hard for sweeping changes at southwest airlines.

they include the former heads of virgin, westjet and air canada. elliott has previously demanded major changes at southwest including ousting ceo bob jordan that is your bloomberg brief. >> up next, the morning calls plus cpi. 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 ♪♪ ♪♪ relax into a caribbean state of mind. visit sandals.com or call 1-800-sandals. why do couples a sleep number smart bed? vi need help with her snoring. 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. ♪ >> 13 minutes seven seconds until that key report, the cpi may or may not the dial. right now markets pretty much any range to anticipate that he data point. just amazing how much we've retraced. the idea we have rebounded entirely the volatility that we saw and then some, that we saw

nvidia up more than 17% in a week. >> is also madness with in that timeframe you get nvidia swinging up a couple billion down. then you get japanese stocks that suffered their worst day since 1987 less than two weeks ago and it is back around. to see that kind of volatility and take a step back and say if you were on vacation you would have missed it is kind of an insane thing. sony peoples of volatility classes will continue to get it, and we just happened. >> first up, updating aaa to outperform the endless, saying the chain can sustain market share gains in the challenging macro backdrop restaurant. baird upgrading starbucks to outperform is with a price target of $110: brian nickel an exceptional executive, savings brand management expertise.

analysts same reputational damage from last month global i.t. outage appears contained. uscp i just moments away. michael mckee, bloomberg economics and policy correspondent. will it be 0.2% or 0.21%? how big a difference does it make? >> to the thin it will make a whole a lot of difference but the rally members can make a difference the markets in the way they see this office. it is like a roulette wheel. you are either on red or black and then you trade on it. i think the biggest thing that people are going to look for is to we see continued progress in the areas in which the fed wants to see continued progress like housing, airfares, used cars and things like that. if inflation continues to show some progress that is going to be good enough.

we don't have to have we have last month which was a big surprise lower. >> talk to us about the confidence we can take in cpi numbers. paul donovan says these numbers are made up, it is a fantasy number. why are we still painted into that? >> i was reading his comments earlier and the only thing you have to say is yeah, oer is kind of a meetup number. it pushed inflation up, maybe inaccurately when we were going to the higher inflation time. it kind of works both ways. there is a good point, and that is one reason that jay powell emphasized super court. services without housing in it, because we know that the housing numbers are kind of weird. and super court has come down a lot as well. the question is, what do we see this month?

everybody is waiting to see would jay powell say next week which may be informed by what happens today. then we get another cpi before the next fed meeting so this is going to dispositive. >> is it the fact that they need to see lower inflation data or just more inflation data? story kaiser saying that is one reason he doesn't think the cpi report is that important. they just need to see more of the data as long as it is not completely out of bounds. >> i think that is true. even the hawks are making the point that we can cut rates if the data continue to show us what it has been showing us. that is the expectation, that will see continued progress if only incremental. >> right now ahead of that week that steve or judo of mizuho onset ready to go. really the key question for a lot of us, how important is the

cpi print? >> this morning's number, not particularly. i think this bed and opened the door to cutting rates as wide as you can open it. they've gone through three iterations of opening the door. first they raised the inflation target consistent with cutting rates, and they lower the unemployment rate consistent with cutting rates, then jay powell basically said all we need to do is see the data stay where it is and we can cut rates. the interesting thing at the market reaction to that and the pushback that has come from some of the members of the committee. i think we were looking at what jerome powell keeps telling you, there is a difference of opinion within the committee. jerome powell is clearly lining up on the other side of the committee. >> do they need everyone in agreement if they are going to be cutting in september? >> i think the chairman would really like unanimous decision. i don't think he wants to go

into a meeting and have more than one dissenter. especially because of the proximity to the politics, because some of the statements made by former federal reserve presidents of new york, bank of new york, these kind of statements have amplify the political nature of this. therefore i think he would like to have unanimity in the process in order to decide this is something that was not a political decision. >> to get that consensus what do we need to see in the data? >> that's a darn good question. i think it declined in terms of the year-over-year growth rates would be very helpful for them. but remember, we are still in the threes. again, that ppi number that came out yesterday argues that some of the key components of the pce number that come out later this month are not going to be

friendly and year-over-year we are starting to move higher. so i think what we are getting into is a very tight window where the prospects of cutting rates have increased dramatically because they really have wanted to cut rates forever. and they get to the point where they sit there and say if we don't do something, what are we here for? and that is kind of the position that gotten themselves into. >> if you are not intimately connected to alphabet soup, the different components, there is this figure take away that actually makes all of these very relevant, and the reason why i care so much about them is that essentially there is a debate right now, i we had greater risk of re-acceleration of inflation or outright deflation even akin to what the problem was before the pandemic? how much are you arguing it is still reacceleration vs. the disinflationary spiral that a lot of people had gotten used to saying was actually negative thing not so long ago? >> this inflation pressures are

real. you don't have to go much beyond the top line of the new services report on the different countries around the world and what they are experiencing to see that. the question is whether or not it gets translated into u.s. inflation and this is where the answer becomes critical. yesterday was a pretty disappointing day for the currency. we moved to some exceptionally low levels. the currency can easily offset the global deflation risk because that is all concentrated in goods prices. where services are driven by domestic forces. domestic forces are being driven largely by the labor market. this federal reserve wants to keep the labor market very tight. you argue there is this great debate going on between the domestic cyclical inflation and the global deflation which way we pan out. unfortunately, it's up to the currency. >> a great point especially when we have the euro at 1.10.27. they have a lot of debate around this in terms of globalization

and what that does. vanguard put out a really good paper on that. questioning the disinflation of globalization. steve will be sticking with us. michael mckee also, all coming up next. david kelly of jp morgan will be joining us with steve. we love having them on. they can go against each other about where the balance of risks is for the federal reserve. this is how we are stacked up ahead of print. expecting 0.2% cpi month over month. still on the downward trend, potentially opening the door to the federal reserve rate cut. this is bloomberg.

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♪ >> we just have seconds to go before the ci -- cpi print. here is the state of play. not a whole lot going on in markets after a pretty eventful four j street. seeing a little bit of a pop across the board. the russell 2000 outperforming. two year yields continuing their dissent as well as across the board although actually picking up a little bit, just fluctuating there. right now we do have the economic data with uscp i coming out. here is michael mckee. >> economists got this one right. hence increase in the court, 2/10 increase in the headline. just as forecast. base effects are somewhat hard to miss.

even though we are in wine with the headline number, we see it drop on a year-over-year basis to two point 9% from 3%. that is better than expected, and 3.2% on the core on a year-over-year basis, also better-than-expected. and that may have to do with their rounding that lisa was talking about before we came on. taking a look at some of the number see her, we see food prices of 2/10, same as last month. food has really come down as an overall issue. gasoline prices were flat on the month. we saw in the ppi gas prices were up and that pushover all goods prices up. new vehicles down to tenths and used cars down 2.3%. those are kind and is expected by analysts. shelter costs of double what we saw in june. we will have to see how that

breaks down. >> gave a second to go through some of the details. hard to know exactly what to do with this. marginally a little bit of a pop on the s&p 500. bond yields kind of fluctuating although a little bit higher. you do see the ongoing pop in the russell 2000 which really stands out with the idea of rate cuts. >> i think here you see the clear divide of how we went into this. the fact that you have bond markets rallying so much is undoing some of that. you wouldn't think if you saw small caps taking off, so maybe the fact that we did see some differences between bonds and equity markets that you did see bonds again pricing in already some very significant fed cuts.

maybe it needs to undo it with a report here that is basically a mine. >> basically not a lot of dramatic action in the euro-dollar, pretty much staying around that zone. mike, you had a couple seconds to part through the numbers. what stands out to you? >> it isn't particularly good news because the fed had been hoping they were now going to see a series of lower and ration levels. shelter comes in 4/10, rented out by half of 1% and owners equivalent rent out by 4/10, which is a reversal of the decline last month 3/10. so housing in the more expensive, and it is not what the fed wanted to see. i will continue to parse through this while you get the reaction of people who are smarter than me and certainly better looking and we will see what else we find. >> joining us right now, we got david kelly.

david, thank you for being on with us. what is your reaction to this? >> i think it is pretty good news because if you look at, first of all, slightly better consensus in the headline, there is slightly. but if you look at what is still holding cpi up, 1.2% increase in auto insurance. it is still the auto insurance anomaly. we did see five tens of 1% increase in rent, but that issue the rental numbers over 5% year-over-year. i think the auto insurance numbers are also somewhat misleading, but everywhere else, inflation is nowhere to be seen. in the actual transactions market the economy where people are asking in terms of prices, inflation is just a theory. i think that overall is very much confirm the idea that inflation is heading down. over the next two months i think we have some relatively easy

comps. i think that by september the fed may actually hit its 2% year-over-year number. you will see what happens. overall, i think this is further confirmation that inflation is gradually whittling away. >> inflation problem dead. your take? >> complete opposite view. i don't think you should ignore things like what is happening with insurance rates, like what is happening in the housing market. i think we were really looking at is the index. take the index for what it is. you don't throw out what you don't like. this is a problem that we have over and over again. this is a problem we have the people who want to look at a particular owner unemployment rate or yield curve to make macroeconomic forecasts out of it. the reality is it is a little bit like chicken little saying the sky is falling. the reality is these are individual components of the larger aggregate set of data. and then aggregate set of data is telling you the unemployment

rate is still low, wage gains are still happening in the economy, inflation is not you the fed target at this level. at the pc level, it is lower. and it is telling me that we have an economy that is still very healthy, so again, they want to cut rates, they are probably going to cut rates because they could open the door wide enough to bring a mack truck through it for bring the queen mary through it, and the net result is that will get what they want. but at the end of the day is it going to have much macroeconomic effect one way or the other? it's going to affect financial markets much more. >> i just want to give you a chance to respond to that. >> i don't think this is inflationary economy. i realize labor market is tight even with the unemployment rate up at 4.3% but what is remarkable is how much wage growth has fallen very steadily since march of 2022. all that tells me is it doesn't matter how tight the labor

market is, american workers are just not demand a huge wage increases, they are just not doing it. wages are still rising more than inflation. horn goods, food prices, energy prices, none of it shows inflation picking up. i think the economy is in a soft landing, it is in a good place. i think it is greater than the risk of any resurgence in inflation. >> not that this is a competition for market had a vote probably be owning steve right now. friend and yields moving higher by about five basis points. where looking and equities giving up on their gains except for small caps. that seems like a market that says maybe that they can't cut as much as we thought it was going to.

>> i do work the details on all these numbers and i was kind of surprised the consensus was as optimistic as it was. if we get a negative surprising inflation, maybe we can price in more fed rate cuts. if we get something close to expectations we will sort of seven news. that is probably what is going on in the bond market but it doesn't change that things are we getting here. the really important thing than is where is the economy looking when we get to september? we will get another inflation report, but we will get a jobs report for the month of august is going to be really crucial here. if it looks like the economy is softening too much i think the fed can study them and be confident going head toward 2%, but they don't want to be responsible for 20 rates too high for too long and helping trigger more economic weakness. i think they will be looking very close the ones going on in the labor market and on the demand side of the economy. >> david set the risk of

recession at this moment is greater will be our than the rest given ration the acceleration. do you see that completely different? >> i don't see a real risk of recession whatsoever. >> do you see risk of reacceleration of inflation? >> if you wind up with an accelerated economy, the answer is yes. this economy really has not slowed much. look at the gdp numbers. we continue to exceed expectations in terms of where we are going in the second-quarter numbers and what we are looking like eventually in terms of where we are in the current order area this becomes an ongoing problem, that you do run the risk of a domestic of -- mystic cyclical story. this really and result debate. this is the discussion, deflation vs. cyclical inflation. where do we pan out on this? david is right, inflation has been coming down slowly primarily because there is this real battle going on between

these forces. in the problem i see is if you start backing away from the pressure that is allowing you to achieve target, you might wind up creating an environment where you stop improvement toward the target. >> what would you say to corporate ceos who continuously say they are seeing the slowdown from consumers, they do see consumers deferring the spending? >> after environment of 3.3% growth, you are going to see that inflection point. that is a real inflection point but by the same token, you have services for spending is doing exceptionally well. and i think that begins part of the problem. services are doing extremely well. receiving some of the components that people want to throw out of the cpi report. the reality is it is services that matter domestically and goods that matter globally. globally it is a deflation story. domestically it is a sink inflation story.

where the currency goes from here will be critical. if we get back to 100 on your dxy measure from having as high as 113, 116, that is a huge depreciation in the currency and you can start to see some of the benefit of the good side dissipate at the same time that you may see little getting service side of the elation and you wind up stuck at 3% inflation. if the fed is willing to be stuck, fine. bonds have to adjust to that. >> if you are just joining us and want to give you a sense of where we are right now. cpi month over month coming in line as mike was saying with forecaster expectations. 0.2%. up from -0.1% in the prior month. cpi year-over-year coming in at 2.9%, just a touch below expectation. all of this really suggesting

forecasters are getting it right. mike has been looking to the details, the line items that we can debate. what are you finding in of interesting nuggets? >> part of this plays into the whole political campaign season that we are in now. insurance prices are very next. we do see motor vehicle insurance prices going up significantly, and if you look at x formerly known, and a lot of complaints about that. but homeowners insurance is flat on the month. medical insurance down just a little bit. it's not a universal situation. airfare down by 1.6%. if you are traveling, you're going to notice that. overall, it is housing at his push for sub. 90% of it was the 4/10 rise in owners equivalent rent and shelter. and that the fed can't do anything about. they are going to have to go

back to the ex-shelter measure and say things are getting better. one other political thing, and a no, real appreciate this, bacon prices are down 1.1%. that was, i guess, a big issue on one of the candidates' appearances. >> if bacon was on your bingo card, here you go. david kelly and steve still with us. david, there is this real question about the line items and how much they actually matter vs. the overall aggregate index pointing to a certain type of scenario. what gives you confidence that we are not at risk of reacceleration at a time when, as steve says, the dollar is actually weakening in the fed is likely to cut weakening even still. >> a falling dollar. follow frankly it would be a good idea if the dollar came down the long run. that would add inflation. but this is not inflationary.

let's pick up on airline prices. airline prices are down 2.8%. if you look at the number of people going through tsa checkpoints, it is at an all-time record high. americans have never flown more than their flying today. the planes are all packed and yet the airlines can't actually push up the prices, they had to push them down. i know steve is a little more worried about inflation going on, i'm a little more worried about the economy slowing down but so long as we disagree in that way, the economy is doing great here and what we are seeing is steady, low inflationary growth with inflation gradually coming down and hopefully the economy avoided ration i do think the federal reserve often normalize rates for exacting they are distorting the economy by keeping rates to hide. but overall this economy is in a pretty good place and i hope that steve and i are similarly dissing being as vehemently in a

few months time because that will probably send the economists straight in the middle doing fine. >> you hear that from the fit, the idea of the economy is doing fine and they have time and many they can wait for more data. steve, you look at this data, is the way over? >> if they could get a unanimous agreement that would cut interest rates. i think you would need something on the labor market to do it. i think they already taken it the equation. it is all about the employment numbers and the claims numbers. we will see with the retail sales numbers give us tomorrow. people aren't getting fired. what is happening is people are coming back into the labor force. they finally used to all the excess stating that most of my colleagues thought they use of a year ago and had used to but the reality of the situation is the transition this taking place from a very abnormal recovery period to expansionary.

-- period is going to be volatile. what is important if the breath of the data within the payroll employment report. it is like the breath of the data within the jolts data. it is the overall aggregate in interpretation and this is what the chairman is trying to bring out. but by the same token he also wants to hang his hat on a particular component within a report to state this is what i'm looking at. the reality is you can't have it both ways and that is what they are trying to do. they want the fed to cut rates a lot, but we don't want the fed to cut rates to quickly that people be worrying about a recessionary environment and then the market goes down. we want bonds up in price, equities up in price and everybody can go home happy. doesn't always work out that way. >> so that's why of whether or not the fed is likely to be coming in september, do they get 25 or 50?

if you think we're are closer to risk of recession than the acceleration, does the fed need to go 50 basis points in september? >> i would like them to go 50 basis points but only if they can message this as part of a normalization the is honestly, rates are in the wrong place and they get to get -- need to get the normal at a decently rapid pace. that is what they ought to do. but they have to messages that waiting is the problem, that the thin cuts at 50 basis points because they are scared of the unemployment rate going up too fast, it won't speed up the economy, it will cause people to hold business decisions. it will cause people to wait for lower rates before they borrow money. it will reduce the income for people with the $6 trillion of money market funds out there. when you cut rates it actually hurts the economy before it helps it, and that is why they are going to be very careful here. of course, this truth is they shouldn't be in the wrong place, they should never have raised

rates as high as they did and they should try to get back to normal interest rate and just stay there. but i do think that the employment report for august will be crucial here. i do think they o 50 basis points, but they ought to try to message that at the economy is fine, we are just hitting back to normal at a reasonable click here. we are not going to dried out over a year-and-a-half. if they do that i think they are managing the situation well. >> i guess what i don't understand than is if we are 50 basis points and we have more room for that, is that not sort of like an emergency cut? isn't 50 on its own something you wouldn't do if the economy is healthy? >> we didn't really have accelerating inflation problem at all in a 2022, 2023. we saw plenty of 50 basis points rate hikes. the fed has to sort of

desensitize the economy. just don't freak out here. the move don't seem to have much impact on economic variables anyway, so let's get back to normal. it is a close call. i wish they had started earlier because then they could have started based on inflation is steadily leaning backward 2%, we are going to take off the brakes here. they ought to start doing that earlier because i agree that if it looks like they're doing this as an emergency rate cut because the economy in trouble, as only going to weaken the economy. they have to be very careful with messaging and it think it should start with expressing some confidence based on today's numbers that the inflation situation is on the road to 2%. >> your view 150 basis point rate cut in september? >> there's no way given the dots they can message that properly. this is a committee that went from several rate cuts before the end of the year to one. now we are talking about in september, let's go 50.

what are the dots going to do? we're going to get a number of people on the committee to turn around and say i'm going to reduce the dots? they don't talk about the dots in that direction. so the reality is if they go 50 basis points, then the question is what changed so much that you only have one that now you have to and you are doing it all in one shot, and then what happens to the additional meetings for this year? the reality saw the other day when the unemployment rate came out and the market moved, people jump to the idea that when the fed cuts rates, a recession begins. and this is a mistake. typically, when the fed has cut rates in the last four cycles, it's because we have a credit crunch. there is no credit crunch unfolding. therefore there is no real need to move aggressively in monetary policy. >> thank you both, we love having you one, especially together. let's get to an update on stories elsewhere this morning.

>> as you were discussing, u.s. inflation eased on an annual basis for the fourth consecutive month, keeping the fed on track to lower interest rates when it meets in september. core cpi increased 3.2% in july from a year ago, the slowest pace since early 2021. the monthly reading rose 0.2%. the print showing inflation is still broadly on a downward trend alongside a softening job market. in u.s. mortgage refinancing surge last week the most since the early days of the pandemic as borrowing costs continue drifting lower. mortgage applications clamped 2.8%, the largest advanced since the first week of june. the rate on a 30 year fixed eased one basis point to 6.54%. and shares of cal anova are rising, after mars agreed to by the maker of pop tarts, pringles

and cheese its for nearly $36 billion. it was spun off from kellogg last year and since 2020, mars, which is known for m&ms and skittles, has picked up north american business and natures bakery as part of an effort to expand its snacks portfolio. that is your bloomberg brief. >>, setting them up for the rest of the week. you are watching surveillance.

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♪ >> markets still trying to figure out what you the cpi print. right now counting you down to the opening bell. tomorrow, retail sales plus another round of jobless claims plus walmart reporting before the market opens. we will also get fed speak and this time it does matter. on friday, round out the week

with housing starts, sentiment and more fed speak from austan goolsbee. we are about 24 minutes away from the cpi print. it hasn't showed that much more clarity but at least hasn't seemed to derail the fed from cutting rates. what is your take away from what we saw today? >> that we met so far on this bond market the jp morgan client survey showed the most net long on treasuries since the start of the year, so we went into this decision kind of expecting something soft. we got something basically in-line, hence the market reaction. >> it sort of raises this question, how much more clarity do we actually have right now v s. before? >> i don't really away from this conversation with any clarity. david kelley saying they should be cutting and he would hope that they would go 50 basis points if that were the case, thinking of the timeline. 50 basis points going into a u.s. presidential election where people are already trying to

politicize this. i have not a lot of clarity except for the fact that i think given the report year, housing costs, that is going to be a huge talking point friday when kamala harris comes out. >> i can imagine so. tom steyer of -- galvanized climate solutions, harry summer and joyce chang of jp morgan. this was "bloomberg serveillance." ♪

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>> we have markets that are showing green arrows now after cpi come in banging line. i'm matt miller. >> i'm katie greifeld. >> and i'm sonali basak. "bloomberg open interest" starts right now. sonali: core inflation easing in september. matt: and we have one of the biggest deals of the year. mars scoops up snack maker for $36 billion.