♪ >> the financial situation has been positive for equities. >> but we are seeing is an increase in volatility. >> how high do rates need to go to slow down this economy? >> what qt does is another unknown. >> the risk of recession is no higher right now than normally. >> this is "bloomberg surveillance," with tom keene, and lisa abramowicz. tom: jonathan ferro, lisa abramowicz, and tom keene on radio. it is a tuesday of extraordinary inflation, that report in 90 minutes, michael mckee leading the coverage on the agony of a nation with inflation. it permeates every aspect of our economics. lisa: a complicated issue,

because you talk about the pain and it is painful for the individuals but the dynamism of corporate america with bank earnings with j.p. morgan, how much does this dissonance yield something close to a downturn versus a tale of two parts, the haves and have-nots? tom: the have-nots not doing well with the global and american recession. the world trade organization gets out front of imf world bank -- lisa and i will be in washington in a few days -- and the gauging of recession worldwide is a big deal. wto doesn't call for recession but with every bit of work i've ever done, 2.8% global gdp by every measurement i've ever heard models global recession. lisa: you look at how big the

downward revision is, 4.1% to 2.8%. we've seen these types of revisions downward to global growth that have been increasingly severe. at what point do we admit we don't know what's going on? how do you game out geopolitical shocks or what is going on in china and what kind of affect it will have on an economy that is still fragile? tom: kailey leinz, in a trilateral world, i will suggest with a massive locked down in china, the war in ukraine, seeing the images of esther putin -- mr. putin, the united states is the only one left standing within the global recession. kailey: the united states in theory more insulated from the situation then europe. rush -- the u.s. could be heading for a crisis whether or not an embargo is put in place and the wto echoes the peterson

institute warning of a slowdown in growth in the backend of the year. the bank of america fund manager saying numbers are the lowest on record. tom: we were in russia an hour ago and images of mr. macron, we hope to bring you madame le pen. this is french campaigning with medical officials in the far east of france over by switzerland and germany, and macron has stood there for at least an hour and done campaigning the macron way. lisa: he didn't do a lot of campaigning into the first round and he is kicking it up after the closeness in the election. the broader implication is dramatic. below are angry about how quickly the prices of the goods they buy are going up. this is not isolated to france. it is global. tom: the anger you see in france

isn't tourism, this is a nation in uproar. those wheat prices we quote from europe are mostly derived from dunkirk. let's go to the data. we will do equities with anna han. 2.08% 10 year yield, curve inversion move to 28 basis points deepening. the real yield -1.4%. oil gives me a four dollar rebound and brent crude $103. i could spend an hour on currency. dxy over 100 gets your attention. in the equity market, absolutely extraordinary here. we are going to get to that in a moment but right now, the day is so busy we need the brief from lisa. lisa: u.s. cpi for the month of march, some say it will be the

peak. it is estimated to be 8.4%, estimates ranging from 8.2% to 8.6%, the highest inflation going back to 1981. how much is this bleeding into the feeling it will continue and we will not see a blip in inflation but over the longer term this will be a trajectory of more painfully high and rising prices? we see it at the benchmark of five to 10 year inflation, the highest levels going back to 2014. how does the fed respond? perhaps they will address that. speakers include lael brainard as well as -- of the richmond fed, talking about balance sheets and how high they can move rates and the potential for breaking the economy. this has been one of the big discussion points, at what point does the economy cripple, buckle under the break of a 3%, 3.5%

treasury yield as some have been speculating? at 3:45 p.m., president biden will discuss how he plans to bring down the price of oil, gas, and all these goods. he is trying to negotiate consumer sentiment that has fallen to the lowest since 2011. he will be in iowa talking about ethanol. how do you take the demand or pressure away from gas prices and put them on corn prices? frankly they have been surging and are seriously in need. tom: commodities worldwide folding into the wto report of 2.8% global gdp, really something. anna han joins us, equity strategist at wells fargo. how d-link are equities -- delinked are equities from the bond market? anna: not too much move, the 10

year soaring. today the driver will be what happens with the core cpi component. food prices, oil prices have been very volatile. that's why they are not part of the core. the market will be more forgiving for a surprise there but what happens with the cpi cord goods versus services portion will be one of the main drivers. lisa: one theme has been that there has been a change in leadership in the index and moving away from big tech. we have seen this in the underperformance from the nasdaq. are we seeing a true shift in leadership or is this a head game? anna: i do think it's a true shift in leadership that's been coming for some time. we've been positioned. it can be frightening because when you think about how much tech as a general sector is in terms of not just market cap of the s&p 500 it also how much eps

it accounts for when it comes to earnings in the index, it is a big amount. the question remains, can the market still go higher even of such a large portion of the market is perhaps not the most in favor? we can't just lump together all of tech. particularly what has been underperforming is the more expensive portions so we can still take this in but be more careful. lisa: hi gross tech companies are large caps. can small caps find relief and why? anna: i think there is an opportunity but you have to be careful where it is not just looking for value in the tech sector. what we have noticed especially when we look at earnings transcribed and corporate calls is that corporations tend to have an easier time off sating inflation up -- offsetting

inflationary costs and labor prices but smaller companies have been able to do so on a broader basis. sometimes they have a little bit of a weaker hand. there is an opportunity but we need to lean towards quality as you grow smaller. lisa: how hard is it to make calls? anna: it is difficult. the volatility with this market, but broader picture, there is not too much that has aggressively shifted. we continue to add to our equation and tweak our models. the probability of recession this year or next year going a bit higher, it increases our tail risk. that's something we have to account for but doesn't completely shift our picture from black to white. tom: anna han, thank you so much. too short of a visit, the dynamics of the equity market.

i need to focus on inflation right now and boy, has the script changed from well, goods inflation, wednesday going to come back and services and this and that -- when is it going to come back, and services and this and that, and four and five standard deviation moves. lisa: we have the pandemic shock and now conflict shock. will we not be in crisis at some point? i really hope so. we are dealing with the fact that we have not gotten rid of covid and are dealing with supply chain issues and disruptions in china as wto was mentioning. at the same time you are getting increases in the prices of fertilizer and corn and oil and wheat and gas because of what is going on in ukraine. how do you wrap your mind around this? tom: the other thing that has disappeared is the idea of a glide path back. a lot of guests suggest

inflation will ebb over time but to what, 5%, 4%? kailey: that's the multi trillion dollar question. even if cpi data today represents the peak, when we talk about inflation rolling over, to what extent given the supply side challenges lisa is talking about? 2% inflation, how far is that room? tom: you are going to have to see. look what it is going to do to tuition. i think of different schools and of course there's a wonderful -- the wonderful schools of new york city. i look at stuyvesant, they are -- a little inside baseball on a celebration of education at "bloomberg surveillance." one of our offspring into stuyvesant. this is bloomberg. ♪

ritika: keeping you up to date, i am ritika gupta. president biden will allow expanded sales of higher ethanol gasoline to lower fuel prices and will make the announcement today during a visit at to an ethanol mill in iowa. ethanol is commonly made from corn. the white house suggests it could save $.10 a gallon. ukraine expects russia to wind in its invasion in the eastern part of the country and predicted a "more projected -- protracted and bloodier war." and shanghai, the u.s. has ordered all nonemergency staff at the consulate to leave china, leading to a rebuke by ukraine -- still some restrictions have been eased and residents report

great access to flights. sri lanka is taking an extraordinary set to save dwindling dollars for essential fuel and food imports. mark creditors will possibly default -- more creditors will possibly default. small business in the u.s. has fallen for a third month to almost a two-year low, according to the national federation of independent business. the biggest operations challenge is that 2% of businesses have raised prices. global news 24 hours a day, on air and bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>>

♪ >> he told me the situation is very dire. he made the call. non-essential workers should be able to go home and it is the right thing to do. tom: an important interview, that's what we like to do at bloomberg. his public service to the nation, a long and important tenure as ambassador to china, you can see that on digital. a really important moment.

endocrine living the life in hong kong -- enda curran living the life in hong kong. i need to go to you on the wto. i sat in hong kong with jimmy chang hundred years ago with the enthusiasm of globalization. wto looks first sub 3% gdp which by my hong kong textbooks is a global recession. how does china react to a syrup we percent -- sub 3% gdp? enda: china has been going bankrupt -- gangbusters since the pandemic began so they have been relying on exports as the pillar of growth for their recovery. now with the downturn the wto are talking about, certainly chinese manufacturers

expectations, and now we have the complication of the u.s. russia -- the russian invasion of ukraine and the chinese covid lockdowns. that will likely spillover to supply chains. when you stack it together and see the wto forecast, it does suggest downward pressure on china and export this year. lisa: how much are we looking at social unrest in china? we hear about issues of food and complaints of lockdowns don't seem related to science. how far has this gone? enda: there certainly has been discontent on social media, especially with the lockdown in shanghai. authorities control social media but it is a snapshot of frustration.

authorities say it is needed to protect the hospital system and elderly and of course the economy, but at the same time it has grown scrutiny on how much economic damage they are doing. the third time in the past week, warning about the hit to the economy and there is only a sense of urgency in terms of the support for the economy. the government isn't pivoting from this approach. they want the stability before the party conference at the end of the year but the discontent and determining to bring cases under control. lisa: can you comment on stability? what stability are they talking about given that people are saying this policy is bringing instability? enda: toward the end of last

year at the economic policy meetings in china, the word "stability" was used quite a bit. october or november is the party conference when president xi's impairing is expected -- president xi jinping is expected to get a third term. to keep things stable and on an even keel, that's being tested on so many fronts. russia's invasion of ukraine, china tensions in the spotlight, and spillover inflation in economy -- in markets. the zero approach is causing -- on the ground. there is a lot of pressure swirling around the government when at least needs it. they are managing it so far. there is a chance inflation will come into control but nevertheless there is a lot of pressure on government strategy.

kailey: let's talk about the government's or policy role, and shoring up the economy. what is the real expectation in terms of easier policy coming from china? enda: today talking about the risk of a contraction in the second quarter, they were saying the world is not paying enough attention to the slowdown in china because of russia and ukraine and the rate hikes. there is a sense of urgency. that was the word used by the premier today. there will be tax cuts for businesses, more spending on infrastructure bonds, more at a provincial governor -- government level to get projects up and running, and other methods to bring down interest rates. the authorities seem to be coming off the sidelines morning of a contraction in the second

quarter will not go unnoticed. economists -- they have to hit the 5.5% growth target this year. tom: good luck with that, with what wto shows and imf outlook in a few days. lisa abramowicz and i at the world bank and imf meetings and that kicks off i believe tomorrow we should see the world economic outlook, as wto front runs imf. it will be interesting to see. a mystery solved this morning. these are the investment and active managing giants of los angeles capital group. they unloaded barclays food days ago, steven arons and -- reporting that capital group is the mystery seller of deutsche bank and commerzbank today. what's interesting about these

big stocks and top-five holdings are index funds that are not capita group. lisa: i love the headlines, mystery seller no more. how much are people trying to abandon some of their calls on the european banking sector? and if they shift their views at a time when there is such a polarized feeling and frankly have been raising issues about liquidity in the market, that's why there's such an interesting moment especially considering some of the european banks. tom: i want to emphasize, and this is something for the modern investor is unknown. there used to be a thing called dominant active management and that is capital group. it is simple, they are unloading europe, right? kailey: seems that way and it raises the question, the outlook for european banks as we have an ecb that might not sit out this tightening cycle. a central bank very quickly hiking rates, shouldn't that

help? tom: seems like a time to talk to david haro. i am looking at credit suisse. mr. haro, credit suisse is not playing as well as the milwaukee brewers. red on the screen just a touch, this is bloomberg.

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tom: good morning, everyone. bloomberg surveillance. terrific news flow this morning, mr. pruden deciding the far east. mr. macron and marine le pen later on. this tuesday with inflation and all you need to know, yields are up. lisa abramovitz, do the data check with me. two point 79% on the 10-year. curving version has disappeared. the drawdown is a -13%. the bloomberg credit return total aggregate index, -13% from the end of 2020. lisa: 13% in credit land is way

more than in equity land. that is a sea change for people looking for full faith and credit may not only the government bond market but also companies that have gotten pummeled that much more. at what point does this change the calculus for investors versus the opportunity? this is the discussion to have as we watch the 10-year yield surpassed 2.8%. at what point do people start seeing value versus something different based on the inflation rate we are seeing today? tom: stay with us for the next hour on radio and television. 8.4%, the inflation report in one hour. romaine bostick on space payment good morning. romaine: you look at some of the movers out there. at&t separating that time warner business after a bruising to

your battle with regulators to get it done. there is a great read on the terminal today that shows all of the missteps that at&t took trying to rebuild that media operation, why it is now a pure telecom plate. they are higher by .3% in the premarket. as we look forward to the new earnings season for q1, the last remnants of q4 are coming in. carmax, eps, a big miss. the street was looking for a gain in unit sales. shares down 2%. some of the other public he treated car sellers including carvana, down. i know you love and a list downgrades. goldman sachs upgrading that stock today buy. morgan stanley downgrading

hewlett-packard enterprise, down 3.5%, saying the demand for telecom equipment showing softness. citi downgrading cisco to sell. they say some of the other competitors continue to eat the lunch of cisco. tom: earnings tomorrow from jp morgan and then goldman sachs. right now, to bring you up-to-date on the dynamics of this bond market, robert tipp joins us, chief investment strategist at pgim fixed income. how much blood is on the street? price down means money is lost. how much? robert: tremendous amount. this is a record move in bond yields we have not seen for 30 years plus. even greater drop in price because you are starting with low yield which means prices are more sensitive to movement.

it has been a tough period and we have jumped the rails in terms of growth and inflation, investors have gone a long way toward handicapping that here. we are kind of at a weighing station in the market at this point. you can see, today, in the price action, when the market is rallying, the president morning about a high inflation number. the market is pretty oversold here in the short-term. lisa: does that mean you are buying? robert: we do not discuss client accounts and short-term activity, but it is reasonable to expect, this is what you get in these cycles. after the martin has gotten 300 basis points ahead of the fed, the market is that far ahead in terms of pricing in rate hikes, it is typical to get a drop in volatility, consolidation in

rates, consolidation and risk markets. some retracement tighter and then reevaluate will be the next steps in this process. lisa: basically what i'm hearing from you -- and i've been giving this a lot of thought to -- if suddenly we have been talking about yields of 2.8% on the 10-year would break the economy, and they are not, because growth is as fast as it is. what kind of message does that send you over the long term about how much higher yields can go? the threshold has gone up dramatically because of the growth picture. robert: i think there are a number of steps here. your comment that you cannot get a big rally here, cannot be very optimistic here, remind you that last year, with a strong economy and high inflation, the 10-year rallied to 1.15, only to be

price to what we have now. you don't want to jump to the conclusion that this will be a much higher yield from here. in terms of breaking the economy, you are looking at a housing market that is incredibly strong with a very strong price appreciation and some underlying micro demographics that are boosting activity. as a result, having your mortgage rate go up 5%, it is not clear that will break it. corporate performance has been strong, very, that a rising rate does not necessarily kill the earnings-per-share outlook for equities. i think you are looking at a very strong economy with very high nominal growth. that is why it can tolerate the interest rate increases we have seen and maybe able to tolerate more. kailey:: is that the signal you are taking from the yield curve

that has steepened back out? robert: chairman powell tried to direct this, other research has well, the first few years of the curve. the first two years are incredibly steep. 300 basis points of rate hikes from the start of the cycle, that is a sign the fed is raising rates, the economy looks good, they have run way to do so. that is typically a good indicator on the economy. the 2s/10s curve, the market is banking on a soft landing. that will not be the important call, i don't think, until 24 months down the road, once they have taken up the slack in the front end of the curve. then the markets will be in the right place to evaluate whether recession is coming or not. it is way too early. that is the park to look at, the first couple of years. kailey: you are looking more

where the fed is looking. how do you think about the fed viewing real yields and how credible the market seems to think it is? robert: so many moving parts here. investors are much better off looking at nominal yields, looking at overall conditions and whether they are tight or loose, and then letting the breakevens, letting the real yields drop out. right now with inflation at 8%, 38 basis point fed funds rate, you are looking at eight almost -7% at the front end of the curve. that will destroy the curve, the tips market will compounded that, and some of the investor base will destroy that as well. going right to the real yields is the most confusing way to try to unravel it. tom: thank you for that. totally agree on the residual

focus. you have to look in a more complex analysis of inflation-adjusted yields. this is important, and it gets us out in front of the earnings to come. lisa, we will see a lot of comparisons, not to the pandemic, but 2019. american airlines gets us started in this earnings week. it is sort of apples to condos, i want to be careful here, but it is up about 5% for jp morgan. forget the pandemic, how are we doing versus 2019? lisa: and the why behind that is what i find most interesting. it is not because people cannot fly. perhaps they cannot hire enough

pilots, flight attendants, cannot get enough lights because they are worried about how much they are paying for gas and how quickly they can hike the prices. there are all of these frictions in the service sector that are persisting in ways that went far beyond people's expectations. how much will that be a driver? tom: we will do a big splash here with the banks. lisa and i will be in washington for goldman sachs. kailey, it's about all the other sectors, this look back to 2019. kailey: and the look forward will also matter. it is less so about what happened in the first quarter. as we have seen inflationary forces pickup, what will the outlook look forward in terms of pricing power, how much can they retain margin in the face of higher input costs? all of that will be important to watch this earnings season, which kicks off less than 24 hours from now. tom: we have to get back to

inflation tuesday. lisa: people are saying we don't care, this is already baked in. if it is 8.6%, 8.2%, we don't care. do you buy that? tom: based on what i have observed, i do not. 2.78% on the 10-year. what if we get 8.6%? 8.2%? what if we get 7.9%? lisa: 13.6%? why don't we just throw numbers out? i am just making it up. tom: there is no gloom in capri for jonathan ferro. tom: seth carpenter from morgan stanley, coming up. this is bloomberg. ♪ >> keeping you up-to-date with

news from around the world. march may turn out to be the high water mark for inflation in the u.s.. cp expected to show prices rising 8.4% from a year ago, the fastest pace since 1982. it reflects higher energy costs in the wake of russia's invasion of ukraine. bloomberg has learned india plans to boost exports to russia by $2 billion in the wake of international sanctions. the countries are said to be working out a payment system among the products india would ship to russia. president biden has unveiled new federal rules restricting ghost guns, they clampdown on purchasers of untraceable weapons. the administration has been criticized for a rise in gun violence during the pandemic. citigroup estimates apple may be

about to announce a share buyback. he also says the iphone maker may boost the dividend by up to 10%. apples second-quarter results are due april 28. the company has more than $2 billion in cash on its balance sheet. the plans to spend $40 billion on electric vehicles over the next ok'd. 30 ev models will be launched by 2030. the declared it would phase out sales of gasoline powered cars completely by 2040. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

>> if it is the first stage of a demand destruction cycle, as you

start to see the energy crisis in particular rising, this is something very visible, something consumers aren't sensitive to, you are beginning to change consumer behavior. tom: that is the most important video of the day. we will play that across the day and even tomorrow. global chief economist at ubs out front on the microeconomic foundations of this unique moment we are living. if you get 5% mortgage rates, lisa, i think you got some form happy demand destruction. lisa: i don't know if i would use the word "happy." people would use other adjectives. people theoretically looking for apartments in new york city, cannot find the inventory, which is why prices have not gone down. tom: welcome all of you on radio and television. 45 minutes from an historic

inflation report. in the equity market, kriti gupta went large on the amazon deal. she does equities this morning. >> we will build on the point that if you are seeing demand destruction, you are changing consumer behavior. what do companies do with that? jp morgan kicks off tomorrow. the question is with the amount of cash on these balance sheet, where does the cash go if you are expecting inflation? the answer has been buybacks. you are seeing record buybacks as companies are flush with cash. this chart shows a huge steepness when it comes to those buybacks. look this up when you get a chance. this is important when we talk about where else they could be spending the money. capital expenditure, spending on your staff? those will be the questions this earnings season.

tom: news flow this morning, the 10, 2 .77%. slight equity left. we have marc champion to talk about his wonderful continental perspective of europe in ukraine. instead, i will rip up the script and speak of mr. pruden and the far east, the first sighting away from the long table in the kremlin, talking about spaceflight with mr. lukashenko of belarus. reuters has some of the comments. putin says clears clear and noble, it was the right decision. we saw this from the comments and austria yesterday. there is no give way here from russia. marc: not at all. what we are seeing is russia

saying, ok, we are a little surprised by the strength of the response by the west to the war in ukraine, but we are absolutely not stepping back. we have friends elsewhere. we are capable, strong enough on our own, to continue without any kind of partnership with the west. it is an extremely unapologetic and important speech. even talking about being in metoo continue the space program and someone. this is russia, putin insisting that he can continue and that he doesn't need the west to do that. tom: what do you make of the reports in the last 30 hours of not a purge -- that is to cinematic -- but he is moving people aside, which you see in every war. new people come in.

discuss that in the kremlin. marc: i think there are couple of moments here. importantly, he put in place a different general in charge, and general that is from the south, from the caucusers region close to ukraine. he is under sanctions over his involvement with the annexation of crimea in 2014, so this is a general who knows the terrain very well. people are focused on the fact that he served in syria. basically all russian generals by this time have served in syria. that is an important moment. in a military campaign, this sort of thing happens. there have been other troubles where he arrested some of the intelligence officers, and that seems to have been about being misinformed before the war, basing the whole military strategy which was disastrous on

that that information. a couple of things going on. lisa: when we talk about vladimir putin characterize his noble goal, the gold has shifted over the past few weeks, at least considering what sergei lavrov said. how much are we looking at annexing off the eastern part of ukraine as the noble goal, and i put that in quotes, rather than a takeover, regime change, other issues that were put out there in the beginning of the conflict? marc: i think the ukrainian president volodymyr zelenskyy was probably right when he said they have not changed their goals. we have to assume that they have not changed their goals. when they have done is probably go about the military campaign the way they should have at the start, which is to go where they have the shortest logistics,

concentrate their forces to consolidate, and then after that to go further and be more ambitious. they have the noble goal, their claim that they have done this to protect russian speakers in the east. tom: i don't mean to interrupt, but just getting a translation of mr. putin's comments in the far east of russia and these are stunning. these will be the headlines tomorrow. neo-nazism became a fact of life of a country close to us. mr. pruden goes on to say -- and this is in translation. he talks further down about nazism. the thing we do, we help people, saving them from nazism. these are stunning comments. marc: it is more shocking to us

listening to pruden -- putin dan russian because that is the message throughout. it is wall-to-wall, 24/7, and that is the language being used, and it's become stronger as the war continues. that is how putin has positioned the war at home, and this is him telling the rest of the world that we are not ashamed of it, this is what we believe. tom: thank you so much for your perspective on these important comments from mr. putin. thank you to our team, associated press, the russian translation. we have to go back to economics, finance, and investments. i am not adjusted to 8.4%. it puts a huge part of america flat on their back. lisa: have we seen this translate into economic growth slowing down?

can the momentum we are seeing sustain? tom: kailey leinz in for jonathan ferro. lisa abramowicz with us as always. stay with us.

>> we are still in a booming economy, eight even if we are concerned about profit margins. >> where we are now is in a pretty rapid and ongoing repricing in fixed income. >> can the fed cool the economy, have a soft landing without creating recession? >> the markets underestimate the extent the fed can go without breaking the economy. >> growth is solid in the u.s. inflation data is critical now. >> this is bloomberg surveillance with