>> the american consumer right now is actually weakening. >> high prices, high inflation are disruptive but they make like challenging. >> there is nothing wrong with being a picky stuck buyer in this environment. >> high-heeled spreads are still quick range bound. >> people should remain calm because best the path to press already -- to prosperity. >> this is bloomberg surveillance. jonathan: live from new york city for our audience worldwide, good morning, this is bloomberg surveillance on tv and radio. equity futures on the s&p 500 and the nasdaq are lower 1/3 of 1%, a massive move on the two-year yield. tom: i have to admit with everything going on, the best indicator of all the central bank chat is the yield and the yield dynamics. as you go into real you'll this

afternoon from the celebration of positive statistics, a reversion in the real you'll act to -1.0 is positive. jonathan: conversations being dominated by more hawkish calls for a big move in made by chairman powell. it's a race to get to neutral in the debate remains open-ended stuff you get to neutral and then what? tom: lisa brought this up two or three days ago. do we have a clue what neutral is? i don't think we do given the growth supply shock and now to once-in-a-lifetime events, the pandemic in the war in ukraine. i don't think we can gauge where neutral is. jonathan: they think it has a to handle. lisa: they think they can get inflation under control and they will have to hike rates. we are talking about how hawkish they are getting in yesterday at

or 30 p.m., i logged onto the fed balance sheet and i saw quantitative tightening and i saw the tightening that was less than 10 billion dollars. it has basically flatlined. jonathan: they are not restrictive yet. and even if they get to neutral quicker, they are still not restrictive. the clue is in the word neutral. from there you look at inflation expectations. for all this hawkish talk about 50 basis point moves and moving toward neutral, they want to get there quickly. inflation expectations are still climbing higher. that's what's happening. lisa: investment management has been one of the longest standing modules who has been right all along. they said this time, bond buyers should be aware because it looks questionable that the fed understands a clear that they have to go to curtail inflation,

that could let inflation go higher. jonathan: good morning to you all, equity futures are a little bit softer on the essen the and the naz zach. we talked about the big move on the weekends treasury yields. up six its basis points on the 10 year and three basis points, 2.9375. lisa: have you hike into a weakening economy particular in europe. that's been one of the main themes of the imf concert. a seminar starts at 10:30 a.m. the bank of england's andrew bailey will be on that panel and the imf manager. how much to the address the idea of what they are seeing in the pound which is ongoing weakening as you get more hawkish talk from bank officials? it's all about economic growth and how much in the u.s. are we

looking at something that looks more unstable over the next 5-10 years. treasury secretary janet yellen is joining bloomberg television and i want to hear what she says about oil bands in russia. what do you do in order to provide some funding to ukraine and penalize russia for the incursion if you don't have an out right ban on russian oil? given all of the calls whether it's bank of america or jp morgan, the demand for higher prices for the tight oil market, why is oil hovering around some of the lows over the past few weeks? there is also the final round of voting to elect the next french president. now we see emmanuel macron leading marine le pen. i wonder how much that was a

tale risk. jonathan: it's something to watch going into the weekend. cable is off the lows in the pound against the dollar is $1.29. retail sales were disappointing and consumer confidence were the lowest in the u.k. and that's a challenge to bank of england. tom: the interdependencies i think are profound. i will go back to a phrase we haven't used in days which is jerome powell is central banker to the world. can he go 50 and 50 and ignore canada, ignore the rest of the world's? i don't think so. jonathan: even though inflation is 8.5%? tom: in the chinese yuan is higher as well. jonathan: the head of the blackrock investment institute

joins us now. you still like equities? >> we've covered a bit of the landscape here and i agree that we will end up living with more inflation then they are suggesting. we are only talking about normalization. i don't think they will go beyond neutral for now. it shows unemployment rising. we see a bit of hawkish in this driving markets at this juncture. we think we will see a rate more conducive of equities. it's a relative call.

tom: we are looking on the bloomberg terminal with some reveling in emerging markets indicated by currencies. you grew up with a phd at the house of bernanke at princeton where he believes financial stability is everything. from your view at blackrock, how financially stable is em right now? >> em is a big stays -- is a big space. you have a complex story playing out. the commodity story is playing out.

these are very distinct forces. it turns out here in an environment where rates are still pretty low they started earlier and were ahead of this and i think that provides more resilience. that's why we seem to be overweight em and that continues to be attractive in this environment stop lisa: how can you look at sectors at a time when people are talking about specific idiosyncratic stories within emerging markets? when you look at oil's versus financials or consumer discretionary and how are you surgical at a big firm at a time when people are talking about security selection? >> this environment is one where

there will be challenges. i think that makes security selection potentially more conducive. my team is responsible for brought allocation so i'm not the one that will be surgical on this. we have a large set of teams that are taking opportunities in this environment. it's things like the community story which has implications. we want to make sure the readthrough from the rate adjustment into the earnings potential of companies, that connection is not misread. jonathan: great to catch up with

you. a binary choice between a fed that causes a hard landing or where the fed has to live with higher inflation for longer? it seems he is taking the second view and not the first. lisa: that goes against what some fed officials are saying and it raises the concern, can they allow inflation to run at a higher pace that is constant rather than one that remains at a much elevated pace that deteriorates the economic trajectory? jonathan: when you watch the central bank come you look for the consensus and you look for the division. the consensus is getting back to neutral and doing it weekly. the division now is what happens

after you've done that step we knew the st. louis fed president wants to get a free hand on the fed funds rate which is not a consensus view stop they want to get back to neutral and do it quickly. maybe it means by year end, after that, they have to go to 3 and beyond. tom: we talk about the nonlinear affected when you get to that level, there is a profound effect. everybody understands where we are now which is abnormal. i don't understand the idea of going versus saying one and done into or done. they will say we cannot do it. jonathan: we have a fantastic line up on the program this morning. futures are down about 1of/ 1% and the nasdaq1 is almost unchanged. 0 this is bloomberg. ritika: federal reserve chair jerome powell as outlined is most aggressive approach to

attack inflation. he is saying two or more have percentage point increases and he describes the labor market is overheated and is taking direct aim at strong demand. in germany, chancellor olaf scholz continues shipping weapons to ukraine. it could lead to nuclear war and says that must be avoided at all costs. big investors are being urged to buy more investments in china. the benchmark index is down more than 18%. elon musk attempt to bite twitter has gotten more real. he lined up more than $25 billion in debt financing.

he wants to contribute another 25 billion dollars of his own money. renault could raise billions of dollars to pay for the companies evand would ease long-standing's issues between them and nissan. this is bloomberg. ♪

>> ukrainian armed forces are locked in this steel plant but it's safe to say the city has been taken by the russian forces. jonathan: equity futures are shaping up as follows. we are negative a little more than 1/10 of 1%. we are unchanged on the nasdaq 100. yields are a little higher. yields are up as much is 30 basis points on the two-year and we come back a little on the session.

looking forward to hearing from secretary yellen in an interview with david westin. tom: the last couple of times she spoken, not so much news but concept and theory. it's a very different secretary of treasury than what we've had before with the central bank experience. emily wilkins is in washington and maria todeo is in brussels looking at the french election. bring an assumed emmanuel macron win to his to do list with the war in ukraine on tuesday. what does emmanuel macron due tuesday? maria: it should be on a monday and that's when he should go back to his agenda.

he called the day wrong. he wants to get back on track but dealing with vladimir putin. the problem is that there is now a number of european leaders who say they don't want him to the on the phone with vladimir putin. he says the diplomatic channel has to stay on in the french say they are the only ones who can bridge the gap between russia and the united states. many see this is not just about his ego but it's also dangerous. tom: we will do the request and test the correction for the day of the week - lundi. this war has gotten really ugly with diplomacy. what is the strategy on war on

land in ukraine? maria: it is clear that finland will apply for membership in nato before june because they are concerned about this huge land order they have with russia. they've seen what russia is capable of doing in ukraine. a russian general this morning hinted at stage two of the war. they say they want a full corridor to go from donbass to m ariopol to crimea. russia is actually expanding. lisa: the focus has been how to do with the oil and gas issue in the united states with tension around germany because of the impact on the economy but also

china. i wonder how much we will hear from janet yellen today about potential tightening of sanctions if they don't more aggressively distance themselves from russia. emily: we heard from state department officials the other day saying that china could face sanctions if they continue to assist russia and continue to provide russia some form of relief from the sanctions. i think it's a good thing to keep and i on because you have seen washington triton pressure beijing to stay out of it or stay neutral. china and india is what the u.s. is keeping an eye on as they try to work with allies in europe. that's not always easy to do. different countries have different demands and you heard secretary yellen the other day suggesting it's not feasible to ask our european allies to completely rid themselves of russian oil and gas because of what it would do to their economies. lisa: as we move further into

this conflict, what do we do have russia takesmariupol? will they let it be if ukraine says fine, take that and we will move on? emily: it doesn't seem like the u.s. stance as shift. there is a high willingness to provide military aid and humanitarian aid but the redlined that they will not send u.s. soldiers into potential conflict with russia and they will not declare no-fly zones, those are still very much in place. it will be interesting to see if that shifts as the work continues. a lot of the heartbreaking images and stories that have been coming out have shifted the conversation. what we have seen, the red lines remain in place and it doesn't seem to be much of an appetite

in washington to do anything beyond sending financial aid and sending military assistance and finding ways to assist ukraine that don't involve american boots on the ground. jonathan: brilliant as always. thank you. wasn't that brilliant? that french correction? tom: it reminds me of the move from scotland. lisa: did you understand any of that? jonathan: no idea. futures are down 2/10 on the s&p 500. would you like to share within the green cup this morning? tom: it's a friday tang. jonathan: yields are unchanged

on the 10 year. a friday tang. yields are up the front and that's getting a ton of attention. lisa: people were talking about hawkish in his last week and then we got more hawkish. i wonder how this will progress as people continue to place rate hikes back to back. is that going to be the case? tom: the heart of this debate which is fascinating. this week, if we migrated persistent inflation out farther, my answer is we have. jonathan: looking at basic market implications, there is some of that going on. later, we will catch up with the

white house deputy national security advisor for international economics and we will catch up with him later. futures are negative on the s&p 500 and on the nasdaq as well. on tv and radio, this is bloomberg. ♪

jonathan: live from new york city, three weeks of losses on the nasdaq. futures unchanged up the back of the pain yesterday linked to what is happening with interest rates. bank of america calling in the meta curse. the s&p 500 down by a little more than .1%. the move in the bond market on the front end. yields higher by another four or five basis points. 2.7281. something that bramo has been looking out for a while that is really important, the breakeven, the difference between subtracting the difference of the yield on the curve and you get this so-called breakeven.

the 10 north of 3%. this gets interesting because the conversation has been dominated by higher interest rates on the front end, but at the same time, something is going on with inflation expectations in the market. lisa: the market is saying we have seen the fed over the past decade, they will not try to torpedo the market, they will back away from the most hawkish productions. therefore inflation will climb much slower than people expected. jonathan: that is the fundamental read. would you give any weight to the idea that we have a liquidity problem? the big moves in this market are not representative of anything without much catalyst at all? lisa: sure, but i would say a lot of the market is like that. where do you get the signals? you can say the same thing

about so many markets, but that bleeds into policy. maybe this is a misread signal, but we are also seeing the yield curve steepen, something you don't expect with ever hawkish predictions. jonathan: in english, french. let's get some movers with romaine. >> we have heard from all the major banks that say credit card spending continues to be strong. american express seems to be ratifying that narrative, 30% jump in card activity in the most recent quarter. that was offset by a 34% increase in costs. investors trying to digest with the trade-off on those higher costs of rewards will be enough to justify the pace of growth. right now they are not seeing that, down only about .9% in the premarket. schlumberger higher on the day. the ceo is pretty bullish,

saying the disruptions in the ukraine moore is causing countries to seek out new sources of oil, which could be a boon for oil services company. autoliv makes seatbelts and other things for cars. they say it is not their production that has slowed but the overall slowdown in vehicle production because of supply chain issues. revising their outlook for organic revenue below what the street was looking for. shares down 9%. snap earnings after the bell. investors don't know what to make of it. shares were down as much as 23%, up 10%, now unchanged on the day. i know you are a big fan. tom: i thought that was snap-on tools. >> they are hanging in. tom: tell me about gap.

what are we doing with beige pants? >> they had that deal with kanye west, but they lost the former ceo of old navy. tom: i want to talk about the urgency at warner bros.-discovery. i don't want to make any jokes about it because we have friends and colleagues at cnn plus. there has to be a renewed urgency at warner bros.-discovery to find synergies given with the price the stock has done. >> i think they have found it. the new executive team taking over, we were looking at the way that cnn plus was jettisoned a few days after this deal was closed. the question is how they pull it all together and if it will be enough to boost the subscriber base. tom: a lot of jokes about it, nothing funny about it, a lot of

people involved. we wish them all the best of luck. thank you so much, romaine bostick. the close, this afternoon. kelsey berro is with us now. bob michele with an exceptionally smart new that pushes against stepping into bonds. thank you for joining this morning. price down, yield up, and you say price can stay down. discuss that. kelsey: oversold the can stay oversold. we have seen a massive rise in yield. you have the two-year german bund above zero for the first time since 2014. we think this hawkish rhetoric from central banks around the world will not stop anytime soon. i heard you discussing inflation expectations rising. the flipside of inflation expectations rising is that

front end real yields are still falling. two-year real yield at -1.8%. that is almost 400 basis points away from where we got at the end of the last cycle. this tells me the fed still needs to push on this hawkish rhetoric. they will need to tighten policy a fair bit in order to pull back on the economy. tom: jonathan, is kelsey berro more hawkish than summers? jonathan: perhaps. what you think they should do and what you think they will do are two different things. what do you think they will do? what numbers are you looking at for the fed funds rate? kelsey: they are definitely comfortable doing 50 at the next meeting. i think they would ideally like to be above 2% by the end of the year. i think the economy will work with them on that. we still see the u.s. economy as fairly resilient.

there is a lot of pent-up demand for spending, particularly on the service side. people want to get out there and travel. this long-awaited move back from the good spending, pandemic winners to the reopening winners, that is still happening now. given that wages are rising and savings rates are low, this is still an economy operating above trend that can be resilient to some shocks. lisa: i know that is why bob michele lacks credit, looking at high-yield bond spreads at 6.6%. investment-grade credit yields also rising dramatically. how much do you parse out the value you are getting by just value and holding and clipping coupons versus the potential rate stock should the fed more aggressively to curtail inflation? kelsey: we have seen a massive repricing in the yields. you have the high index at 6.7%.

investment-grade credit with yields that are nearly double what they were just 6, 9 months ago. there is a lot more value to that credit now than we had before. at the same time, corporate fundamentals remain strong. when we look at leverage ratios, the cash they have on hand, their ability to raise prices, this is not an easy time for corporate, but they are coming from a very strong place. tom: we have a real framework of bear markets in equity. price down, yield up. can there be a catharsis? do people unload bonds in a panic? is there a history of that? kelsey: we are seeing a lack of buying right now particularly from the foreign base. i know you watch the spread, the currency pair, the u.s. dollar and the yen.

one of the ways we are seeing this translate into the bond market from the currency market is that weakness in yen is driving selling from the japanese investor, selling their foreign treasury -- there treasury bonds. that is putting upward pressure on yields when there is not a lot of people who are comfortable stepping into this market right now, trying to catch the falling knife. jonathan: explain why you and the team are still constructive on credit given what you have said about core government loans? kelsey: right now, we want to have that credit exposure, but we want to get it in structures that are shorter duration, that are floating-rate, that protect you from what we believe is still going to be higher yields for now. jonathan: kelsey berro, awesome as always. the bloomberg terminal, look at this. kelsey berro looks to log in.

did you see what comes up? her code today is "tang." what are the odds of that? kelsey: i believe one in 1.6 million. tom: how many tangs have i had on the set over the years? jonathan: if tk ever offers you tang before the show, don't drink it. tom: on friday particularly. jonathan: the risks out there in the treasury market. we keep talking about the hawkish federal reserve. that is the pushback that you are getting from some people in the federal reserve. tom: we will we be in six months, six years? this is absolutely fascinating. i will be adamant about this, none of this is in the textbooks. at the imf, he has to put

together the world economic outlook, financial stability report. none of that right now is based on core theory, we are making it up as we go. jonathan: so much of difference from what we have seen in the last 10 years. the ecb will be playing a part in a different way as well. the boj is doing peculiar things. lisa: i love the way that you phrase that, peculiar things. honestly, it is true, and it bleeds into the yields victor -- picture, if all of a sudden japanese bond yields are more attractive and stay away from the u.s. jonathan: fascinating times for the global market. tom: when brentford does a derby, who did a play? jonathan: west london? if they go down, they would delay qpr.

-- play qpr. ♪ ritika: keeping you up to date with news from around the world, i'm ritika gupta. let's get to first word news. you is threatening china for sanctions if they assist russia. wendy sherman says they are not helping by amplifying russian disinformation campaigns. in china, demand for oil is following the most since the early days of the pandemic. demand is expected to follow 20% from a year ago. china's zero covid policy has humbled large parts of the economy. emmanuel macron is getting closer to winning another term as president. marine le pen is running out of time to narrow the gap between them. she needed to land a major blow in the presidential debate wednesday night to catch up but

failed to do so. an international arrest warrant for former nissan head carlos ghosn. he now lives in lebanon after a daring escape after facing charges of financial wrongdoing. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg.

>> business travel across the atlantic already exceeds 2019

levels, and still opening up. it makes us feel really confident about the outlook. we have all of these travel research into europe, asia is shut down. it feels like we're in the first inning of the revenue recovery. jonathan: scott kirby, ceo of united airlines, great to catch up with him. up another 2.2% in today's market. we all like having a back-and-forth with the ceo, throwing some dirt at him and wiping it up, but he has been right. he said business travel would come back, we shrugged our shoulders and said good luck. united got the call right in a big way. tom: we all have our different stories on this, but away from buy, hold, we all get this analysis of who is winning. don't talk united are winning. british airways, what a

disaster. jonathan: they have to work out the customer service. everything is living it right now. it is expensive, you are paying for it in a big way. and the customer service has been horrendous across the board. tom: futures at negative nine. we can do specificity of air travel with helane becker, at cowen. a bit north of tucson, they had 89 jets in the desert. something like 400 jets now in the desert. is that the concern, they have to get those out to straighten out our fly capacity? helane: actually, no, that is not the constraint. the constraint is labor. they don't have enough pilots, flight attendants, mechanics. flight attendants you can solve

fairly easily by opening up classes. it is the pilot situation that is horrendous. we have outed over 10,000 pilots over the last two years as the airlines encouraged any pilot considering retiring between 2020 and 2022 to retire in 2020. it takes a long time to qualify as a pilot. scott kirby, yesterday, of united,, 10 there are 5000 to 7000 pilots every year trained to be commercial pilots. if you got rid of 10,000, and you can only manufacture five, that puts you behind the eight ball right there. then when you think about growth and continued retirements, you think about how many pilots american, delta, united are hiring alone, each are hiring 2000 pilots for the next five

years. it is a staffing issue. pilots are the most egregious. lisa: how much are prices going to go up on tickets as a result of some of these constraints? the fact that the man seemed to be searching? helane: we think fares will go up 7% per month through june, and oil prices are going up, as well. not only do you have to hire and retain employees -- and that is another thing that we are seeing. people jumping from one airline to another, something we have not seen in the past. that coupled with high jet fuel prices, everyone is estimating between 340 and 350 per gallon on jet fuel, and we see it there for the rest of the year, which means ticket prices have nowhere to go but up. there is a lot of pent-up demand, which is a good thing. domestic will continue to be strong.

domestic leisure is about prepend them it levels. it is the international and business that is not. if you do the math on it, and business comes back to, say, 90%, international comes back this summer to 60%, you would be at about 3 million passengers a day. it is not just the airlines. the airports cannot handle it. the infrastructure, tsa has to be trained, air traffic controllers. it is across-the-board. and to your point, it is miserable to travel when it is so crowded. we don't see it changing. jonathan: what about price tolerance? we heard about the price of fuel, they are able to pass that all to the consumer right now. is there going to be more tolerant in the business camp, will not allow them to settle things down in the back of the plane? helane: maybe.

i think as business travel recovers to some level, whether it is 70%, 90% over the next 12 months, that will certainly help the back of the plane, will help them at least maintain fares where they are. if jet fuel stays around $350 a gallon, it encourages the replacement of older aircraft with newer aircraft, and that is another issue. delivery delays with the 787, delivery delays with certifying the max 10. you still have a lot of issues out there that will keep a constraint on capacity growth. if you maintain the strong demand, even if anybody -- everybody just takes one trip a year, you'll see prices go up. there is nothing more for them to do. jonathan: i tried to ask this yesterday of scott when it comes to united, we know how much

these airline spent on buybacks going into the pandemic. do you think there will be a rethink of the strategy around capital returns if they experience profits again? do you have a read on that yet? helane: i think what happens with capital is they pay down debt. they still have billions of dollars -- they talk about $20 billion of liquidity -- but they still have a massive balance sheet. they have floating-rate debt that would be paid back first, especially as rates go up. and then they also have a massive capex program. it has been reduced because of the delivery delays on aircraft, but you are still talking about $5 billion a year for the next five years. they went need to use that capital to acquire new jets. n returns i think are on the

back burner. jonathan: helane becker, wonderful to catch up with you. it's been miserable for the people working in it, difficult, miserable for the shareholder, and things are turning a corner in a big way. tom: the quiet thing you mentioned about debt and what they'll do this time around is critical particularly with what they are doing in washington and the bailout from the pandemic. united airlines, 72% debt, there are some leasing issues that make it fungible, but that is a joy norma's number. jonathan: this is bramo's world. lisa: how much does that save them from the thornier political question? once they don't have those obligations to pay down, what do they do with those dividend payments that really came under scrutiny when they came under a liquidity crunch? jonathan: bramo's world.

a dark, gray cloud, thunderstorms. lisa: so dramatic. jonathan: with sound effects and everything. futures down .2. yields unchanged on the two-year. you always have to take it too far.

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>> in the near term, the fed will do what they can to get their credibility back. >> the type of inflation they are trying to control is androgynous. >> food and gas prices are out of control of the fed. >> it is behind the curve in a way it is never been before. >> while the market is not indicating recession, we expect a three year end. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. tom: good morning, everyone. jonathan ferro, lisa abramowicz, and tom keene.