>> the fed is in warp speed in terms of trying to get to neutral and past neutral. >> the fed needs to get to above 3.5%. >> the fear on the fed hiking cycle is something going to break. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. >> live from a stormy new york city. this is bloomberg surveillance on tv and radio. kailey leinz alongside lisa abramowicz, futures up about a third of 1%. it is all about the fed this week. lisa: do they go 50 basis points. do they signal a forward look.

how far they willing to go and what are they looking at in terms of inflation projections. jonathan: how data-dependent is this for the next several months. do you think anything comes through in the next couple of months makes it different to the trajectory of fed hikes? lisa: i don't know if that comes from the payrolls report, perhaps in the inflation side. when it comes to supply chain disruption, when it comes to china and perhaps higher oil and gas prices should there be some sort of embargo on russian energy products, could that shift the narrative more than the tightening labor market. >> last month was brutal. >> the worst want to be seen for equities going back. for the nasdaq, the worst month since 2008 and that was even in the face of earnings that by and large have been ok. you the vast majority of

companies beating to the upside. you're seeing 3% earnings growth and get that has not given relief to this equity market. jonathan: why is that? margins are up pretty decently. the earnings are there. at the moment people just aren't buying the good news and focused on the prospect of it turning bad. kailey: revisions over a negative territory not just for the u.s. globally. it doesn't look at rosie when you look beyond what happened in the first quarter. before we got a lot of the hawkish miss that has emerge from the federal reserve. >> it's about the reality of the here and now. the manufacturing pmi's 47. 41 hand is not pretty reading. arc of main effect in the united states will be the supply chain disruptions. the main effect on europe will be more substantial and a greater hit.

i wonder if we are overthinking this. perhaps they are down because benchmark rates are up so much in the relative valuations of gotten less attractive. how much is that the main driving feature when the dollar keep strengthening and people are completely readjusting their sense of what is normal when it comes to the backdrop. >> painful month behind. futures look like this up a third of 1% on the s&p. yields just a little bit lower. much higher the last month on tuesday and tens. crude negative about 3%. >> here's what i'm looking at today. the eu energy ministers are holding an emergency meeting to understand and perhaps get some sort of consensus in the region's approach towards russia. they've a meeting at 9:00 a.m.. how much did they get a consensus with respect to a timeline for gas.

natural gas prices well below the year-to-date highs, fascinating and a time when frankly people are saying they need to move away from gas and it doesn't seem likely they will do it in the near term. the global conference beginning first day in los angeles. among those speaking, james else are of global -- how much do they signal a doubling down on risk following the worst selloff going back to 2008 which we saw in april. how much is as a buying opportunity versus a shot across the bow. today the earnings continue. has there been enough weakness baked into some of the pandemic darlings, down 26% year-to-date. has there been too much optimism baked into the reopening stocks which is up 29% year-to-date. where is the dynamism going

forward at a time and you've supply chain disruptions, the tying -- the chinese slowdown and outperformance that is so bifurcated in a market. >> did tom keene take off because the red sox lost to the orioles. they destroyed the red sox. just curious because he has no problem bashing the birds from baltimore. day two of a hangover. on day three when he is forced to come back to work i will ask him about the red sox. kailey: i look forward to his reaction. jonathan: his football team won so he is a happy man. julian, your view is that this is the market of stocks, it's not about the index. walk me through your thinking. julian: going back to the rising cost of capital is clearly the

combination of yields moving higher and inflation moving out of a 25 year range has change the correlation between stocks and bonds. it is risk on, risk on and later risk off, risk off. interestingly enough of volatility where it is, a correlation has been low. it is no longer an index game and from our point of view there's a whole group of stocks out there who have had their earnings estimates revised higher and still have situations where they've been crushed year-to-date and that's where the attractiveness lies for us. >> these are specific stocks. where do you see the biggest opportunities? julian: semiconductors have been hit very hard in general and actually if you go back to last week there were several which in

a season of very poor earnings responses had good earnings responses. the homebuilders is the group everyone loves to hate. huge short interest there. to us, any sign that even the rates are peaking but that the level of this scent of rates is likely to moderate which i think if powell gives the market what it wants you get to see that. >> do you think there been pockets of capitulation in the market already. >> profitless tech is certainly close to capitulation but again in a rising cost of capital environment it doesn't necessarily mean there is a by because if you look at one or two years, a clearly refinancing is a more difficult concept going forward, but the problem here is particularly when you think about this week is it's very difficult to explain to the

public but negative gdp along with large inflation numbers in the public is the one that disproportionately goes into faang. >> the consumer by large seems to be tolerating higher prices, do you expect that's going to continue to be the narrative as you move forward through the year? >> we do on the ground survey work literally day-to-day and week to week and ed's work as tries we might to find material weakening, we do not see it. 80's is our view that if you look at years like 2015 and 16, the last time and exhaustion us shock like china weakening spilled over into the u.s., it derailed the consumer very briefly and then capped ongoing. jonathan: before we run away,

the conclusion of thoughts, yes and no. it's very difficult to pick stocks. michael pointed out the average drawdown of the average stock on the s&p 500 is 21.8%. what do you say to people who maybe don't have a skill set to pick stocks or the track record to do so and do not want to pay up the fees to see if someone will be successful. do we really want to give up on the index now? >> what you do is you really need to take a different sort of luck. it is our view that given the likelihood you will still get above trend. trend pre-pandemic was 2% growth that you will get above trend growth in the u.s. this year and next, you will get rising rates, you will have sustained high inflation. you want to tilt towards value. value has outperformed this year

after 15 years of underperformance. we think that continues. the fact is nothing last forever and index exposure has won the day for 15 or 20 years, we think that's good active management and this is where you have to do the research is going to look very attractive going forward. >> they've heard that of the last 15 years. do you know where i'm coming from, the people of heard this so many times. our i would argue it is simply because if you think about it again we've had two other regime changes that people probably hadn't thought could happen in the last 20 to 25 years, that's a bond market that is now reversed its bullish trend and is are deeply having yields headed higher as well as an inflation breakout. we think these things because a rethink of the investment landscape.

>> awesome having you in the building as well. that got missed on saturday night. trevor noah wrapped up his speech and handed over to the president. by saying careful when you leave the building, this administration is not good at handling evacuations. i am not sure anyone really heard it because they were clapping. the line was there. >> he said a lot of wonderful zingers. he had some pretty warm words about the power of the first amendment. >> on the nasdaq 100 up 4/10 of 1%. yields just a little bit lower. tom keene, out of the building, a kailey leinz in the seat along with lisa abramowicz. this is bloomberg surveillance. ♪ >> keeping you up to date with

news from around the world. federal reserve chair jerome powell could shift the needle on how high investors expect the central bank to raise interest rates. the fed is expected to boost rates a half percentage point on wednesday. another half-point hike is expected in june. it could push that signals a more restrictive stance. a warning from the imf, inflation may turn out to be even faster than central bankers anticipate. the risk is rising that inflation expectations drift away from central bank targets. he said the most important priority is to end the war in ukraine. lockdowns and china are taking a toll on the country's economy. official data showed manufacturing and service activity pushed april to their worst levels in more than two years. hungary is drawing a redline.

the government says hungary will never support extending easing sanctions to russia's energy sector. the eu set to propose a ban on russian oil by the year. warren buffett is buying big. berkshire hathaway made $41 billion worth of net purchases in the first quarter. they boosted their stakes in chevron and activision blizzard. 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 kailey leinz, this is bloomberg. ♪

>> i am really excited to be here tonight. the only group of americans with a lower approval rating that i have. >> republican seem to support one fellow. some the -- some guy named brandon. >> the president of the united states at the white house correspondents dinner saturday evening. we were on a different table but very close to each other, i could not stop laughing when he mentioned brandon. >> he's not sure who he is.

>> i think he knows what it means. >> i think he knew going in as well. jonathan: futures positive about a 10th of 1% on the s&p. we were recovering, tom keene still recovering. he will be back tomorrow ahead of a federal reserve decision after payrolls on friday. 44, crude down about 3%. the germans making some noise this morning saying they are open to a possible crude embargo. and they are open to it. >> they have already cut back their oil imports quite significantly from russia. really the main story with oil is what's going on in china and the shutdowns and how much that will affect the global demand supply picture when they could have a negative print. jonathan: joining to discuss.

annmarie hordern. keeping my voice. let's start with you. maria, the germans open to doing something on crude how quickly can they do it? >> i think they want to do it quickly. if it was up to them they would agree to it this week. i would note the details, it doesn't mean the implementation will happen immediately but the germans say they would drop the veto if they get a transition phase for this so the german industry is able to adjust in a phaseout that's gradual from now till the end of the year. there really is a key to this move in this change of heart from the germans is that they are already doing a lot of structural changes to the dependency from russia. yesterday they put out data in which the number should speak for themselves. oil imports from russia to germany has dropped from 35% to

15%. when you look at gas it's more. but you're seeing huge changes already from germany. for them dropping from 12 by the end of the year going to zero it does seem feasible at this point. >> where they getting their gas from? >> i think oil and again i know you asked about gas, but very quickly on oil we know in terms of transportation for this it is way easier so they are making ground here when comes to gas it's a very good question. the infrastructure is connected to russia. a lot of transit nations, for the time being it's not very clear where germany can narrow that gap. we have the german vice chancellor who will be here in a few hours time on a plane to many different places trying to get all of these deals. they've made a significant

reduction but to go down to zero i think will be very tricky. >> and others been a lot of discussion of rbc the release of oil from the reserves in the united states, but what about the biden administration's approach particularly with natural gas. because it is subject to a lot of weather issues and frankly as a national security importance with germany now that it didn't have a couple years ago. >> we saw the administration take on most a 180 on how they are communicating to the natural gas producers and the oil patch in the united states because of this wartime effort. we should note the u.s. is a massive exporter of lng and a lot of this has been shipped over to europe. the president as well announcing they will increase that the end of this year. the issue europe has with importing whether or not it's from the united states or qatar

or tokyo is willing to move a tanker and give it to europe instead of intaking it themselves, they are long-term contracts is the fact europe is just not set up strategically. the issue with natural gas is the entire structural issue. these terminal issues to liquefy natural gas. germany is still building them. this is a major issue so when maria says we are likely not to go down to zero, it is going to take years. >> you've nancy pelosi aching that surprise visit to kiev over the weekend. i don't believe sure turn right back to the capitol hill. when are we expecting action on that $33 billion in aid for ukraine president biden ask for? >> speaker pelosi sitting down in poland talking about the nato alliance. you can see the united states wants to make sure they are fortifying that relationship not

just with kyiv of the important allies surrounding ukraine. this trip is on the heels of that pitch. the president is asking appropriations and congress drawing down on that money usually starts in the house but because there really is this sense of urgency on capitol hill we could potentially see the senate take up that bill first. you will see a lot of bipartisan support for this. that top line figure you might have republicans nitpicking some of the issues going into that. it will start in the senate likely this time. the houses back at their districts. >> just working through some of the calls this morning, we anticipate the negative impact spread across all segments of internet including e-commerce, advertising and cloud computing.

these are the cuts, this is the u.s. list of chinese stocks this morning. jd cuts to 90 from 100. from 180. they believe that the story. >> at the same time we have heard from chinese officials some sort of support from their tech giant that rely completely on the supply chains out of china but their own tech companies. how do they compete with the fact you are looking at such a substantial slowdown. who's out there even delivering. >> bear in mind these cuts their overall ratings don't change which are mean their top picks. we anticipate both companies to be market share gainers. and competitive environment. we can talk about that another

time. leslie will be joining us very shortly. futures up on the s&p. for audience worldwide on tv and radio, this is bloomberg surveillance. ♪

jonathan: i cannot believe it is may. i'm still recovering from april. equity futures up on the s&p. on the month you know the story, of the worst month of the s&p 500. here are the year-to-date figures. s&p down by 13% and some on the nasdaq 100. things have felt worse than this on the s&p 500. michael writing about that and saying the average stock on the s&p is down by more than 21% so maybe that captures some of the -- what we had last month but equities were down and bonds were lower. we did not find that offset in the market.

this is of the bond market is set up going into the federal reserve this wednesday. the intraday high on the two years about seven basis points north of where we are right now. on the 10 year with a gap higher last month on the 10 year yield. that's with the surprise was for some. the fact we got some steepness back from the curve. >> people worried the fed would not be able to get inflation under control and they would remain behind the curve for longer. that was the big shift in april? have we reached peak hawkish nests but how much inflation will gain traction. jonathan: we will pick up on some of those themes in a moment. let's get you some signaling -- single names. >> we start off with the big tech picture. write up the bat you have apple shares down. you can see some of the losses.

this after an eu complaint about apple restricting technology allowing payments directly from your iphone. sticking with the text theme, we talk about microsoft up. this is not the conviction move if you are looking for a positive the pretty rough month of april. do we start off may with a bang. one of the big stories over the weekend was the buffet bid, of annual shareholder meeting were warren buffett talked about the arbitrage deal. microsoft coming in saying they will buy activision blizzard for $95 a share. those are still trading around $77. let's talk about the other name that warren buffett has been talking about which is building a stake in chevron. he's been building a stake in occidental. now he's doing a similar thing with chevron. the growth story in china

outweighs the buffet bid and you can see those oil names and the copper names all down on those china growth fears. >> in addition to some of his 90 plus-year-old fellow officers talking about how it's fair to show everyone they still alive and kicking. that was one of the main themes of the affair. >> he wants to let everyone know he's alive. >> it's fair to let you know we are here and we are fine. i think it was interesting that they were buying stocks because of the inflate -- inflation call and not necessarily because of value. really one of the key questions i have, have we really priced in peak inflation fears over the longer-term with the move we've seen in the 10 year rate.

i'm glad to have leslie here because you've weighed in pretty significantly. do you think it's time to start buying that 10 year treasury? what gives you that conviction? >> simply because liquidity as you know has been very poor in the treasury market plus volatility is high. as you get towards that three and a quarter, it's starting to feel that. it moved very quickly. the markets pricing in consecutive 50 basis point rate hikes. we have three and a quarter going into 2023, so there's a lot of price. we do think it's time. we don't think you want to be short here. but it's difficult to go out

right along with the type of liquidity and volatility that so high. >> what you looking at when they give their guidance area >> it is fair. i was figuring they go 50 in june as well. everyone will look at the q and day to see how hawkish they are going forward. whether these turn into -- with regards to qt, it's really about will they sell. and how high the mortgage rate has gone so quickly. if you look the level of 10 year yields back in 2018. the mortgage rate was much lower. so part of that rising mortgage rate is because this is down. i think this could be a big headwind to the housing market. >> i know you said it doesn't

really make sense now to be short to the longer end, what it out at the short end? >> particularly when you look at what's had such a large rise. we are not calling for the high. given the fact we moved so quickly with the heights expected this year. andrew seen such a large rise. combined with similar performance, it's not a bad time to take that incremental carry a little bit more protected now. >> let's talk about the relationship between the short end in the long end? we saw briefly inverted yield curve that's no longer the case. where you anticipate that trajectory goes from here? are, we normally when we look at the forecast what recession might be, we normally look at

three month 10 year. going forward, more than likely it will flatten out a bit. this can be for the long end coming down not necessarily the short and going up. >> before we let you go is that the best time to invest in riskier credit in a long time? for so long people are complaining about no yield. there are think and how you can have a high-yield bond. they diminish the prospect in these portfolios and now it's looking at high-yield bonds with a 7% average yield. this is really yield getting to the point of the pension fund. what do you see in terms of value here? >> yields are very attractive, of the fixed income market has been waiting a long time. those fundamentals are expecting

a soft landing. you really need to be cautious and pick your spot. given that this is matured so fast, and it will continue to mature. fundamentally this is sort of the same. we might see some deterioration. >> that's from the quality side, what about duration? >> one of the things we look at right now we would take that duration over defaults type of allocation. we expect again we are not willing to get along yet. you should think

underperformed so aggressively. we are just not ready to go along yet. jonathan: leslie on the bond side of things. we had the equity side of this as well. i think it's important to reflect on this for the drawdown we've had on the s&p 500. there's reason for that. it goes on to say more mental attention is spent on moderna, netflix and paypal which are all down. the focus seems to be because they are some of the most traded stocks out there. >> you ask that question do you lean into the strategy the time and again has failed for so many people. do they stick with the bat at a

time and i find that fascinating. i think about the banks and some of the such a high conviction. basically when the exact opposite direction. very uncertain environment on the economic scale but uncertainty as to how traders respond to that. >> i try to put myself in the shoes of the audience who for years averted end of passive and then they hear it for the 15th year running and this time do they really believe this is the regime change? >> on the flipside you can be really skeptical. there's been such a massive divergence in the outlooks for specific sectors. you think about energy and what's going on there.

being able to pass along the price increases versus the more volatile stocks. >> of things really didn't in the face of rising yields. to perform and it just has not performed. in the way so my people lined up on the show. >> while that may help them on the net interest income side. this if your the fed may leave the economy -- leave the economy -- lead the economy into a slowdown. that does not spell great things. jonathan: joining us is the global heads of commodity research. you do not want to miss this arid -- this. this is bloomberg surveillance. ♪ >> keeping you up today with news from around the world, here is the first word. nancy pelosi told ukraine's

president your flight is a fight for everyone. she became the highest ranking american official to visit the country pray chief told volodymyr zelenskyy they are committed to ukraine until the fight is done. sanctions against russia can be lifted only when forces leave ukraine entirely. the german it ambassador -- moscow is unlikely to give up the region. officials from rich countries are trying to pull together multibillion-dollar packages to help poor countries phase out coal. they are trying to get it done before global climate talks in november. the fighting has made coal a lucrative commodity to mine and export. in the philippines a new poll shows support for the late dictator.

the election is set for may 9. european union has hit apple with affordable antitrust complaint. they come -- they say the company could face heavy fines. apple says it's contactless pay system helps consumers. warren buffett is buying big. berkshire hathaway made $41 billion worth of net purchases in the first quarter. they boosted their stake in chevron and activision blizzard. 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. this is bloomberg. ♪

>> we need to see more production in the united states.

the market provided incentives and we are encouraging companies to do so. >> director of the u.s. national economic council, a lot to discuss in the next several weeks as a trying do something about these really bad polls going into the midterms. good morning to you all. futures down about a 10th of 1%. we started off positive were now negative on the nasdaq by 2/10 of 1%. a couple of stock stories out there. jetblue and frontier can we make a deal. >> there remains an open question. jetblue offered to buy for $33 a share. it's now offering an enhanced superior proposal to that adding a debt fastest her commitment and says they would agree to divest assets if necessary. jetblue is the disruptor on what's been agreed frontier spirit deal. asking to buy that airline for

$2.9 billion. jetblue initially wanted more. the board supporting saying the jetblue offer is not the superior proposal. interesting to see how this shakes out. spirit trading at $23 a share. >> jetblue has not had a good time of it. they failed to take over my mosaic status for. that's another story. would you take the flight from australia to new york? >> it depends if they have a track for me to run around inside. jonathan: you get a whole bedroom. a lie down bed and a seat. >> no way on economy. jonathan: that would hurt.

we will talk about that later. ed moss joins us now. it's not all doom and gloom. you say on natural gas this perfect storm how this market should loosen up later on. compared to the consensus view that's giving you pushback at the moment. >> natural gas we are getting significant them out of pushback. the issues we see is where markets are loosening up and we are dealing with a problem in the powergenerating sector not of the moment to transport -- not in the transportation sector. or the agricultural processes but very specific to the powergen sector. we are seeing china actually going all out. they are already looking at producing 13 .5% more coal than last year. they are adding 100 million tons of domestic production and each

another 100 million tons. that's can it displace imports in china they can coal available for the rest of the world. they are reducing their imports of natural gas, they make their way down. they have other supplies of natural gas imports, of a pipeline gas from uzbekistan, big jump from russia, a domestic production of gas around 6% or 7% last year to 10% this year and they simply need less natural gas. that will loosen up a markets and provide a significant amount for europe. what we see happening is a progressive reduction in european and global gas prices are and along with that gas prices in the u.s.. >> how much do you factor in some sort of overall embargo on russian gas imports to germany. >> we actually think it's a low likelihood on both sides and if

germany is not going to use its veto power in the eu, hungary certainly will. we don't think there will be a european acute -- community agreement on not pulling a natural gas or oil from russia and we don't think russia will pull back. income is better than no income. we actually think that that's a kind of controversial point where russia is now exporting of natural gas could go down but they could also go up, tolerance, contracts with european countries to add on above the contracts they have, they added on what they could. assuming the ruble payment issue is dealt with which you think it would be. more gas means lower prices and we get the volume with lower revenue for russia. it's another strategy that might

not be politically satisfactory but could actually work. >> for many months we've been focused on the supply equation and at how tight supply is. the conversation is shifting back towards demand especially when you see the chinese economy looking incredibly weak in the face of persistent covid policy. how are you thinking about china and the demand story not only for fuels but for metals as well. >> for china, it looks as though demand is down year-to-date. it doesn't look like that's in a comeback anytime soon. we think they will keep the blockage on international travel through the end of the year. there's much less room for growth than people thought. certainly not the seven under thousand barrels a day. they've been thinking that's can i come from china. we will see negative growth for the year.

maybe not one million barrels a day year-over-year. it's also in the u.s. where we've seen -- not seen demand increasing. indeed for the last four weeks on the moving average, u.s. gasoline demand is lower than in the last five except during the weakest part of the pandemic. u.s. demand is stalled out as chinese demand has been reduced. european demand will be lower. emerging market demand is lower. i would not be surprised if you see significant projections going down for where demand will be. jonathan: supply in the u.s. has been creeping up. where do you see that topping out? >> 900 a day year on year by the way. we think it will keep growing at this rate through the end of the year. we've raised our outlook for

u.s. production to be 1.4 million barrels a day year on year. we think it will be getting close to that 13 million barrel a day peak we saw. the momentum from that should be adding another one million barrels a day in 2023. we think one of the reasons for tight markets for helping u.s. production, that's coming back strongly. and it would be. >> thank you for catching up with us this morning. ed morse there of citi. effectively saying we get back to 13. >> which does seem to be where we are headed if you are looking at things creeping up. a lot of the producers to ramp up production. his idea that if you get more supplies, a demand from china and in the u.s., where do you

and up? jonathan: more recently, that output number stateside is creeping ever higher. lisa abramowicz and kailey leinz, tom keene back with us tomorrow. the fed and payrolls on deck. ♪

>> clearly market is very worried right now. >> we've been on a roller coaster ride in terms of tech earnings. >> we are seeing a massive downswing post-pandemic hangover. >> if you look over time, the equity markets are the place where you can cover your inflation. >> we are in a>> pretty interesting part of the market cycle. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: britain's april. -- good riddance, april. this is "bloomberg surveillance

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