>> 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

," live on tv and radio. futures rolling over here, now down 0.3% on the s&p. lisa: after a really brutal month, saying goodbye to april. the first part of the year was dominated by peak hawkish in us, peak rate hike concerns, now moving into a new area where people are worried about something more pernicious perhaps. jonathan: it is funny when you talk about that relative to payrolls friday. here are the estimates from bank of america. assim 59, payrolls on friday, unemployment friday, 3.5 percent, and a federal reserve that is going to go 50 basis points and implement qt. does that sound like a bearish growth story at the moment? the data points coming in that they are looking for, pretty decent. lisa: there are no signs that the consumer is slowing down. you can try to look for

bearishness across the board when it comes to how much people are spending. however, the projections from apple, from amazon, from some of the tech giants really did shock the markets and i think has staying power in terms of sentiment. jonathan: the market has to end his bait, and last month it was anticipating some pretty bad things. kailey: that was true in the bond market as well. the 60/40 portfolio in april got absolutely battered. it was the worst month for global bonds going back to at least 1990. even worse in the case of technology. it was an area in which you did not have anywhere to hide if you were invested in fixed income or equities. as far as with the equity market is considering, it is not just the hawkish federal reserve, but also the outlook for earnings going forward. first quarter margins held up fine. is that going to be the case through the remainder of the year? jonathan: the only place to hide was in the fx market. we had a 5% move almost.

lisa: do you feel like we have made enough of this? as far as the yen and the thresholds being crossed there, but in terms of what the financial stability and ramifications are of the dollar strengthening, have we really wrapped our heads around what that means for a world hinged on perhaps a dollar that is not as strong as we are seeing? jonathan: the chinese lockdowns were not talked about enough. they only started to get talked about when we saw some real weakness come through the chinese currency. the euro-dollar story, sterling breaking down, barely featuring in the conversation. the fx market screaming something over the last 30 days. lisa: frankly, a lot of people have said it is u.s. being able to raise rates more than europe, but it is something more. it is the one haven people are finding a bid that sea of red. jonathan:jonathan: usually when you see this kind of dollar strength, it is not a good thing, and that is reflective of what we sign the equity market. equities down 0.3 percent. they were higher by 0.3% earlier

this morning. on the nasdaq, down 0.6%. last month was ugly, and if you are waking up thinking it gets better, gets worse. yields down a basis point to 2.92%. in the commodity market, just about holding onto 100 now, $100.96. the thing we are missing here as well is credit. that spread widening that you might expect given what we have seen in the equity market wasn't really there in a massive way. lisa: this is something morgan stanley talked about when they were talking about how a lot of the selloff has been driven by interest rates, and they see that shifting to now a little bit more of a gross concern being reflected with spreads widening out, even as perhaps some people start to see value in that rate story. i do wonder whether we start to see that be the main narrative as we look into the second half of the year. jonathan: let's get the global

conversation with the global director of fixed income research at morgan stanley. i read your note a couple of weekends ago and you closed out a preference that has dominated much of this year. it was loans over high-yield bonds. set us up with what you are thinking coming into this year, how that market developed, and why you have closed that position now. >> coming into the year, without the real risks to the credit markets are in terms of duration longer to raisman bonds, simply visit -- significantly lower duration were more exposed than high-yield bonds, which has somewhat lowered duration versus the investment grade bonds and leveraged loans, which had the lowest duration of the mall. it has played out pretty much as we fixed in -- as we expected. until last week, the total returns were down 12% for investment grade, 6% for high-yield, and slightly positive for leverage loans.

but we think now incrementally, that duration is the main driver of underperformance is going to be not as significant because we think a lot is already in the price. a terminus amount -- a tremendous amount is in price and terms of monetary policy, the amount of hikes. there's a lot of aggressive monetary policy easing. not to say that rates can't go higher from here, but incrementally, what has happened so far is actually going to be substantially higher than what we expect to happen in terms of duration. on the other hand, and terms of the economy, we are able to see some slowing of the economy. we are seeing margin pressures that lisa was referring to a minute ago. all of this means we should start paying greater attention

to the tales of the market. in particular some of the ccc, overextended part of the market is where we want to be concerned about. so we have shifted our preference away from loans to have a lot more direct exposure to incrementally higher cost of funding. that is the most exposed part. compared to investment grade, where we think there's actually significant pockets of opportunity. lisa: how much is this a fundamental story tied to defaults simply because of refinancing mechanisms and the fact that they have refinanced so much of their debt versus flows, at a time when japanese investors might be disincentivize to to buy u.s. credit, u.s. debt more broadly? vishwanath: fundamentally, we are at the beginning of a rate hike cycle. we have never had such strong fundamentals here.

to eva. -- debt to ebita, we have never been stronger at the offset of a hiking cycle. but that said, i am not trimming thusly concerned that we will see a spike in defaults, but the defaults are at such low levels, the long-term average below 3%, so defaults could go up, but not dramatically. nothing higher than the long-term average. kailey: how are you thinking about china and the potential ripple effect from what is happening in the property sector there? vishwanath: i think on this thing, i must say our expectations, i have spoken on this program before, we anticipated a much greater support to come in sooner that has not quite transpired, but i

think i'm concerned about the effect is slowing china has on global growth, and that ripple effect is part of the narrative in our concern about growth slowing going forward. jonathan: wonderful to hear from you, as always. just as we are having this conversation, james crumbley of bloomberg news messaged me and said og total return, worst record since march 2020. losing streak now, five months, the longest since 1994. lisa: it has been dramatic and it is important to note that this is the debt considered safest within the corporate universe. the riskiest has done the best, and that is the shift now. they are more concerned about the stuff actually considered risky and less about the stuff considered safe when it comes to the credit profile. i'm curious about that, given where we are in terms of fundamentals. jonathan: where using the fed put is?

i asked that question of several investors, trying to work out where they thought it was. clearly the consensus is not here. with get out regime change, that has been the biggest change. a move like this on the equity market, a move like this on total return and credit. still, the belief that this fed does not step in because they barely got started on interest rates. qt hasn't even been initiated yet. that is something for later this week. when lisa: i think it is really -- lisa: when you ask about the fed put, i think it is important to realize that a lot of companies have already locked in their financing. if you don't have that kind of real-time mechanism to bring in those higher borrowing costs, what is going to be the check that is gone to force the fence hand -- force the fed's hand? jonathan: if you ask someone to guess and they didn't know because they didn't follow the federal reserve, good for them,

to guess how may times this fed had hiked, what do you think they would guess versus what we've actually had so far? kailey: i would think people would think we are already where we expect them to end the year, at neutral or possibly potentially above it, because this is still a federal reserve is mostly just talking. we have only moved 25 basis points, and yet you have financial conditions that have tightened once again to levels we last saw in 2018, and they have had to do very little to actually get us to that place at this point. jonathan: hard to believe that is all we have moved. for all the talk, that's it. lisa: my favorite is looking at the balance sheet. people talking about balance sheet runoff and it is basically the same, the sort of decline, you can see it if you squint really hard. jonathan: futures are down this morning by 0.3 percent. tom keene back tomorrow. i'm jonathan ferro, together with the brilliant lisa abramowicz. "bloomberg surveillance this is -- this is "bloomberg

surveillance." kailey: keeping you up-to-date with news from around the world, here's the first word. victor says hungry will never support extending sanctions to -- viktor orban says hungry will never support extending sanctions to russia. a russian billionaire reportedly in hiding after could sizing the war in ukraine. he told "the new york times" the day after his instagram post on the war, vladimir putin threatened to nationalize his bank. he ended up selling his 35% stake to another russian billionaire in what he called a fire sale. a warning from the imf, inflation may turn out to be even faster than global central bankers anticipate. the deputy managing director tells bloomberg the risk is rising that inflation excitations drift away from central-bank targets. he says the most important priority is to end the war in ukraine. coronavirus lockdowns and china are taking a significant toll on

the country's economy. over the weekend, data showed both manufacturing and services activity plunged in april to their worst level in two years. exports and imports also with a formal lawsuit. the company could face hefty fines. apple says its contactless payment system helps consumers. 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. ♪ m kailey leinz. this is bloomberg. ♪

>> the pushback right now is no one wants to buy anything in tech. it is not just amazon. good pull of a chart on microsoft, google, anything. we are in a buyer's strike across wall street on software. jonathan: that was the equity research analyst at jefferies. there's been some big pushback. we had their earnings, and on the street, the consensus is still incredibly bullish on the south side -- on the sell side. just got this monster feedback that says no thank you, we do not want to. lisa: you talked about it with

the nasdaq having its worst month going back to the end of 2008. it could be catching a falling knife. jonathan: we are down 0.3% on the s&p. we were down 0.4%. yields coming in by a couple of basis points. that is something a little difference, given that last month stocks were down and bonds were down, and yields are up now just a bit. down 3.7% now on crude to $100.85. joining us now, and experts on all things in the stock market, gina martin adams, chief equity strategist for bloomberg intelligence. our question is how we pick up the pieces through the month of may. what are you telling people? gina: unfortunately, the technicals of the market are still very ugly. you would think after such capitulation on friday, we might pick up a better trend into this week, but there was not enough capitulation friday to get too excited. we are looking at things like 14

day rsi, which is still well above 30. normally you would see that crater down below 30 on a day like friday for you d percentage of stocks in the index trading above their 50 day moving average still just above 30%. back in the lows of the pandemic , even the 2018, we got below 2%. there's still not a lot of evidence of pure capitulation in the market, which is usually what makes a bottom. at the same time, these mega-cap stocks in the index are a trim and distract, and they are still dramatically overvalued relative to the rest of the index. they've got the one-two punch of rising interest rates and now we getting earnings trends to contend with, so it is just gone to be very difficult for the index together any momentum. i think you need to either see a shift at the federal reserve, which is frankly not coming, or an end to the war in ukraine to create some reprieve in inflation for the market to get optimistic right now, and those things are not likely to happen. lisa: with that said, i know you

don't give necessarily a price target, but i wonder how much more downside there could be before there is a sense of parody and value -- of parity and valuation with these markets. gina: if we do see the two-year treasury yield marched closer to 3%, which doesn't seem to be the inevitable direction on the two-year, you are likely to pay only 14 times forward earnings for the s&p 500. you are looking at an equal weighted index still close to 15.5 times earnings. overall market cap weighted index, close to 17 times forward earnings. that is a tremendous amount of downside is indeed the fed is committing to take that to your treasury to the level the market thinks it is going to over the course of the next 12 months. you can make up for that was a much stronger earnings outlook, but unfortunately, as we have found out over the last couple of weeks, even though 80% of

companies are beating expectations, those misses by the mecca cap s&p 500 companies are dragging down the earnings outlook as well. we are looking at second-quarter earnings excitations for close to 5.5% gross from where they were just a few weeks ago, which was just above 6.5%, and that downward revision to forward expectations is entirely coming from the mecca cap stocks -- the mega cap stocks. so you start to see may be some opportunities emerge, but frankly, if we can't get any kind of earnings stability or some signals that the fed is going to stop at some point in the interest rate increases, it is very difficult to identify that target low. lisa: you sound pessimistic, but it does not necessarily mean you are talking about recession. can you parse out the difference between more downside risk in the price target and recession, where you start to see real contraction? gina: your average drop in the equity market to indicate

recession is close to 20%. however, we have had multiple corrections in the equity market near 20% that did not indicate recession over the course of the last decade alone. we had one and 2018 that did not lead to recession, one in 2015, 2016, one in 2011 that did not lead to recession. so a 20% correction in the equity market can happen and not indicate recession is imminent. i think most economic models, including the models the fed would suggest recession is unlikely until late 2023, maybe early 2024 at the earliest. it is difficult to say the market is pricing that right now. at the moment the market is pricing down a material slowdown in earnings growth and some real damage to confidence for mecca cap stocks at a point in time where the fed is trying to catch up to economic reality. it is this confluence of events creating a downdraft in equities. frankly it was entirely pretty double.

most strategists were not predicting a great year. the uncertainty that emerged is really that from the commodity complex and the persistence of inflation, partially as a result of the war in ukraine. that certainly added a very different context to this market and creates greater downside pressure, along with now i shut down in china as sort of the producer of the world, creating a tremendous amount of risk as well to supply chains were supposed to start to clear up this year. kailey: the one real safe place to put your money this year has been energy, up 35% year-to-date. how much oxygen is there left in that trade, considering issues like china? gina: not a ton. what happens with the energy sector is it is very dependent upon what happens with oil prices. if oil prices are starting to peak, as we talked about this morning, earlier this year we were talking about 100 when he five dollars, maybe $150 for oil prices. some of that sentiment got embedded into the price, so you

have this near-term downdraft in energy adding some pressure. that said, energy stocks are still incredible cheap relative to the rest of the market. as long as oil prices are going to maintain about $100 into the longer-term, you could still rely on energy to contribute some overall positivity to your equity portfolio. in the short run we are contend with a lot of volatility in oil price and some changes to expectations, which frankly is also weighing on energy sector earnings. we saw some big energy sector companies come out last week and provide not exactly positive expectations, so those are certainly dampening confidence as well. i think it is more of a short-term reflection of what is happened with the oil price and about agility than anything, but if we can't maintain $100 on oil, we will see the energy stocks generally underperform as well. jonathan: gina, thank you. gina martin adams of limerick intelligence. ash of bloomberg intelligence. you can pick a single name out on the s&p, apple, 7% of the s&p

500. lisa: it gives you a sense of how difficult it is to really position right now. jonathan: futures down 0.25 percent on s&p 500 futures. on tv and radio, this is "bloomberg surveillance." ♪

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jonathan: live from new york city. with tom keene at home and coming back tomorrow, kailey leinz is stepping in, with lisa abramowicz and make him a jonathan ferro. for those of you saying be kind, see what happens when i take a day or a week off. mike wilson over at morgan stanley and the team writing this on the equity side of things. "last week was adjusted the bear market was reaching the phase when virtually nothing would work, even defensives." that seems to be exactly what is happening. lisa: it has been a really rough moment because both bonds and stocks have sold often tandem. nothing seems to be working at a time when you've got the dueling ideas of inflation, a very hot

labor market, as well as worries about some of the down -- some kind of downturn in the later half of the year. jonathan: let's have that discussion with the chief u.s. financial economist at oxford economics. we love catching up with you. let's get straight to wednesday. what do you expect to hear from chairman powell? >> thanks, jon. happy to be with you. i think we are going to have to rely on the forward guidance and any tweaks to the policy because we will not be getting revised gdp or inflation or those infamous dot plot estimates. it really does come down to the messaging and any kind of forward must -- any kind of forward guidance he provides. they are very worried about u.s. inflation. they see wage pressures picking up so 50 basis points, done deal for wednesday. our view is probably another 50 basis points in june. we don't think they are quite ready to go 75, although the

markets have been flirting with that. lisa: what do you thing has the most potential to move markets, the wednesday fed meeting or the friday payrolls report? kathleen: i would bet on the fed meeting. payrolls should be solid. the data probably actually takes front and center in terms of what is most important for you and maybe also labor force participation rate because the view is as labor force conditions continue to improve, that is going to pull more workers in the labor force. you need that to keep a cap on wages going forward, so i think the fed right now sets the stage for the financial markets and also for the economy. lisa: kailey asked a good question about what the consequence from the china lockdowns would be for the u.s. economy, whether it would be faster inflation or slower growth. the answer unfortunately is

probably some dose of both of them. how are you viewing this with respect to the fed and how much more difficult it makes their decision? kathleen: definitely makes it more difficult. it is another stagflation or a shock, even if we are not in stagflation per se, because we have strong growth and momentum thankfully. the u.s. still looks very good. consumers can actually outspend inflation. only by 0.2%, but that is significant because it gives us a solid handoff for consumer spending in q2. that said, the fed is looking at still strong domestic demand backdrop. supply chains are not correcting as quickly as we all thought or hoped. on top of that you have wages picking up a bit. that is going to keep them in a hawkish mood and hope that they contain inflation without killing off the business expansion. kailey: to your point on the

consumer, that is not just some thing we are getting out of the economic data. you are hearing it from a large part of corporate america as well, that the consumer is tolerant of higher prices. i'm wondering how long that can remain the case, and if the american consumer and the support from it is actually going to allow on support the fed in landing softly. kathleen: we think it can last for quite a bit, at least through this year. household balance sheet is really strong. you have aggregate savings that were built up during the pandemic. they have tapped into a little bit. we estimate somewhere around $40 billion, but they built up $2.7 trillion. leverage in debt is quite low, and you have the wealth gains from housing and even the equity market, even though it is faltering a little bit as of late. that still gives it a powerful effect, so we think this carries us at least through this year and even into next year, but that is really going to depend on the fed. if they have to drive rates much higher, 3% or 4% -- we think it

is somewhere over 2.6 t percent on the fed funds rate -- but if they go higher than that, that is going to be really difficult for the consumer and also for businesses. kailey: how is your thinking on the balance sheet -- how has your thinking on the balance sheet evolved? do you think that can hold any surprises? kathleen: i think they would rather not surprise us on that front. there is so much uncertainty around the rate forecast and outlook. they want to keep it as boring as possible. we know they have struggled to do that. it is not as boring as watching paint dry. so we expect they will ramp up the balance sheet reduction, they will start off with maybe $30 billion in treasuries, $15 billion in mortgage backed securities, and eventually get somewhere around $95 billion, which is what they floated in the fomc minutes, and it is largely what the markets are expecting. jonathan: looking at the move in

real yields this morning, the high of the year happening right now on a closing basis on real yields. just about positive. we did that intraday the last couple of weeks. lisa: but at the same time, people are looking for this being a more sustained move. 0.0154%, this is actually interesting because it has been so deeply negative and was more than lower -1% as recently as march. this move has been dramatic as people really assess how tight the fed would like to go and the ripple effects through equities could be what we are seeing today in terms of the sentiment. jonathan: i want to come to you on this so-called fed put and whether the fed is truly data-dependent. rob miller of blackrock said they don't have the luxury of being data-dependent. when you think they can become data dependent again? kathleen: it is a good question. i think the our data dependent,

but part of the data they are looking at our broad financial conditions, so that is going to include equity prices, the dollar, so how they see financial conditions evolving is going to help them calibrate where they think the fed funds rate is going to be, but i think right now, front and center for them is taming inflation, and that is what we're going to here for now. as we progress through 2022 and if things slow a little, they may pull back a bit on that really hawkish rhetoric. lisa: what would be a restrictive fed policy rate? kathleen: in our view, anything above 2% would get you to restrictive. the federal reserve thinks it is 2.4%, so there's a little pension there. markets probably a little closer to our view, but it is an unknown. it is an estimate that is very difficult to pin down precisely, but certainly once you get above 2%, that is going to have some

ripple effects, and we see that in the mortgage market. you see mortgage rates already jumping well above 5%. keep in mind with the market has done is already doing some work for the federal reserve. kailey: we were joking earlier that the fed has only actually moved 25 basis points, and yet, looking at the market, you may think they moved a lot more dramatically. has the market done enough work that the federal reserve may have to be less aggressive than is currently the consensus thinking? kathleen: we think they are going to go less aggressive than the markets believe. when i look at the euro-dollar curve, the front end short-term rates, they were predicting a fed funds rate topping out around 3% or so next year. we think it is about 40 basis points lower, so it is in that ballpark, but the fears that they will have to go even higher i think are unfounded. we will have to watch closely the financial conditions. we will have to watch inflation.

but if inflation is close to begin despite supply chain problems and aggregate demand for the consumer is shifting from goods to services, that is really going to help the fed out a lot, along with the tightening and financial conditions. jonathan: that next cpi print i think coming up next week. lisa: i believe so. i'm looking right now, and hold on a second. i will check that for you. the cpi print will be important for perhaps the psychological impact, as well as the direction. it is the 11th. jonathan: i kind of knew it was the 11th. i was just imagining you would have confirmation. lisa: you imagine more of me than what actually happened area thank you. [laughter] it's been a long weekend. jonathan: thank you to kathy. looking ahead to wednesday and the federal reserve. we might have evidence that that has already happened when we get the printed next week. lisa: doesn't matter? honestly, does the mechanical peak actually matter, or does it

mean the pace of the decline? we were talking with adam posen about how it could get back down to maybe 3% in 2024. is that good enough for the fed to feel comfortable, even if we did reach a mechanical peak in march or april? jonathan: that's the two sides of their goals in conflict with each other by the end of the year. we are going to be talking about maybe an ism close to 60% a little later this morning, the view of bank of america. so let's say you've got something in the high 50's, then you got a payroll report that shows payrolls growth in and around three poi -- around 350 to 400. is that the same around the end of the year if inflation is still 3%, 4%, and they got a growth story that is not robust or resilient? i thing that kind of sums things up. lisa: as well as how long does it take for monetary policy to

actually transfer itself to sentiment and a slowdown in the economy. how much lag time to they to really use to judge with the efficacy is of some of their tightening? jonathan: really looking for to talking about this with alisha levine around the opening bell at 9:30 eastern time. with an equity market that is just not holding up at the moment, down about 0.1% on the s&p come on the nasdaq and 0.3%. kailey leinz, thank you for jumping in the seat. always great to catch up with you. tk will be in that chair tomorrow, we are told. can't guarantee anything. yields come in almost a basis point at 2.9299%. for our audience worldwide, heard on radio, seen on tv, this is "bloomberg surveillance." kailey: keeping you up-to-date with news from around the world, here's the first word. tensions against russia can be lifted only when forces leave

ukraine. foreign minister says this includes crimea, which russia annexed into any 14. moscow would be unless he to give up that 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 done before the next round of global climate talks in november. the fighting has made coal a lucrative commodity to mine and export. house speaker nancy pelosi told ukraine's president, "your fight is a fight for everyone." she told volodymyr zelenskyy that the u.s. is committed to be there for ukraine until the fight is done. spirit airlines says it will go ahead with its deal with rival discounter frontier despite an attempt by jetblue to enhance its own offer. jetblue says it would provide a $200 million reverse fee and would divest assets to meet the deal happen. spirit's board says the offer does not constitute a superior proposal.

shares of videogame maker activision blizzard are rising today. berkshire hathaway raised its stake in a merger arbitrage bet. berkshire noun owns -- berkshire now owns 9% of the company's stock. the european union has hit apple with an antitrust suit over iphone payments. the complaint alleges apple abuses its dominance over mobile wallets via its apple pay service. the company could face hefty fines. apple says it's contactless pay system helps consumers. 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. ♪

>> let's say you want to be positive if there's going to be china stimulus. because what you wish for

because if it is going to be a 2009 style credit stimulus, then the inflation or impact on that, you ain't seen nothing yet. lisa: that was geoff yu of bny mellon. what we have seen overnight is that services sector plunged to the lowest since february 2020. this is the reported data. how bad are things getting as you start to get all of these shutdowns locking up the major economic engines of the second biggest economy in the world? leland miller tracks on the ground, international ceo of the china beige book. how bad have things gotten economically and asia, not at the official level, but the unofficial nexen boats surveys you do in the mainland -- unofficial nuts and bolts surveys you do in the mainland? leland: what we saw was not just a tick down in shanghai or

beijing. we saw widespread slowdown everywhere, and pretty intensely. so it was not just services and retail flailing like what happened at the beginning of the covid shutdowns and china, wher manufacturing was getting up and running. the big thing now is that manufacturing is being hit hard. factories are being shut down by the lockdowns. not the outbreaks come about the lockdowns. no longer have manufacturing pushing growth forward. at the same time, retail, services are flailing. so you have widespread weakness now and there is no definitive timeline for when it will end. lisa: what the chinese authorities have put out there to potentially combat this. who's going to be able to go out there and actually do them if they are locked down? leland: this is what we have been stressing for the last several weeks. there's definitely worry coming out of beijing in terms of not just what the growth is going to

be, but how you have a plausible story around there not being flailing results and flailing overall performance. so there is talk, and this is why you saw the conversation moves last week from monetary stimulus to fiscal stimulus. we're going to beat the usa and gdp. but if you are locking down all of these major cities, closing down the arteries between them, how do you do fiscal stimulus in a meaningful way? i think a lot of what you are seeing is still rhetoric. it does not mean they are going to move more and more into the fiscal side. we have seen that in our data for some time now. but the idea that they are going to all-out stimulus to re-create some of the conditions, it is way to early to make that jump. kailey: so it is talking the talk versus actually walking the walk at this point. something also authorities have talked about is wrapping up the regulatory crackdowns on industries like technology. do you think that actually will come to fruition?

what difference will that make? leland: it might, but here's what investors need to take note of your get they are scrambling right now to send positive signals to markets, which is why you are seeing positive signals about a compromise over audits and delisting issues. you are seeing positive signals about the regulatory crackdown and egg, positive signals about fiscal stimulus. it does not mean any of it is going to happen. i don't think any of this was part of their original trajectory for policy going into the party congress. so they are increasing sentiment and they may cause people to run into the stock market for the 15th time this year, but are they actually doing this? it is too early to tell. i think markets it ahead of themselves to think that a pivot has already happened. kailey: you have seen some money coming into chinese equities, but still it has been brutal, and it does seem a that is where policymakers are focused. we are also looking at a chinese yuan at its weakest against the dollar since november 2020. how much weaker can it get before beijing starts to get

really uncomfortable? leland: the yuan, all of my friends who do forex are excited about this. the you on -- the yuan has been range bound for years and years. there are political levels they will not go past, ultimately seven, because they are trying to maintain stability. the importance is you are not seeing the yuan fall of a cliff. you are seeing a supercharged dollar because of weakness in the euro, weakness in the yen, weakness in the yuan, so you are not actually seeing the yuan disintegrate. you are seeing the dollar. so there's not a rush to do some thing about this. stability is the mandate. stability within a bound. lisa: we are hearing from officials that we are looking to a 4%, perhaps 5% handle on gdp this year. what realistically is the gdp you expect for china in 2022?

leland: hello? sorry, i missed that. lisa:lisa: what gdp do you think is realistic for china? leland: if they can get lockdowns under control, they will still shoot for 4% plus. use to have chinese economists talking about 5.5%, which is rather silly. if they are shut down for all of may, the question is is there a plausible story for guiding this over 2%. i think they want to be able to claim that no matter how bad things get, they are still going to report for percent. it is just a question of whether the lockdowns allow the optics for them to be able to announce that. lisa: thank you so much. we always love having you want to hear your insights and the more unofficial estimate of what things are happening in terms of the momentum and china. i've got to say, what he was saying before, that this is probably the most underplayed story out there, that if you have the world's second biggest

economy possibly having a contraction in the second quarter and a 2% handle on gdp for this year, how do you game out demand for commodities? how do you game out some of the supply chain disruption zero going to see around the world and come to some sort of projection for global gdp? kailey: and on the demand and commodities side, that is why you are seeing oil down. you are seeing some weakness come through in the metals off the back of this data, but is it so much a growth concern or an inflation one, or is it both at the same time, which is a central banker's nightmare? if you have weaker growth and exacerbated inflation within the pmi data, it showed suppliers faced the longest delays in more than two years in delivering raw materials to their manufacturing customers. so it is a growth story, but it is an inflationary one as well. lisa: it goes together. stagflation come of the worst nightmare for central bankers. we were talking earlier about real yields in the united states reaching a positive level for the second time this year.

they have now reached the highest on an intraday level going back to march 2020. we see them continuing to climb, now solidly above 0, 0 .0531%. honestly, this is one of the biggest stories of the past couple of months. it has been the completed repricing in terms of the inflation-adjusted yield. basically, the fed is not going to be accommodative. they may be now, but they are not going to be in the future, and that is what people are starting to contemplate. kailey: i wonder how much of what we saw with the pain and the equity market really came in full force in april, the worst month for the nasdaq 100 in particular since 2008. what does that index hold? a lot of high multiple stocks threatened by real yields, not just higher than we have seen, but ones as well. the question is how far that goes. lisa: the nasdaq futures are near the lows of the session, down 0.4%, moving down intended

with real yields moving up, so perhaps a repricing as we head closer to the open. coming up on "balance of power," general david petraeus, chair of kkr. this is bloomberg. ♪

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jonathan: live from new york city, good morning. the federal reserve on wednesday and payroll report.

the countdown to the open starts right now. >> everything you need to get said -- set for the start of u.s. trading. this is bloomberg the open with jonathan ferro. jonathan: looking ahead to the fed's next move. >> the fed goes 50 basis points. >> they have no choice but to hike for the basis. >> people are heavily fixated on where rates are going to be. >> the path to a soft landing for the fed is narrowing. >> the fed is in warp speed. >> i think it's dead.