>> the damage is done, the pricing of the yield curve reflects the fed that will do a lot. >> how much of the financial sector will have problems as rates go up and rollovers become more difficult. >> is it a cycle ending bear market? i look at it as more of a normal correction. >> our biggest issue is how much little tightening is pricing yet -- next year. . >> the fed is blindfolded, it will be tough. >> this is bloomberg surveillance. . jonathan: here comes the downgrades from new york city

worldwide. this is bloomberg surveillance on tv and radio. futures are little changed, down about 4/10 of 1%. tom: a lot of adjustment over the weekend and it sets up what's been a clumsy monday. it's one big turn but i would suggest we will get some important data today and this week and part of the downgrade is how is the spirit of america retail sales tomorrow is not a small item. jonathan: looking ahead to a squeeze on consumers. the year and call is 4300 down from 47 and the three month call is for k. higher equity prices in the near term with ease financial conditions and that would go against the fed's goal of slowing economic growth.

tom: they are threading a needle and it's real simple. we will have to see what they do. i would focus on financial conditions that have tightened. bloomberg financial conditions index is down almost one standard deviation. the markets are getting it done for chairman powell. jonathan: we have to look to the data out of china. it was absolutely dreadful. the data behind this which is bad and shanghai is slowly reopening, which do you focus on? lisa: there was a focus on the slope reopening of shanghai and the possible concession of loosening so the zero covid policies. i wonder if people will stick to their forecasts as to how much gdp can expand in china.

this is beyond what people had expected. these are the official numbers. going forward, how much of a hit will we see coming out of china? jonathan: economists are not just catching up that they are catching down. they are going with 4.2 growth in china which is a downgrade from 5.1. that's huge. lisa: they say it should be a whole lot lower than that. they are looking for nodes of momentum and the u.s. is supposed to be that. the supply chain disruption goes to retail sales and walmart and home depot and all that is coming out this week. jonathan: when the southside starts to downgrade chinese economic growth, that handle is so sensitive for so many banks. there is a belief on wall street that the market participants that when a bank downgrades chinese growth, it's a worry

about access to chinese access and chinese markets. i think this is a big deal. lisa: we have seen this time and again on analysts getting called out even recently. certain stocks in china were on investable and reversing their call and highlights the political tenure when this -- tenuousness of this particular market. jonathan: good morning to you all, that nasdaq is negative 6 /of10 losses. going into last week i'm of the 10 year yield has been climbing for five straight weeks and then something changed last week as the yield dropped. a little higher on the session today. lisa: people are downgrading the perspective for the consumer. everyone says the consumer is strong but for how long. 8:30 a.m., quiet on data but we

get empire manufacturing coming out, giving us a first read on may so how much do we get a repeat of what we saw from the consumer sentiment survey friday they came in unexpectedly much weaker than people had expected. it goes back to 2011, how much do we get ongoing signs of dissonance and weakness. 8:55 a.m., the new york fed president is speaking at a mortgage banker association event and after retail sales we get housing data later in the week as mortgage rates are rolling back to 2009. how does this bleed into the momentum we see in housing pricing and the momentum of sales? then we get the ttc meets to

discuss how to deal with things from export controls to chip shortages. gina raimondo will be there, the european commission will be there. i wonder how much we get some sort of close alliance between europe and the u.s.? they talk about it being a russia issue but how much is it a tightening issue? jonathan: some detail on russia. one group is selling their entire russian portfolio. let's see how that works out. tom: there is a corporate exit but it's very complex. all of these corporations, you have to keep in mind your employees and russia. that seems to be the working effort for mcdonald's and

everyone else. how many employees does mcdonald's in russia? you can't just walk out. jonathan: you can't speak for the entire employee base. tom: people think it's easy. jonathan: it's easy for us to read the headline but the work behind it is incredible. tom: it's difficult and it's an ongoing story. the russian story over the weekend was ukraine put up a sign on the russian border and said this is ukraine. it's not reported but it's in the military gossip of the weekend. jonathan: we will catch up with the foreign minister later this morning. lets talk with the chief investment officer at deutsche bank. six straight weeks of declines in the u.s. market so when do you buy this? >> we have been underweight equities and we are now thinking of coming back and going to a neutral position because we are seeing parish signs in the

market -- seeing bearish signs in the market. everything is super bearish. it's time to go back to neutral. it doesn't mean we are getting super optimistic but the environment is a tough one. tom: there is a note this morning where a lot of companies did not get the crisis memo. you see that with the great separation which i'm sure you see as well. how does profit matter going forward? >> if you look at the market and analyze the market moves like the s&p or europe, in recent weeks including the last six weeks, you have seen the very high correlation of indices to real rates. that's the inflation component. it has not been so much about the results of the companies. that might change down the road. if you have the q2 earnings

season coming in in july, there will be focus on how much margin pressure was there or is still there because of inflation. i think there is a change but the recent market was driven by inflation and real rates. lisa: you are underweight cuties -- underweight cuties but as you see the prospect for inflation over the next 12 months, how can you be bullish on equities heading into a recession? >> i'm not saying i'm bullish on equities but we been underweight which was the right call. even in recession markets, we have the strongest lending. the sentiment is so negative that there is some room even any -- even in a recessionary environment. you don't get overly optimistic. that's not the economic environment. jonathan: you want to go back to neutral so let's talk about

that, what would you buy to achieve that? >> markets which are mostly underweight was the u.s. and china. there was a lot of discussion on china. i don't see an immediate change. we've seen the numbers this morning in china and the sentiment is extremely bearish. note change to zero covid policy but longer-term, the market is down 25% since the peak so if you go between neutral position, that cannot be wrong. jonathan: wonderful to catch up as always. he's looking to get ahead of what was already done. tom: there is 14 different opinions out there we will have many people frame out what the different opinions are. the immovable separation now which you always get in a pullback in the partition is

value and growth but it's much more profit were story. -- four story. -- profit or story. i was on my peloton this weekend. jonathan: how did that work out? tom: how are the story stocks doing? jonathan: companies that might be bought out. they had massive caps a couple of years ago but now not so much. lisa: how do you talk about the likes of twitter when you have things whipping around based on specific points? stories that have to do with the pandemic but some say it was the story of sex in the city. that episode. jonathan: not about stories anymore, it's about making money. it's not about hopes and dreams, it's about the future. it's about real things.

you are listening to this on radio. lisa: what do you mean dreams don't matter? jonathan: futures are down a third of 1% stop from new york, this is bloomberg. ritika: keeping you up-to-date with news from around the world, this is the first word. another dramatic change in the european security structure triggered by the russian invasion of ukraine. your rally around finland and sweden at they announced plans to join nato. sweden and finland have had relations with kurds in eastern turkey. the chinese economy is paying the price for the covid zero economy. they have hit the worst level

since the start of the pandemic and industrial output fell 2.9%. speech spending shrank 11.9%. economist at an goldman sachs have cut their outlooks. they pick the u.s. economy growing at 2.4% this year. mcdonald's is leaving russia. they said that shifted the business in russia, the invasion of ukraine. 83.3 billion dollar potential hostile takeover and shareholders may vote no on the airlines takeover. spirit will offer three dollars per share. they will entertain a higher price if they deal -- if they

had -- if they -- if they agree with a consensual deal. this is bloomberg. ♪

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>> stagflation is the baseline. we are going to see real growth and frustratingly high inflation for this year and into next year. whether we get something worse depends on the soft landing debate. i think recession is something we must keep an eye on. jonathan: he was fantastic last week. it was perfect. tom: it was great, he ignored

me. he didn't say hi. he wore a green bowtie in honor of the jets. jonathan: you have to figure that out stop tom: futures are -13 and we are steeled for an interesting week. right now, we will go to russell's. he is a foreign minister ukraine but from a family of public service to ukraine, his father was an ambassador. maria todeo in brussels. maria: we are joined by the ukraine foreign minister. you alongside the rest of the ukrainian government made the decision of not leaving. we will fight for our country and we will win this war.

it's been almost a global tour. what is the message you are sending diplomats on this tour? >> you can see that ukraine will win this war. you can share the victory with us for the sake of the world because not only russia's war against ukraine, it's a threat that russia poses the just to the entire world. we have to stop them here so offers -- so others will not suffer as much as we do. maria: the only strategic option that works for ukraine is winning, nothing else will suffice. when you say we will win, what does it mean in real terms? >> this is the war for our existence because president putin does not recognize our identity or the right of the ukrainian state to exist.

this is why we understand we have no other choice but to win this war because it's a war for our existence and winning it means restoring territorial integrity and a recognized borders. we have no intention to capture anyone. we want everything that belongs to us to be hours. maria: it infuriates ukraine when you hear that they should accept a cease-fire or giveaway the donbass. what is the flaw in that theory? >> one of the reasons why this war is happening is since 2014, western countries, germany, france, to some extent the united states and other european countries always presumed the

policy of tough measures toward russia. maria are they scared: of president putin? >> every country has its reasons. one of the reasons why this war is happening is because everyone was always telling ukraine that you have to concede this to pacify putin or concede that to prevent the war from happening. this war happened and it means only one thing, that this entire policy failed. it doesn't work this way. instead of asking what ukraine should do for a cease-fire for the end of the war, the russian should be addressed to russia, what russia should do. i would like to commend both germany and france and the united states for really changing their perspective on this. we still have some discussions but in principle, they clearly understand this is a black-and-white situation in

russia bears full responsibility for what is happening. maria: you mentioned the french because there has been a huge debate as to whether emmanuel macron suggested he should giveaway land to get a peace deal in the french denied this. what's going on this? have global leaders asked you to have a? -- asked you to give away something? >> i was not present in the conversation so i cannot comment on this. before 2014, before the 24th of february this year when the war started, there was -- they were not pushing but they were exploring the option of what could be the solution, what could ukraine abandon in order to make a deal with russia.

i want to make it clear and i think everyone who is watching ukraine and sees russia committing atrocities, it's not ukraine to blame. this is an unprovoked war. neither ukraine nor europe nor nato nor the united states provoked putin to do what he is doing. therefore, he must bear full responsibility for that. looking for face-saving options for putin is a false approach. let putin himself find the approach. maria: we had finland and sweden wanting to join nato. are you disappointed and when it comes to the european union, is that your best hope?

have you given up on nato? >> i believe ukraine is the best hope of the european union. look how the european union has changed in the last 2.5 months. in the beginning of the war, the percentage of membership in nato was strong. nato can act and deliver and the only thing the eu can do is to express different levels of concern in public statements. more proof that everything is completely different. it's nato as an alliance and an institution that can do very little if anything. allies a very helpful and the coalition is willing represents part of the alliance and they'll helpful and we will never forget much they sue us but nato as an alliance did nothing. the eu sanctions is a strong political statement. military, financing military support to ukraine. the european union is back on

track as a driving force. someone who can shape the future of europe and ukraine gave them the chance to demonstrate that they can. maria: thank you very much and i know you are heading to the hague tomorrow. thank you so much for your time. >> the pleasure is mine, thank you. jonathan: thank you, a wonderful interview with the ukrainian foreign minister. tom: it's a terrible moment for the government and as maria said, you have finland and sweden as nato exercises in the baltic states. it's operation had shock and operation iron wolf. jonathan: from new york, this is bloomberg. ♪

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jonathan: live from new york city this morning, good morning. down a third of 1% on the nasdaq and the s&p 500 half of 1%. equities are up in representing

an easing of financial conditions and that's not what the fed wants rest of this summer. range bound is stuck around for k for the --4k for the time being. we had five straight weeks of yields higher. we will get to the bank of america call later in the program. the likes of hsbc, ing, rbc and nomura are talking a prospect of euro-dollar parity. tom: i'm glad you mentioned the developing markets but over the weekend, it's much more an em

story. there is a giveaway of a new level on em which is dollars strength em weakness. jonathan: the fact that we finally got some chinese weakness is a change from last year. tom: on its way to seven, the yuan would be the mystery there. he is one of the great watchers of international economics, carl weinberg. he has decades of work of when it unravels. dr. weinberg, thank you for joining us. with all of your experience, back to the 90's and ecuador and the rest of it, or we near a great unraveling? >> we are near a great shock but i don't know if we will unravel. that hinges on things breaking

and we are not in the business of predicting things breaking. we are certainly going into with alan greenspan used to call a tough patch for a lot of economies at the same time. we know that the pressure on consumers in the united states in europe and asia. we see that happening and we see the shock out of china documented by the numbers overnight as an awesome decline in industrial production and consumer spending. it's not over yet. at the same time, we have energy prices which are behind some of the recession issues we have central banks around the world hiking interest rates which is the most important single indicator of a recession. we are in for a rough patch. tom: you have an important china letter3 have you link china data in our conventional analysis with the absolutely original government in beijing?

will they blank or will they be forced to blink due to the gdp? >> that's a question we have no historical residence to turn back on. zero tolerance for covid this year is here to stay and that's the policy of the land and they will tough it out. i don't see of -- any sign of them breaking now and i cannot point to any historical experience that says otherwise. lisa: what is the real on the ground trajectory for gdp in china now? >> we are looking at a contraction for the second order. -- for the second quarter. normally, seasonals would have industrial production fallen by 11.5% in april to march and we got a 19.5% actual decline so that means that seasonally

adjusted industrial production was down 8% for the month. people who are familiar with converting monthly to quarterly calculus know that the first few months contains half of the volatility of the index for the entire order which is to say we've only got 50% of the information we need to calculate for first quarter industrial production. it's down probably -- i'm looking for my exact number -- 14% for the order and that's a big hit. i don't know how gdp can grow with industrial production on that trend. lisa: one of the explanations for the weakness in european assets is reaching parity with the dollar. is there a part of the weakness in china does not being adequately accounted for with respect to the u.s. economy in addition to what's going on in europe? >> it's all about supply chains.

industrial production could be down less than 1% but if that amount reduces one part that i need for a car they are making, that will not be produced and that will lead to an interruption. it's not just the percentage declined it matters, it's the quality, the individual things that are seen. lisa: this is something we've been talking about for a while. is there any aspect of this that has not been accounted for based on the projections we are getting for european and u.s. growth? >> when you look at what's happening to equity rises this morning, you are looking at the change in the mood in the bond market. people are now beginning to account for the decline in covid seriously or the decline in china's covid reduction seriously. i think that's a new element in the thinking that this is not just happening right away. the other thing that i think people have to think about is

that the drop in industrial production in china in april will affect the shipments that arrive here in may and june. it takes time for things to move across the pacific. that means we are not beginning to feel and are just now beginning to feel the impact of the slow down in industrial production in china on our own supply chains. the worst is yet to come on this side of the pacific. tom: i want you to take your international mask and bring it to the u.s. gdp equation. at goldman sachs, they have a stunning 1.6% u.s. real gdp for next year. how does diminished exports in massive u.s. imports fold into something like that statistically? >> we've got a lot of things running against is now in gdp calculus. everybody's been talking about the fact that energy prices have

risen in relation to all other prices. we know about that but we see on our balance of payment, that dragging growth down. now we have increased uncertainty and higher interest rates making a drag on investment. it's hard to find an engine of growth amongst those numbers. it brings u.s. gdp back to the 2% or 3% numbers. tom: are you calling for recession? >> we are bordering on calling for a recession but consistently marking down her gdp growth numbers. tom: it's monday, i need to make some news here, give me a recession call. >> i will give you a recession call guarantee for your 100% for the second order and recession call for japan guaranteed in the numbers we will see this week. the u.s. economy is still pretty powerful. we could skirt a recession but

it will not be strong. tom: does the slow down in europe lead us back to negative interest rates in europe? >> you still have negative interest rates in europe at the short end of the yield curve. is just beginning to be talked about and hiking interest rates. even if they do two or three interest rate hikes to get to zero, they will not get to positive interest rates for a long time, possibly not even in this cycle. jonathan: wonderful to hear from you. citibank came out of their debts came out with their downgrade on china. lisa: you have to focus on what's happening now and the pain of things. i think that is important for them to point out. this isn't something you can recoup. how do you get that back?

what's going on with china? jonathan: did you see the jeff bezos complaint? he said if you want to bring down inflation, he said let's make sure the wealthy corporations pay their share. he said the disinformation board should review this tweet. he said raising a call for taxes is fine to discuss and paying is critical but mushing them together is misdirection. i'm not sure he's the greatest person to believe in corporate tax hikes. it's very confusing. tom: confusing is the right word and i would defer to political experts. i don't since they are getting political direction from this. jonathan: they want to talk about inflation as if it's a call for greed. they are doing it again. what they don't want to to talk about is maybe a failure of

public policy. they are going to carry the corporate greed angle into the midterms. tom: the agony off of february 24 which is the beginning of the war in ukraine. wheat is up big and rice is up less. u.s. rice and u.s. wheat. what is petrol? jonathan: you can call it gas. this is up 6% and diesel is up even more and these are real price increases but they're not because of jeff bezos.

tom: i don't understand soccer, you win a game off of a sure penalty shot? jonathan: sometimes that's how it happens. tom: it's ridiculous. lisa: it's the american dream. jonathan: futures on the s&p 500 down about a quarter of 1%. this is bloomberg. ritika: keeping you up-to-date with news from around the world, this is first word. germany plans to stop importing russian oil i the end of the year. german officials are confident they can solve logistical problems in the next few months. their consumption has declined to 12% down from 35%. saudi aramco posted its profits and followed big oil rivals and reap working earnings in the

first quarter due to surging oil prices. it's become the most valuable company. the u.s. justice department is invest -- is investigating a mass killing in buffalo. the shooting left 10 people dead and three wounded in 11 people shot were black. a white man was arrested and official said he posted a hateful document online not long before the attack. british prime minister boris johnson is warning the european union that changes must be made to the northern ireland protocol. he says the u.k. government will act on it the u.k. doesn't engage in genuine dialogue all . the carlisle group is in talks to buy government i.t. contracts. it values the company at about $4 billion and that could be announced this week.

they primarily work with u.s. defense. global news, 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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>> there is strong consensus for bringing finland and sweden into the alliance if they choose to formally apply. >> if they apply, this would be in a historic moment. their membership in nato would increase our shared security. jonathan: they were talking on nato membership going forward from here. futures right now are negative one third of 1% and the nasdaq is down about a half of 1% with yields slightly higher.

on the 10 year. we will touch on retail sales tomorrow and a little ater, news on russia, make donald pulling out of russia after more than 30 years -- mcdonald's pulling out of russia after more than 30 years. tom: it goes back to the price of the big mac worldwide. the symbolism out of russia is there is importance as to what took so long. i don't have an answer. jonathan: how do you think it will work out in russia? tom: i don't know. jonathan: if someone went after their trademark, who will protect that if that happens? tom: we are making it up as we go. we are on from february 24 and it was a war that was supposed to be weeks but it is not the case. tina has been grieving us on these international relations. we have ian bremmer scheduled to be with us on our first day in d

avos. thank you for joining us. i think sweden and finland are underplayed in the american press. swedish independence goes back to 1523 and 1809 and as we speak in estonia across from finland, there is 15,000 troops from 14 countries in exercise hedgehog, a huge nato exercise. what is the symbolism to mr. putin and the st. petersburg of finland and st. petersburg -- and sweden joining nato. >> it's well beyond symbolism. finland has harsh and deep memories of its conflict with russia and the fins were engaged in a terrible war. for this reason, the finland

policy took place [indiscernible] with ready for war with russia but not being formally part of nato, their application to join is an example of how putin's tragedy -- strategy in attempting to take ukraine has backfired and he's getting the opposite of what he wanted which is a larger and better funded nato. tom: how does he respond to this along the border with finland? >> you can see how the initial response is a threat. the threats are not working. the way that we should interpret what we are seeing from the kremlin is a diminishing power. vladimir putin made a big play to see russia's -- two state russia's imperial status.

his threats are being exposed as pretty hollow. of course he does have nuclear weapons in a chemical arsenal. lisa: you work with clients and you are trying to understand and make them understand what is not adequately priced into the market.the ukrainian situation has moved off of the front pages of wall street investors because they are looking beyond and sing this is not been the biggest threat. is that wrong? >> yes because wall street biggest concern is inflation. an interest rate hikes in this political turmoil feeds directly into those factors. it's a driver in both of these risks to the market. there is higher commodity prices like food and gas. for europe, yes, it's a security

threat more directly but for markets, this is the biggest geopolitical risk that i have seen in my career. lisa: do you think the clients you speak with fully understand this or do they see this as a prolonged, entrenched conflict that becomes in the back of the rear view mirror even though it still goes on? >> it depends on the personal experience and the generation. there is a whole generation of people under 45 who have grown up in the west who have no experience with geopolitical risk. they think it doesn't happen and therefore they find it irrelevant. people on the older end of the curve remember the middle eastern conflict and others which did become systemic and triggered a u.s. recession. i think people are not properly connecting the dots because ukraine is exotic and far away

and gas prices in the united states are partially in acted by the dish impacted by that. -- impacted by that. it's a misunderstanding of the interrelations. tom: we've been talking about a holiday from history by robert gates. we've got a younger generation learning about our history as we go. what is the key message of sustaining a short war? they always become longer wars. >> there really aren't short wars even going back to the u.s. invasion of grenada. churchill said it will be over by christmas. it never is. the notion that people will become less subjected to it or not affected is not true.

unless we see another spike in escalation, this will be a watch but as long as it remains unresolved we have that risk of escalation, it will drive up prices and will command attention. it's not going to look like afghanistan or iraq that investors might remember. jonathan: a reality check from you and thank you for that this morning. how many people believe this will be over by christmas? tom: i don't know about that but there is always a trap of a short war. in the discussions i've had, i am thunderstruck by a lack of any collective memory across those younger. i don't blame them for that it's just that it's been really something since 1989 or 1991. it's been a very different set up and we are back to things of our youth. jonathan: from an economic

perspective, what happens when it gets cold? the gas issue will be front and center. lisa: you will see a doubling in price that people have to pay and you will get supply disruptions filtering into the economy. no one is talking about this ending quickly, the issue is how much rain will be experienced on the economic side dish much pain will be express on the economic side. jonathan: good luck, you're not alone. tom: it will not be a snooze fest. jonathan: you never know. futures are down, this is bloomberg. ♪

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>> the damage is done, the pricing of the yield curve affects the fed it's going to do a lot. >> how much of the sector is going to have problems as rates go up. >> everyone's looking at is this a cycle ending bear market. i look it it as a normal correction. >> the fed is effectively trying to thread the needle wearing oven mit