>> there's a lot of pessimism in the market, more than we have seen in years. >> don't fight the fed is definitely the mantra and the bond market. >> the fed is still trying to slow the economy, slow employment. >> for the fed to rebalance or support the rebalancing in the economy, they do need to hold demand -- to pull demand. >> the trajectory of inflation is important. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. on radio, until bullish and -- on radio, on television. we interrupt this hour of "bloomberg surveillance" to see retail america at new lows. target just breaking down 24%, a big 51 point move right now. jonathan: it is walmart volume and some. walmart got hammered yesterday. margin pressure is here right now. talking about it for quarters.

here it is. tom: what we get is a value added in the last hour. it is about the net income, ebit., and all the others. joe feldman goes to where the target executives are, what is up the income statement to gross margin. the way you fix gross margin is cut costs. jonathan: i would love to know where target has been. they have been under a rock. how are you surprised by higher costs? we talk about it everyday. tom: maybe it is the magnitude of higher costs or a sum of moving costs. it is down now big. just making those lows, but in defense of them and everybody else in retail, they are working with in a pandemic, but now it is over. now what? jonathan: that is the problem. there are struggling to find balance.

we've gone from understaffed overstaffed, undersupplied to oversupplied, and there's clearly a program -- a problem we did not have 12 months ago. peloton spoke to that too. tom: i look at the mix that we are in right now, the stew of six dollar gasoline from i believe jp morgan, but also the idea of a fully employed america. how long does that honeymoon last? lisa: when you have 11 jobs, basic lead to jobs for each worker, i live in .5 million job openings, how much are you looking at that needs to get worked out? at the same time, you wonder at what you start to see this bleed into it. if you start to get increasing pushback but consumers, this

could be a tell for a downturn, and that is something that an increasing number of investors are worried about. tom: i am fascinated by the data today. even fixed income is pretty quiet, but off target news, negative nine spx has become -33. jonathan: we are negative by 1.15% are you looking at the treasury market, yields higher by about a basis point at 2.9 and 15%. talking about the quiet in fixed income, the world of corporate debt, did you see peloton yesterday? fascinating. $750 million loan, something like an 8% yield, and the demand for that off the richter. lisa: i did not really know what to make of this other than that people are actually getting yield. at the same time, have to wonder what warrants were on their, and maybe assurances. if you want yield, here it is.

you've got companies that are not going to go out of business. they are going to pay those coupons. go and get it. jonathan: i will stay away from the idea of guaranteeing whether those coupons get paid. i have no idea what is going to happen with some of these companies. look how fast things are moving. trying to find the right balance in this economy from the downturn, from the quick snap back to the headwinds we face, they are all clearly really struggling to find the right balance coming to get the right inventory levels, the right staff levels, the right supply at the right time. tom: and they are doing it was in strategist calls for much higher hydrocarbon prices. we recapitulate that research note. jonathan: jp morgan talked up six dollar gasoline. u.s. gasoline prices to break

above $16. tipsy refiners produce more ahead of the summer road trip season. the buildup inventories. in the investment bank since mid april, u.s. gasoline inventories have fallen counter seasonally. something javier blas has talked about. he will join us in about 40 minutes. it is a problem. tom: what does that study due to utility bills in the united kingdom with 9% inflation? jonathan: did you see the inflation numbers this morning? utility bills have gone through the roof in the u.k.. tom: where are they with six dollar american gas? the answer is higher. jonathan: things can get worse before they get better. tom: futures -31, and we are watching target this morning as well. thrilled to bring you daniel morris, chief market strategist, bnp paribas. two days after the july 27 fed meeting, the fed will get the

pce inflation studies. what are they going to see? are we going to see inflation lessening the end of july? daniel: well, we are looking for peak at least in headline inflation. that i think is going to have a beneficial impact for market sentiment. it is not going to be every month. not only has inflation beat expectations, but -- if that starts to roll. but we will still be in a high level -- at a high-level in absolute terms. regardless of what numbers you see in the pce, the conclusion from the fed is not going to change at all, which is way too high relative to our target. if anything, the risk is that they raise more than what you see price in the market right now. jonathan: the earnings call starting now. they are facing multiple cost pressures that we know.

but saying something that really echoes what we heard from walmart yesterday. it dramatic change in the sales mix in the first quarter. consumers are struggling right now. they are struggling and target stock is struggling by 23.5%. where would you be comfortable taking risk in this equity market at the moment, given the headwinds we have in the fact that in many places, we so i'm not fully discounted the earnings risk that lie ahead? daniel: one thing to keep in mind, we see what is happening with retailers, and in general, coming out of the lockdowns into the reopening, demand shows a shift away from goods and into services. whereas if you look at demand for services, there's a lot more with people willing to pay that. on the goods side, when equities

are on the slightly underweight side, we are not taking a lot of risk right now. it is more a question of where you feel most comfortable, and for us it is not the u.s. we are underweight in europe, neutral on the u.s., but overweight in emerging markets, and china, and in japan, so in particular when you think about the interest risk that the u.s. is facing, what that means for growth, what that means for discount rates, there are certainly better opportunities for us elsewhere. lisa: i would love to have you back on to talk about that china call. sticking with the retail story for today, is there some larger message about liquidity, about brad's in the market, -- about breadth in the market after this earnings report that really comes after a lot of pressures that were largely expected and baked in and discuss distance of lee by a lot of analysts, as well as economists? daniel: i think the liquidity

risk is probably more on the corporate credit side. we certainly do hear from our portfolio managers on the credit side, and that mix you a bit nervous when we know there are plenty of other things that could go wrong. jonathan: daniel morris there of being you. -- of bnp paribas asset management. the ceo going on to say we are seeing healthy spending by customers, seeing stronger sales trends in recent weeks, but on the corner they saw a rapid slowdown, apparel being one of them. in the sales mix in the first quarter, something we've heard a few times now. lisa: this is i think a big issue for target in particular

because there's a lot of discretionary spending and target. so walmart has a better mix, and i sit better in relative terms, relative to what we are looking at with consumer appetites right now. target is getting that much more slammed because they do tend to be the upper end of these particular stories. jonathan: are you borrowing atk line -- borrowing a tk line? lisa: he still that. tom: i've done nothing original. [laughter] lisa: yeah, that's classic. jonathan: i am just a foreigner. i have no idea what is tom's and what is someone else's. losing 1/5 of its -- losing 1/4 of its value in a single morning. tom: this is a massive readjustment and what we see from larger companies. jonathan: 450 thousand

employees. as tom has said repeatedly, corporations adjust. last year they adjusted by passing on higher costs through higher prices. we have to start thinking about costs getting cut? where do those costs get cut? lisa: how much slack is there in the labor economy? how quickly do we see this bleed into some of the numbers to gauge how much the workforce is shrinking? jonathan: futures on the nasdaq down by a little more than one proceeds. -- a little more than 1%. this is bloomberg. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. shares of target are plunging in the premarket trade. the discount retailer cut its profit outlook and missed first-quarter earnings estimates. target says a surge in costs shows little sign of easing anytime soon. the company cost and freight charges were $1 billion more than expected. the most hawkish remarks yet by federal reserve chair jerome powell, he says the fed will keep raising interest rates

until there is clear and convincing evidence that inflation is in retreat. the economy is strong enough to withstand tightening. inflation in the u.k. has risen to its highest level in 40 years read consumer prices surged 9%. all of that will add to pressure for action from the government and the bank of england. finland and sweden have made it official. they are now applying for membership in nato, a move that reshapes europe's defenses. still, the two must overcome opposition from turkey's president erdogan. he alleges that both countries support kurdish militants. it is a milestone for the u.s. soccer federation, the first national governing body in the sport that promises men's and women's teams will pay. that years ends of often acrimonious negotiations.

global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

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yes, m'lord. >> we are now looking for only 1.2% growth this year in the fourth quarter basis, and 1.5% next year, and i think that is needed to create a little bit

more capacity in the labor market in particular, alongside an improvement in labor force participation. jonathan: given the bearishness of the moment, that is the constructive outlook on wall street. that was jan hatzius at goldman sachs. from new york city this morning, good morning. this is "bloomberg surveillance ." your equity market lower by 0.7% on the s&p, the nasdaq down by just about 1%. target stock is getting absolutely hammered. brutal for this name right now. it is -24%. it is about 0.298% of the s&p, but it speaks to a major worry or broadly. are we going to see a whole lot more of these concerns around margins through the next several months? tom: if i go into aisle four, looking for the speedo power flex swimsuit or marina swim

trunks, but that is the heart of the matter that clothing. jonathan: unfortunately this is live and i can't rewind that. can we not even think about that? tom: i just love busting your chops. [laughter] our u.s. retail analyst with encyclopedic knowledge on the floor of the big-box stores, let's start with the basic questions. are you surprised at the market shock we have seen? reporter: we have been seeing it all year, so it is not that much of a surprise. we sought across the board, whether it was amazon, walmart, target. investors are penalizing the stock. tom: let's go to clothing in general. how much does it make on $10 t-shirts? reporter: the profit margins on clothing are definitely higher than in any other category, so

when closing sales suffer, margin does suffer. we saw that tjx also reported this morning. their profit guidance on the contrary was better-than-expected, and even those sales were weaker. the stock is recited to be higher in the premarket. lisa: the ceo of target coming out and saying they saw a dramatic change in the sales mix . is there any sense of how that mix will change in terms of consumer appetite? reporter: if consumers are trading off from discretionary to more staples, that is going to hurt margin. we don't think that discretionary spending is dead by any means. we are seeing people go out, people travel more. it is just where are they spending, where they buying their apparel. will discretionary spending fall

as inflation gets to be a bigger problem in the economy over time? yes, that is typically what happens. there's a trade-off between discretionary and staples. lisa: is there historic president for how much of a mess this was in terms of guidance from management? poonam: it is really all about the margin. it comes down to the higher cost of distribution centers across wages, and that is not going away. i think that is the key here. do you see signs of the cost pressures passing or listening over time? we may be entering a new normal wear higher costs are here to stay, so that means you have to raise prices. tom: what does supply chain cost? paul at citigroup talks about $1 billion out of the blue of new supply chain costs. define that. on a cfa exam which does a supply chain cost?

reporter: it is the cost -- poonam: it is a cost to make the product, to get the product to the just to be concentric, and then into the store and people's homes, so the costs are rising on every snuggle front. it is not one piece of the puzzle that you have to fix. it is from the start to finish. tom: what is the history of them raising prices? jon has been talking about the initial tranche. is there a wall they run into, or do they just say this is what the bicycle costs? poonam: it depends on what competition is doing. when you see the price of milk going up across the board, it is ok to raise them. but if you start to see some retailers do it and some not, than there will be a shift in where consumers spend. so it is a hard and difficult thing to do to raise prices without trying to press on other levers you have in place. i think retailers in general will try to flex cost where they can before taking a meaningful price increase. lisa: who is the next target?

who's the next walmart? poonam: you are going to hear from dollar stores, so that will be interesting to watch. you are also going to hear from some of the e-commerce names. isaac across all of them he will start to see pressure on the cost side. a pair of retailers -- apparel retailers may be better insulated because they have end up demand for more consumers are spending. jonathan: thank you. that headline from target, let's go over that. they offered markdowns as demand for big and bulky goods actually fell. that's not a headline you would have found in many places last year. tom: i don't know what that means. it could also be the nine inch marina swim trunks. jonathan: you want to do that again? tom: it could be a number of different things. we are talking original statements here.

is big and bulky ever discussed in financial media? jonathan: it is relative to what we experienced last year. last year they faced down costs, but also had to confront a boom in demand. they could pass on higher prices. it just seems to me that certain retailers, executing in a certain way, they cannot find the right islands area to find the right amount of inventories, the right amount of staffing mania at any given time. we had a really positive demand shock at the start of last year, and now this year we are facing headwinds and ultimately could be facing the opposite. lisa: we always say unprecedented, and this is what this all highlights because we saw a period where everyone was stuck in their homes and buying as much as they could, and now people are moving to experiences . but take a look at airline costs, how much the prices are going up there. how much are big and bulky goods basic staples and homes. people saying we don't have to

pay that higher price right now. we can take a plane somewhere else. how do you experience this shifting market with some sort of accuracy? jonathan: you can't be right all the time on the sell side on wall street, but mike wilson of morgan stanley, what a year he's having, calling this market and the dynamics, the issues that would ultimately push it to the lower. tom: it is the underlying themes of mr. wilson's work, and when you're right, you're right. but it is the why you are right. but they've gotten right is the big macros you mentioned, demand idea that we have learned in 48 hours. that is oliver wilson right. jonathan: futures down 0.7%. this is bloomberg. ♪

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jonathan: live from new york city this morning, good morning. on tv and radio, here's your price action. market now, but off the lows so far. on the nasa 100, down 1%.

with some housing data, let's get to mike mckee for more. michael: we care about this because everyone is watching to see whether the fed is having an effect, added they have. housing starts on a month of the month -- month over month basis fall by 2.1%. the expectation was for 2%, so i guess you could call that better-than-expected. that is the annual rate, below march. the building permits number comes in 3.2%. below the estimate of 0.4%. that suggests that maybe we are seeing some capitulation from builders. the homebuilders index came out.

it plunged. there was a feeling that maybe builders are seeing a real reluctance of people now to sign contracts on new housing. interesting number to watch is the housing completions number. we don't often talk about that, but it is down 5.1% below march. we came into this year with a shortage of housing. now all of a sudden we may end up with a shortage at the end of the year, but without the demand that would compel additional supply. it does look like the fed is having an impact of higher interest rates now over 5% for mortgages, seeming to slow not only mortgage applications which were down 11% today, 11% last week -- jonathan: that is the real number, isn't it the applications number? poonam: people -- michael: people are not entering into contracts or trying to buy homes anymore because it costs too much. jonathan: mortgage applications

down. we are not seeing a massive move in this market. we are down 0.7% on the s&p, on the nasdaq down. it's got to be a big story, hasn't it? we are responding to these higher mortgage costs by not getting a mortgage. tom: we mentioned this to jan hatzius. he said this data is speaking, and it is beginning to show changes in housing. the 10 year yield now above 3%. that is like dow 10,000. jonathan: two mondays ago we dropped to 2.84%, and now we are back above 3%. citi published mom's ago, reflecting on how they won't hesitate to keep pushing beyond the point of neutral. he said this at the end, the market take away is clear. this is andrew hollenhorst

and the team at citi. a very negative environment for risk assets. tom: right now joining us as well is seth carpenter, global chief economist morgan stanley. whether it was maynard keynes or the giant paul samuelson who said when the facts change, i change my mind, right now for the deciles of america, the facts are changing. how crushed will the metaclass be dusty middle class b? -- will the middle class be? seth: we had the end of the child tax credit, a surge in energy prices and a surge in food prices. so that means for people who are below the middle of the income distribution, their ability to spend on things besides those true staples has been diminished, and we are looking for that to be a big part of the slowdown in consumer spending this year. tom: jon ferro mentioned

citigroup with a more strident view on rate rises and many other shops as well. is this a central bank where the facts will change and jerome powell will blink? seth: i don't know about blink, but i have to say jay powell is in a very challenging situation because what they are trying to do is slow this economy a lot, but not too much, and neither of those is particularly well defined. they are trying to bring the growth rate of the economy down enough so that the inflationary pressure we are seeing outside of some of these temporary phenomena, they want that to come down by slowing the economy enough that it goes away, but not so much that they dip things into recession get that is such a terribly difficult job to do. lisa: your former boss, the former fed chair ben bernanke, put it is almost a certainty heading into stagflation, and had some pretty harsh words for this fed chair come over the past they have taken in not

getting ahead of this. do you think that almost certainly we are headed towards a stagflationary like environment in the united states? seth: very hard to get into debates about the definition of stagflation. i think the following is very true, sharp deceleration this year, and the risk is clearly skewed to the downside. i think in that sense, there's clearly elevated risk for things going into recession. and then inflation is high. we have it coming down, but it is not going to be back to the 2% target anytime soon. so call it what you will, it is going to be a rocky road. lisa: what is the new normal in terms of the inflation rate that seems to stable if it is not 2%? seth: i still think the fed very much wants to get to 2%, but they are faced with a very challenging set of fact. you can either bring the excess inflation that we have down to 2% italy, but that would require

causing a pretty bad recession, or they can bring it down gradually, which means the realized inflation will probably still elevated for another couple of years. that is a really difficult choice to be in. they will try for the rest of next year, probably sometime in 22024, you will probably see inflation about their target. lisa: we have been talking about the potential for six dollars average gas prices in the united states, as per the expedition of jp morgan. what would that do in terms of growth? how does that factor into your base case? seth: it gets back to tom's point about the distributional effect. for people who are living paycheck-to-paycheck, consuming

almost all of their current income and have to drive to work , that is a huge chunk of this population, they are just going to have less money left over to spend. the funny thing is that inflation terms, if gasoline gets up to your hypothetical 6% and stays there, those elation area facts start to go away, but people are still paying more out of their paycheck eggs -- their paycheck each week, it's month, each quarter, that does continue to crimp spending. tom: i come up to a midyear outlook which i believe has delivered on seth carpenter's desk june 30. what matters is july 27, which is where the fed meetings get excruciating. and my right on that, that the two meetings out is really where this game gets tough? seth: i think that is exactly right. chair powell said for the next couple of meetings, some thing like 50 basis points is right. i think he made it clear when he first said it, but reinforced the view yesterday that he is not anything else beyond that in either direction, so the fed really is going to have to be

looking around a lot more, asking themselves are we seeing any slowing in the real economy, are we seeing signs that inflation is coming down, and quite honestly, because they are starting in june the runoffs -- the runoff of their balance sheet, are we seeing the effects of that so-called quantitative tightening? this is a tool to have used before any much smaller degree than what they're doing now, and they really are going to have to wait and see how that plays out through the financial markets and how it plays out in the economy. tom: you took data dependency 102 at princeton a few years ago. explain to our audience the weight of data dependency to the phd's at the eccles building? seth: is the only game in town. it is funny that the term came into existence because there was never a time when policymaking was data independent. but here it is going to become that much more difficult because they are going to have to scrutinize every last bit of

data to see what is going on. monetary policy works. first policy tools, then financial markets, than the real economy, and then inflation. they have to scan with whatever high-frequency data they can conjure up each of those different links in the chain to see if they're getting traction with their policy tightening and if that is leading to lower inflation. it is a tough job. jonathan: always good to have you. here's another one from goldman sachs and the chief executive officer david solomon, in a phone interview with sonali basak in the last 24 hours. "we have to get rid of inflation. inflation is punitive, especially on those living with week, paycheck-to-paycheck. ." talking about recession risk, reflecting about it in the research department. tom: i think it is great that these ceos are talking up the macroeconomic stuff are i want to know what he's going to do on

the bond desk, where price down, yield up. i'm fascinated how global wall street manages this mother of all bond bear markets. jonathan: one thing he said on spreads, tumult and credit spreads would be concerning. are we there yet? tom: yes, i do think we are there yet right now. jonathan: using we are here. tom: i think the price decline log, bloomberg total return aggregate, any credit series you want is jaw-dropping. jonathan: we are adjusting to rates, and i know you can build on that. is that concerning in and of itself for the federal reserve? have we seen a dislocation in spreads, liquidity? can companies still come to market and raise money? lisa: peloton can just raise a loan with a pretty risky business model at this point.

if you took a look at spreads, they are well within norms that are not scary for the fed area he bore starting to widen out. this is what could potentially trigger the fed put. it is not there yet, which means they're going to keep hiking rates. the flipside of that, the bank ceos are watching execs it the fed is watching as well. jonathan: it is not december 2018 yet. futures done 0.8% on the -- features down 0.8% on the s&p. looking forward to catching up with evercore and jay pelosky. all of that in the next hour on bloomberg tv. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. shares of target fell more than 20% in early trading. the discount retailer credits profit outlook, saying surging costs during the first quarter shows little sign of going away soon. additional hits came from higher

pay for warehouse workers and markdowns driven by overstocked inventory. goldman sachs ceo david solomon says clients have paired for a decline in asset prices. solomon told sonali basak what he because extremely punitive inflation is creating a tax on the economy. he sees a 30% chance of recession in the u.s. over the next 12 to 24 months. bloomberg has learned the u.s. is forcing wall street acts to search more than 100 personal mobile phones carried by top traders and dealmakers, the largest ever investigation into secret messaging on platforms such as whatsapp. the sec will decide who to punish for failing to preserve messages via unapproved platforms. the eu is considering whether to use proceeds russian oligarchs to help rebuild ukraine. the eu will also propose issuing joint debt. ukraine's foreign minister dmytro kuleba told his counterparts that reconstruction bill could reach over $1 trillion.

the board of twitter plans to enforce its $44 billion agreement to be bought by len musk. directors voted unanimously to recommend that shareholders approve musk's bid. almost $16 higher than where the stock closed out on tuesday. he board statement came as musk appears to be maneuvering to ditch or renegotiate his offer. global news 24 hours a day. i'm ritika gupta. this is bloomberg. . ♪ morning security briefing—make that two. share that link. send that contract. see what's trending. check the traffic on your network, in real time, with the next generation in global secure networking from comcast business. lunch? -sure. you've got time. onboard 37 new people, with 74 new devices. does anybody have any questions? and just as many questions. shut down a storm of ddos attacks. protect headquarters

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>> putin's war is heavily disrupting the global energy market. it shows on one hand how dependent we are on imported fossil fuels. we must now reduce as soon as possible our dependency on russian fossil fuel. tom: ms. von der leyen, who is really quite something. we have spoken to her numerous times at davos. she is encyclopedic on the german military, and of course,

the duties of brussels as well. we will get to that in the moment. right now, kriti gupta with a chart. kriti: we've got to talk about these record high gasoline prices. i believe six dollars in california, five dollars in hawaii, and it is not just the over 100 dollars we'll prices use young your screen. it is about refining margins and to kill her. stick with me here. essentially three barrels of wti crude to barrels of gasoline and one barrel of distillates which is jesus or jet fuel. -- which is diesel or jet fuel. what this shows is this major jump last week, coming down a little bit, but $50, that is the margin for refining or get one of the big questions is can one of these american refiners they do get their hands on crude, do they have the capacity to turn it into gasoline? it is really that concern that is partially driving up the price. tom: for the 12 people that just

drove off the garden state parkway by some refinery in new jersey, is it done? is there any incentive with this record margin to make the distillates, make the stuff we use? kriti: right now it feels it is very tough to do that. tom: let's go to javier blas with his true global expertise. i want to talk about china. i guess they are coming off lockdown. when you look at blas economics, what does it mean if china comes off lockdown? javier: it means higher prices. retail prices for gasoline, it is because china has not yet opened up. china is a lot more for crude oil and gasoline worldwide and it needs higher.

there's just simply not enough for everyone, so they price has to kill some demand. if china comes back, i'm afraid we are going to see higher prices. for the beginning of the summer season, it is going to be very painful. lisa: what are you looking at in terms of potential prices? we are seeing refineries not keep pace at all, which seems to be the real big issue, not just crude prices. javier: you are absolutely right. the prices i'm looking is forget about the wti price. if you look at wti, we are wondered $15. if you look at the home sale market for refined product, gasoline, diesel, and jet fuel, we are somewhere between $170 and $270 a barrel. depends on whether you are looking at gasoline or diesel. we start to see some demand destruction come particularly in

emerging markets, and we are beginning to see that. the key question is people really want to travel. this is the first summer, the first spring of traveling after covid-19, so i think that while we see prices may need to go higher to destroy demand, just because there is an appetite for traveling after two years, basically staying at home. lisa: but will it take for refiners to actually just refine more? at what point does the supply-side respond? javier: the refiners in the united states are working almost as hard as they can. we have seen operating rates already in the gulf of mexico around 90%, which is very high for this time of year. we have seen lower operating rates because they are doing seasonal maintenance, so i'm not expect the refiners are working harder than they are. any executive today is trying to run their ends as hard as they can because the profit margin you could make, i don't think

anyone in the american refining industry has ever dreamed to see the 321 refining market north of $50 a barrel. i'm not expect that refiners can do more, so we need to bring demand down, and the only way is through higher prices. tom: my amateur take is the spread between west texas intermediate and brent is four dollars, five dollars, six dollars. right now american oil is $.70 more expensive than brent crude. why, and which one moves back to normal? javier: i think we will see at some point brent coming above wti again come about moment we are seeing american refiners buying as much as they can because they can make money refining that growth, and that is why we see so much pressure on wti. it is pressure from the refiners , and a huge refining market.

lisa: meanwhile, tony blinken returning from his trip to abu dhabi. what do you think the ask is from the u.s. from 1-800 call abu dhabi? javier: they have been asking i would double he and riyadh -- asking abu dhabi and riyadh for more oil, but the policies also have their own asks. neither is blinking, neither giving up on that particular request, and we have seen opec production increasing very slowly. but even more saudi and uae oil in the market, those barrels need to be refined, and the bottleneck right now is on the refining sector. more opec oil will help, but it will not bring gasoline prices for consumers immediately down. tom: a chart i have of saudi lite, it goes back to the

1950's. it spans daniel juergen's the prize. we were all humbled in 1986. is saudi going to crush oil again if they have to break opec? javier: if they have to, they will do it. they have demonstrated time after time that they are willing to do whatever is needed to keep control of the market. the position right now is that saudi arabia, production is approaching all-time high. most likely, on average, 2022 is going to match the highest ever saudi oil production. we have had the ability to really be in command of this market. if the economy is down at the beginning of 2023, they can cut production was no problem and control prices. there's not much they can do right now on the upside, i'm

afraid. tom: wonderful to visit with you, as always. his wonderful book out on oil trading as well. what a day. i don't know where to begin. lisa: this is a great story to really end on, perhaps not so great from people filling up their tanks. build on what hobby or was talking about, reaching the highest on record in the united states, at least at a nominal level, $4.57. how high could it go? how high does this crimp people's budgets places like target and walmart and affect the pricing power of these retailers? tom: that is the aaa average price coming sitting sheep -- price, including cheap fuel. bloomberg radio, bloomberg television. good morning. ♪

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janet margin -- jonathan: margins under pressure. stocks right now. >> everything you need to get ready for the start of u.s. trading. this is bloomberg deal been with jonathan ferro.