>> i think the fed is already aware that we are showing cracks in the armor. >> as we reached higher and higher price levels, it becomes more difficult. >> tightening will get us down to about 4%, probably engineer a recession. >> i don't think they will be able to raise as much as markets have priced in. >> this is bloomberg

surveillance. jonathan: live from new york city for audience world wide, good morning, this is bloomberg surveillance. hello june. tom: there's been so much turmoil, i'm almost looking at june 1 as july 1 stuff you got a negative 1%. we are down year to date a little more than that but we have political and financial amid your day. jonathan: a midyear review in the white house, what do you make of what's happening. tom: there is a smart note talking about how you change the guards if you are a one term resident. what do you do along the way?

jonathan: op-ed in the wall street journal on inflation by the resident step lisa: i don't know if this comes to a cohesive message. how much is too late. it's unclear to see how long they can position themselves moving forward. jonathan: a later focus on the potential for a shakeup in the white house given an nbc report. the president is upset about what's happening within his administration. tom: it's typical, we see this among all administrations. it's part of the political process. how does it reach down to the bloomberg world of economics?

you wonder about secretary yellen and if there would be a switch there. jonathan: june 15, the bed, 2021,. lisa: price of gas at the point may be the most important data point of all. how did they honed the message when you have a credibility issue? this is not political drama. i think people will have to deal with the prices at the gazprom. jonathan: did you see the monthly performance of the s&p 500 through may? it didn't feel like a positive 0.01% month. lisa: there is still the turmoil.

citigroup is saying this is a bear market rally. valuations still need to make the adjustment with slower growth and higher inflation and perhaps much higher interest rates. lisa: jonathan: futures positive on the s&p 500 this morning. looking at the nasdaq 100 positive and then negative. yields look like this on the 10 year, up about aces point. euro-dollars basically unchanged. crude oil was interesting yesterday. $116 right now. lisa: after a report in the wall street journal talked about how russia might be kicked out of the opec agreement because production will not come online which will pave the way for other oil-producing nations to increase production materially.

the fed is formally kicking off quantitative tightening but it doesn't really begin until june 15. how quickly are they going to reduce their balance sheet? what will the impact be? people are trying to price this in. fed officials saying it's the equivalent of a couple of 25 basis rate hikes. people are trying to price this in as a big unknown. frankly, the bank of canada has been out front. we don't talk about it but it has been one of the more rest of banks and it sets the tone for how aggressive potentially the federal reserve and the ecb could potentially move. we get a bunch of fed speak today at 11:30 a.m. and st. louis fed president jim bullard at 1:00 p.m. on the former new york fed president bill dudley is joining us at 7:45 a.m. after

ism data well as the opening data we get to day. it gives an indication of how tough the labor market is. maybe it's giving them an exit ramp. jonathan: the data point is a target for the federal reserve. lisa: jay powell indicated how tight the labor market is. if you look at the help wanted signs in the stores, it is important but it's backward looking. how to they give you a sense of how the fed presidents are looking? jonathan: thank you, what a week ahead with payrolls friday. the head of european epic strategy says yields haven't peaked in the dollar is not out. on the third piece of that,

where are you on the dollar? >> i agree with that. i think we have a tactical view of a correction. [indiscernible] markets will pay attention but they will also be extended periods of them being solvent. [indiscernible] it's down considerably in china

on the back of the lockdown step it's important because you can get the dollar projecting lower. the condition for that will be rate hike china could play a role in that step going further out, the dollar is probably the best house in the worst neighborhood. tom: what are the ramifications to the general currency market if we get week yen from $1.32? >> i don't think it will bottom

out for now. it should go higher and that in the sense would ease creating an issue as far as japan is concerned. the ministry of finance has been pushing back against the further yen weakness. it will be an issue for the rest of the regional currency. [indiscernible] it also implies that imports to japan will be for more expensive and be an inclination the asian

importers will push into a product change. i wouldn't say it would have a major impact but i would be more concerned as to 100 -- $1.40. jonathan: it's wonderful to get your thoughts. deutsche bank is out with a big call this morning. the burden of proof has shifted further and the data over the summer now needs to disprove the case for a 50 basis point hike early in the hiking cycle. we are talking about the ecb. our previous based on what to expect back-to-back 25 basis points and now we expect one of the two hikes to be a 50 basis point hike in q3. that's the call for the ecb.

lisa: they got some confirmation from the governing council that supported a rate hike at the ecb. how much can they get ahead of inflation. if they get that right, what is the impact on the euro? does it make the euro weaker? jonathan: if you ask someone in the fx market that question, it's incredibly divisive. deutsche bank says the ecb continuing to underestimate inflation and we expect a 50 basis point hike will increase as the summer progresses. tom: what i find fascinating and others will correct me -- so what? they will make a first rate hike like to you is, nothing really happens, maybe second rate hike, nothing really happens and maybe you get to some interesting things in september.

what are we waiting for? jonathan: rates have been negative since september of 2014, it's been eight years. tom: it should normalize. jonathan: when do you speak with resident lagarde next? tom: i don't know. we will watch the jubilee together. jonathan: that's right, get it done. futures unchanged on the s&p 500 and i think you get a lot of soup with that on twitter. tom: like the red sox, let's go. they are waiting for mike coverage of the platinum jubilee. jonathan: we are picking up the covers tomorrow, from new york, this is bloomberg. ritika: keeping you up-to-date with the first word. janet yellen says she got it wrong last year on inflation and made the admission in an interview. she predicted that elevated

inflation would not solve the problem but now she says she didn't understand the circumstances. president biden says he will get that ukrainians rocket systems and other weapons will allow them more precision in attacking russian targets. ukraine has agreed not to use the weapons to attack targets inside russia. investors are weighing the future of unity is ministers from the group have routine meetings thursday. opec members are exploring the idea of suspending russia from its oil deal which could mean an end to their participation and saudi arabia will add more arrow sooner than expected stop shanghai reported the fewest coronavirus cases and three months on a day when the president celebrated and and to isolation for most in shanghai. it's a dramatic drop from the

peak of more than 27 thousand per day in april. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

>> i think i was wrong about the path inflation would take. there were unanticipated and

large shocks to the economy that boosted energy and food prices. jonathan: credit to janet yellen, the one person in the administration with the me a call but on inflation. good morning, futures look like this. someone is saying i was wrong. tom: there is a not enough of this and she is a first-rate academic in economics and rule number one in academics is when you get a wrong, study why. i'm sure she and others around her are really thinking of how they got transitory wrong. i'm going to cut them some major slack stop there was a small matter of a pandemic. jonathan: some people got it right and they were ignored by this administration. tom: yes.

i think there were people including mr. dudley who will join us later that did that are at this guesstimate. we will touch on this in a moment but right now, we need to go to anne-marie or dern -- porter and - hordern in washington. the lads lined up in black suits and did what they did step when everything is said and done, there are up there for a serious reason which is asian hate in america. >> this was certainly a serious moment having bts at the white house. they are a supergroup and have a ton of popularity in a way the administration amplified that message. as i was walking out, there were

fans outside and i tweeted a video that fans asked me what they look like and if they were cute. i got a lot of twitter inbox messages asking me to delete that because there is a fight within the supergroup fans. they are called the army and there's a fight about the fact that some of the fans say they should have never showed up and didn't want to be strapped to a serious message. there was a ton of people in the briefing room the second bts left. a lot of other reporters also left. tom: let's move on right now to the meeting yesterday on inflation and secretary yellen said that's great, what to day two of the biden inflation battle look like? >> they will deal with this for the entire month of june as they

talk out the economy. when issue is that inflation was at 70 -- 7.5% in january so they could have been talking about this since the end of january and they are making this effort now in june. yesterday, when we got wreath on his rear meeting the present help with the fed chair and secretary yellen, the takeaway is the president wanted to make sure that is the feds job. it's one of their mandates to control consumer prices but the administration is also trying to hammer home the fact that they are doing everything they can to bring down inflation but when you ask them, what about the tariffs? economist say that could potentially shave off some inflation. there is still no decision. a lot of things are still in limbo that we don't have answers to step lisa: the nbc poll came out in may and had intentions of the 33% of americans say they

approve of the handling of the americans. will there be a shakeup in the white house at the cabinet level? who will get the boot? >> it's a great question. these poll numbers are scary if you are looking down a few months to the midterm election i cannot answer that right now. they are struggling and they are trying a few new communication efforts. it's something we haven't seen the president do his writing back-to-back opinion pieces. potentially, this will help shake things up with a different kind of messaging but i don't know yet potentially would go. did see the mea culpa from janet yellen to own that there were

mistakes to be made in this once-in-a-lifetime pandemic step brian dietz was asked the same question yesterday and he said things were uncertain and then pivoted and said we are not the only ones to deal with this, the eurozone is at 50%. if there was to be a shakeup in the structure of management of the white house. lisa: there was an op-ed in the washington post that said the biden administration just laid out with a plans to do about inflation and they haven't got a clue what to do about step that's been the takeaway for a lot of people. is there any proposal he has put out there that is garnering another opinion from experts in the field? >> there is a lot of proposals that have been put out there by the biden administration that some say could work but like everything, there is what could and could not stick.

the tariffs could shave of inflation but many say that would not give good negotiating tactic when china comes back. then there is the issue of the gas tax holiday. it's been floated but others say what it even get to the consumer? or with the industry eat that up? there are these debates about issues and you never really get to the final finish line whether or not it will go through with this or not stop if they are going to fight inflation, will that be the key focus or will that use the issues like a gas tax or tariff, there'll always be something else where there will be pushed and there seems to be a lot of debate. jonathan: thank you so much. just quickly, the nbc report that came out on the frustrated president, the name that came out in that was wrong klein.

there was a target on his back. i think it's a matter of time for a lot of people before he goes. tom: he's usually respected on both sides of the aisle and i don't know the details but always the chief of staff is the focal point and what's important here is president biden has seven candidates to choose from of different character and it depends on which way the president wants to go. jonathan: a massive effort in the last couple of days to shaken -- to shake things up and sharpen the message. lisa: do you hear a message coming out or did you hear a lot of new speaking points? jonathan: every time we get a cpi, it sticks on the white house. futures are unchanged on the s&p 500 stop good morning, this is bloomberg. ♪

jonathan: sometimes things don't feel the way they actually are. this won't be a therapy session. 0.0 1% higher on the s&p 500

last month. futures this morning are exactly 0.0 1% higher as well. futures on the nasdaq are at -- are down about 2/10 of 1%. let's look at the bond market, yields lower through the month of may step a little bit higher on the session by basis point on the 10 year. the story for many people from the fed to the ecb come in next week, president look guard and deutsche bank ahead of that saying in q3 come expect to hikes and one of them could be 50 basis points. euro-dollar is $1.19. tom: what about the ism numbers today? jonathan: some survey data and i

think the jobs data could be the one to gets people's attention. tom: that's 10:00 a.m. jonathan: for a lot of people, that's the target for the federal reserve. can you rebound the labor market without pushing unemployment too far? that is a delicate balance on the fed will do that with some old data. tom: brent crude is $117 20 cents and that is elevated as well stop let's go to the equity markets and look at derivative strategy at bnp paribas. what do the derivatives say? what to they say about the bet on equities? >> good morning. when we look to the derivative market, we see some remarkable similarities toward what we saw on the backend of 2001, that bear market. the range of the vix looks

similar to that regime. tom: we had a may that was flat. is there a that within the equity market in particular -- is there a debt - bet for june? >> what we've seen over the last week is very much a air market rally. what we've seen in terms of price action, the laggards in last month or so have all outperformed. it's been a mean reversion trade step there is some decent buying pressure that supported the market and we are now a little bit more in no man's land step we will see whether that bear market value returns to something more sustainable. lisa: it sounds like agree with citibank and morgan stanley in saying the valuations have to

continue to rerate and we are not done with this repricing? >> i don't necessarily think so. i would describe as very much a air market regime but i think it's been driven by an extreme multiple compression, the type of multiple compression which we've already -- only ever seen in a recessionary environment step we are in this bear market environment but we haven't seen the recession manifest in the macro data yet. we think there is a chance for the u.s. to be in a soft landing. it will not necessarily the test prohibit the market from rallying from here. we think it will be less bad for the second half of the year which could set us up for our next rally. lisa: given the uncertainty, will this affect earnings? >> i think it's incredibly

difficult to have superhigh conviction where the market be on a one or two week view. we think year to date, it's more than justified by the economic data so if we have the data and proof, it sets a self -- it sets us up for the market to perform. the current spot levels could remain choppy and we think we will be higher than we are now. tom: there is a phrase we hear a lot and it's a cheap phrase but you are a grizzled pro. describe the symbolism of a rebound. >> the thing which characterizes this is a lack of new leadership

and more about mean reversion trade. over the last week when the market has had this bounce, you look at what has lagged of the market and led the market. i would look for to things to confirm that this is less of a dead bounce and more of a sustainable rally. one would be new leadership. the second thing we would look at is a further normalization of the volatility market. we look at the vix to come back toward the low end. tom: give me a vix level you have your eye on. we are at 26.33 right now. give me that level that signifies the end of therebond do charmoir. >> we would be the lower end. tom: 22 point zero?

mon dieu. >> i don't think we move into amid teens review very soon. we think that would be a good signal we could be in for more comparative comps. lisa: thank you for maintaining a straight face as tom keene butchers french. what do you see as the dichotomy between retail positioning and it indicates perhaps more than unwind and specific data? >> that's a great question and it comes to the core of our thesis of what outperformed through the balance of the year. when we look at equity markets, valuations are important. the flows really move the market. when we speak to incident -- institutional accounts, we get corroboration of what we already see.

that is at odds with the picture we have seen in retail. in retail, we think there is a lot of success in the market but the interesting thing is those investors have concentrated in different areas of the market step retail is more concentrated in these euphoric high growth stocks that have been underperforming but still look expensive relative to values and we think that rotation could have more to go. lisa: i'm looking at gamestop down more than 15%. does this matter to the overall averages or is this just noise on the periphery? >> i think every single stock is noise around the periphery. we can take a signal from what those stocks are doing. bnp paribas had a play on the frothy is names in the market.

taking a poll of these stocks, not any one of them will move the needle. we focus in on them together. tom: did you say the cappuccino index? >> yes, the frothy is names in the market. tom: what are you going to do with a basic call for the equity markets away from a cappuccino index? is it about profit and free cash flow forward? >> i think the best single metric we can find for equity markets is earnings forecast revisions. whether it's upgrades or downgrades, what we've seen is the downgrades have been concentrated on the growth and. when you look at the nasdaq, it looks pretty poor and the s&p looks more reasonable. when you look at something more cyclical like the russell 2000, that looks over k so that's an gauge we look for.

that should move the needle again but to the extent we see better earnings in the cyclical names, this is one of the things that gives me more comfort that maybe we are heading potentially toward a soft rather than a hard landing. jonathan: thank you from bnp paribas. you should practice your french. tom: i don't know about that but there love of cats is so sensitive. jonathan: last time we did this, the cap mafia golden - cat mafia called in. tom gets so emotional. he is deeply invested. the on his face led to the game against novak, joyous. tom: he is not a young guy. jonathan: and he was upset they

had to play so late as well step the game started at may and ended in june and it went through midnight in paris. tom: he's got semi final and then the final. jonathan: that will be number 14, that's french. tom: ok, we will have to see. we have a mixed market and are sitting on the data and i will go back to the data this morning. it was in all the turmoil, is not another june 1. jonathan: ism data may show as deceleration a little bit later then onto jobs after that. then payrolls the rest of this week. lisa: all the economic data points have had less significance and it adds up to a sea of much. - mush.

jonathan: did you just call breakfast in london a sea of mush? lisa: i really enjoyed it stop jonathan: right before the queen jubilee, you're calling english breakfast a mush? , on. jonathan: it was with love, i like mush. jonathan: it tom: will be an extended bank holiday. jonathan: tomorrow we will, for payrolls and also futures are unchanged on the s&p 500. from new york, this is bloomberg. ritika: keeping you up-to-date with news from around the world. ukraine will get advanced rocket systems from the u.s. president biden and he made the announcement in an article published in the new york times. it will allow ukraine to hit targets up to 15 miles away in the u.s. says ukraine has promised not to attack targets inside russia.

consumers are being urged to break for just brace for inflation getting worse and the u.k. fresh food prices are now widening. fresh food rose to 4.5%. china is planning for years of covid zero with testing sites on almost every corner. tens of thousands of lab testing booths are being set up across the country's largest and most economically vital cities, with the goal of having residents always just a 15 minute walk away from a swabbing point. elon musk sent -- a note to his employees about remote work. apparently, he wants tesla employees back in the office at least 40 hours a week. the new top gun movie had the biggest ever theatrical opening for a memorial day weekend.

it lifted the spirits of movie theater operators to bounce back from the pandemic. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

>> my plan is to address in laois and that starts with a simple proposition, respect the fed and their independence, they have a laser focus on inflation just like i have. jonathan: the president sing respect the fed alongside chairman powell. it was more elegant than the former administration but ultimately making the same point. tom: exactly.

for the pros on the street, i think it was a colossal nonevent come i thought it was timid and tentative and the difference is, there is a difference of relief from inflation versus moving the needle of inflation lower as we will state test speak to adam pozen later. jonathan: it's how we can provide some relief. tom: william poole says you got a monetary solution and you've got a fiscal solution in an election year, the fiscal solution is out step you will not do a fiscal contraction to slam the nation into recession. on the monetary side, what we are arguing is the speed to get there to get to some for of --

to some sort of mystery. we will have to see. i will leave it to anne-marie to tell me. she was more focused on k pop. wendy schiller is from round university. i want to talk about one term president's suggesting that maybe mr. biden like mr. trump is a one term president. what do the last two years of one term president look like? >> your pointing out with speculation. what kind of congress do you work with? do you work with a narrowly controlled democratic congress or a republican congress and we don't know that yet. we will have to wait and see. the president's look toward executives order and tend to do things around congress and do as

much as they can rather than in a legislative change. there will start to be a free-for-all in the democratic party if it becomes clear that joe biden doesn't want to run or can't run or will step aside. then you've got those dynamics which will get very messy quickly when we get toward the end of the year. tom: you said you have to read alan nevins about the 1890's. it's a lot like the 18 90's, pre-teddy roosevelt, with huge polarized america. is that close? >> you are spot on. if you look at the levels of polarization and people do these figures all the time, the gap polarization and division with -- was at its high now and then. the range of issues is broader. we are divided along many more

divisions than we were then but we were still divided and the republican party was a mess in the 1890's. we will have to see if republicans can get out of their own way moving forward so joe biden may not have is difficult a time theoretically if the republicans are divided amongst themselves and that will depend on donald trump and how much he intervenes and how much the pressure is that he puts on if they win a majority. is that terrible? others on the horizon, gun violence and of course, we have abortion. these can mobilize constituents. it raises levels of uncertainty going into november. lisa: how would president biden

position his cabinet? >> you have an economic member. if you can get attention about the economy, he needs to get more of his cabinet members out front which obama did not do either. you got people that can help you and get them on the road and out there. tom: we saw secretary davos and was wearing a hockey teacher. >> she didn't go to brown but she got along well with them. i didn't go to brown either. lisa: your view here is counter

to what many people are saying which is get rid of cabinet members and you say push them forward more and make them more visible and make it less biden focused. how unpopular is your view and why that would work? >> i've been updating the communication side and biden has done a good job for a while but there needs to be a change but the general infrastructure of the staff at rising him has long-term people who are loyal. you need to go with a fresh perspective, people on the ground and newer and younger people perhaps. i think the internal staff has to change and the comedic age and staff has to ramp up better. tom: >> the sense that he knows a lot. he's been on the hot seat a long time and he has proclaimed he

doesn't know what he's doing. i don't think that's wrong. he needs to send the message out that the democrats are better and economic crises than republicans which is normally true but we are not hearing that message at all. jonathan: thank you, great to catch up as always. a headline caught my eye -- the financial services company s&p global is having spending guidance. if that doesn't tell you a lot, i don't know what does that lisa: this is a company that literally tracks other companies. that is what they do and they have no clue. it tells you everything you need to know about getting any kind of visibility. tom: the times are bizarre but it's not s&p global, the math of

this is way out on the right side of the equation. we don't have a clue what we are doing and the epsilon is original. jonathan: don't you need to have a clue if you are s&p global? lisa: and they talked about significant deterioration in an economic backdrop. you wonder how the prices ofhe goods are affecting things. it's a big wildcard for not only the s&p 500 but also for big banks. jonathan: it's a little bit awkward when you put out a rating on a company from your own company. this is bloomberg. ♪

what if you were a global bank who wanted to supercharge your audit system? so you tap ibm to un-silo your data. and start crunching a year's worth of transactions against thousands of compliance controls with the help of ai. now you're making smarter decisions faster. operating costs are lower. and everyone from your auditors to your bankers feels like a million bucks. let's create smarter ways of putting your data to work. ibm. let's create

>> i think the fed is very aware that the u.s. economy is already showing signs of easing and we are seeing cracks in the armor. >> companies can pass cost through but as we reach higher and higher price levels, that becomes more difficult. >> there is a frustration from where policy is headed. >> tightening will get us down