>> the fed has given strong guidance about what they are going to do. they have probably reached a maximum level of rhetorical hawkish in us. >> i am afraid the fed is going to have to do more. >> the fed is tolerant of inflation above 2%. this is going to take time before the fed gets to the point where they have to hurt us. >> this is "bloomberg

surveillance." >> live from new york city, good morning, good morning. this is bloomberg surveillance. equity futures down .5% on the s&p. 140 on brent, the new price target. >> this is not about a spot estimate. this is about a sustained set of corridors, even years, of higher oil prices we are not ready for. jon: triple digit crude. that is what is needed to rebound at this oil market. in the mind of jeff curry. tom: that is the oil story. i think lisa chimed i got a three point 02% on the

10 year yield stopped our first guest will talk about that stuff these rt leaves of the shift of a new regime. jonathan: yields are up and last 24 --24 hours. tom: surprising what half a percentage move highlights how the central banks are trying to get ahead of the inflation they see that continue to have legs. there was a story on the bloomberg this morning about how supply chain disruptions are starting to ease a little bit. is it enough to bring inflation low enough unadjusted basis. there is a half a percentage point move into market expectations by year end by the ecb. here we are as a base case at

year end. tom: can we do a dumb question? jonathan: there are no dumb questions. tom: how did japan get away with not raising rates? jonathan: the inflation backdrop is very different. tom: for so they say. jonathan: they cannot ignore what's happening with the bond market. for a long time, the center of gravity for the global market has been the bund yields. that will change with the ecb on the move. can the markets sit there and do nothing with bank of japan trying to stay on top of it? lisa: the bank of hand is moving with the rest of the world for the last decade and now the rest of the world will move away from them in a medical way. -- in a dramatic way. jonathan: futures this morning just a little more negative,

lower by half a percentage point. the story this morning is yields are higher but what on second lisa: not much yet there seems to be a feeling that people got ahead of themselves with this expectation we saw this roll over and central ranks might cause. people start is a look at the data. 8:30 a.m., we get the numbers for april. we have seen a record deficit in terms of trade with the u.s. and this has come on the heels of a dollar that has strengthened and the u.s. can export and in things more cheaply on a relative basis because of the dollar. that has come on the strength of

the dollar. if the trend continues, we could see one .5 percentage points taken off of gdp d. 10 :00 a.m., treasury secretary janet yellen is testifying [no audio] in terms of not wanting the stimulus in 2020 one. this comes ahead of the cpi report is still expected to come in hot. how weekly do we have to see inflation decelerate people to be more comfortable? u.s. treasury department is selling 33 billion dollars in treasury notes. is the first auction affected by the onto tatum tightening the reinvestment of the --ahead of

the fed for the market stuff it's a watershed development, the beginning of want to take of tightening when people do not have a clear view of how that will affect the market. jonathan: it's important. tom: i always find lisa: i always find tom important stop to that clear that up? jonathan: not really. lisa: tony croscenzi joins us now. where are you and the team on that? >> it seems like the odds of a soft landing are reasonably good. it's tough to manage. the federal reserve wants to avoid an outright recession.

it's defined as a decrease in output but it wants it as a growth recession which is the soft landing between beer just 0% growth and 1.8%. the narrow roadway is challenging. lots of other things have to happen. you see the federal reserve acting the housing market. it looks like the chances of a soft landing are pretty good. the chances of a deep recession are pretty low. tom: the anomaly is japan. can they ignore the fed, the

ecb, the bank of england and everybody else including all these other banks? it's out there that japan was to late by a different playbook, can they get away with it? >> the real challenge is when the governor of the bank of japan leaves next april. there will be a communications challenge and communication is important to central banks these days. sometimes more than the actions they take and will have to navigate that time which could be to mull to us. it's possible that japan will have difficulties in the same way some nations have difficulties defending the currency picks. what will help japan it looks like it will go on to $1 million by the year 2050 so that will

keep wage pressures down in the cohesiveness of society enables it to achieve certain goals with the communications challenge surrounding the passing of the baton to the next governor is going to be high. lisa: when we talk about a soft or hard landing, we are talking about the measurement of an leisure --of inflation. larry summers said that at unadjusted basis, inflation right now is highly comparable to the peak we saw in 1980. does that create problem even what the fed has to do in order to rank inflation packed down to the target were do you just reject it? >> the federal reserve is succeeding in keeping inflation expectations from moving upward and it appears as if they are helping inflation expectations to move downward. you see the -- that in their

favorite gauge, the five year/five year which is a way of leaping past the noise from the rise in the rise of oil, the rise in food prices and lots of things that occur in the short run for cyclical reasons. it's a way of looking at where inflation expect tatian's five years out will be just the expectations five years out to five years before. that comes down and looking at the term ring them, they meant to yield that is moving out along the yield curve is still negative and historically, it's been positive step in other words, you clients at the yield curve -- you can glance at the yield curve. that means there's not much term premium. it would be if inflation were a bigger worry so this is a long way of saying market participants still view the federal reserve as and will

succeed ultimately in achieving its inflation goal of 2.6% --not a goal but it's expect tatian, 2.6% at the end of 2023 but the question is how would gets there. it will require a lot of tightening or do we get the soft landing? jonathan: thank you so much. for all the doom and gloom, do you sense that is the consensus view? when you look at equities, the consensus seeks to be pretty constructive with this idea that inflation starts to decelerate quickly through the summer. lisa: the number of notes i've been watching and reading that about in the week pushes against the gloom saying what are you doing. lloyd lang find said everybody has to basically gird for the worst-case scenario about things and are not that bad. that has been the consensus of

people pushing back. jonathan: jp morgan agrees. they say china, small caps, energy, bio, this is it a step people are waiting for the moment. futures are down a half of 1% from a beautiful new york city, a white summer morning so far. this is bloomberg. ritika: with first word news -- boris johnson has managed to cling to power in the session is for how long step he survived a confidence vote one hundred 48 tory mps voted against him. the u.s. has warned kim jong-un

there will be a strong punishment if north korea continues to conduct nuclear test. there are signs that nor rhea could soon set up its first atomic device since 2017. they have been test firing missiles at a record pace this year. russia has come up with its own sections and band 60 one u.s. officials and executives from entering the country. among them are treasury secretary janet yellen step they are retaliating for presently expanding sections against the country. elon musk is threatening to walk away from its deal with twitter. both sides have been meeting and the deal is proceeding. it's a $44 billion also. exclusive talks for franchised

offer of 60 dollars per share which is surging in the market. 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. ♪

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>> russia is solely responsible for the food crisis despite the kremlin habit of lying and disinformation.

we will do everything we can to help solve these challenge. jonathan: that's the president of the european council. from new york city this morning, good morning. equity futures are negative 6/10 of 1% on the s&p 500. a little bit lighter lower negative. tom: brent comes back but i'm looking at a week yen which is extraordinary on japanese yen. we go to 10 downing street right now on a view of the future for the prime minister of the united kingdom. i want to cut to the chase which of the former leader of the conservative party hugely

respected, william hague, writing in the times of london that this is an honorable thing to do, leave. when does boris johnson exit? >> and another major point that he made in that piece was how the biggest worrying factor of boris johnson is how disparate the rebellion was last night step young, old, north, south, brexit remainders, not just one rebel faction to take. boris johnson has had a cabinet meeting with his ministers and he will try to hold them all to gather. --altogether. tom: jonathan informs me on the crazy government. what two people do in that room with the prime minister with the piece of paper and they say leave? how does that dynamic happen

over the next 72 hours? >> don't forget, there are people in that room who want his job step the foreign secretary is interested in her jet --in his job. they will all be jostling for his job. mps from the north one more's ending. --more spending. they warned about the inflationary impact. tom: how do they do law? is it a lame-duck prime minister which is what we would call it in the u.s.? is this a lame-duck government? >> likely so because if you look at the history books, is predecessors, theresa may lasted

six months. the question is how long he can last and that's what all of them will be asking and that's why got this circulating. lisa: thank you for all of your working step there have been a number of reports in washington as we talk about the why jane disruptions and they recommend if there is some sort of disagreement over taiwan that china should take over the semiconductor company. how is the administration trying to get ahead of because in that situation? >> they may struggle to get ahead of that issue stop on one hand, you have congress working on their semiconductor production and competitive bill

which is a longer-term issue. in the shorter term, what the administration does with its rhetoric involving taiwan may be either more effective or ineffective but i don't know it was fully aghast but the president walked back when he raised the possibility of military involvement over taiwan. the administration can try to handle the day to day tension over taiwan but the broader supply chain issue regarding availability of semiconductors is something where there options are limited, there is work on a bill going quite slowly and it's a longer-term issue. this has become a nuanced aspect. lisa: going forward, how likely is it that this administration can spend more even on link up things like supply chains based

on the increasing criticism on the stimulus back in 20 20 one and how it contributed to an nation? >> one that weighs on the administration i think you will hear a lot of debate focused not even on forward-looking issues regarding inflation on the role of the march, 2021 stimulus in the hearings the secretary yellen is participating in this week. it doesn't necessarily preclude action on something a little more bipartisan. the bill on semiconductors, the work is still happening and it's difficult to move forward and still going. there is a possibility that something deficit reducing, they are not calling it will back at her but something that could get into those issues. the legislative outlook is not totally destroyed because of the role of the march, 21 stimulus

but it is dominating the politicized conversation as we move to the midterms. jonathan: awesome to catch up. did you see the latest move from russia, that they have band 60 one u.s. officials and executives including secretary yellen and blackrock's larry fink to retaliate for what it called expanding sanctions against its citizens? lisa: i'm not that surprise because he is a huge investor and he does wield some control over who gets assets and who doesn't and russia is preparing to contest the default they are about to be declared and saying we can pay and we want to pay but we are being prohibited to pay and the editors in the united states will be pushing them on the default so it's not that surprising but it's inconsequential to me and shows how little power vladimir putin

has. jonathan: we will hear from secretary yellen a little bit later today. tom: she's got to readjust to the upper last week but what she needs to do is get out front and support her president. she can do that stuff i think you will see a lot of different administration people try to hone in and managed the president's message forward because he has struggled to do that himself. jonathan: the treasury secretary will be on capitol hill for a few days. [no audio] futures are down 6/10 of 1%, this is bloomberg surveillance. ♪

jonathan: live from new york city, here is your mind --morning price action. lower by 6/10 of 1%. yield started to kick higher.

can you call a low on the equity market without calling a high on bond yields? last year, --lastly, up 20 basis points. a little bit lower on the session but think about the highs, three 20 in early may and we inc. about it more. --three hundred 20 in early may and we think we know about it more. crude oil front and center. they been talking about demand destruction and brent crude is one hundred $19. --$119. tom: it's my big team. you have to tell me where the x

axis is on the german lagarde for the 10 year yield. it is eight moonshot off late december and it leads up to a higher yield. it's different than the u.s. 10 year. jonathan: we have gone from -20 basis points up to 130 on the german 10-year. this is foreign to anyone following the ecb for the last decade step tom: futures are -20 one so let's swing to the market. the chief investment strategist at charles schwab joins us. we update? >> not quite as gloomy as what the year ahead outlook for 2020 two was in december but that's given that we are well into a bear market here.

there is a lot of churn under the surface. some of what the market is facing has been priced into stocks, maybe not extreme but i think phase one and phase two were about tighter financial conditions and tighter look witty and inflation rates and phase two was reflecting the weakness in the economy which was witnessed in the first quarter. now i think we may be in a phase that the market needs to price in a change in the profits that work. nothing dire but i think this may be the first quarter we start to see a noticeable hit to profit margins. tom: what's important is the separation of profit-making enterprises from those that are not. what happens in a bear market to non-profit-making enterprises that have a story? we used to call them story stocks. what happens to them given the lovely mood we are in? >> maybe the question is what

has happened. if you look at nonprofitable tech which was a popular area of the market, goldman sachs has an index that you can find on bloomberg. that had a 70 2% drawdown at its worst -- 72% drawdown at its worst. we have been living across the spectrum of these groups of story stocks that represent the ultimate in a long-duration because they have no profits right now. your investing in them based on the hope for profit and a 40 year height in inflation with the fed as aggressive as it is, there has been a shortening of duration on the equity side. other than maybe some trading lips and these lower ologies segments of the market, i don't think investors should be there at this moment in the cycle. lisa: what is the bet they

should be making? >> a quality grabber. the factors that have consistency in leadership in at least near term will continue to have consistency in leadership in things like strong free cash flow yields, strong balance sheets, load that in this more constrained earnings revision environment. all of those have that quality wrap around them and i think that is still the approach that investors want to look at. lisa: there is a fight among strategist whether people are being too bearish with respect to the economic outlook. it's whether the economic recession is an outlier of that that could come down the pike. or do stand in terms of how investors should think about this. how much potential help should they give up hedging against some sort of recessionary circumstance? >> if we were at all time highs,

it would be different because it would make a big difference whether we get a soft landing. the pain we have experience in the market, especially under the surface in the case of the s&p 500 at the recent lows, the average drawdown across the 500 members was 30%. the question of recession/no recession patters less right now in terms of looking at the downside for the market. bear markets with recessions were down in the low 30's on average and markets without, low 20's but there is a wide range around both of those. assuming we are going to get a recession is always the better bet if use history as a guide in tightening cycles. i don't think it will be an 0

7-09 type of recession. this would be the more typical and to a cycle but the fact that the market has suffered a lot already, i'm not sure it makes such a huge difference where we go from here. tom: talk about profit-making companies that have announced share buybacks. do they skew them up given the drawdowns we have seen across the indices? do they complete their buybacks record to announce more? >> you have seen a pickup this year. it's not just among the s&p companies but you are seeing a recent pickup in buybacks down the cap spectrum into the russell 2000 sphere. when you look at insider buying or selling, insider selling is less valuable in indicator because they can sell for lots of reasons, it's the buying.

now you got buybacks as an attempt to help boost the profit picture. that's a positive net for the market and could accelerate things. lisa: people used to say companies with borrow to buy back their shares but that's out the window right now given where the shares are to or a money for the vast majority of companies. deutsche bank and met with a note talking about the increase in default and the return to a higher default cycle. is that a likelihood? >> i think we will start to see more trouble. when people talk about spreads and the credit market, they often think of it in level terms but i think it's the direction so maybe it's seven percent or so. maybe if you are on the marginal end of the spectrum, having trouble financing, it becomes much more difficult even with

another couple of percentage points so that also has the potential to be more of a story in the second half of the year. what is the sweat factor in retail right now? >> we have seen pretty steady flows into etf's, the passive side, more of the out flows on the mutual fund side. we actually have equal weight and doing better than cap weighted. not a lot of panic. we saw a capitulation on the attitudinal side of sentiment with a lot of fear and angst and concern but it wasn't matched on the behavioral side. it's almost always a case with their investors. if they are disciplined and have strategic asset allocations and are disciplined around that using diversification and rebalancing, they tend to ride

through tough environments more so than the wing it traders. [no audio] tom: it's way too early to do this. we are not talking about execution rules but everybody has been waiting for the sec and today may be the day where they say let's go. jonathan: that's what we're focused on day after day. what did you make of yesterday? tom: he wants out. i thought matt levine was great at bloomberg about this. he is playing by his own rulebook. i think he did it within its 13 day filing and is allowed to do that.

tonight do ok on boris with lizzie? jonathan: uh, yeah, ok. where do you want to go with that story? tom: we aren't americans, we don't get it. jonathan: the bank of england is not westminster. tom: ecb and bank of england, are they overcome by yield? jonathan: they are overcome by prices right now. it's the number one fear we have had for years at the become of the idea that in asian would start to build and start to run away and the 10 year yield would go with it. what on earth do you do? lisa: they are time -- they're

trying to deal with the price rises that are unsustainable and it's become a political and economic issue. jonathan: how did we go from elon to boris to prices? tom: but we do. jonathan: because we are in different rooms and cannot get on the same page. tom: we are in the same room. jonathan: the nasdaq is down 6/10 of 1%. from new york, this is bloomberg. ritika: here's news from around the world, boris johnson is trying to draw a line that has been threatening his leadership but the mutiny against the british prime minister suggests his days may be numbered and he survived a confidence about by members of his own party but more than 40% of tory mps voted against him. he says it's time to get back to the cost of living. coronavirus restrictions in

china have hit an anniversary. there is a speculation that the chinese resident might attend celebrations in hong kong. they have begun rolling back social distancing rules. oil prices are likely to go higher to solve the inflation picture right now. that's $15 than the current price. u.s. regular tape -- regulators are investigating whether one firm has broken the rules. the sec wants to know if the initial coin offering in 2017 should have been registered with the agency. the most significant overhaul in more than a decade.

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>> there are a lot of things that are driving the earnings picture and revisions have not been to negative. you need to see it rising at the lower end and how badly will that impact profits going forward and when does that come through? jonathan: sarah hunt, just brilliant yesterday. from new york city, futures are negative on the s&p 500. in equity market is trading just a little bit lower.

yields are on a couple of basis points. not the 3% right now. six percent and for anyone on twitter, here we are at 38 90. the spread is getting wider over the next couple of days. tom: we have to dive into twitter and elon musk. we will now talk to the senior equity market analyst that i want to take early seconds and talk about the core of apple. that is with never talked about which is the chip technology. the new m2 yesterday does 15 trillion operations per second. can anybody compete with apple on chip technology? >> that's the point.

they are beating chip companies at their own game. compare what they are doing to intel and they control more of that system in cupertino. they are releasing new products this time with the supply chain that's the worst in 50 years and it shows how they can flex their muscles to own that ecosystem. tom: i think the elon musk story is important. it's been a hallmark of surveillance for 20 years, we believe in technology and what apple is doing. whether you buy and sell on it doesn't matter, it's stunning how they have leapt forward. lisa: i don't think the twitter story is more in or information structural market perspective. i think you have highlighted how apple is on the front heels of this trend. it's the one that's sucking up the oxygen in the room at least when it comes to gossip step

what is the goal here? you on mosque wants to walk away -- elon musk wants to walk away but how much conviction is there for him to stick with it or pay the breakup fee. >> their backup --they're back is up against the wall. you see that in terms of where this talk is trading. there is a 60% chance that he could walk away. the board will fight him in court. this continues to be a company that can low in the wind. it's between a rock and a hard place and this is a nightmare scenario and the way elon musk has dealt with this is to create a black eye. lisa: that's probably the bigger story, elon musk's foot print

and his reputation, how much of a black eye has it been for him and tesla? >> i think it's near term but is not a longer-term issue. you started to see elon musk 50 step the want him to focus on tesla and the supply chain and the bill that in china. narratives have changed over the last week and i think that's why you are starting to see at change ofone and that's the key. the last thing he ever wanted was the twitter deal in the first place. elon musk woke up and got cold feet on the bond issue is part of it will stop lisa: we not only have the breakup today and the obligation on both sides of the tensile lawsuits which may or may not happen but will they let him walk away and not prolong this fight?

thanks have given him financing agreements. this has been a pretty involved negotiation. how much has to be done to unravel this deal? >> this is rubik's cube times three. the legal spiderweb around his deal is extremely complex. if you look at all the legal experts, that's the problem and you saw the first shot across the bow yesterday. it comes down to the stock telling you that if you get a lower deal or he tries to walk. tesla is in a different situation, 400 billion dollars coming off the market cap and elon musk has started to change his tune. tom: i was taken by the reaffirmation of 70% revenue

growth at amazon and this explosive ebita growth. what is the persistency of revenue growth of the major tech companies? have they reaffirmed that or is there doubts? >> i think the strong have gotten stronger. when you look at the cloud theme and what happened in terms of amazon, you seen beneficiaries of the work going on as well. in this softer macro, you ultimately see numbers come down a bit but i think right now, there is have and have-nots. the consumer is clearly seeing some weakening but what fees into the stocks? jonathan: what's the big call

for the game tomorrow? >> i think the celtics will win this in six, that's mike all. jonathan: are you happy with that? tom: i love it. i don't like the three-point shot. move the line back and make everybody play. people tell me steph curry is so good that it wouldn't matter. i don't know, i'm bored with the three-pointer. jonathan: any suggestions for any other sport? tom: i love the new jerseys. jonathan: we call them kids. lisa: what's your view on curling? tom: now that you bring it up, there i was indavos with great food and right there in the lobby, they have the granite

thing that was used in the winter. jonathan: i almost broke my hip. thanks for getting me out of trouble quickly. on microsoft, insider reporting estate they are slowing hiring across the company. that report follows the story of the last week that they are pulling back to the estimates on fx headwinds, something is building there. lisa: it's not just microsoft and amazon and not just specific areas like retail. it's broad based, the areas that benefited most during the pandemic step jonathan: the futures are down about a half of 1% step new york, this is bloomberg surveillance. ♪

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>> the fed has given very strong guidance about what they're going to do they have probably reached a maximum level of hawkish news. it's very difficult for the >> >> fed to change its reaction. >> the fed is tolerant of inflation