>> welcome. the of aldi shooting, and an upcoming supreme court decision on abortion and others are providing opportunities for violence toward to the united states, that is according to the department of homeland security. the dhs process it expects to see the threat environment to become more dynamic as high-profile offense could be exploited to justify acts of violence.

trying to draw a line under the controversy that has been a threatening his leadership, the scale of immunity against the prime minister suggests that his days may be numbered. hate survived a note -- he survived a no-confidence vote. many voted against him. boris says it is time to get back to helping people with the costs of living. hong kong will not tighten coronavirus restrictions according to chief executive. china's president may attend the celebrations, hong kong's covid cases have been rising since they have been rolling back social distancing. tiger woods will not be playing at the u.s. open next week. his body needs more time to get stronger. it is planned to play at the british open, the last major tournament of the year. he has recovered from a car

crash last year. he pulled out of the pga championship after the third round, he walked with a noticeable limp. global news 24 hours a day, on-air and at quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ >> welcome to bloomberg markets. you are saying a bit of mixed messages when it comes to the stock market, green on the screen as it comes to the s&p 500. dropping below the 25 handle, does that mean that the rally is a sustainable one? we look at the indexes as well.

it is not just the s&p 500, you have this entire equity complex that is actually under pressure. a lot of this may be a function of a stronger dollar at which you are seeing the ripple effect. let us look at the dollar yen, at the weakest since 2002. jon: retail stocks after target, the profit story is not what it once thought it would be as they navigate through inventory realities. and higher fuel costs. that is not sitting -- that is not sitting well with investors. you have walmart and home depot, down 1%. we are seeing some weakness for costco. even though target shares or at the weakest level of the trading session, they are one of the worst performers in the s&p 500.

we dive deeper into the story for retailers. kriti: a rising rate environment's -- it does not mean it is a one way street. listen to what market cabana expects from the u.s. central bank. >> nominal neutral, they will probably about slowing things down a bit. that is consistent with our view , then ultimately downshift to 25 basis points. that will go more aggressive. kriti: it is not just the fed, this is a phenomenon that is going global. you see it in the fallout of currency. we talk about it with the head of fx and rates, christine, thank you for joining us.

we got news from the reserve bank of australia. hiking by a much stronger margin than a lot of people were expecting. it was inflation. i do you see the rest of the world catch up with the fit -- do you see the rest of the world catch up with the fed? >> there is the problem -- element we are seeing, central banks trying to catch up to this fight against inflation. it is not just the u.s. facing this problem. it is everywhere. we are looking at 40 year highs for inflation. it is a problem everywhere. what we are saying in currency markets is interesting. it is not just a one way back over currencies. if you have a central bank that is hiking aggressively, that is

not an automatic driver for your currency anymore. investors are not just thinking about how much they are going to do, they are thinking whether a central bank is going on these aggressive tightening cycles will be effective against inflation that has run away from a lot of central banks all over the world. jon: as we watch, a central banks making moves with higher interest rates. where does the u.s. dollar fit into that equation? a strong year for the greenback. >> that is a big question. we have seen the dollar pulled back a little bit from the multiyear highs we saw at the start of may. this catch up from other central banks that we are seeing in terms of tightening cycles. interesting dynamics going on within the dollar as well. it is also this idea of growth scares that a kind of lie on the

others these massive tightening cycles that the fed are about to embark on. what if that causes a recession? it drives the safe haven flows that benefit the dollar. it is a catalyst and it will be quite interesting to see which ones win out. it is a battle between growth and inflation. jon: thank you very much. in currency markets, operates a plate to this story. let us get to that, kathy, on the theme of growth or concerns about growth, they got an update from the world bank which trimmed their expectations again, what kind of numbers are

you looking at right now? >> our expectation is that the second half of the year slows down. global growth will continue to swell. we have capone in place that would make that happen. central banks raising rates fairly aggressively, tightening financial conditions on the u.s.. at some point, demand is going to start to respond to all of this tightening by central banks. that inevitably leads to a slow down there is a question of timing and magnitude, we are looking for if substantial slowdown. -- a substantial slowdown. a slower trajectory in the second half of the year. kriti: when looking at a 10 year yield of 2.96, you see the decelerating narrative.

the data is showing that it seems to be the case. that creates a bigger case for treasuries. >> a couple of things. the more aggressive the fit is, the more aggressive it is for the long end of the treasury curve. we can high expectations through the summer and we get the slowdowns we are expecting. even if inflation is high, that is going to be good for treasuries. what we are seeing is that a flat curve, five years out. that really implies that is where our market expectations are. jon: you are focused on the fixed income world. the wealth effect, a lot of people have been trying to gauge on this, talking about retail,

the health of the consumer. at what point does not become a greater consideration if people are looking at their portfolio statements and making tougher choices on how and when and where they spend? >> every cycle, this happens. they usually start with the household that have the least in the way of savings. this cycle, households at the lower end actually had savings to the fiscal stimulus. that gave us this big boost. what we are seeing is some household seem to be slowing down a bit. you get to the wealthier households were a lot of the assets are in the stock market. those come down. they get more concerned about the long-term outlook and they tend to slow down as well. we are on the cusp of seeing some of that. it takes a little while, there is a bit of a lag. if we do not see a rebound of

financial assets you could see people in the upper middle class, higher income areas start to slow down their spending. kriti: thank you, as always. coming up, a target shares tumbling as it grapples with bloated inventory -- target shares tumbling as it grapples with bloated inventory. that is next. ♪

kriti: this is bloomberg markets. shares of target are down, cutting the profit outlook against bloated inventory. let us bring in jennifer of bloomberg intelligence. thank you for joining us. i have to talk about this story in context, isn't this a good thing? they were doing this to protect against the supply chain issues. why are they being punished for it? >> there is a lot going on. i agree that there was a lot of measures being taken in order to make sure the people would have supply when they got to stores. it is a matter of what inventory

we are talking about. it is important to have inventory on basics and staples, but consumer spending is impacting more discretionary categories. that is where the problem lies in excess inventory. jon: people are trying to figure out the health of the consumer going forward. they're going to be deals for people looking for them -- there are going to be deals for people looking for them? >> they have always had a loyal fan base and customer base. if they are going out and clearing inventory, of those fans are going to be able to get some great deals. that reinforces the value opposition that they have. there is that good -- that could be seen as a potential benefit for target. kriti: what about the sale

story? is it decelerating at a pace that quickly that you are starting to worry about things like back to school season? holiday season? are we at that point of a downgrade yet? >> not yet. thank -- think about back to school. there are things that are going to spur back to school spending and there is a certain amount of spending that happens with the holiday no matter what. if you are headed into this time of year where they start to actually build inventory for back to school and holiday, trying to get rid of inventory that they already have, it is about making sure that there is confident that they can find the right balance and have the right goods on hand for the rest of the year. jon: helpful context as always.

target news, the consumer appears to be back to traveling, meanwhile. that is due to the ceo of alaska airlines. >> has demand is amazingly strong. we see demand on levels i have never seen in my entire career. we are actually going to be profitable this year. jon: the upswing in demand coming as the carriers are challenged by an extremely tight market for pilots, causing some canceled flights, creating frustration for some travelers who are navigating sky high ticket prices. we hear from the president of the airline industry firm airt rav. let us talk about some of these challenges, we have seen it in canada as well. the whole idea of the labor shortage for airlines that are

trying to bring back staff, what are you hearing from your industry sources right now? >> above the wing we are hearing about the pilot shortages, having to pull back scheduled capacity because there is a lack of pilots to fly it. we see weights in terminals for security services, ground handlers, even in companies that put fuel into the wing of the aircraft as some shortages. the ceo of alaska just said demand is incredibly high and it is frustrating when we cannot fly all of that demand. kriti: there is a commodity story as well in the airlines. airlines are known for hedging against these higher jet fuel prices to cushion that. why are they sheltered in that way from these higher costs?

>> u.s. majors are largely unhedged. like in europe, all of the carriers are hedged upwards of 70%, 65% of the top consumption this year. everyone was enjoying the pandemic in the lowes and got used to that and forgot about the ironclad principles of hedging, moving volatility, moving earnings volatility and some of them are going to go back, co-ops and premiums and an equivalent or high. -- are high. the oil has to be scary, a lot of airline cfos -- scary for a lot of airline cfos. jon: we just talk about --

talked about the state of the u.s. consumer. do you think the u.s. consumer can handle higher prices they have been paying to fly? >> every ticket that is flying in the system is sold. the problem is the average consumer household, look at the family balance sheet concerns, a looming recession, it either has people in the lower end of the earnings spectrum have to put a brake on the travel right away. those who could afford two have to be spooked by the stock market and put the brakes on travel. airlines are not going to be able to pass on fuel, labor, and other costs to the same degree they had been to spring and summer. that will be a difficult thing to an update for the airlines. kriti: we have to talk about the

recession question. do airlines go back to the dynamic where they saw in the pandemic where cargo was used to offset the lack of demand? >> recession discretionary spend constitute the leading edge of a recession. a lot of these airlines have a rate of conversion, bringing them back to the passenger basis. the cargo market started to get more supplied as these carriers did the conversion. as we see a recession, people are going to be buying from amazon and from other online retailers less. that will drive down some of the accelerated growth in the e-commerce space.

jon: a lot of dots to connect. the state of affairs in the airline industry. shop if i is a company that has grown rapidly -- shopify has grown rapidly, the president have received special voting rights. ♪

jon: this is bloomberg markets. 15 -- went to $5 billion, that is the amount lost by shopify, wiping out billions in market cap.

there was a key investor decision on whether or not to give the founder and ceo more control, special voting control that allows him to have 40% voting control. this is something that is not transferable to anyone else. it only lasts as long as he is at the company. we did see investors vote in favor of this move, even though it has been more of a challenging year in the eyes of the markets for shop if i --shopify. kriti: shares have dropped 73%. this voting shares a story is so important because it is the legacy that the founder has had, what we see as the premier e-commerce company, amazon. jon: founder having control in

tough times is something that they decided on. kriti: for shopify, he is going to stick around. this is bloomberg. ♪

mark: here is the first word. vladimir putin's warning for key sectors of his country's economy is facing major slowdowns. he majored out the auto industry where the car plans are shut down because of a lack of imported parts. the country is facing one of the steepest downturns in years. at a meeting vladimir putin also said there was work at low unemployment and the strength of the ruble. boris johnson plans