>> higher inflation is undermining consumer confidence and consumption. >> you can tell this is some semblance of a demand to slow down because this is all the fed has got. >> i would be amazed if they were able to go 50-50 without any pushback. >> maybe they can pause and naturally bring down high demand. >> rate cuts are on the table. >> this is bloomberg surveillance with tom keene, ivan barrow and lisa abramowicz.

jonathan: live from new york city come out the morning about this is bloomberg: surveillance alongside tom keene and lisa abramowicz, i'm jonathan ferro. tom and an ice back-and-forth, different trends we are seeing including -- tom: a nice back-and-forth, different trends we are seeing. make jokes it is a snooze fest, what would christine lagarde do for gas? jonathan: there set to announce the end of qe, laying the groundwork for a rate hike and maybe another. the forecast we get in the purser -- presser, it could be ugly later. tom: it's different than america, in the united states, jason bleated out in the wall street journal. there is a huge difference across the atlantic and we can't

say the lagarde press conference is like a powell press conference. jonathan: that is what i'm expecting again and again. lisa: and that will be a dovish surprise for the market that will believe ecb is not getting ahead of inflation, but they are bringing in a 20 point rate hike for the july meeting. if the ecb pushes back and talks about going slowly, does not give any hints of a 50 basis point rate hike this year? surprise in the markets on the long end as people look at inflation. jonathan: you stay awake in this one. lisa: i always stay awake. i don't call it a snooze fest. tom: the history of these folks is very important, we will stop the show. there is a surveillance timeout share. [laughter] lisa: -- tom: they did call it a snooze

fest. i said yeah, it was. lisa: my favorite part is you get the timeout chair and you talk about it proudly, they got mad and it was true. jonathan: we had the news conference every meeting, the ecb should be happy, futures positive, .3%. yields basically unchanged but look on the euro-dollar, absolutely nowhere going into this decision about an hour and 45 minutes away. the euro-dollar 1.0 714. lisa: how surprised, may look at moving the dial, we have a serious hiking cycle based into the euro and what -- i what point can the ecb change that trajectory? 8:30 we get the

christine lagarde press conference. we have so much baked in and this is what i looking at to determine to yields already up at 0.7%, a shocking reversal after years and years of negative yields. how much can they really push this higher or keep stasis given the uncertainty around where inflation is going to come from, and how is going to come down in a way that does not destroy economic growth? 8:30 a.m., we get jobless claims, rick of black rock with jonathan ferro last week saying this was the last solid jobs report, the one on friday. you can see a negative print over the next three to four months. how much do we see this in the jobless claims and filings for unemployment? especially when we see a >> rate, -- quit rate, people leaving their jobs. and the primetime hearing for the january 6 insurrection,

widen primetime? they're building expectations and what can they bring out at this point that is going to meet expectations? don't know who will be testifying and what they are going after, given the other issues on the table. jonathan: a few things to look for this morning and afternoon. turning us is sebastian page, chief investment officer and head of global multi-assets. normally after a selloff of this money should we will be buying stocks but we are not. why? >> we started the year well positioned for this, underweight stocks and underweight bonds, underweight duration. generally speaking we tend to lean on valuation opportunities. right now we are buying bonds and we have closed our underweight position in treasuries, but we remain on the margin underweight starts special stocks. the key question, and you thought about this quite a bit,

is whether inflation will trigger a recession. the transmission mechanisms for this, through gas prices, monetary policy, it impact corporate margins. that is the question, is the next shoe to drop a recession and then earnings and pressures and margins? s&p earnings up 7% year to date. if you look 12 months forward. that is a high bar to clear. that is the risk we are worried about. there is a narrow path between an inflation problem or a growth problem. tom: on the other side of the coin, he has in here since 2016 and says inflation has peaked. are you about inflation driving higher, sustaining or if it peaks, you are cautious? sebastien: we don't have a consensus on inflation. tom: but that is the history of

your firm. the invented argument. continue. sebastien: we don't have a house view but we debate this inflation question all of the time. overall we lean toward yes, inflation has peaked that we worry about where we are going to get stuck on the way down. are we going to get stuck at 4% or 5% year-over-year with more structural components of inflation? that could be a problem. tom: lisa, what is difficult as i can imagine roger mcnamee at t. rowe price leaned across the table and took a swing at somebody arguing about tech. lisa: when i read the comments on social media, it's getting heated. if you look forward to how to buy assets, how much is liquidity a concern given the speculation from financial market accidents in the

liquidity market? sebastien: it's like there is a fire in the building and everyone is trying to get out. it's i say this often come up the difference in financial market, but in order to get out of the building someone needs to get in. that applies to holding credit or less liquid assets. you need a buyer. it is a constant duration. we are invested, we are diversified, we are underweight stocks but we are not saying investors should not hold any stocks for the long run. but the key question is inflation, and if i might say, there is something more important to inflation than fed policy. maybe i will get in the time out share here. -- timeout chair here. but that is pent-up supply. if you look at the new york fed index of supply chain pressures, it is not two standard

deviations, it is three above historical long-run average. you can think of pent up and semiconductors, but it is everywhere. there is pent-up supply of labor starting to soften. for just transportation in general. there is pent-up supply and housing. houses not yet finished under construction, a high number. there is pent-up supply in commodities and energy, so on. this is the key question we are debating. will releasing that pent-up supply do part of the fed's job in blaney -- bringing inflation down? that is the scenario where we get a soft dish landing. jonathan: maybe we are seeing that on the good side with the industry story. i just wonder if the genie is already out of the bottle on the service side the psychology, the consumer has shifted.

do you think we are already there? sebastien: i think we are not already there, the turning points are difficult to call but look at the overall index of supply chain pressures. there are many indices you can use bloomberg to find down on pent-up supply, but it is still there and housing and it is definitely still their own energy and natural gas. so yes, some part of this pent-up supply is going to start softening over the next few months. that will help with inflation and doing part of the fed's job, what we are not out of it yet. jonathan: sebastian page, of t. rowe price, always brilliant. we have seen a series a few months now, a robust jobs growth, really strong but we have not seen unemployment come lower or wages accelerate. i wonder what people start to make of that. lisa: some people talk about the

inflation rate picking up and there are questions about how many people have so much power in the labor market and the composition of jobs coming back into the market. it does seem as though there is not a wage price spiral, or at least the concerns people had a while back, which raises questions about supply and demand. and how much more can the consumer continue to buy if the wages are not keeping pace? jonathan: let's talk about china, shanghai will lockdown a district in the southwest saturday morning to conduct a mass testing drive. it is the first movement we have seen since they started easing at the start of this month. the stop start nature of chinese lockdowns is a problem to make any forecast for the rest of the year, never mind 23. tom: a real surprise, it is a setback and a small district of shanghai where they are focused on.

tangentially, they are looking at other district to quote read lockdown -- rate lockdown -- re-lockdown, jonathan: equity futures positive, .3%, coming up in new york city, and ecb decision around the corner. ♪ >> keeping you up-to-date with news about the world, i'm ritika gupta. the new york central bank to sum up its plans to help negative interest rates. the ecb will probably join the fed and others in raising interest rates to fight inflation. on capitol hill, gun legislation including raising the age of buying semi automatic weapons to

21. it's mostly symbolic and will not pass the senate. covered related bottlenecks on production and logistics in china, but consumers around the world have started moving spending two services instead of goods. a fire on a liquefied natural gas point in texas -- they exports will remain closed for at least three weeks and there are all overseas shipments in the u.s. to the terminal last month. china may revive jack ma and ipo's, one of the clearest signs that beijing is cracking down on tech. it began when regulators got rid of the opening that would have been the biggest ever. global news 24 hours a day, on air and on bloomberg quicktake,

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generating economic opportunity for people in our region. jonathan: president biden at the summit of the americas in new york city this morning. equity futures look like this going into the ecb and onto u.s. cpi tomorrow. futures positive, yields going nowhere at 0.2% and euro-dollar unchanged, going nowhere into this decision later. 1.0 719. tom: you can call it resilience is welcome at the pulling back, watching foreign-exchange genetics off a press conference we will see this morning -- afternoon. from amsterdam, jeff fitzpatrick joins is in washington. to those of you in america, it is still light -- it is lite. joining us as the ecb discovers heritage, maria, this is not t

heir ecb. this is christine lagarde's ecb. how is it different than early days? >> yeah, you are very right. this feels like the end of an era for the ecb, the end of doing whatever it takes. we are headed into something new. what that looks like is going to be a challenge for christine lagarde. it is clear we are heading into a lift off, july is one category, there will be two things that are very important. she stay on the 20 five basis points narrative there was consensus until a few days ago, or are we going to see a hawkish christine lagarde that potentially opens the door to something like 50 basis points? the other thing, this will be a big test and potentially a big point of departure from the old ecb, and fragmentation around the euro area. the reason we are here in

amsterdam is because the euro central bank does not need it like this. once a year they like to showcase the system, 19 economies but will the central bank managed to take rates higher but also taylor policy in a way that it does not -- tailor policy in a way that it does not -- particularly in italy ? tom: the symbolism is important as they go into belgium, but on what level are they on the same page in amsterdam? >> meeting in two days now it will be tough, especially as we are seeing lift off in july play out, when you look at countries like the netherlands, we had inflation report at 10%, almost quadrupling the target. when it comes the diagnosis, a difference between the south of the north, some say this is

persistent inflation and the european central bank should change the way it looks at inflation. others say this is ukraine and if you keep an eye on the impact of the european economy, we are about to find out if the 19 economies are in tune or not. this is difficult, whether christine lagarde can do it, it will be the start of the new arrow. but it does feel like the end of something, the start of a new central bank. lisa: it is also the end of a low gas price arrow in the united states, part of the issue. in new record high on gasoline, average costs now four dollars, $96 a barrel. which we know about the trip president biden may take to saudi arabia to talk about output? >> one thing we don't know is that it might be particularly important, especially to the saudi's, whether there would be a meeting or communication with

mama builds on -- mohammad bin salman, that would be a key part to any developing change in the relationship between the biden administration and the saudi's. looking for more production is the broad goal but the details are hard to come by because when the story broke that this might happen, president biden pushed back and said there was no plan, nothing concrete. it may be questioned question the white house still needs to ask themselves, what is the plan in changing or tweaking the relationship with the saudi's? lisa: how important is it for the united states to supply oil and gas to europe where maria tadeo has been traveling to different spots and hearing the angst of high gas prices? we saw that flyer at a shipping center for lng that lower prices in the u.s. because there cannot be the same kind of exports perhaps we had been expecting. how important is it from eight

diplomatic standpoint for the u.s. to continue those? >> it is important, and is filtered into a broader debate in congress about what they can to short-term versus long-term to increase those exports, to shore up, maybe change any policies with the strategic petroleum reserve. that is a bit more of a long-term issue. at its face, that is an important issue and there is a lot of agreement that the u.s. role in exporting oil and gas can be important. the question turns into, and it is a bit of a bickering match on capitol hill, what policies would need to change and what is the long-term outlook and that is where it gets stickier. jonathan: what we have to do to get on the today -- tadeo-euro

tour? lisa: [laughter] it is not just that, i think we should get back to back photos of your hair flowing. >> you will have a lot of tape of that in every language i'm sure. jonathan: as always, maria tadeo of jack fitzpatrick, --and jack fitzpatrick. it is such as energy in europe, it is not that long, put out in early may, and report the talked about where inflation prices were going into the pandemic. less than 20% of the core inflation basket were accelerated above 2%. that number is now 75%. prices rising more than 2%. it is broad-based, a big change for the ecb. tom: a change for the ecb and

america, too. tomorrow, core inflation analysis is with the pros are watching. steve trent at citigroup out on what maria tadeo has been living, revenge travel. he is saying it persists not like it was but we are still all getting on airplanes and maria came to me and said price it out at surveillance travel and i did. newark to naples on the way to capri, business class, the only way she travels, $23,404. jonathan: is that the way it is now? lisa: are you just looking at different prices in different places? jonathan: from new york, this is bloomberg. ♪

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jonathan: live from new york city, good morning. price action on thursday morning, .6% on the s&p and the nasdaq 100 up .8%. we need to get julian emmanuelle of evercore on the phone. he downgraded his call from 4800 to 4300.

but if we go to recession, $2900 on the s&p 500, tk 2900 best case over evercore. tom: what is so critical is the granularity his boss at hyman works with. -- ed hyman works with. i really want to see what rolls over to the equity strategy. jonathan: let's look at the equity picture, the bond market, .2% of 30. 3.0141 percent on the tenure right now. a big development in europe over the past 12 months so we can discuss that now. look at the spread between germany and italy. the spread has been widening, we were inside 100 basis points last september, now about 200. a big change for this bond market, for the german 10 year and the italian, a turnaround,

also for the german 10 year yield, which has broken out in a big way. tom: i take your point and the idea of watching the spread market is critical. and we critical in the tick tick tick through the 8:30 press conference. jonathan: and the euro going into that news conference at 1.07. what do the ecb do if inflation persists in the bond market start getting messy? they have to come together and put together some package where they can tactically allocate reinvestment of the bond buying program. you take that stock and when you have to reinvest, you get more tactical so you can keep volatility in the bond market down and hike interest rates. lisa: the model of the blunt tool, keeping them low in the peripheral regions, has failed. they have to be more tactical and that's what i'm looking for, any indication they are setting

up programs to selectively by italian bonds, trying to keep down spreads, allowing benchmark rates to rise. tom: to comment on this, it's a little clumsy but were going to do it. we want you to hear this first from bloomberg surveillance. target raises their dividend 20% . their quarterly dividend. this is a rebound off a tough press conference the other day. this is corporations adapting and adjusting. lisa: yeah, i will pick this up. target coming out after having shares plunged hermetically, trying to shore up investor support. increasing their dividend despite the fact that prophets have gone so much lower in terms of projection. tom: i can't say enough about that. use of cash is a quiet optimism of people pushing against recession gloom. one is katrina dudley, folio manager of franklin mutual series and we are thrilled she

can join us today. this is precisely what you're talking about at the bottom of your research note. we will get to the government in a moment, but what you're talking about that is so important as we will adapt and avoid the big are -- r recession. katrina: i think you're right. when we look at a big recession, you need to look at the downturn in order to have the change or see the negative downturn that constitutes a big r recession. why it is a little r recession, look at the housing market. it will continue to support the economy. while we are getting a little more flexibility, there is not a lot of inventory in the system so that's why we are thinking it is little. tom: we are intuiting that in europe there will be spending, that's what happens with a war.

to think united states will have -- will allow for a recession? katrina: you have to think about the midterm, we are going into elections and democrats need to get back some favor particularly with the lower end of the consumer. we are talking about mcdonald's, walmart. the low-end consumer is feeling the pinch of higher gas prices and higher food prices. you may see some type of action there. alternatively, we could see some process that progress on the bill now. we have been talking about that, so i'm not exactly putting a lot of weight on that going forward. finally, there are other things the government can do interactive first time homebuyer support and other things in order to stop them as well. i want -- lisa: i want to double down on the julian emanuel call, a bull case of 4800.

john was pointing out earlier, the bear case is driven by oil prices and the fluctuation, the idea that we could see a dramatically higher oil prices that crimp growth and sends the economy into a recession, how much are you considering this outcome? katrina: that type of range of outcomes is so big, you can get a mack truck through that. it is a big range of outcomes. what i think you are ignoring is the adaptability of people and the economy. that is what offsets the huge downturn. in terms of high gas prices, what we think will happen is that maybe people will be driving less and drive the jumps closer, and that is a benefit of shifting into a service economy. those jobs tend to be closer to where someone lives. we can see the consumer adapt to rising gas prices and i don't necessarily think that will

plunge into a huge recession. if you combine that with the fact that as a economy we are much less reliant on oil that we have been and that is the offset. lisa: do you think investors are to perish, i target, increasing dividends by 20%, shares up more than a percent, premarket training has been hammered because of higher gas prices in pretty -- impeding pricing power and margins, and supply chain issues they have been facing. would you be a buyer? katrina: if i look at something like target, it is showing you that the supply chain is starting to loosen up. they are talking about discounting product because they have too much product and too much inventory in their stores. we are seeing the other side effects, for by down and people shifting out of the profitable, nondurable goods, towels and sheets, decorating items, and

into the food products which has a lower margin. everything comes down to the price and as the stock has come down, their earnings are come down. it is been and more attractive territory and the current we would take out something like that dividend increase is that management is trying to be good to their shareholders by increasing the amount of capital they are returning and they are returning and fear using that as a way to message to the market for confidence and ability to get back to those promised levels of margin. i think it is a positive set up but it comes down to the price you have to pay. tom: where in the income statement do you define profit? exhibit revenue, the dynamics of unit and price, or to come down the income statement to find where you say this company has profit in this one does not? katrina: i will turn this on your head, i had to say this, it comes down to free cash flow.

as shareholders, that is all we care about. what you are seeing is a huge disconnect in the first quarter between profits and cash flow and what is driving that has been huge buildup in inventory. you have seen that, the buildup in inventory is volume related as well as price related. we are seeing very low levels of cash flow at the moment, but as we go forward, we think the supply chain's are starting to normalize and you will have a reversal of those trends. you may have a little weakness in the income statement and the reported profits of companies, but you can see the cash flow numbers are driven by the unwind of that significant in dutch significant inventory. --significant inventory. tom: that was textbook. for those of you studying for the exams, how to that to your brain. jonathan: katrina, thank you.

cathie wood sitting down with ed ludlow yesterday, chalking her book but i think a lot of people are gravitating toward this idea. i have never seen a resurgence like this in my career and i have been around for a long time. she went on to say this highlights the cyclical reason we believe inflation will unravel. that is the view, it has been for a while and after that target news this week, is becoming the consensus position on the good side of the story. tom: ed ludlow nailed that. i'm going to give credit to the economist, two issues ago, i can remember, a tour de force explainer on inventories. we make jokes but this is serious stuff. once it is cleared out, free cash flow pops. they go from just in time to the new reality, just in case inventory. jonathan: this is an element of

the season dutch of the thesis. the idea there is too much into dutch too much inventory, the shift from goods to services, to the disinflationary force to: things. maybe we can talk about that through this morning but the thesis is that inflation has to come down for cyclical reasons kathy has been talking about. rates don't have to go much higher and what wins in the market, the stocks that she holds. that is the hope. lisa: [laughter] exactly. that's why people talk but this is a self-serving prophecy. it's interesting, in terms of how we are judging price moves, how idiosyncratic some maybe and how they stem from unprecedented. -- period of time, how much we don't have a handle on what they are buying it when. people are not going to be spending their money at all

possibly in light of this. tom: that is the gloom we need. jonathan: there are desks on sale at target. lisa: he wanted to buy one. jonathan: i was going to buy want to sit around. brings together. futures positive 22 on the s&p, up .5%, yields still in and around 3%, and ecb decision. relax, is that a message for me or bramo? tom: bramo. jonathan: one of us is enough. ritika: keeping you up-to-date with news around the world, i'm ritika gupta. the first interest rate increased in 11 years, policymakers the set to announce an end to large-scale asset purchases. rate hikes are expected next month. officials trying to bring down record inflation while assessing

damage from an economy hurt by a war in ukraine. president biden called inflation the bane of the u.s. and entered with jimmy chemical he said high food prices and gas prices could be offset by legislation lowering the cost of prescription drugs into childcare. in his become one of his foremost political problems. walking down part of the city again, shanghai will conduct a mass covid testing drive saturday and the first major restriction since the city ended a bruising two month shutdown at the start of june. more than 6 million people will be involved. a consortium of a apollo global management and reliance industry has made a finding of the international unit of this alliance. $3.6 billion on the business, more than 2200 across the u.k., a rival group focusing on tdr capital has considered dropping out. global news 24 hours a day, on air and on bloomberg quicktake,

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>> the fact of the matter is that u.s. exports have been booming. when companies had to look away, where do they go? u.s.. they had to look for crude oil, they went to the u.s. and our inventories came down, giving a misleading impression that the whole world is going down from inventory side. jonathan: head of global commodity research at citigroup, his view that we will get down to 85 on brent in the less dutch next several months, jeff curry pushing for 140 130 over the

next 12 months. the ecb just around the corner, one hour away on the euro-dollar, just about positive. just about a stronger euro in the mix. 724. tom: we love the macro babel of the hydrocarbons into the world-class team at bloomberg leads on this. when i was to adjust his stop what you're doing and listen to the microanalysis of where a barrel goes, from 123, does it go to 133 or back to 113? paul joins of sankey research. i want to go back to the simmons gate, at deutsche bank, you do granularity like no one. reaffirm how expensive it is going to be to produce oil in america. cliques how expensive it is going to be to produce oil in america. while the cost will actually

come down so they do have a lot of cash available. the covid lose, they said we don't have any money and that is where the major underinvestment in oil supply growth occurred. but now, if you look at the counts in the u.s., price spreads which is what you need to generate oil as well, they are both ticking down a little bit and at the same time we are not seeing any growth in gas production, natural gas production, another mine actual gasoline production either. but in the case of the three, oil, fracking, drilling and gas supply. it is very surprising that zero growth, basically as you mentioned, 120, 120 wti and yesterday nine dollars natural gas. in natural gases come down a lot because of those problems. one of our concerns is the government may down exports.

tom: after our conversations with j.p. morgan, i want to combine the threads of analysis. the idea of an excess, at what price point does investment clip in which jp morgan screams we desperately need? >> at the mormon dutch moment, they don't have the price, it is the same problem with refining and that is why everything is so tight. with a democrat administration, there's nothing in this day being helpful in type -- in terms of providing regulatory certainty. one thing that is happening is there is a bit of lemonade. devon, which reaches high capital discipline, dropped $900 million on a bolt on

acquisition. it's pretty big, spending a billion dollars. but there's a different -- definite problem with reinvestment. another good example to continue, if you look at saudi, they have massively increased their capex. the effect of that is to increase production a million dollars a day by 22 a seven but it is not happening globally. lisa: how much of a factor to china, given the renewed lockdowns in one part of shanghai and the threat of more? will this drive prices going higher or lower depending on whether lockdowns these or tighten? >> absolutely over the cycle, but the problem with china, there is a lot of interest dutch industry playing around, which means the short-term effects of what they do domestically are muted. if you want an example of how marginally priced oil and gas is, look at yesterday, there was

an explosion of fire at freeport lng, the export circulator in the u.s. and gas prices went down in the last 12 hours. a dollar to you. china is usually important, a 3 million barrel a day swing relative to covid lockdowns, which is huge, the global market is 100 million barrels a day, the swing is that big on chinese demand, 20%. in the margin for prices, absolutely. but i am stunned they are so mucking around with lockdowns. lisa: have you seen evidence given the fact that prices have gone up as much they have come up that we are seeing demand instruction in the united states and europe as a counterbalance to the fed when chinese--china does open more materially?

paul: i wrote about this last night, i know talk keene will enjoy this, about a huge can dutch huge convenience story. 's there were reported results yesterday, they said that across the midwest, very middle america, they're just seeing the beginning of the destruction believe it or not in the highest price areas, it should be six dollars in certain parts of chicago, six dollars a gallon. but much of the footprint is actually in places where prices are still four dollars a gallon for the south and midwest. they are they are still seeing growth. and gasoline demand, fuel is up. still in this course, april 30. the demand strength has been a huge feature of what prices have been so high and lack of prices on the demand signed. jonathan: one of the best, paul

sankey of sankey research. we were just talking about julian emanuel, he heard the call and will join us about an hour 30 minutes. tom: we have to think all global wall street for tuning every morning, we granted -- grind it out every day but we are thrilled people like emmanuel can come on so we can grill him. jonathan:, we will be grilling him about his equity forecast. tom: i want to know how that fits into the first click into demand, jonathan:, they should rename it, the southside research, the promo case, the base case. lisa: i'm not making a call and i think there are a lot of

potential good outcomes. i love the idea of putting out a call and having a simple like the bat signal, but the light shining up. jonathan:, julian emanuel of evercore at 8:15 eastern, looking forward to that, futures positive about quite 6% on the s&p, nasdaq up as well. counting down to eight rate decision, a conference with president lagarde, the euro basically unchanged against the dollar, positive but just 0.03%. from new york and on radio, seen on tv, this is bloomberg surveillance. ♪

>> this higher inflation is undermining consumer confidence and consumption. >> the fed has to keep making these basis points until a demand slowdown. >> i would be amazed if the fed is able to go 50-50 in a straight line without any pushback from markets. >> maybe they can pause and let high prices naturally bring down demand.