♪ ♪ ♪ ♪ >> they are dealing with a stagflationary environment. >> ♪ ♪ i think ♪ it is important to realize, we've got ♪ to good returns, labor fertility, being supported by the fed. >> this is "bloomberg surveillance." tom: good morning. kailey leinz in for john. we have -- we welcome you all in

on radio and television, markets on the move. 599, 5 big figures on the vix. this is not about the stock market. it is about declines in both equities and bonds. lisa: people saying the fed has to do more, central banks have to do more. the inflation read last week did not give anyone comfort we are deceleration -- decelerating. inflation expectations starting to climb in a way they haven't since 2008. tom: i am going to go to the dow a lot to harass jon ferro. we closed the vicks five big figures, but the dow as the mother load of decades and decades of these moments.

a draw down down -16%, full faith and credit bonds, -13%. i have never seen that. lisa: i have never seen that. i will point to another index, the nasdaq, down 27% year to date. down nearly 3% at one point ahead of the market opening, futures. that would bring it down closer to that 30% drawdown. these are asked if figures in a time where markets are recalibrating to a central bank, all central banks have to do more. tom: i want to get to you on the economics and politics of an adjusted fed. we talk about inflation expectations on friday with shocked economic wall street. kailey, greg publishing moments will, thank you, greg. you stepped aside for the global wall street pros, he says 75

basis points more likely in july. is that 50 now, 75 in july? kailey: that is what the market would indicate at this point. one hundred 70 five basis points by september, 175 basis point move. jeff fully -- jeffrey barclay saying this could come on wednesday of this week. there is a question of if the fed wants to keep expectations in the market with where it does, -- tom: the designs wednesday -- besides wednesday. i want to go through the data check. you can wonder to the wall, lisa. use my walker if you have to. it has been a wild weekend. let me talk about the data check. s&p futures are -93, dow futures -600 trade everything

correlates, maybe goes a little off the will darshan mark -- -- are -- we start with the italian yield popping out on a deviation basis, the italian german spread is a great european litmus paper. it shows two things, ac milan won, 2.7 standard deviation. dollar strength, year in beginning -- yen, -- sterling, 122.02. lisa: we are unprepared for the week ahead. what i usually do is talk about what to expect for the day. the day is about markets and preparing for what to expect this week.

wednesday, the rate decision at 2:00 p.m., jay powell gives his conference. this is why two-year yields are popping at the highest levels we have seen since 2007, they have succeeded onward to 3.5%. we are talking about a 75 basis point rate hike getting baked into expectations as soon as july. this is a fast-moving market, on the heels of inflation expectations. university of michigan consumer sentiment survey on friday, this is what caught people's attention. five to 10 year inflation expectations grew to above 3.3%. the biggest and highest level we have seen going back to 2008. people are expecting inflation to be sticky. thursday, inc. of england rate decision. second month in a row they have

seen negative growth in gdp. two-year yields seeing it rise since the highest levels in 2007, people are bringing back expectations because they do not see a good outlook for the economy there. friday, i wouldn't be talking about this. the bank of japan policy decision, keep things where they are. the decision is driven by the yen. they weakening in the yen is a linchpin of global markets, that linchpin is telling you that we are looking at diverge in monetary policies that are unattainable for japan. the yen weakening, it comes as they keep rates the way they are, trying to manage a market that is no longer a market. tom: one board to get through the morning, i want to introduce this to someone, what i see in the launchpad board.

the vicks up, five figures. the dow, you flip to that in a times of crisis. -599. 2/10 spread negative a moment awoke -- ago. back to a level curve. euro, 103 handle. mark chandler, chief strategist joins us. wonderful at the astrology of the market, the stars, the astronomy of our market. mark chandler, what is the item you are watching to glean the astrology of the market? mark: i think you guys are right, the fed is printing at 175 basis points hikes in the next three meetings. the implied the hike sometime in the next three meetings coming this week. dollar has a lot of -- here, the

talk of intervention seems to be displaced. lisa: when we look at big banks, if we reach peak hiking expectations, have people gotten over their skis in terms of hawkish initial? mark: i do not think a lotta people are critical of the federal reserve, i think that to your point, we have two numbers last week. one, the consumer confidence number four inflation expectations jumped. at the same time, the consumer sentiment saw the level associated with recession. they market believes the federal reserve is going to follow the inflation expectations, not the potential possible contraction of the u.s. economy. we contracted in q1. we could have second-quarter contraction, but the market convinced the federal concern -- reserve is going to become more aggressive in the face of

economic weakness. kailey: it is not looking for any tightening coming from the bank of japan. when is corona going to have to given when the yen has hit the weakest since 1998 today? mark: the japanese comments have been clear, they are not concerned about the level the dollar yen has come to. they are concerned about the pace. with the appropriate tools, the pace may not be actual change in policy. if anything, it seems the doj is doubling down on its policy, reinforcing the idea it is going to cap the 10 year yield at 25 basis points. it did today, the yield got above there. they increased the bond buying for tomorrow. this tells me the bank of japan is not about to change of policy, the ian weakness could be addressed by the talking about it -- yen weakness could

be addressed by talking about it. i think we have to wait until the g7 summit later this month to endorse the idea that markets should determine exchange levels , volatility can be undesirable. i think the question of the innervation, not a change of monetary policy. tom: how does renminbi and planned that? mark: the chinese currency, many of us thought that covid zero policy being effective, beijing and shy hank -- shanghai would reopen. beijing schools delayed, more lockdowns and restrictions introduced to shanghai. a part of the issue i think is

zero dollars strength, he does alignment with what is going on in china. tom: thank you so much, we are trying to blow up the show to give you the market coverage you need. futures, -88. i think all of us realizing import of the university of michigan inflation expectations numbers. chuck banner, i'm going to talk this through. 2008 is the last time we were here. lisa, what i -- what is shocking, we went to a two point 2% inflation expectation before the pandemic. it is amazing how far we have come across the pandemic. lisa: the surprise is, how much we have ticked upward, despite how much the fed has talked about being aggressive. consumers are going out there, filling up tanks, seeing it is $100 or more given how quickly the gas prices are moving up.

it is mooring expectations beyond what the fed wants them to see. tom: for those of you for and against bitcoin, we will keep you abreast of that move, jumping to 23,000 level, just above 24,000. stay with us, more margaret -- market coverage this morning. more data checks. this is bloomberg. ♪ ritika: chinese officials reportedly told u.s. counterparts the taiwan is not in international waters, that is said to have caused concern within the biden administration. u.s. allies saying much of the straight constitutes international waters. french president emmanuel macron facing a challenging upcoming election, allies are likely to remain the largest lock in the national assembly, looking at the first round of votes his majority will likely shrink.

his margin of victory narrowed from his results five years ago. a software engineer on google's team has gone public with claims encountering sentiment beings on their service. claims he breached the terms confidentiality policy. crypto withdraw transfers, figuring a broad cryptocurrency selloff to a competitor to allow a potential bid for assets. high yields, such as -- intensified after tighter monetary policy helps curve. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg.

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>> i think you've got to be moderate about what we know about this inflation process. i fear that it is going to get worse. we may get to 9% at this rate. tom: 9% inflation. are you ready for that in the united states of america? maybe we will see chat on that

in euro this week. we welcome all of you on radio and television. lisa, it coin cannot find a bid. down to lowe's at under 24,000. lisa: we didn't get to a good quote this morning. tom: i am asking for a friend, lisa. [laughter] lisa: i think it is fascinating to see the froth taken out of the market, that warren buffett quote, when the tide rolls back. tom: they came to me and said, do you want to do the crypto show? my people told him, that would probably not be a good idea. kailey leinz doing a crypto show, how big are the wakes this week? kailey: tuesday, 1:00 p.m. matt miller have been joking -- and i have been joking for weeks, bitcoin has become terribly unexciting.

tom: so much for the afterglow. we will get the afterglow with mr. matthew in washington on hearings. i want to pause on the market carnage we have got and talk about the next hearing. how will the hearings today theatrically be different than last week? >> theatrically, may not be different at all, save a much smaller audience. it starts at 10:00 in the morning today. lawmakers on this panel have their work cut out for them to get into people's living rooms at 10:00 in the morning, but compete with stories happening in the market. what we are happening from china. asked we, opening statements. today, they get down to the process of connecting the dots between win trump was told by his inner circle he had lost the election and was losing it. he heard this long before

january 6. the pro-trump supporters who turned into a mob, the witness we are watching, bill stepien, former trump campaign manager in 2020 about these behind the scenes conversations we keep hearing about. tom: meanwhile, there is news including the distance from a law -- island off china from the mainland. lisa: china said the straight of china -- taiwan is not international water, they will command over it if there is any kind of untoward interference from other nations, a direct shot across the bow to the united states. how concerned are people in washington? joe: the defense minister in china using the word fighting when it comes in regard to taiwan, it comes after secretary of defense lloyd austin talked about u.s. is indo pacific strategy, it refers the status

quo when it comes to taiwan. this is another point in the conversation, it is decades old. recently, coming to a war of words against the backdrop of the war in ukraine. we haven't heard much coming back from the administration, but stark language coming from aging this morning. kailey: the fact of the matter, the day after the inflation print of friday, a huge political problem for the biden administration. as they point the finger to the federal reserve, is that a worse political problem for the u.s. if the fed acts aggressively and you get the higher unemployment rate and potentially a recession? joe: that is the $30,000 question inside the west wing, it is when the white house would prefer not to answer publicly, deferring to the fed. he is going to philadelphia to speak to a convention tomorrow,

to check out the language in the white house schedule we got. he is going to talk about building an economy around the power and possibilities of working people, an economy that rewards work, not just wealth. tom: thank you so much. greatly appreciate it. while joe is yammering away, i am looking at my portfolio going down. joe mathieu, 5:00 p.m. with an important show. 4% yield on italy. i am only down 68% on might 100 year, how about that credit? how is credit corporate's doing in america? lisa: corporate has actually done better until a month ago, in terms of how much the total

return has been in terms of relative debt. average yield on just bonds, hasn't been high yields for a long time. nearly 8% yields on average from u.s. high-yield bonds. this is indicating people are concerned about credit, making it a bigger cushion for higher yields. this is a conundrum a lot of people fear, not facing into a big charity cycle. what is going to make them default? people are trying to bring forward a recession that has yet to happen. this is why the fed is going to keep going. tom: we will go more on the markets today, futures at -91. six out five big figures, well over 32. sterling, is ferro in sterling? lisa: no. tom: ok. [laughter]

lisa: see if he writes in sterling. tom: lisa has the h2 to do -- up by tupper lake, exxon has moved from 27 billion to a modeled 88 billion. i think they are making money, mr. biden mentioned them this weekend. kailey: that they are making more money than god. this is something he has repeatedly come back to. the energy companies are the ones responsible for higher prices at the pump, he says they are prioritizing profit over the american people. he is looking for someone else to blame other than his own administrations school policies, which is why they are trying to point the -- point at the federal reserve. tom: lisa, are you filling up? or are you doing the top thing, you spend $22, spend more, spend

another $22. lisa: we ended up trying to empty the tank to see how much it would cost to philip the whole thing, -- fill up all thing. it was great. we had the kids in the car, it was fabulous. tom: she got the matt miller gallon. i think she is out $250. we are watching the markets this morning, and the underlying economics of them. futures at -90, vicks 32.79. on chairman powell, francis dowell, next. this is bloomberg. stay with us. ♪

tom: good morning. a historic monday with vicks up five point -- futures at -90. bitcoin tanks, no other way to put it. lisa, let's do this quickly. here is a board i am looking at, the 10 year yield is three basis

points above flat. crude is off, showing that global slowdown. euro comes down, 104. futures, -90. what is the symbolism of inversion? lisa: stagflation, possibly a recession. i think stagflation first, we haven't gotten inversion. we are looking at a fed that is expected to raise rates by 75 basis points as soon as july. i was looking at deutsche bank projection, they expect a peak hedge fund rate is going to reach 4.125% in 2023. that is a level we cannot even comprehend, given where markets have been the past few decades. tom: i have been criticized for calling it a fed parlor game. francis donald is writing brilliant economics for manual life investment, asking if your mother in law chairman powell is.

you know your mother-in-law -- she is lovely, she will drive 30 kilometers out of her way to save $.10 a gallon. how does chairman powell speak to your mother-in-law? francis: he is not. he says, let me speak to the american people. the challenge for the federal reserve, inflation expectations, which they are desperate to control, are not going to come down in the near term on rate hikes. most of the general public is going to see what they are paying at the pump and what they are paying at the checkout, rates are rising. this is going to be a different communication for all central banks. they do not have the luxury of being honest about what control they have on inflation. that is underlying problems, chairman powell, -- facing chairman powell, lagarde, any others. tom: i look at abel bernanke,

chapter 22, it is about the effect of what the fed does on finance. if they pop 75 now, or whenever, what does that do to north american banking? frances: it is a struggle, another strain on the system. we could be inverted on the yield curve by today or tomorrow. unlike act in april, you will not hear as much pushback as a precursor to a recession ahead. the economy is slowing. the consumer looks fine now, but leading indicators is -- suggest it is slower. if you made a tablet -- people of challenges for the economy, each wanted -- would tell you, in the next 12 months, they will be more challenging. despite these leading indicators, we have not seen federal thanks link.

most sinful banks appear hawkish. the hopes that -- fall away in front of us. >> consumer sentiment at its lowest on record. your mother-in-law driving 30 kilometers for $.10 less of gas can drive very asian. at what point does it have to reach peak negativity before you get response from the fed that can address this? if they come out as hawkish, perhaps they will create that are sentiment. frances: macron tends to be most valuable inflection point at the story, we are not at that point yet. we haven't seen the bleed from central bankers, haven't seen employment start to rise. consumer sentiment is a range of

indicators, consumer confidence does not look as bad. the challenge for consumers is, we get retail sales numbers this week. they might look fine in nominal terms, but in real terms, every single month, this is a consumer that loses purchasing power. they are losing purchasing power. they are going to start worrying about their jobs, that transition from capital to labor , it is looking short-lived. that is the biggest challenge facing this consumer. kailey: michael at organ stanley says people are not pricing at the consumer weakness, we will see how much their budgets are being crimped. lori campesinos saying if we break through these levels, we could get to 3400 on the s&p. do you think this is accurate? people have not taken into

account how much disposable income is getting eaten into? frances: the challenge is, the narrative has been there were two stimulus checks. balance sheets looked good. real wages are declining. we are going to see challenges in jobs. the idea, the balance sheets are solid, that is where they are now. where they will be in the next six to 12 months will be challenging. when does the central bank start to pivot? they are telling us, they cannot until inflation starts to --. what i would like to see from chairman powell, we want to focus on corn, remind the general public, my mother-in-law will not be listening. they can controlled some segments of inflation, but not others. that will be the hope in terms of the pivot ahead. that is why we are not at an

inflection point in the macro story. kailey: are we going to get a hint that the 75 is coming in july? frances: i am not sure. when asked if they would rates by 50 basis points, they said may be more than that. central banks want optionality. what we might it, asymmetry in that optionality, more talk about a september reassessment might be valuable. we will probably need more indication for inflation expectations to cool. lisa: they are not cooling yet, the fed cannot be responsible for reining in the factors contributing to inflation. they cannot do anything about the supply side. how confident are you for them to get it down to their target without a hard landing? frances: not very confident.

there is a significant week pass in both economic models between q1 and q3 of 2023, whether or not it tips the scales into a recession depends on what you are looking at. this is a material growth slowdown. whether it is a recession or not recession, that is not the name of the game. it is an overly binary type of focus. tom: we've got somebody who cares less about us then your mother-in-law. good evening to qantas and australia, he knows a kilometer, one kilometer equals 6/10 of a mile. lisa: you are not going to quote that. [laughter] where is the tom i would know? tom: western australia, let's

talk about commodities. they are part of this pullback. copper sales this morning. lisa: when you look at the jump conditions, they are there in terms of how quickly things are moving in the commodities space. this is akin to what we saw in the 1970's, particularly with oil and gas. when it comes to gdp and the increase year over year, that is factoring into these feelings, it is not the same as the 1970's. tom: kailey, what are the differences here? i am looking at the price of corn, wheat complex. i am looking and australia at newcastle coal, i don't -- i think it is in queensland. to be honest, newcastle coal in australia has not pulled back. i think that speaks to the

tension of a china opening, versus the other financial gloom. kailey: big time. china is still firm and its zero covid policy. there are commodity strategists saying, be prepared when china opens back up. that is going to unleash more, pent up demand. there isn't going to be the supply to meet it. that will exaggerate higher prices in commodities across the board, that comes down to food and energy, things people have no choice to pay up for. when do we see demand instruction for other things? tom: some guy in a bar called platypus says, come on, you more on. i do not even know where new south wales is. north of tasmania, i know that. lisa, help me. a better chain -- check on the carnage we saw. -91 on spx, -88.

i am struggling. help me. lisa: a little better, nasdaq futures, i keep watching nasdaq. were saying, you see trader cycle back and a big tech in a haven of cash wealth. it is not happening. it is down, two point 8%. the underperformance of the nasdaq versus the s&p is something we have not seen to this degree, more than 10 percentage points going back to the early 2000's. how much more do we have to go in terms of repricing if the fed were to add to the massive way? this is shocking, this is going to better so many portfolios. what portion of these index are these stocks? tom: german yields, one point 1% on the german two-year. that vaults out to the italian

four, the italian 10 year is 4%, which is the bond wheel of europe -- bond roulette wheel of europe. dollar strength this morning. stay with us for more data checks, futures at -88. this is bloomberg. ♪ ritika: keeping you up to date with news from around the world, with the first word. the government reduces covid-19 testing, pointing to risks of a contraction underway. domestic product sales percent from march, output decline .1%. in china starting to reimpose covid-19 restrictions weeks after's easing in key cities,

raising concerns the country may employ strict lockdowns to control its outbreak. beijing reporting 45 cases on monday, with single digits most days last week. japanese bonds tumble, a warning from the bank of rising indown e lowest since october 1998. the worst performing of major currencies. french president macron acing a challenge in upcoming elections, likely to remain the largest bloc in the national assembly. his majority will likely shrink, his margin of victory narrowed in april's presidential election

from his results five years ago. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> a much longer lasting, persistent inflation than we have had in the past. the zero tolerance policy in china, it is unlikely the supply chain will come back anytime soon. tom: he was brilliant, i believe friday last week. william lee and his rim work for the imf.

i thought he was brilliant on the challenges of the pacific rim, centered around covid, which is something we have not talked about with the miracle of the vaccines in america. we will give you more market checks, -91 spf is negative 87, quiet in the carnage overnight. on radio right now, we are featuring oil south. we had curve inversion momentarily, for basis points the difference in yield within 10 year and the two-year. the difference in covid reality in china is real. i know lisa and kaylee want to talk about china in the markets, but i have got to start with a single headline this morning, beijing and doubt about covid. what is the bloomberg reporting on covid and the ability to restart a broken china economy? >> it seems to be backwards, happening in beijing and china,

we have been seeing restrictions easing in recent days. over the weekend, we get news of another take-up in cases in beijing and shanghai, 50 in beijing, linked to a single event. implementing mass testing and in parts of beijing, and shanghai, a similar story. new restrictions being reintroduced, after the city reopened after two months lockdown. a lot of people looking at this news are saying, this goes to show you how challenging covid zero is going to be for china. we know the back story with omicron and how highly transmissible it is. how long can china get their balance between the economy and the course to contain the virus? the big question mark lingering

over china and their policy. lisa: prolonged shutdowns are going to slow the economy for lack of demand, lack of production. on the other, it could help the commodity picture. is that the way we should be looking at this? if they reopen, there could be a shock and commodity demand. enda: people make this point, if china factories are off-line, there will be a number of consequences for energy consumption and commodities, copper, oil, iron, etc. we have seen a rebound in china factories and china's exports over recent weeks, reopening gets underway. the bigger issue that might play in the manufacturing story in china, it might be slowing down. they are all saying their order books are slowing down. forget the supply story, they are saying they dashed there

demand is weaker in the u.s. and europe. that speaks to lower activity, that could speak to a source of disinflation for the global economy. plenty of economists are saying china could be a source of disinflation. >> with the rolling shutdowns fueling ahead of that part of congress meeting later this year, we are not going to see a end of zero covid, china is probably going to grow sub for percent on a gb -- gdb basis -- gdp basis. enda: this seems to be the worry facing china. you have got the underground, domestic problem. the housing slump, that is a drag on china. the workout and the housing sector is may be up to 25% gdp. the ongoing construction in covid zero.

external story is, china's great exporting trade boom might be coming off the board. that was a key dynamo during china's recovery during the pandemic. that is expected to be even more in a decline as we head later in the year when interest rates hike. china is facing dual pressures, domestically driven bonds, and slowing grow -- global demand. kailey: part of the china story, what is your take on the developments over the weekend, the conversations between the defense minister of china and defense secretary of the u.s., and the conversation around time one feels like it is escalating.

-- around taiwan feels like it is escalating. enda: it demonstrates how sensitive the issue of taiwan is between china and the u.s., you heard of comments between the china's defense official. i think a lot of people are taking away from that, it is the context of this conversation, despite what is going on in ukraine. there was a thinking china might mellow its language, soften its tone. look for ways, their big take away from that was, there was no softening of the tone. hawkish. they are looking to engage in an international stage, -- tom: thank you from the report from hong kong.

futures, -91, now -83. fix, five-point ex-lover, comes up 4.74 points. 32.49. lisa, you are watching nasdaq. lisa: wholesale risk off, driven by the bond complex. two-year yields edging from the highs. a huge move to the highest levels we have seen since december 2007, 3.9% on the two-year. 10 year, 3.23%. it is getting close, the dollar is affected across the board. how many notes did you read over the weekend, talking about how there is nothing to stop it. given the fed has not blinked yet, how do they avoid dollar strength in the face of global

stagflation? tom: the best case is outlined by oecd, the united kingdom. i believe they have a banking meeting this week. lisa, moments ago, 1.2 200, we get a 121 handle on sterling. 14% drawdown, 14% sterling depreciation. off the peak of another time inflation. lisa: it highlights the angst of the moment for central banks, hiking rates into weakness. at what point does weakness make them think again? tom: -15 on gold, euro swiss seeing 103 handle. stay with us, futures -84. this is bloomberg on radio and television. ♪

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>> we are dealing with a stagflationary environment. >> it is important to realize we have got a lot of emotion in this market. >> investment comes accustomed to good returns, low volatility, being supported by the fed. >> this economy