>> the fed is behaving much differently than we might otherwise have anticipated. >> i just don't think that the fed would keep hiking aggressively when the economy is already slowing and wishing is already headed down. >> we haven't been in a situation like this with the fed is changing the policy narrative so quickly. >> we continue to see elevated prices coming back from ace my side. the fed is going to tighten. announcer: this is bloomberg surveillance. jonathan: i think i remember how to do this.

good morning, good morning. alongside tom and lisa, i'm jonathan ferro. get the vacation jokes out of the way with. tom: no, no. people from europe go to work to plan their next vacation. you and i were just in denial about it. >> on the importance of the ethics channel, that research now, it is up to you. i can share some with you. tom: let us know, the dow is up 110 points. 31,000 listing, there was seriously eight bout of enthusiasm. >> another half of 1%, what did you make of that move? >> i digested the chart, and very importantly, it is not a

lot of technical instruction in this rally area it was just a very healthy bounce in the bear market insert of a " we will see" end. jonathan: you take following yield and you ask yourself what is the dominant factor behind that move and what are the implications when it comes to risk assets? lisa: do you get oil decline on an ongoing basis? could we see peak inflationary concerns or not? frankly, this bear market rally continue. jonathan: did you end up thinking of a longer u.s. expectations on friday? is that where we are at now, the big data point for this fed for this market? lisa: you missed a lot.

jonathan: i don't think so. lisa: that is how this market feels. it is a breather, looking for the next narrative. people are just taking a pause. jonathan: a big week ahead. equity futures of 4/10 of 1%. yields in last week on a session this morning, a little bit higher. lisa: still in a broad downward trend which i find really interesting. if that is the main driver, there could be some sort of different view. treasury selling $47 billion of five-year.

five year have calmed dramatically. one: 30 pm, european central bank president christine lagarde is getting welcome remarks at the central banking 2022 by the ecb in central portugal. maybe we should all take a road trip, i would love to do that. how much as they reaffirm their commitment to bring inflation down? asked them about maybe earnings to nike. this to be potentially 18 leave the broader economy, as people look to a possible waning of consumer demand. at the same time, nike has done pretty well, also facing off with the headwinds of china, very much a litmus paper in terms of the paths ahead. jonathan:jonathan: the most european thing that i've seen in ages, the ecb is going to push back its decisions by 30 minutes and push back the news

conference by 30 minutes as well. i can only presume that is about having a longer lunch over in europe. anyway, put that in the diary. inflation expectations advising recession expectations, i think they are two very, very different stories with very, very different implications. ultimately, that is what mike wilson and morgan stanley brag about this morning. >> you go through, and there's a lot of different areas, but i didn't see a lot of conviction. a blistering note last week, he said inflation expectations come down hard they rolled over hard.

i didn't see a lot of conviction out there. jonathan: laura, let's start with that bond market. what is the dominant effect of high-level yields and the durability of the equity market rally? >> is a great question. the rate strategy team has been looking for that on the 10 year yield. those growth concerns and recession concerns, it was way on that bond yield strangely, this ends up being a stabilizing force in the equity market because of its contribution to things like market cap and net income. i think it feels a limit contradictory in nature, but i do think that is one of things that has really been giving some stability to markets. as i've talked to investors the last couple weeks, there a real purpose that if we get a recession, it will largely play out in the next couple quarters and we won't have any lasting

ends and scars and we can get into 2023 with deason earnings. i think that kind of longer-term optimism on 2023 is something that i've actually just in my conversation as landings and optimism for investors. tom: you are on the road a lot, i want you to get away from the strategist and what is going to happen by next tuesday, and i want you to look long-term. you are more qualified to do this that anybody out of collegiate america, you lived in the most prestigious dorm rooms in america. i want you to go back to jefferson and say how do you do this now for the long haul? how do you stay in the market and not afraid in cash? lisa: i think that when we go back and look at the history of recessions, but we have to remember is that they do typically beget buying opportunities from longer-term

investors and beget very caught up in our competitors and investors are going to wonder what is the absolute downside, what is the end of the year number look like? but if you go back over the course of recessions, stocks actually go up a little bit. you tend to see a very big pivot. areas like small caps, these are historic buying opportunities. i think you need to keep those bigger, longer-term pictures in mind. the second thing is i think the conversation about recession is an important one, but if we are really longer-term, we need to be thinking about what things look on the others, what is the longer-term goal expectation? i'm talking to a number of people who think it was boosted by stimulus. if that stimulus is lacking in the economy and economic recovery going forward, anticipate a slower growth backdrop.

>> that brings us to john's plan where he started off asking are the scenarios consistent with each other and mark if you got slowing growth in a recession and you also get inflation that doesn't fully materialize under recession, that brings us back to where we were before and then some parse out what the difference is and whether we are still in that stagflation environment. >> i think that they are two parts of the same timeline. this idea of recessionary fear, frankly, that is something investors have already been positioned for. it does feel like that is still playing out, but the position in the market already reflects that. that longer-term type of environment is something investors can still wrap their heads around perhaps you don't need to be as bearish on things

like energy as you did in the past even if there are some pressures in the short term. but you also do want to think about that longer-term backdrop and how you want to be position for that slower growth environment which i don't think is going to exit anytime soon. i don't think investors are being inconsistent. jonathan: great to start the week with you. just weighing in briefly. just go through how we perform last week. look at the commodity price elsewhere. there are problems out there, there are big winners and losers in the last couple of weeks. lisa: people are basically betting that the rally in crude is over. to your point, and i think it is a really good one, if that is the case, doesn't that give a tailwind economy to alleviate some of the inflationary

pressures that should not be here in the first place? at what point do we end up in the turn? jonathan: we will give mark wilson the final word. falling yields and low oil prices. the market took a bullish view which may last a few weeks before the reality of lower earnings arrive and the bear market is here. tom: while you were on sabbatical, a small startup called federal express reporting put those detail -- i don't have those details in front of me, but they adapted and adjusted to a changing america and the numbers were actually pretty good. i get the idea there is a lot of earnings gloom out there. we will wait and see. jonathan: i love how you don't have the details but you just took everyone -- took the opportunity to remind everyone i was on sabbatical.

cpi july 13. july 14, earnings season begins. jonathan: put it in the diary, tom. futures up 4/10 of 1% on the s&p. from new york, this is "bloomberg." >> for the third -- first time in a century, russia has defaulted on its currency, a combination of sanctions to creditors. the grace period, about $100 million in interest payments. still, given the damage done to the russian economy, it is mostly symbolic for now.

leaders will commit to providing indefinite support ukraine for the war against russia. the plan by some nations to ban new gold imports from russia is largely symbolic because the industry has already taken its own hit. and the billionaire italian entrepreneur who created the largest eyewear company has died. as company rollout brands such as ray bans and oakley. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more

than 120 countries.

>> we are talking that apartment buildings of everyday citizens, so it does seem like they are trying to reboot. at the moment, what you are pretty much seeing in eastern you train, and these are some of the strongholds that russia has, is a continuation of the we had over the past eight years. it was in eastern ukraine for eight years and ukrainian and russian-backed separatists have been fighting. tom: they've been fighting, but the backdrop of the g7 meeting, is there an urgency, or is everyone sitting around and having a lovely summer afternoon? i didn't sense an urgency over the weekend. i sensed going through the motions.

anne-marie: i would describe this meeting as one of angst. there is a proper discussion about how do they continue to support ukraine, whether it is humanitarian efforts, defense efforts with a new front on that. financial efforts, diplomatic efforts. the quote, "we will stay as long as needed." they are putting all of the sanctions on russia and not creating even more problems domestically. every leader here is worried. boris johnson has made clear every leader here is worried about the anxiety, the everyday citizens are feeling. that is because of higher inflation and higher energy costs. >> given all of that angst and how much it is tied to russia, is it surprising that there is so much focus on china and then countering the road initiative and investing in other enemies as there seems to be?

anne-marie: remember, this plan is 2.0. they announced this at the first she summit. now it is rebranded. in a lot of european leaders were not able to cough up the money for that and they were certain that the bible version was not going to get their own build back better agenda congress. you heard the president say u.s. wants to put up $200 billion toward this. but how much between public and private investment, or country -- what countries will be going to? they wanted to counter china multilaterally. they are just trying to reboot his effort to do so.

they are not going to take their eyes off of china while they are still dealing with crises. one of the articles written about u.s. leadership after a supreme court decision on gun rights and abortion, i'm much of the conversations you have of these topics are actually dominating the conversation? if there is, divided populace. >> this is not something being discussed, but it started to feel a bit awkward for the u.s. president to set foot amongst all these other leaders, which many have come out and said this is a step backwards. this is an awkward moment from the u.s. president when his peers are saying we think the united states is taking a step backwards when it comes to women dr. bright. domestic agendas for all of these leaders is a really large issue. >> before he got on that plane he was asked you think the

supreme court is broken and he said i think they made some terrible decisions. jonathan: we will confront him when the president comes home later today. don't let this one slip, the russian default lisa: the russian finance minister called the label a farce. period expired on sunday, but this is utterly bizarre in many ways because it is pretty original. it is not many times you get to say a country has defaulted when they have both ability and willingness to pay. lisa: there are some people say it weaponize the financial system and it is up to the u.s. other people are saying this is a new world order where there has to be some sort of financial

penalty and a country cannot play nicely so they cannot be allowed to play in the same sandbox. how much does this really prove a game changer in terms of sovereign defaults? jonathan: what do you make of this? tom: i see a wet band across my bloomberg terminal. there is a red band with a little warning sign. sanctions applied to this security. russia, if you want to run over ukraine, you don't get to play. jonathan: so the west gets to pick and choose who defaults on their debt. tom: that is what sanctions is about. simple as that. when they come for new debt at some point, what do they do? jonathan: what were the consequences be further down the road for countries that what access to capital markets but if they default, it comes down to ability and willingness to pay.

lisa: we are not seeing it completely. we are on the edges when you look at some of the balances, but the dollar has actually strengthened. jonathan: it is not easy to get away from the dollar but i expect to see the dollar ruble in the 60's three months ago. tom: no. for many in china they are bringing in gazillions of d ollars. jonathan: good to have the team back together. this is "bloomberg surveillance. "

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jonathan: live from new york city this morning. the correlation between bond yields in this market. here equity market up again this morning. positive by about .3% on s&p

futures. equities up, yields lower. you two year yield will off the highs of mid june -- your two year yield well off the highs of mid june. let's talk about why yields were lower. are yields lower because of rising inflation expectation or peeking inflation expectations? -- peaking inflation expectations? we've got a pretty weak earnings story coming up that we need to talk about.

a really important panel coming up later this week in portugal. he will hear from chair powell, governor bailey and francine -- francine lacqua interviewing all three of them. tom: i got real mixed signals about that. i don't know what else they can say other than to be massively data dependent like you see a rally in the euro. what draghi's got to do in italy with the italian lira. even if you go to europe, you don't just look at euro, you look at each individual story. jonathan: thanks for that tom.

you are trying to wind me up and i'm going to ignore it. the tension between the three of them could be in the fx channel. at this point i would argue that governor bailey wants one, president lagarde made its one and right now chairman powell has one. tom: futures up 11. dow futures 61. i don't even know where to begin with the fixed income view. what is your theme into midyear. >> it really comes down to this balance between recession versus inflation fear. we will still stay under the guidance of the fed. the fed has a clear and present danger on inflation and they have been behind the curve. the curve will invert but probably form more issues around market sentiment later on in the

summer and the fall. tom: what is the distinction of looking out five years and not 10 years? over the weekend i saw a lot of literature focused on five years and not the convention of 10 years. >> that's kind of a pivot point. we are used to seven to 10 year cycles. so if we were to make it five years as a business cycle which i still think is debatable as an expansion. even if it's a mild one, the five-year will start to pick up on that and rarely hard. lisa: what do you think the fed's response is going to be if inflation comes down but not that much? we are going to see earnings that are lower but inflation is still sticky given some of the endpoints that aren't going -- inputs that aren't going away so quickly.

>> between now and jackson hole i would envision they are going to start to explain why they got inflation so wrong. we'll start to see why they were missing what was going on with inflation and give us what they are looking at going forward. they will be looking for the turn. they are going to look for certain components. lisa: the reason why i ask this is because we are talking about the two aspects about what we are seeing in markets right now. either slowing growth leading to potentially worse earnings or inflation rolling over which could give a tailwind to the economy. are these two sides of the same coin? if inflation isn't rolling over that quickly, if the fed hikes rates couldn't we end up with stagflation short-term, recession long-term, back to low

growth? >> either way you could get a small recession and stagflation on the backend. the fed not knowing if they have really put inflation back in the bottle. it clearly should start turning the until the end of the year but we still have months to make that judgment tom: this is the key thing in terms of all the analysis and getting to july 27 and the next fed meeting, the core inflation analysis whether it's pce, the core inflation is the heart of the matter. >> some components as well as what's going on in travel and things like that should all work its way through the summer. headline highly dependent on energy prices which could get a respite depending on what's

going on globally. it's this give or take between recession and inflation because a slowdown should curtail inflation over the long haul and every single major spike in inflation has been fixed with a recession. the question is is it big r or small r. tom: if you believe in price up yielded down, i guess that's a moneymaking opportunity in your world. but is it? >> the tricky part being we don't know if we are in the eighth inning are the sixth inning. i think we are closer to the eighth-inning especially on long term rates. the way the breakeven curve is forecasting, the bond market is saying the fed has credibility over the medium-term long-term.

we have had one of the worst quarters if not first halves of the year. i think people are going to look up and say 350 is an interesting level if we ever get back there again. lisa: have we seen peak yields? >> i think we are close. the problem being there was really no technicals in the short run. that probably was the cathartic move for the bond market to get we haven't seen an equivalent one in credit is. it felt unchanged a little bit last week. i do think we are getting closer to a top. jonathan: the markets picking up on this. we had a bottom of the nasdaq two days later and clearly we are starting to question how far

this fed can go because growth is going to be a problem. you've had this big rally and the nasdaq. and what's rolled over, the energy market in a brutal fashion. pretty ugly. they've had a fantastic year to date but there is some weakness emerging in a more concentrated way over the last couple of weeks. tom: the commodity index which rolled over with a vengeance, with the financial conditions index which i should point out is still one standard deviation negative. that's some real stress in the system. it's competing forces now. i saw a lot of tentativeness in the notes except from michael derrida who said flat out. jonathan: if inflation comes

down, is it because growth is getting hammered or the supply-side story is improving? tom: it could be both. i would suggest the supply-side story is clearing up a little bit. is that dominant, no. i think it's more about the recession betting game which frankly bores me. jonathan: why? tom: because there's no researcher. you can predict what recessions do or the magnitude of a recession. while you were gone, there was clearly a magnitude debate about recession. jonathan: i will tell you someone who it doesn't bore. lisa: i especially don't find boring because of what george said. our central bankers going to take a sledgehammer to inflation and keep raising rates even in the face of diminishing growth simply because they don't want it to become entrenched? or is the fed going to take a

signal from some of the growth rolling over and back off? and those are very different scenarios and we don't understand that dynamic. jonathan: the san francisco fed president, 75 in july is where i'm starting. this quote from jonathan haskell of the bank of england. we won't be wimping out on inflation out -- on inflation. they are pretty serious that they've got more work to do. lisa: they all memories of what happens when they don't get it under control and there is a credibility concern after what happened not going quickly enough and people seen data that came out that even jason furman came out and said this is terrible. we need to get this under control. they are facing off with a credibility crisis that undermines the central bank in general.

jonathan: trying to keep tom interested. tom: what i want to know is when i go to italy do i think in italian lira or do i think in euro? usd itl is one way to look. you could stay there for a sabbatical. jonathan: that's how you confuse people. i will make it easy for you. you just go there and in your mind, euro is basically a parity. do you know how many american accents i heard on the amalfi coast? full of american tourists taking advantage of euro-dollar. some people will think that's trading somewhere. from new york, this is bloomberg. >> i'm ritika gupta.

seven nations are expected to agree on exploring a price camp on russian oil. the goal is to limit a key source of revenue for vladimir putin for his war in ukraine. the potential mechanism at work by imposing restrictions on insurance and shipping. commodities are heading powerful headwinds. the index of spot commodities has fallen 13%. analysts say that growth and demand are slowing down but not fallen. china plans to extend trading hours for the yuan. it's part of its internationalization push. trading will close at 3:00 a.m. the next day instead of 11:30 p.m. local time. boeing 737 max jets reportedly experienced at least six emergencies during flight and

work grounded dozens of times in the year after they were returned to service according to the australian broadcasting corporation. boeing says none of the indicates -- none of the incidents indicated a trend. global news 24 hours a day on air and on bloomberg quicktake powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> we are seeing price increases beyond energy unfolding elsewhere in the economy. we discussed how to mitigate the economic and social facts especially on the most vulnerable of our societies. this starts with being adequately prepared to deal with potential for the disruptions in deliveries of russian gas to europe. jonathan: these leaders have a big problem. that was ursula von der leyen

and good morning. the equity really that continues building. -- rally that continues building. we are positive just .2% and we are backed right away from the highs of the year so far. tom: interesting to see, i must admit the isn which i never paid attention to. it's going to be fascinating. jonathan: pmi's were not impressive last week. tom: it's going to be interesting to see. here's what we are going to do over a weekend of emotion for americans. it's difficult to calibrate the importance of the decisions plural of the supreme court. mohamed younis is editor-in-chief at gallup. they have been doing it longer and deeper measuring the pulse and cadence of america.

i thought the new york times was spectacular this weekend on looking at the state legislatures. the revolution of 2010 which was very much like gingrich in 1994 and the fabric of america. trifecta america which is when a state is entirely democrat or entirely republican. does gallup presume that we will stay as polarized as we are now and frankly become evermore trifecta america? >> that's a great question first of all tom as always. there is no doubt that america is politically more divided since we started measuring it in the 1930's. there's been no sign during the past months of the biden administration the that's improving in any way. we do ask americans whether they

preferred this kind of trifecta set up at least in congress. we find the majority of them prefer a divided government. they prefer there to be a balance between the parties. this decision really can't overstate the magnitude of upending 50 years of settled law. tom: completely unfair question but i'm sure you will engage it. what is the belief in america of a glynn county in union? do we believe in union or do we nudge towards some form of separation? >> we have never had that specifically, but i would say the union is still intact and will remain intact and i say that because americans are pretty positive on their own lives and their local government

. americans are very disappointed in national government and that's where we've seen the most decline in confidence of institutions. overall satisfaction of the united states hasn't been above 50% in over a decade now. americans are very down on their national government but they aren't signs necessarily of dissolution of the union and public opinion. lisa: there just seem to be a galvanizing of local elections. do you have a sense of when some of these social issues could overcome inflation and economic issues as the main voter preference going into the midterm elections? >> if you would have asked me that on friday i would have said that's very hard to believe. now it's an open question. it depends on how bad inflation in the economy really gets for main street moving into the selection.

we ask americans how important abortion was a your vote and we did see an uptick in those that said they would only vote for somebody who shared their views. this decision is not popular in america. six in 10 americans did not want to see roe v. wade overturned. 55% of americans described themselves as pro-choice and that has been on the increase. america has moved if you will to the left on abortion and now this decision by the court is really out of step with public opinion. not that it's the wrong decision, but we know this is not going to be a popular decision with the public. jonathan: do you find that is coming up in more than one topic ? on certain issues it's really not divided. it's just washington, d.c. that's very divided on party lines. do you think that's becoming a bigger issue across a range of issues? >> actually know -- no, but

these social issues can really become a focus and divide community and we have seen that in the past. americans are rather positive on the government. they are not seeing state governments nearly as negatively as they see the national government. in the 90's that was close to 60% or 70%. jonathan: a difficult few months ahead for this country trying to settle some of these issues going into the midterms later this year. lisa: whether that will be one of the main motivating factors, you have raised an issue about whether the center is bigger than some people think.

i point to starbucks, tesla, yelp. whether they will come under the target of washington, d.c. is a good question of the peril of companies to weigh in on this is interesting and whether they decide to are not highlights the court of public opinion. jonathan: do you think we fully understand the legal ramifications of some of that effort? lisa: absolutely not. teams of lawyers our meeting right now to understand and a lot of lawyers are staying quiet. jonathan: the legal aspect of this is highly highly complex. tom: within the zeitgeist of disney, the leader of disney is in contract discussions with his board this week and maybe i saw

this in variety but disney down in orlando was really the first test case of this on any numbers of these social measures. this is going to be front and center for the bloomberg world to this week. we are here right now. jonathan: building on the gains of last week. yields last week lower. today i by three basis points. crude positive .2% and euro-dollar big week ahead for central bankers. a whole range of them speaking. a panel hosted by francine lacqua in central portugal later this week. live from new york, this is bloomberg. ♪

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>> this fed is behaving much differently than we otherwise might have anticipated. >> i don't think the fed would keep hiking aggressively when the economy is already slowing and inflation is already coming down. >> we haven't been in a situation like this