>> 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 where the

fed is changing their policy narrative so quickly. >> if we continue to see elevated prices, the fed is going to tighten. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: live from new york city, good morning. this is bloomberg surveillance on tv and radio. i'm jonathan ferro. equities up in a big way last week. tom: there's a quality here. there certainly big action in the technology companies. there are some summer distractions. tesla, twitter and all that. but you mentioned the energy certitude, just a whisper of that disappearing last week. jonathan: marathon down hard. all of those names have been absolutely hammered. we've got to ask why yields

lower over the last week. tom: i know you didn't see the recession on your sojourn in the mediterranean. lisa was nonstop all week. lisa: let's be very clear because i get hate mail sometimes. you wish for a recession. i get hate mail for being too gloomy. the reality is everyone's hoping for a soft landing. last week was the week of meaning and perhaps we are going to get a softer slow down a cello or -- a shallower recession. people are reassessing whether we have moved to four -- 24 -- whether we have moved too far. jonathan: did i miss a deeply philosophical week?

tom: there's parts of america that are flat on their back with this really difficult recession. you go to the amalfi coast and you sit there and have the dinner. it's 54,000 layer -- lira. jonathan: did you practice this last night? i can tell you the amalfi coast was packed. tom: there's this polarity. jonathan: i know you are making a big effort to make me look immensely out of touch. s&p futures up point 4/10 -- up .4%. just say i wasn't alone. there were other americans with me and the airports were absolutely packed in a massive way. lisa: last week you missed tom talking about inflation from the lens of a lobster in maine.

tom: $41 for a lobster roll. you take the clan to the lobster shack. it used to be short money like 20 bucks was living large. now it costs $200 to take a family to get a damn lobster roll. lisa: that's what the u.s. treasury department is going to do at 1:00 p.m. i'm interested to see this whole conversation around peak yields. where do the buyers come from. is this just a pause or do you get a riproaring auction. is this a signal that there will be more to come as people pile into duration and does the five-year really count as that. christine lagarde giving welcoming remarks in portugal where she and other bankers from around the world including jay

powell will meet with francine lacqua. this is really something that i think is going to be a hidden tea leaf in the day. nike's earnings are coming out and they are going to give a sense of supply chain disruptions from china and what they are expecting in terms of profits and margins for the rest of the year. how much does nike serve as a bellwether for other corporations in particular the retailers in the united states. jonathan: thank you. it's going to be back. wasn't much of the welcome, was it. kristin bentley is happy i'm back. here's the quote that jumped off the page for me. unfortunately we do not believe inflation will fall faster for the fed to recognize the cumulative impact of its actions in time to moderate its policies. what's the bottom line for this equity market rally?

>> the bottom line for this rally is unfortunately we are going to see continued volatility in this type of price action is quite normal. this is why we are advocates against market timing. they tend to be followed by the best days. over the past 50 years we did an analysis. if you are just of the market for the best days of each calendar year, you erase your per animal returns by over 9.6 percent. in these type of markets you need to expect that volatility. last week we saw some defensive line but i don't think we are turning a corner until the market knows that we have definitively avoided a recession. tom: we will stop the show here

first because what you just heard is the single most important -- how many days if i'm in cash do i need to miss before i destroy my return because i didn't get the few ginormous days? say it again. >> just two days out of the market and basically you a ways to the majority of your per annum returns. sometimes people ask the question, what's the problem guilty that i could actually pick those best days. unfortunately you are better off playing the lottery. that is no longer an investment strategy. that is pure speculation. lisa: that's the argument against cash. there are certain parts of history that are aberrations including the great depression where nothing works and everything loses.

how do you discern that type of period amid all the gloom we are hearing from strategists? >> one of the historic anomalies we have seen is the fact that since the first time in history that we have seen both equities and bonds declined by more than 10% over a six-month period. to go throughout history and try to find other examples of when have we seen this decline in tandem. we have seen that there has been five other situations in history . in the six months following, fixed income was higher. equities were high only in three out of those five times so right now many people are questioning whether -- is dead. with the exception of the great

depression come we haven't seen a negative return of 60/40 portfolio. jonathan: is it in the bond market relative to equities? >> i think you need a balance. funds have been so out-of-favor. three years until we had over 40% of the world's government was negative yielding. the seismic shift that we have seen in rebates -- in rates. we are looking at the muni market where depending upon what state you are living in, you're getting tax-equivalent yields in the ballpark of 7% to 80%. around a 40% chance of a recession so it's not ignoring that probability. that's where we are adding exposure over the past couple of weeks. jonathan: this was awesome. kristin bitterly.

not the first time i heard people getting more and more excited about fixed income. your part of that story. you're talking about fixed income in a way you haven't in a long time. lisa: if i wasn't and i would be hypocritical. all of a sudden you are getting yield. unless you believe that we are going to hit some sort of inflationary spiral, it makes sense for the first time. i understand that argument because over the long term unless you see a sea change in the way we do business, it makes sense. jonathan: what do you make of this? tom: how many other fedex's are out there. fedex sees low single-digit package volume. they are going to contribute to

their pension plan. fedex is up 28% off the bottom in early may. are there other fedex is out there? jonathan: it sounds like you are going back to that old line it's about timing in the market. tom: we make a joke about -- the hardest part is massively asymmetric. it's a win to get back in. behaviorally that is a battle each individual faces. jonathan: we've been conditioned with the likes of target and walmart. they were very poorly priced. lisa: the visibility is just not there.

jonathan: futures positive. from new york and tk with throwback market checks taking a look at the italian lira. real helpful stuff this morning. tom: i think it's good. it's good. when you are pricing the gambler owning its 60,000 lira. jonathan: 1961. tom: i am having a hot dog on coney island and you are having prawns. >> i'm ritika gupta. the u.s. will provide ukraine with an advanced missile defense system called nasa ams. it's the same system the u.s. uses to protect the airspace

around the white house and the capital. russia has defaulted on its currency sovereign debt. the grace period on about $100 million of interest payments due may 27 expired sunday. the default is mostly symbolic for now. analysts say that the plan by some g-7 nations to ban new gold imports from russia is largely symbolic because the industry has already taken its own steps. a new poll suggests a majority of americans disapprove of the u.s. supreme court's decision overturning the constitutional right to an abortion. 59% oppose the ruling including 67% of women.

70% of republicans support the supreme court action. 83% of democrats disapprove. 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. ♪

>> it's going to be very important to make sure that if we are going to go through a period of pain, we do slay the inflation dragon.

jonathan: from new york city this morning, good morning. big week of gains behind us. we add to them this morning. tom: it's as if the weekend didn't exist. there was a quiet as people reset for the end of the corridor. let's get right to it. the g-7 meeting with maria tadeo. and annmarie hordern. i think it's so important there's a war in ukraine to me this is a g-7 overwhelmed by domestic realities. macron, biden and the rest absolutely overwhelmed by the politics of each nation. >> i'm going to push back on that a little because when you

go to a gathering like the g-7, there's always this unspoken rule that your domestic issues, you leave them aside. there's a lot of issues for everyone here. macron had about election two weeks ago. boris goes from scandal to scandal and we know the president in the united states also has his own issues. when you come together like the g-7 that's very much the language we have had over the past 24 hours. it's about presenting a united front and they would argue they have been successful at that. they just had a communique that says we are going to support ukraine. tom: estonia, latvia and lithuania are not part of the g-7 but they are front and center. please tell us how the g-7 looks at the beleaguered baltic states. >> i think we are about to find out tomorrow when everyone who is here gets on a plane and goes

to madrid. this is going to be a very important nato meeting and if you ask me it will be more important in terms of the content and the substance than this g-7 has been. a lot of this is just prepping the ground for nato. the most important thing yet to come is that nato meeting. russia is the most immediate threat and that's the focus when it comes to deploying troops but also changing the nato strategy. lisa: in the conversations that you have with people at these meeting, how much feeling is there that america is back. >> that's how the u.s. officials

would like to describe it. there is a lot of anxiety amongst european leaders that there will be a big shift. they just don't know what america they are going to get. are they going to get an america that goes it alone. while the u.s. will not discuss this in european leaders won't say this publicly, that is the concern behind the scenes. lisa: how much are european officials willing to pony up cash? in a broader sense with the potential initiative to combat that, how much is there a real willingness to put money into that? >> they tried this already. president biden pitched this at the last g-7. it was called bill back at her

world. it's getting a rebrand and they are trying it once again to coalesce g-7 leaders to come on board. president biden says collectively there will be $600 billion. there is still a lot of questions about this. how much are each country's going to be able to cough up when it comes to public versus private sector. european officials at bill back better world were asking questions about how much can the u.s. actually do when they've also failed at home to get some of their initiatives passed through congress. tom: as we move on to madrid, topic number one in madrid, is there going to be without gareth bale. he goes to los angeles -- israel madrid the same real madrid it was a month ago? >> it's better.

and don't forget a month ago real madrid won the champion like a record no one else has done. we are going to get a new stadium. this is going to be even better. jonathan: i think she's more excited about that than this g-7. thank you to the both of you. great coverage. lisa: she's rubbing it in. she knows i was rooting for liverpool. jonathan: is that right. the losing side. lisa: she knows i was rooting for liverpool. jonathan: if you should have your own show. where did that real madrid banter come from? tom, i spend all weekend trying to keep up with you. i don't get the whole american soccer thing. basically they go out and they hire older premier people who can't do it anymore.

jonathan: with the branding. they have the brand and try to bring some eyeballs over. it kind of makes sense. tom: doesn't work? jonathan: it goes back way before that. do you want to talk about the elephant in the room at the g-7? of the country that's not there. it's china on a whole range of issues. tom: to me it's basically an allied meeting in a war against mr. putin. lisa: the discussions around china were fascinating. the fact that there were so many initiatives to build up some of the infrastructure away from china to talk about more money into this computing initiative to me was fascinating. he saw the main headline discussions were all about russia and ukraine but under the surface it was all about china.

jonathan: germany has found itself as the weakening of the west effort to do something about russia and the chinese communist party. he's learning a hard lesson when it comes to russia. there are big questions about how they will contain china. look at the kind of policies they are trying to come up with at g-7. lisa: they are playing a difficult game where they are both trying to isolate china and not necessarily poke the bear too much. jonathan: big rally last weekend continues. yields of three basis points. you will hear from chairman powell again this week. from new york, this is bloomberg. ♪ to get to tomorrow's opportunities.

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jonathan: live from new york city this morning, good morning. futures positive .4%. we are up almost 9% since the

nasdaq bottom on -- bottomed on june 16. on june 14, 345. we have come on the way -- all the way back in. fully understood. i think we've got to go further. why are yields lower. is it about the fed back in the way -- backing away? tom: we have backed away from where we were when you were on sabbatical good it's an important mark. jonathan: he wanted to cut into this market check just to say that? thanks. euro-dollar looks a little something like this. there's no point in me saying anything. let's get you some stocks.

romaine: it was a wild week while you were out. if you are looking for the type of with that we saw in friday's rally breath a lot lower in the premarket. you are seeing some of those big camp tech stocks -- big cap tech stocks. this is a month for apple is still down 5% from that all-time high. jd.com up about 5%. we should point out the broader market in china particularly when it comes to some of the main indexes: no people are starting to talk about the return to a bull market.

keep an i on the semiconductors. there are a lot of decliners out pacing gainers in the premarket coinbase. they're expecting a lot more pain in the crypto space. betsy also getting -- etsy also getting downgraded.

goldman sachs. we have underplayed em dynamics. we are not talking enough about the linkage of the nimby response is all going on around the g3. explain the dynamic of em currencies in china. >> it's a great question. china is in a very different place to the rest of the. as you are seeing central banks around the world hike rates to slow their economy down because of continent -- china's experiences with zero covid they are actually lowering rates in order to support the economy from the shutdowns and that means that the yield advantages is just no longer there. so china is in a very different place. you're seeing pressure on the currencies. i expect that to continue. we would expect to see a number of these currencies underperform the dollar. lisa: this goes to an underlying angst about whether there is a spiral. once a currency starts to weaken the an economy that deteriorates further and there is even less impetus to buy into the nation. >> the tale of emerging markets that have significant dollar financing requirements.

market access is divinity impaired and that's where you are seeing the real pressure. you are seeing the inflation impact but not quite that sort of concern about distress or sovereign credit. getting to see that in the tale of emerging markets. lisa: bill dudley was talking about how if you start to see financial dysfunction it will be with emerging markets and it could spread some distress. how much are we starting to see that with the likes of argentina. are we going to see and other cycle in the near term in the developing world -- another

default cycle in the near term in the developing world? >> sri lanka has already defaulted. i think that tells you the degree to which market access is impaired. this is one of those situations where time is not your friend. so it's getting to be a pretty challenging place if you are a high-yielding emerging-market with a lot of dollar financing needs. currencies under pressure and the world as a whole. that is where you are going to see the pinpoint speaking to manifest themselves. tom: what's your calculated dollar yen where things begin to

fall apart their shell game? >> i don't think they have a particular point in mind. our view has always been that to some extent the real point where they will feel perhaps comfortable moving away from the policy they have been place is probably when u.s. yields have already peaked and are moving lower so you don't continuously see the pressure. i don't think there's a level. i think you're going to have to be a little bit patient. lisa: have we seen? we have seen a number of investors come on our show and say that we have reached peak

yields and we are going to have this summit or perhaps they will get together and commit to fighting inflation. do you think we have reached the pivot point? >> i think we have reached a point where the risk around the current yields is much more symmetric. it has been a one-way train given that central banks were behind the curve when it came to fighting inflation. what that means is you are at a point where the risk to that are much more symmetric. i think it's early to say that we have already peaked. we might still see some upside surprises and inflation. if recession is not imminent, these things can still push higher from here. it's fair to say it's no longer

the one-way train that it used to be. jonathan: just on china, perfect timing. we've had no inflation impulse from china for six months if not longer. his beijing suddenly starts pumping again out of necessity, that could be a different story. he goes on to say durable goods as well. there might be a sting in the tale. tom: i strongly agree. it really stopped me cold over the weekend. work core inflation and china on the pacific rim is so dramatically lower than the 6% or 7% core inflation in the atlantic world and it's really remarkable to see her 0.8% core inflation away from the shocks

that we are all going to. jonathan: we thought a lot about it from the supply china -- supply-side because of supply chains. lisa: but then longer-term i was trying to extrapolate out what that means if you get an alleviation of some of those lockdowns. or do you get some sort of remedying of the supply chains. it highlights how difficult this moment is. jonathan: and what it means for the dow. this is really important stuff. lisa: did you really just say that? jonathan: i'm joking. i'm just waiting for him to cut in again. he almost took me seriously. i give up. -- you almost took me seriously. i give up. tk is quiet this morning. tom: the tang is a little

flat. jonathan: where did you spend your weekend? tom: it was really special. lisa: what's your favorite ride? tom: i just can't decide which. seriously, do you go nonstop to naples or do you go into milan and drive down? lisa: he is still so bitter. jonathan: you can go direct into rome and work your transport out from there. tom: i'm taking air tuition. jonathan: impressive stuff. i can share that with you in the commercial break. futures up 1%. this is bloomberg. >> a group of seven nations are expected to greenlight exploring

the price camp on russian oil. a potential mechanism would work by imposing restrictions on insurance and shipping. goldman sachs says prices haven't topped out yet. analysts say that growth and demand are slowing down but not falling. frontier airlines has written an open letter to urge -- to shareholders. frontiers latest bid is better than jet lose or cash offer. jetblue has said its bid is decisively superior. coming up, we will talk with frontier ceo bailey biffle -- barry biffle. colorado beat tampa bay to win

the best-of-seven series. tampa bay had won the last two national hockey league titles. 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. ♪

>> two days out of the market and basically you have a race to the majority of your per annum returns. we have looked at a 50 year period. you are better off playing the lottery. that is pure speculation. jonathan: time in the market, not timing the market.

the message from the head of north american investments for citi. busy week for economic data. we hear from chairman powell alongside president lagarde and governor bailey sitting down with francine lacqua on wednesday. lisa: it's wednesday. tom: has there ever been a panel like that where there has been such disagreement on the x-axis? jonathan: what a moment for that conversation. tom: how about the odds? if you are at -- in capri and you buy your ticket as you did on the --, it is one in 622 million to win the jet but. jonathan: how long do you reckon you can keep this going? tom: all week.

until the next time you go to italy for a sabbatical. never on sabbatical is kriti gupta. kriti: this is a historical moment as we look at those bonds defaulting officially. they were looking at those bonds they were defaulting on. the 2036. these bonds have been trading in distress territory so the idea they defaulted as a result of this sanctions is largely symbolic. these bonds have basically been trading at $.20 on the dollar. it's been forced into nonpayment. also keep in mind this is the foreign debt and not the local debt. tom: i read very carefully maybe

they bury up someday down the road. kriti:, thank you so much. joining us right now with hyper detailed notes for bloomberg intelligence. let me start with the monday open question. which part of em is the part that our audiences should focus on? >> it's got to be russia. this default has been going on for three weeks. the cdc announced that basically a one .9 million coupon payment was late and it's been until deliberations -- in deliberations for three weeks. it can't figure out how to get a transparent market price for the cds to settle that. this has been going on for three

weeks and it's going to go on for that much longer. no one knows where the cds is trading out of current price. lisa: it must be a slow day if this is what we are focused on and it already happened. it raises a question of whether this is dangerous territory for the united states to go after our nation and say we will not allow you to pay has there been any signs that this has materially eroded the united states position in the dollar as of funding currency? >> for me it's more about the efficacy of the credit derivatives because if they can't figure a way to hold an auction and find a clearing price that both the buyers and sellers of the credit default swaps can agree to, is it going to be a cash settle? are they going to go to a third-party market pricing?

china and india are trading these contracts but they are the only ones. the verdict is still out but that is the real test of the credit market itself. jonathan: how isolated has this issue been over the past few months? >> it's incredibly isolated. i have not seen anything like they are the ones who chose to invade a sovereign nation. that's what people are going to hang their hat on this is going to go on" years and just the fact that they can't hold an auction to find a clearing price for these contracts tells you everything you need to know about the market for credit protection. it's at risk. jonathan: what does it mean?

>> if it's a cash settlement, the way i see that is the holders of the protection are going to get better pricing because they go right to their dealers. those dealers can't max their books so it's going to be very difficult for them to find a price. the physical market would benefit the sellers because that's a less transparent way of doing things or they go to a third party sort of pricing mechanism. how reliable are those prices because after may 25, u.s. and foreign creditors really can't trade in the to find that transparent price is the critical issue. jonathan: awesome to catch up. lisa: if you think about it, what is credit protection used for. for investors who want to offset their exposure to certain

nations or certain types of risk. if you cannot effectively hedge that in a credit default swap market, how much do you demand a bunch bigger premium -- a much bigger premium? jonathan: we are in pretty original territory. tom: i agree with that. original is the right word. i'm really fascinated at the adjustments we are going to see of the politics of the moment. if you wrote your midyear report three weeks ago, can you publish that today? i don't think so. jonathan: when it comes to this and this russian so-called default, there was always talk about moving away from that dependency on the u.s. dollar. it just hasn't happened in the way people thought it would. lisa: this has been ongoing and you have seen certain nations try and diverse eye away from

the dollar and they have not succeeded in this really highlights how the u.s. has this very dominant position. the credit default swap issue is perhaps the bigger one because the other one hasn't come to fruition. jonathan: do you remember when giselle wanted to get paid in euros? futures up .5%. she is a married woman. tom: is she on the panel? jonathan: and tom brady will be joining, too. lisa: they are gorgeous couple. jonathan: beautiful. i haven't got anything negative to say. stop being mean about giselle. from new york, this is bloomberg. ♪

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>> what the market is saying is you might hike now, but you're going to have to start cutting much sooner than in prior cycles. >> with the vendor raising interest