>> i do not think we are turning the corner until the market knows we have avoided a recession. >> we might still see upsides to prices and inflation. >> still tighter financial conditions. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: good morning. this is bloomberg surveillance on tv and radio alongside tom keene and lisa abramowicz.

equity futures up .5%, trying to hold onto these gains. tom: the vix has worked down another notch. the unspoken story this morning is now oil lifts. it is up 6.5% according to commerce bank and it has a further lift in the last hour with brent crude $117 a barrel, not where we were a week ago. jonathan: china at the epicenter of nato talks in madrid today and the next couple days and at the epicenter of price action, too. tom: i wanted to talk about including turkey, sweden, and finland. the china story to me is in the headlines. they are trying to reopen. jonathan: i will get excited when they get rid of the quarantine. lisa: going from 14 days to 10 days.

this is not a removal of the zero covid policy. this is a temporary reprieve to actually help support global growth. how long it will last, how much uncertainty this will cast remains to be seen. jonathan: no clue what china is going to do for some of these earnings for the rest of the year. lisa: and how much of a hit they took. what our company is going to do with the strategic issues with how nato is raising concerns about china paired with the lockdowns that are intermittent in china? how does a u.s. company deal with that? tom: we have to be mixed on this. hsbc went on luxury. they said lecture is booming worldwide, so maybe it is a mixed picture. jonathan: did you hear from

morgan stanley yesterday? she was scathing about earnings estimates. people are asking the downgrades for earnings this year. >> while you were on sabbatical, we did a lot on how the world changed when the government said you are in the timeout chair if you get free information or information ahead. there is a delay, so you are right about that. we did speak to her while you were gone. it was very informative. jonathan: good to now. share this with me ahead of time and then we can build on that when i next speak. futures positive .5%. tom: i was going to tell you later today. jonathan: tom said to me this morning, i thought you were not coming back. he said, i need a pay cut. two hits a week. tom: i see the three of us on a

grand canal in venice doing work. jonathan: you do a 30 minute daily show, tom. let's work it out. lisa: i feel like i have just been part of something and i am not clear on the implications. we do have an auction brief and it is good. 9:00 a.m., we get the home price index. we have known that home prices have been climbing at a record pace. expect deceleration, but will it be enough to puncture inflationary input, especially as it translate into rent, considering the housing market lags behind the rental market by a big margin? june consumer confidence data comes out. this is one -- been one of the biggest debates among economists. you have consumer sentiment falling off a cliff and consumer confidence hanging in there. what is the difference? some people point to one of them

and the other one points to the other one. the issue is consumer sentiment from the university of michigan takes into account oil prices. we expect a big debate about how important that is in terms of longer-term inflation expectations. i just want to say yesterday? -- yesterday's 5-year note was exciting, one of the worst performances going back to 2010. the reason why the seven years particularly interesting is it is always falling off and it is not as liquid as 10 year notes. i point to this chart of the idea the you get a deeply inverted curve for quite a while where seven year yields are higher than 10 year yields. it is a liquidity issue at a time that liquidity is of must -- is of utmost concern. jonathan: are you still with us?

with us now, a strategist at invesco. let's start with citibank. they cut their outlook. they still see upside and here is the line from the team over there, better than feared earnings combined with bearish investor positioning to support a positive second-half risk reward set up. do you agree with any of that? >> i think it is going to be a challenge. volatility is likely to persist as long as there is uncertainty. we have seen evaluations come down, which is a positive. the question is now on earnings. the market is expecting around 220 peak earnings, the economy slows down. i do not think the market gets down. i do not think we have the substantial amount of downside here, but certainly will be

challenging to sustain. you need to see inflationary pressures start to come down for the markets to get a better bid here. tom: how can fed language change your world? how do they address our expectations of what to do with our money? brian: we are still in this don't fight the fed type of environment. the two year rate has priced in significant tightening. the question is how much further would we have to go beyond that. goods inflation looks like it will start to come down. some industrial commodities have come down significant lay and we will need to see alleviation of pressure. if inflation starts to roll over , the market is going to care more about the direction of that. the federal reserve starts to get more comfort that

inflationary pressures are coming down. it will be a positive for markets. lisa: what do you think of the theory that inventories will be overstocked and we will get to a whipstock kind of environment where there will be a disinflationary push that will cause the feds to reverse course in the next 12 months? do you buy into that theory that people are looking to? brian: there is a chance of that. if you speak to people in logistics or storage or trucking , they say this is going to be an oversupply economy. that was our view before russia went into ukraine. we thought inflationary pressures were going to moderate this year because in -- demand was starting to slow and businesses were working to rebuild inventory. there is a chance, particularly on the goods aside -- goods side, that you will see an oversupply economy. the question is, do inflationary pressures come down fast enough

to give the fed comfort? i do not think we are in a world where inflationary pressures are going to be elevated. you know they are going to come down as the economy slows. the question now is more of timing and when the federal reserve feels comfortable that we have accomplish this. jonathan: and how much damage is done in between. given the guidance you have heard from the federal reserve so far, is it too late? brian: the policy mistake has already been made. can they back off? it is going to be a challenge. the risks to the cycle are elevated. there is a path to a soft landing, perhaps narrower than many of us would want it to be, but what is important for investors to know, if you look at the last nine recessions, the average return is -30%.

that is cold comfort to say we have only done a little more than three fourths of it, but a lot has happened. for investors to get overly bearish year, the timing is likely to be off. jonathan: good to catch up as always. this came from jp morgan yesterday. in line with their mid tier outlook, we saw last week the words as follows. it is not that we think the world economy is in great shape but that the average inspector -- investor expects an economic disaster. if that does not materialize, risky asset classes could recover from the first half. my number one question this morning, who is the average investor? how do you gauge that the average investor expects an

economic disaster? is that what we see priced anywhere? tom: i think there is a fair amount of gloom in there. you and i had our ties off yesterday. that was gloomy. the fed is talking about consistency of cash flow and even given challenges to the economy, as just outlined, companies keep doing what they do, which is profit. jonathan: i am with you. tom: but they profit and buy back shares and raised in but in -- dividend. jonathan: it is not for me to question the year end forecast but i am here to question the process. lisa: another way to ask is our risk assets even pricing in recession? we do not have any clue. the lack of visibility is going to mean companies with cash flow

have difficulty knowing where to put it. these are concerns underpinning what catastrophic scenarios people are pricing in. jonathan: quoting leonardo da vinci this morning, every obstacle yields a result. tom: he was great at glastonbury. jonathan: it was fantastic to see. futures up 4/10 from new york. this is bloomberg. ♪ >> keeping you up-to-date with news from around the world, i'm ritika gupta. china has made the biggest shift yet in its covid zero policy. quarantine times for inbound travelers have been reduced from 14 days to seven after beijing and shanghai said they had no new local infections for the first time in february. european central bank president christine lagarde is promising to be nimble.

she has plans for a quarter-point increase in interest rates but said policymakers are ready to step up action if needed. and runaway food inflation may be tamed at least temporarily. the fed pushed up the price -- it pushed up the price from everything from red to chicken wings. optimism that key producers. 46 people were found dead in a semi trailer, apparently victims of heatstroke. another 16 were taken to hospital. authorities suspect they were migrants. smugglers sometimes use commercial trucks to bring over migrants. in the u.k., the prime minister's bill to override the brexit deal survived a challenge in parliament, but members of his own party.

it now goes to the next legislative step. it would allow to unilaterally amend. that could lead to a trade war with the european union. 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. this is bloomberg. ♪

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>> inflation is undesirably high

and is projected to stay that way for some time to come. in july, we intend to raise our rates for the first time in 11 years. jonathan: the first thing i read this morning. that was president lagarde, calling challenges for monetary policy in a rapidly changing world. this is bloomberg surveillance with tom keene, lisa abramowicz, and jonathan ferro. muted price action on euro-dollar. the bond market yield is a little higher. tom: i am going to focus on brent crude, six dollars away from west texas intermediate, up 2%, different than a few days ago. jonathan: is that the china factor? tom: i think it is a global demand issue.

certainly emphasizing pacific rim and emerging-market demand is part of that. maria tadeo is in madrid. she will join us in a bit. annmarie hordern in germany on the austrian border joins us this morning. i want to go to see peoples -- steve peoples, writing of the stunning one million registered voters moving from democrat to gop, many of them in the suburbs as well. does the democratic party apparatus really care about the g7 meetings? are they riveted on the midterm elections back in america? >> all politics is local. if you have the president here, he is going to make sure he has

a domestic voice or angle and he goes back. this is part of being the president of the united states. you have to take part in global diplomacy. even here at the g7, while the war in ukraine has loomed large, for all of these majors, including the president, is that angst back home and what you are alluding to. inflation is what dominates the minds of americans. it is the reason why they are talking about some of these issues, like price cap's, so they can keep more fossil fuels on the market and each inflation or concerns. tom: america wants a price cap on six dollar a gallon gasoline as well. please explain how a price cap works. the microeconomics of it befuddles me. i am not aware of how that mechanism would work.

annmarie: it has never been done before. if it had, it probably would have been used to keep iranian crude on the market. this is completely new. it has the push from janet yellen, who yesterday was working the phones in washington, d.c. to get others on board for this. what it would do would be complicated. russia would need to agree to be willing to sell at a lower price that is closer to production figures. that is what they want to do. how much it costs to make russian crude is how much they sell it for, so president putin is not -- benefiting from these high prices, which he had. 20 -- $20 billion last month, that is how much the kremlin brought in from fossil fuel. jonathan: can you explain what emmanuel macron was up to when

it was obvious the cameras were on him and the president and he was breaking down a phone call he had had about how much spare capacity was available in the crude market? what was he doing? annmarie: he wanted to get the president's attention. this has been a bit of phone tag. he is relaying a conversation he had with the ruler of the uae and what he said was that the uae is at maxim capacity in terms of how much production they have of oil and he relayed with the crown prince of saudi arabia said to him, that they can only add about 150,000 barrels a day, maybe more. you can see why there is phone tag here. after this had become public, you had the uae energy minister

come out and say, i want to clarify recent media reports. we are at maxim capacity when it comes to our deal with opec. many believe there is still spare capacity left and more than 150,000 barrels at the kingdom, but macron knows president biden is making his inaugural trip to saudi arabia. part of that will be asking for oil. jonathan: thank you. heading to madrid later this evening to catch up with foreign leaders in madrid for the nato summit. can you make sense of what is going on here? the french leader explaining to the american president on camera where he thinks are heading just before the president heads over potentially to tap the shoulder of the saudi's and ask them to do more? lisa: no idea. maybe trying to feel relevant ahead of this. macron has tried to take a leadership role at a time when it is more up for grabs european

and globally. how much is he trying to jockey? to me, that is interesting. with the nato thing, how interested are you and what they say about china? did you hear about china being a systemic challenge? what does that mean? jonathan: the former president has a lot to say about to say tomorrow. the script they are about to read on china come on spending. -- on china, on spending. lisa: but perhaps a touch more polite. jonathan: the former president could not form a consensus on those issues and now a consensus has been formed. are we done? i think we are done. my default is to get to the market, so let's get to the market. the nasdaq 100 up 52.

tom: china is in the mix. on radio, you do not get the full glimmer. can we speak clearly that jon looks tanned and rested? jonathan: he is so bitter. lisa: we will send you away for a weekend. jonathan: just a golden glow. effortless. tom: just complete lee taken up with domestic politics. -- completely taken up with domestic politics. jonathan: oil up 1.9%. we are going to do this all week, can't wait. from new york, this is bloomberg. ♪

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jonathan: live from new york city, this is bloomberg surveillance on tv and radio. on the nasdaq 100, up .4%. growing talk is a consensus on overwhelming bearishness.

morgan stanley says the downgrades have not even gotten started. the likes of citi say earnings will be better than feared. it sounds gloomy, but when you listen to the south side, it is mixed grammar at this point. i have not seen the downgrade in a massive way. we are waiting for a bit of a mea culpa at j.p. morgan that we have not seen. lisa: some of us have given up on amia coppa, -- a mea culpa, and i do not expect one in the near term. expectations are at the highest ever at a time when you have economists downgrading expectations rapidly. jonathan: interesting given the headlines. seemingly waiting for companies to tell them what to do with their earnings outlook. in the bond market, lisa wins with the supply that you get from the treasury side of

things. you will hear from chairman powell tomorrow. you have heard from president lagarde already. let's take a look at girl-dollar briefly. 8.1 on eurozone cpi. why does all this matter? this word for a lot of people implies 25 basis point hikes, predictable starts. the optionality is interesting because when you start to see inflation breakout and hawks get more leverage, it promised the ecb to move and start to deliver something bigger. tom: dependency is parsing between headline inflation and the gloom of 89 percent. and what we are going to see and core inflation.

i think this reality is focused on topline inflation and the bloomberg world's focused on core inflation. jonathan: looking for 4% core in the eurozone. tom: there is 4% and that is not 6% but the trend is a mystery and we will get more on that. we will talk to blackrock about that in a bit. right now, on the dynamics of our inflation, the head of research joins us. it is not only oil. it is about everything. let me start with an observation. can you take american food prices and extrapolates them over to the rest of the world? if food prices in america have broken and rolled over, can you say that about asia, europe, or tunisia? >> to an extent you can because

the usa is one of the world's largest exporters of grain and you have futures prices set, so very much dependent on the u.s. i would argue the u.s. is hugely influential on world grain supply and demand prices. tom: can you talk to the monetary thugs and tell them if you see food inflation rollover will allow core inflation to come in nation to nation? kona: yes, i think to a certain extent the monetary authorities have accepted that. they have acknowledged that core inflation, that whole thing is no longer transitory. it is sticky and they are worried. this last two weeks where we started to see commodity inflation come off a little bit for various reasons, recessionary fears and the fact

that we are coming closer to harvest, that is allowing some crop prices to come off and the market is sensing that maybe core inflation is reaching peak. that is allowing the markets to recover a bit. when i say markets, i mean stock markets, beginning to pick up. we are getting closer to peak inflation. lisa: you try to throw cold water on this idea by talking about the physical market for oil in particular versus the futures market. there is a disconnect. the fiscal market is pricing in a tightness you are not seeing in futures. which market is right? kona: futures is always anticipatory. they can see what is coming next and they are worried about the recession ahead and how that could destroy demand for fuel,

but we are not getting it right now. we are still in the pent up demand phase where demand for fuel is still strong. you are not seeing much of a drop in driving. i think demand is still strong and supply as we know is just about able to meet the target. we are nowhere near resolving the tightness right now. that is later, when we do get demand destruction. that is with the futures market is affecting. lisa: this is the issue. how much pain needs to be meted out now to get to where futures are down the line in terms of where the price at the pump has to go to? kona: i think so. i think you are right. even at $120 per barrel, we did

not necessarily see the demand required. you need continued price pain and to see more supply. lisa: can you just put a number on that? where do you start to see demand destruction? kona: we got that before it started coming off again, so that is the target you are looking at, really where we start seeing demand destruction kick in. tom: talk to me about the distance from tunisia to egypt right now. it is a sideshow to many of our viewers and listeners, but it seems to be a reality to the arab spring. how critical now are food prices along the southern mediterranean? kona: absolutely critical.

they are hugely dependent on imports and always have supplies coming from ukraine and russia, the world's largest exporters of grain. the ukrainians are out of the picture. russia is trying to meet some of those needs and the ports are unstable. and they are having to face a higher import bill. they do not want to face another arab spring. that is the stuff that causes food riots. there is unrest at the household level, so they have to be careful. european harvests and australian harvests should be good. you mark -- you might start seeing relief, but we are not there yet. tom: what can institutions and particularly men in bavaria not wearing ties do about it? what do developed world institutions do about wheat

prices in the southern mediterranean? kona: at a moment -- the moment, a lot of governments are providing food subsidies. ultimately what they want to do is rebuild reserves. you are seeing import holding. that is typical in food imports depending markets. the reaction is you end up seeing less tradable export available. that becomes a problem. i think we are looking at harvests that should provide short-term relief. fertilizers are also very expensive. we need that food supply response to be more sustainable. for that, we need fertilizer. that is an issue now.

jonathan: this is a sobering stuff and we appreciate catching up with you, kona haque. the ties of the g7, i got scolded for that yesterday. i was told it is hot. climate change is a serious issue. we should not joke about the fact that leaders had to take the ties off. tom: you were being completely responsible. it is a whole sartorial thing. what is interesting is president trump -- if president trump had been there, do you think he would have gone tieless? jonathan: i do not think he would have taken the tie off. this is an important conversation. do not interrupt. lisa: ok, carry on. jonathan: you said something that i do not think many people heard. did you call them monetary stocks? tom: philip hildebrand was on in london here two hours ago

talking about blend chard from 2005 and divine coincidence. i will talk more about that. there is so much hot air right now. on the back end of the equation, the epsilon is off the chart. i have heard more hot air in the last 90 days on monetary theory, gamesmanship, whatever. i am worn out by it. jonathan: the individual hike in interest rates now and qe at the end of the year -- tom: all the punditry and gaming. the only one i will give a victory lap two is bowler, who was saying inflation is up and and optimistic tack on a good american economy. jonathan: it was the fed again. tom: i am going to cut him some slack.

we underestimate the fiscal impulse. they had a natural disaster. they had a ridiculous fiscal impulse -- impulse. jonathan: how much qe did they do in the first three months of the year? tom: that was an overlay by the new administration. secretary yellen is going to indonesia. all of us should go to jakarta and do the show from jakarta. jonathan: i think we should go down to the fed and see if they want to talk to us. from new york, this is bloomberg. tom: are they really going to change the ecb meeting? jonathan: let's talk about ties. ♪ ritika: keeping you up-to-date with news from around the world, i'm ritika gupta. a russian missile attack on a shopping mall in ukraine has killed at least 18. authorities say dozens more were wounded and more than 30 are missing. the group of seven leaders called the attack a war crime.

in california, the state senate passed legislation that would allow the public to sue firearms manufacturers for harm caused by guns despite federal law which immunizes gun makers from civil response ability. and labeling china a systemic challenge when it outlined new policy guidelines. the u.s. will highlight beijing's deepening partnership with russia. nato will not go as far as to call china and adversary. one of china's biggest private equity investors said the nation's tech firms are turning a corner after that recent route. >> there is value, some proven not just leaders in china but globally.

they have been hammered with the panic. ritika: and positive outlook for tech firms even as others have abandoned tech. 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. this is bloomberg. ♪

>> will transform the nato response force and increase the number of forces to well over 300,000. together, this constitutes the biggest overhaul of collective events -- offense and defense since the cold war. jonathan: that is the nato secretary-general. nato leaders convening in the spanish capital of the next couple days. good morning. i'm jonathan ferro. equity futures up .5%.

also, chinese and quarantine rules for inbound travelers. that may help things a little in the commodity market. this story from the south china morning post. presidency will had -- president xi will head to hong kong for the celebrations on july 1 and will not bee sting overnight in hong kong. this will be the first trip out of the mainland during the pandemic. tom: it is june onto july and he has an important meeting in november where he has to reaffirm his leadership of all of china, including hong kong. really every step is studied and analyzed. jonathan: first visit to the city in five years. tom: a 26 handle on the vix is really a short an area. now an important conversation.

-- barely touches on his public service to the united states. the effort to risk it all is out, each chapter important on admirals that had courage. thank you for joining us this morning. the turkey-sweden relationship is extraordinary. it goes back to 17:30 -- 1730. it was sweden and turkey against russia. once again, they are trying to recalibrate that relation. what will be the price to get mr. erdogan to allow sweden and finland to be part of nato? >> first and foremost, this is a win for nato, a huge one, to bring those two high-tech militaries quit very capable. they deployed troops under my command to afghanistan. i know these militaries well. they will be very capable.

in terms of the price, we are seeing president erdogan negotiating. he wants to squeeze two principal concessions out. he wants more attention paid to the kurdish issues. he feels there is some level of kurdish activity in sweden. he wants a cap placed on that and at a larger scale he wants more high-tech military capability in the hands of the turks, export controls lifted on some systems. gets very technical quickly, but bottom line these can be negotiated. i think we will see sweden and finland in the alliance by the fall. tom: maybe it is two or three miles at the maximum. when you see it, it is shockingly narrow. how does this submarine go up that canal? >> very carefully.

and on the surface would be the two answers. at the end of the day, turkey's control over that narrow straight -- strait is an important part of the functionality of nato. we were just talking about getting grain out of odessa, critical to global food security. we are going to have to open that with negotiations with russia, which is blockading it, or put some level of escort system in place, like we did with oil tankers in the 1980's. it will be more of a conversation in the weeks and months to come. lisa: this is all about nato's position versus russia, once thought is not necessarily an adversary but that is changing. my colleagues think of me as a broken record when it comes to this nato meeting because i am focused on what they talk about

china, this idea of potentially labeling china as a systemic challenge. how big of a shift is this? >> huge shift in the sense that the previous strategic concept came out in 2010, when i was supreme allied commander and china did not appear. russia at that point was a potential nation that nato could work with. that has all changed and russia will be the top headline threat. china is being categorized as a systemic challenge, but significantly going to be four observer nations from the pacific at that madrid summit. that would be japan, south korea, australia and new zealand. that is very significant, to see them coming to madrid. it speaks to nato concerns about china. lisa: when you talk about russia

being the number one threat, they are perceived as the aggressor, so it is less risky considering the conflict is in full force. how much are we looking at an aggressive position versus china, poking the bear in a way that is going to prompt response versus just getting together allies? how big is the distinction? >> the distinction is enormous at this point and i have categorized it as with russia in many ways it is tactical, very focused on the ukraine situation. we are going to get to an outcome there and i think nato is standing together strongly. that is why the updraft you just heard from the secretary-general to 300,000. that is about russia. we are not going to have land forces engaged with china at any point. with china, it is a strategic set of challenges, including in the south china sea.

at the end of the day, velocity with china is going to be confront china where you must. but cooperate where you can. so it is a different feel between the two nations of russia and china. jonathan: always wonderful to hear from you. i do not think you are a broken record at all. i think this is important. chancellor schulz is speaking now. and this idea that nato will label china as a systemic challenge, once again exposing weakness of german foreign and economic policy over the last several decades. this is europe's biggest trading partner. if they are about to call china a challenge, it is a critical economic vulnerability for germany that has yet to be addressed in a material way. lisa: he just said he expects

china not to undermine russia sanctions. what does that mean when china is importing a record amount of oil on a dollar basis from russia? when you look at how much there is some sort of economic partnership between those nations, at what point does it trigger an aggressive approach, especially given the economic dependency? jonathan: the two biggest geopolitical challenges of this world right now for the west, china and russia. tom: in the last 15 minutes, the market is really be getting to move, the dollar stronger for the first time in three days. jonathan: equities positive by about .5%. from new york city on tv and radio, this is bloomberg surveillance. ♪

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>> i do not think we are turning a corner until the market knows we've definitively avoided a recession. >> i think we might still see some upside surprises. >> we are trying to digest with the federal reserve is telling us. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and l