>> this is a volckeresque type of federal they are clearly focused on getting inflation down. >> the whole thing is no longer transitory. >> there has been some signs that the economy is losing a little momentum. >> we think there is a 50-50 chance of recession in the next 12 months. >> if there is a recession, it

will not be massive. >> this is bloomberg surveillance. jonathan: a lot to look forward to this morning, from new york city for our audience worldwide, good morning, this is bloomberg surveillance on tv and radio. futures are down about 2/1 of 1%0, two hours away from the central bank meeting in portugal. tom: i think they will finesse to what they will not say. they are looking at foreign exchange as the litmus paper on an uncoordinated central-bank system. jonathan: the economic data starting to weaken. tom: sterling gives way, i think that's a change overnight and what i'm watching is the yen up

to one dollar 36. that speaks volumes to the western central bankers. jonathan: we are waiting for the economic data but the earnings and a company specific story. earning system will kick off into -- the earning season will kick in around july 14. lisa: u.s. ipo volume accounts for less than 6% of what we saw in the first half of 2021 and a similar story in high yield bonds. it has all but completely halted so how does this speak to the lack of conviction and the lack of forward guidance? jonathan: let's compare the capital market activity to 2018? is there any comparison yet? lisa: if you look at high yield bond issuance, it's nothing compared to what it has been over recent years.

it's better than zero. given how quickly rates have been rising, there is a fear that if this continues for a year or two, how do companies that finance themselves in 5% rates go to 11 or 12%? that's a real possibility and people are thinking how long this can go on and how can the fed get ahead of that? jonathan: the rates have not come in in a way that says equities have rallied in the last few weeks. we are down about 1/3 of 1%. we are about an hour from an interview with the three major bankers. the euro-dollar is not giving me much this morning. it's unchanged on the day. lisa: looking forward to that

panel but before that, we see the nato nations going to madrid for the nato summit. we will hear from the secretary general later this morning and present biden is going to be there as well. it will be moderated by francine lacqua. how much do they speak of prioritization and continuing to go at rate hikes can -- regardless of the data? this is at a time when people are getting concerned about inflation expect patients. at 10:30 a.m., the latest read on the crude market with crude inventory reports after we get in been -- indications inventories were still not building on the gasoline front.

this affects not only people driving around but the market as well. jonathan: joining us now is stuart kaiser. this is the movie been waiting for, we bottomed on the nasdaq about june 16 and pounded aggressively on big tech and big cap stocks. have we seen the move and do you think it's more durable and why? >> we did get a bounce off the bottom. to make it sustainable, you will need to see follow-through on the inflation data the next couple of weeks. we will get cpi next month and i think that will be the number one driver. what's happened in equity

markets since late march, you had a decline in inflation expectations but you also have real rates higher and growth expectations coming down a lot. that's back and growth data. what the market is looking for is for inflation to stabilize and that will allow less restrictive policy to be priced into the system and ultimately, that's what you need for this to be more sustainable. tom: as my parents taught me about foreign-exchange. i had a passbook from the union bank of switzerland and it made money on strong swiss franc. that was a few years ago. this is an historic moment and i don't want you to speak for ubs and the politics of switzerland but expect the unexpected. we are seeing shifts here of one example of a national bank with

shares of apple going to parity moments ago on euro-swiss. these tectonic forces are extraordinary. how do you fold them into an equity belief? >> i think you are seeing interest rate volatility mainly. that was the issue coming into the year. the policy regime shift was going to create the macro volatility in equities in the vix averaging over 26 for the year. to me, i'm not sure where homebase is. fx has been volatile so it's hard to have a view on risk assets. tom: you lose money. do you assume you lose money given what you just said about volatility? >> i don't think so but you assume your risk-adjusted returns are structurally lower than they have been the last few

years. it has institutional investors reducing the size of their positions and takes down look entity and that creates more volatility which portends weaker risk-adjusted returns. i don't think you assume you lose money on a nominal basis but your risk-adjusted view on that is impeded seriously. lisa: we talked about how the fed is at the beginning of rate hikes. they haven't raised rates nearly as much as they are expected to do so. has the market truly priced in a scenario where the fed funds rate is going to be at 4% by early next year or are people retracing too much in the belief the fed will ease off in the face of weakening economic data? >> you have to assume that was priced into the market. equity markets and investors in

general are probably hoping that the fed is being aggressive to frontload rate hikes. they are really talking inflation expectations and keep those anchored. you have a front rate hike cycle an effort to keep expectations anchored and in the back of their mind, some investors are hoping once that happens and it patient gets more under control, than they can ease up with that rhetoric is the year goes on. if it's priced into the bond market, you have to assume it's largely priced into the equity market at this point. jonathan: do you assume the leadership comes from where the leadership was in a previous decade and not much has changed? >> for the second half of this year, i think our view is the things that have been hurt the most by higher inflation and higher rates will recover a little bit. the trick your frankly is tech has underperformed significantly but if you told me we were going into recession in the next

couple of months, you want to put your money into defensive's and large caps and strong balance sheets and high-quality stocks and that most points you back into tech. that's one thing investors are struggling with. they didn't want cyclicals because growth was slowing but inflation was rising. that force them into energy so they are going through a similar issue where they don't want to be intact because it sold -- in tech because it is sold off so much but that's a part of the market you want to own. that has driven the lack of conviction in high volatility in markets. jonathan: thank you and good to have you in the studio. it plays what we heard from j.p. morgan, big tech gives us pause on the economic slow down. it's highly correlated with gdp. it kind of makes sense to look around tech but certain pockets

of tech, there is a cyclical story embedded in some of those names. they think a lot of this is already priced in. we haven't even started to price where the fear is coming from? lisa: the bar has been lowered so much for tech and people may go back into duration. if you believe eventually people will go back into longer dated bonds and bring down those rates, tech looks pretty terrific. jonathan: can i talk about carnival? morgan stanley came out with a call on carnival. listen to this -- we cut our price target nearly in half and introduced a new zero dollars case even escalating leverage and remain

underweight. the stock is down about 7%. tom: i would go right to the leverage. jonathan: a zero dollar bear case? do you need something more dramatic? it's a near end of the world experience for carnival. jonathan: that's my bear case. futures are negative a quarter of 1%. this is bloomberg. ritika: keeping you up-to-date with news from around the world, nato leaders are preparing to meet in the face of russian aggression europe. they want a new model that would put about 300,000 troops on high alert. president biden said the u.s. will set up a permanent headquarters in poland. nato leaders are meeting in madrid.

the fed president says the central bank is at the beginning of raising interest rate. she wants to see the lending rate reached 3.5% this year. even if that puts the economy into recession, she doesn't see that happening. a former white house aide said the violence is out of control in president trump's final weeks. kaylee hutchinson had the most damming testimony yet. the dow has been cast on her secondhand account and she was told the president tried to grab the steering wheel of his limousine after the secret service was going to drive into the capitol on january 6. the majority of workers let go were hourly workers at tesla. elon musk cut 10% of hourly

workers but would increase executive jobs. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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>> today, i am announcing united states will enhance air force posturing in europe and respond to the security environment as well as strengthening our collective security and that nature was ready to meet threats in all directions a rust every

domain, land, air and sea. nato is more important that it never has been. jonathan: significant moves from the president of the united states. good morning, futures are negative about a quarter of 1% on the s&p 500. the date that recently hasn't been great. you look at that pmi last week and you look ahead to the ism and you would more of the same. yields are lower by a couple of bases points on the 10 year. tom: we are watching euro-swiss to go to parity. we will discuss that when it happens. at 9:00 a.m. eastern time is an important panel of what will be said and what will not be said.

jerome powell and christine lagarde among others. we have anne-marie and maria and there is a decisive difference here in the stories of christine lagarde and jay powell. in spain, there 15% unemployment amid 10% inflation. in the united states, it is 4% unemployment amid 9% inflation. what does christine lagarde not want to do today on fragmentation? what tissue want to be silent on as she is grilled? maria: the inflation in spain was the big talker today. the sad reality for many of the ukrainian effort is that the people are not debating how to help ukraine but the fact that fuel has risen so much over the

past two months. this is before the winter when everyone agrees things will get difficult for the european economy. it's about not giving too much detail away on the fragmentation and wait for the july summit. there is a lot of conversation about how fast the rate hike will go but christine lagarde went to signal that the ecb is in a position to ease inflation but set up policy for 19 countries that are very different by nature which is a difficult job tom: joe biden has to worry about one country and he will fly back to the worry and the angst of moving from 4% unemployment. how will he address that infractions washington? anne-marie: he's been trying to address it while he's been abroad making sure all foreign policy goals pit it the united states.

as maria said, while these leaders are gathering to help these efforts in ukraine, what people on the ground are talking about across the board are higher consumer prices. you look at inflation, its groceries, gasoline and these are things that are worrisome. the president needs to make sure that while he delivers these foreign policy messages -- today was a big goal for him strategically.i was in the rose garden a month ago when he said finland and sweden need to be part of nato. this is something he was able to achieve but will it be overshadowed with these problems he has at home? the party is pushing for him to do more on women's reproductive rights after the supreme work struck down roe v. wade and you have the testimony yesterday out of the january 6 hearing and inflation. these are the issues he will

have to face while he's meeting with these leaders in madrid. lisa: how much daylight is there with world leaders as far as fighting inflation? maria: it's not the same but we now know that president zelenskyy was on a video conference with nato leaders and he said the top priority for you should be to improve and strengthen nato but help ukraine win. we mean on the battlefield. he said they will need more weapons and hopefully it comes out of this meeting. in terms of the economy, for the europeans, it's clear this will be a very difficult winter. particularly the germans and italians and vladimir putin will cut off the gas. europe feels we have done a lot to help ukraine on the financial front and the sanctions for the time being need to stop because

we need a breather especially to get a good step ahead of september before the winter. that is the concern for everyone here. jonathan: absolutely fantastic as always. some of the best international correspondence in the business, thank you. anne-marie: if i can mention one thing quickly, while we talk about gasoline prices at home, dodging this president, yesterday me and my producer filled up our tanks before we gave back our car at the airport and it was $7.64 per gallon of gasoline in germany and about $10 in the united kingdom. these inflation concerns are more dramatic in europe. jonathan: i was just saying how great you are and then you cut us off. when the three of these individuals sit down later this morning and we hear from

president lagarde, governor bailey and chairman powell, president lagarde has been diplomatic about it but she's revealed the differences between the what the u.s. is experiencing and what europe is experiencing and she talks about the robust fiscal response we had in america. is that something that comes up in the conversation later? lisa: is it to say we don't have to go as hard as the u.s. and can see some sort of transitory inflationary impulse? or is it to say we can afford to spend more and we can go further? how will she use the differences on policy? tom: it's what they don't say, it's absolutely what they don't say. these guys are pros. francine last them tough questions and i think you will be shocked. i like the idea that you said

fragmentation will not come up in detail with christine lagarde. jay powell just try to get out of this unscathed. jonathan: caught between an alp and a hard place on euro-swiss. tom: i think that's the song we sang at the piano bar a couple of years ago. jonathan: futures down about 2/10 of 1%. tom: it's like a christopher cross song. jonathan: any drums in that? tom: i think jeff porcaro did the drums, actually. ♪

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jonathan: you get bored of listening to the perma bears and bulls but when you hear from somebody who's been covering the federal reserve, you pay attention. he is very cautious on this

market. futures down .2% on the s&p. the data so far over the last couple of days has not been great. we talked about the richmond fed manufacturing number, dreadful. the conference board consumer confidence number, not great either. you can see why maybe people are starting to think about even more so looking at the longer end of the yield curve. we had a sniff at 3.20 five yesterday but we came back in. develop market sovereigns. hsbc very cautious on risk assets, high-yield credit, equities. perhaps that is your view. maybe others would push back. it is not just lower growth expectations. what do you do with the inflation piece? lisa: how much is this about

central banks getting things under control, overshooting and then giving back duration. things have been coming down rapidly over the last couple of weeks. jonathan: we will hear from those bankers in about 90 minutes from now. this will be important particularly for europe. we will finish on european bonds. the two-year coming in down a couple of basis points. that is on the back of these regional german cpi prints. spanish inflation into double figures. it puts the ecb into a tough spot. tom: the fragmentation is what she will not want to talk about, that policy meeting coming up in a couple of days.

the litmus paper of the system, and they have been quite yes it, but i do not buy it. a region at war. jonathan: the italian spread coming at around 2.40, pushing about 1.80. tom: on your sabbatical, you move the needle on gdp. jonathan: when are you going to let this go? you have to take a vacation sometimes. i know that you like the european way secretly. tom: i am going on a hols when romaine goes home. what do you call it? jonathan: holiday, does that make sense? are we done?

romaine, i don't know how much we pay him to tune it this morning. romaine: let's get a quick check on the broader markets. he talked about the weakness we saw in the markets. a lot of that coming from big cap tech stocks. not quite as severe as what we saw in the cash session but something to keep. tesla shares, a third day of declines. down about 33%. i want to bring your attention to some of the macro economic conditions. two interesting earnings out of mccormick and general mills. these stocks are going in the opposite direction. general mills surprising to the upside.

food service was up 25%. margins just blew it out of the water with regard to analyst expectations. they talked about inflationary pressures but said they could navigate that. mccormick talking about those same inflationary pressures but they were not able to navigate that. an unexpected decline in sales, margins detracted by about five percentage points. a couple of stocks for you as you prepare for your holiday season. i know you are a big pinterest guy, changing of the guard. tom: was he pushed out? romaine: i don't know about that but he has been there for some time, some concern by investors that maybe he was not the right person to lead the company he will still be there as an executive chairman. jonathan: can you tell me what pinterest is? what do you do on it? romaine: you can plan out your

wedding, holiday. you want to find a nice shirt, shorts. tom: i was asked to study it. i never figured it out. it is hugely female, as a real geographic bias. jonathan: keep going, tom. what does that mean? tom: it is like planning weddings, like romaine said. lisa, weigh in here. lisa: no. jonathan: she is just giving you more room. romaine: i am done. coinbase is down. jonathan: romaine bostick, we appreciate it. tom: i am glad he mentioned general mills.

the 10-year piece at 1.02. i am showing it today at 81. kathy jones is here. she told me to get into bonds. fixed income strategist at charles schwab. that is the reality, not a bunch of bond strategists talking about spreads in credit quality. people watching are enjoying it at 81 or 82. what do you do if you own that bond? kathy: two choices, one is you hold it maturity and goes back to par, or you sell it now, replace it with a higher-yielding bond. lisa: when does that concern start to creep in that we are not seeing issuance pickup and

that companies can choose not to now, but maybe in six months, 12 months, it will be less of an option. kathy: corporate balance sheets are still among the investment-grade community are still pretty strong, they did load up on debt and lower yields. they are in pretty good shape but we will probably see issuance pickup. there will always be a window open later on in the year as we get into next year where there is refinancing taking place. a lot of the issuance right now is waiting for yields to come back down. lisa: do you think they will? if they don't come back down, they are looking at financing costs that were double what they were potentially from a year ago. much does the need for them to come down the term next default cycle? kathy: when you talk about high-yield, bank loans, you have a problem with short loans moving up.

the duration is very short, they adjust rapidly. for those junk companies, their cost of financing will jump 40, 50%. that is one reason we are not a big fan of bank loans right now. it will also hit the low end of the high-yield market. spreads have moved up a bit but they will probably move up more. we think there is a high risk of recession, particularly if the fed goes hard and fast the way they are talking about. that will not be good for the high-yield market. tom: euro-swiss lunches through parity right now, strong swiss franc. kathy, that speaks volume of the unexpected out there. what is unexpected if the fed moves 75 beeps in july and onward? kathy: it translates into the fx

market. if the fed goes 75, that is built into the market. i think a fair amount of tightening is built into the market. then i think we are seeing an inverted yield curve, all things being equal. it is difficult with the economic indicators rolling over to see yields move up from there. that translates, when we look at the japanese bond market, the yen, what is happening in europe, that will translate into a global tightening cycle, and that is when things break. jonathan: i love hearing from you, kathy jones. thank you. tom: that is when things break. jonathan: here are the choices that the s&p faces, according to kit jukes.

is that the beginning of that? tom: they have been created with equity ownership. it is much more than apple. they are basically running a sovereign wealth fund within the s&p. each country has its own challenges. i'm not saying this because you know how much i love jon, but united kingdom is exceptional here. it is where people have secondary ownership, where they travel to. the city is the financial center. governor bill lee today is not only for the united kingdom but international. jonathan: from the perspective of consequences and spillover. tom: that is always powell. you look at the unexpected.

we are looking at euro-swiss, finland and sweden and nato. jonathan: i cannot wait for your interest coverage in the next segment. tom: i don't even know how to log on. jonathan: i have know what i am doing there. mood boards? lisa: i have to be honest, even though i am female, i have never been on before. jonathan: rare nike sneakers. futures down on the s&p. this is bloomberg. ritika: keeping you up to date with news from around the world, i'm ritika gupta. turkey's president will meet with president biden to push for the purpose -- purchase of new airplanes. erdogan is open to capitalize on

a positive atmosphere. ties had grown cold after buying russian defense systems. pressure is on central banks to raise rates for the first time in a decade. inflation in spain has risen to a record 10%. it dashed hopes that inflation in spain had peaked. the life of clarence thomas has declined the request for her to testify. her lawyers say there is no sufficient basis for her to appear in front of the panel. disney has given a vote of confidence to ceo bob chapek, extending his contract for another three years. he has spearheaded disney into a streaming powerhouse.

they are getting closer to taking over the number one streamer netflix. 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. i'm ritika gupta. this is bloomberg.

today's challenges require real insights, to get to tomorrow's opportunities. ( ♪♪ ) what can we expect in the coming year? this has been a record- shattering year for m&a. five trillion dollars in deal value. and we're still very bullish on the deal market for 2022. in this kind of climate, what are you advising clients to focus on? we really think companies need to elevate their risk management processes and also scenario planning. what's your outlook, kim, for the 2022 labor market? organizations really do need to take a pivot on their lens of their people and talent

from a cost center to make that a value creation center. for key insights into what matters today and what lies ahead for business, this is real time business with ey. >> at these levels you really start to see the pain threshold. i think that is the target you are looking at, 125, 130 is when you see demand destruction start to kick in. jonathan: futures just about negative bouncing off the lows. the nasdaq 100, down by 0.15. bill ackerman out on twitter this morning.

business is a confidence game. ceos are losing confidence due to the perceived risk of inflation. he says the fed must act to subdue inflationary expectations. then business confidence will be restored. something he has said a few times over the past weeks. tom: maybe you will hear this new word in the panel. it is sort of a bullard-esque word, frontloading. just get it done. here is what we will do. oil up 6% off the bottom. 119.23. enough to get will kennedy on. i want you to talk about

something i learned in school, which is demand destruction. are you seeing demand destruction across europe when javier blas says natural gas is 200 of dollars brent barrel? is it evident out there yet, demand destruction? will: not widespread. we have seen some heavy industries close down. the u.k. lost a fertilizer plant. had two, now only has one. fertilizer is one of the most gas intensive industries out there. we will see more if prices stay at these levels. the other thing i would tell you is it is summer and gas demand is not at its highest. where we will see that impact is in the winter where people will

have talked choices about how to heat their homes, and they are likely to be colder than last winter. tom: what is the significance of going through the daily average? i know it is like a 127, 128. what will be the significance of a 125 print? will: i think we are looking at a resurgent oil price. when you look at the time structure, value of contracts across the curve, people are pricing the front months really strongly. that tells you there is a lot of desire for barrels, that refiners are willing to pay up. you can attach those levels quite quickly. once they go through, they often get a bit of a surge. there is a bullish argument to make at these levels. tom: rbc was blistering today

about asymmetric calls where you go to 150. he even alluded to above 150. lisa: which leads to demand destruction, as people have been looking for. how much already are we seeing that? the conference board survey showing that people were ratcheting back plans for road trips, general vacations over the next six months. will: that was an interesting piece of data. people have really changed their expectations of how much they will drive this summer. if that is true, demand will be lower than otherwise thought. but we are not seeing that in the market yet. customers are willing to buy whatever they can produce. refining margins remain extremely strong. we have been starved from data

because we had this server blow up at eia a couple weeks ago, so traders will be interested to see what the latest numbers are for petroleum products, whether they see any softening of the normal seasonal pattern. lisa: as nato members meet, they are talking about capping the price of russian oil. do we have a sense of what the consequences could be on the price of crude? will: it is a very difficult question to answer. as you say, the scheme itself is quite complicated, requires the use of the insurance market to insist on a price for russian crude. when you look at what happened at the g7 yesterday, it was instruction to examine this more. many people out there think it will be too complicated and that russia will find ways of bypassing it.

it is hard to see this happening in the short term at least. that makes it hard to see what the impact would be on the crude price. it depends on how russia responds. would they try to get the price they can or will they take more oil off the market? those things are very uncertain. jonathan: as always, thank you. look at the shares of bed bath & beyond getting hammered in the premarket. an executive change. the numbers are not great. lisa: adjusted loss per share, $2.83, versus the expectation of a five cents gain. how much of this comes down to inventory, planning for an environment where people are buying different items than they were six months ago? how do you plan for that in a fast-moving pandemic backdrop? tom: when are they put out of

their misery? they are making -- forget about the losses. even at the ebitda line, it is pennies on the dollar. jonathan: there is way too much in the store. lisa: ever hurt his bed bath & beyond gripes? jonathan: it is overwhelming. tom: you look at their income statement and you say, really? jonathan: sales were down 20% in the first quarter. did he come over from target, meant to sort this out? lisa: target is having some of their own problems. stocking up for a very different period in terms of what people are buying. how much they have to discount, dealing with employee turnover. all of these issues companies are dealing with. jonathan: final word on

pinterest? lisa: i am actually going to bail tom out here for saying overwhelmingly female, but it actually is. as of january 2022, 70% of audiences were female. tom: i was asked years ago to do pinterest. i deleted the account. to study if there was an audience. there isn't an audience. jonathan: did you make a mood board? tom: it was years ago. jonathan: futures are up two. we are one hour away from chairman powell. >> welcome back to another special wimbledon update. two superstars were in the

spotlight tuesday at the championships in london. serena williams' wait for her next title will have to continue as she goes out in the opener. the american was playing in her first tournament in a year and was looking to break margaret court's all-time record for slams. rapine a doll continues his quest to complete the slam. five aces and six breaks were enough for rafa to put the wind in the books. after his wins, he is hoping to at a 23rd grand slam title to his already illustrious resume. don't forget tennis channel's daily coverage of wimbledon it's the air at 4:30 eastern.

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