jon: i am jon erlichman. welcome to "bloomberg markets." kriti: i am kriti gupta. the s&p 500 was lower, now only down 1.1%. the outperformer is the nasdaq. with that you are seeing dollar strength as the name of the game. that moved to entire s&p 500 lower. it is across asset story with the dollar stronger. much of that the consequence of what is happening in europe.

look at what is happening with oil. it is getting hit hard. below the $100 mark. a $98 handle, almost a 10% decline. jon: that sets us up for what is happening under the hood. within the dow one of the biggest percentage decliners has been chevron, given what is happening with oil price. s&p 500 includes halliburton down 9%. it is the energy where we are seeing the steepest selling. as you mentioned, some of the technology companies are hanging in and some safety trades as well, such as dollar tree. kriti: for big news in the last hour is the u.k. chancellor announcing resignation. guy johnson joins us from london. break this down for the american

and international audience of what this means in terms of the support boris johnson now has, or does not have. guy: it is the latter point worth making. margaret thatcher, back in the day, was brought down by her cabinet. if the prime minister no longer has the support ofs hisu or her cabinet,n they are no longerak the prime minister. -- cabinet, they are no longer the prime minister. this evening, we have seen two of the most influential figures resigning. we are in the middle of an economic and health crisis. we have seen the chancellor of the exchequer, the finance minister, and the health secretary both resigning. this comes after a period in which johnson's credibility has come under question. we have been watching a slow spiral toward this moment and we

now wonder whether or not boris johnson will survive this evening or for much longer. the latest incident surrounds the minister appointed by johnson, despite claims of impropriety, boris johnson nevertheless did appoint him knowing, we now understand, there was this risk associated. it is just the latest in a series of events that have questioned -- that have been questioning boris johnson's credibility. we find ourselves in the situation where very senior ministers are resigning. normally this points to the end of an administration. we will see if boris johnson can survive. jon: it was a month ago we saw the prime minister survive that confidence vote. clearly, things for the senior members of his team have changed these last few days. you mentioned the speed at which

this has been unfolding. the messaging from the government seems to have been evolving these last five days to say the least. guy: boris johnson continues to be hit by scandal after scandal, that is the problem. his credibility, his honesty is now being called into question. that is something you do not want to see it in a prime minister, in a leader of a country. as a result of which the fact that he survived that confidence vote in theory should have met he would be able to survive for a longer time. but if his cabinet does not back him, that may not be the case. margaret thatcher was brought down by her cabinet. it may turn out to be the case that is the achilles' heel the boris johnson experiences. this is his weak point, that his cabinet will no longer tolerate him being prime minister and

will step in and intervene and effectively remove him. the question is, some of those resigning are going to be leaving leadership challenges. rishi sunak talked about this could be his last ministerial post. he also faced his own challenges as a result of his rich spouse and the scandal that surrounded that. maybe he is going to step away from government. we will see what happens. kriti: guy johnson, that leadership potential is what will keep a close eye on. thank you. we step back into the volatility. that coverage all coming up next. this is bloomberg. ♪

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kriti: this is "bloomberg markets." i am greedy group to with jon erlichman -- i am kriti gupta with jon erlichman. vince cignarella brexit down with us. it does not seem this is a fundamental trait or even a technical trade. this seems to be more macro. what is driving the stock market lower? vince: we saw big data on friday and the traders we were talking to were confused. there is a lot of selling going into the market. that lifted on friday. today it looks like buyers' remorse. energy stocks are trading and wti down over 10%. jon: let's stay on that theme.

in canada, the first half of the year was a better one compared to the s&p 500 because of that outperformance of the energy sector. it makes up a bigger part of the market, about 18%, versus 4% for the s&p 500. what you make of these dynamics? whether there is growth versus value? growth had a rough ride in the first six months of the year. tech holding better today compared to the value areas. vince: i just think the whole growth story is, to me, overplayed. you are going to see sector rotations from time to time and what happens with the portfolio managers, as it starts to turn and you lose money in one sector or area, you need to sell your winners to balance your losers so you do not get margin calls. that is driving it more than anything else.

when i look at tech -- i am not going to get my next smartwatch from campbell soup -- so i think tech is here to stay. it is the larger companies that will do considerably well as we go forward. i think a lot of this is on recession fears, seeing the energy complex up across the board, and with the selloff in stocks you see a bid in the dollar and that weighs on the canadian dollar. kriti: vince cignarella, thank you as always. that brings us to the fx space. the euro looking at a $1.02 handle. >> we are expecting the euro to

hit parry in july. we expect john 21st to be -- july 21 to be the focus. jon: joining as is the head of our fx and rates coverage. kriti: christine, $1.02 on the euro. what are the ripple effects for something like that. ? christine: a lot more weakness is coming for the euro. there is good reason for it to be headed lower. it is a question of the fundamental of deteriorating and the central bank being forced to respond to that. we have seen signs of worry from christine lagarde and her colleagues that the signal for tightening that the ecb has been signaling will be seen in the

italian bond spreads. that is the gauge of risk in the euro area and on the rest of european assets. i think what we are seeing now in terms of the euro levels, it is bearing fruit as we speak. jon: liver talking about the differences between the canadian and american stock. when you see the u.s. dollar safety trade that works against the loonie, but also the selloff in crude, you have to wonder what the road ahead will look like. kristine: i think that really has been one of the wildcards in the currency market. the passive commodity currency initially in the wake of russia's invasion of ukraine -- and we saw the oil price spike, -- that was the theory, that

these would be the beneficiary. but what we are seeing now is the volatility cannot possibly be good for a lot of these commodity currencies, particularly because they are not just commodity currencies but commodities levered toward china. we all know that is not necessarily going gangbusters at the moment. it is all these competing factors that potentially leave these currencies listless or high volatile. jon: always appreciate your insight. kristine aquino from bloomberg. when we look at the recessionary worries driving the action are watching this tuesday, let's get more perspective. joining us on the phone line is our chief economist at jefferies, aneta markowska. i want to jump into the recessionary risk/reality. you are doing analysis right now

on when that could happen for the economy and how long of a recession we could be talking about. could you update our audience on that? aneta: absolutely. i think recession is inevitable because the fed has to push unit labor costs from 18% down to 2%. that will be hard without creating more slack but i do not think it is imminent. you typically see broad-based cycles after periods of margin compression, cash burn and deterioration. it is when businesses see their balance sheets at risk, when they shift from expansion to cost-cutting and we are not there yet. i think we are quarters away from that. we are just beginning that cycle. up until now, businesses had pricing power. while they have been experiencing pressure they have been passing them through

preserving margins. i think margin pressures will intensify the next three or four quarters, but given that our base is that we will not go into recession until the second half of next year. from their i do not think it will be deep but it will last five quarters. the main reason being we go into that recession from elevated inflation. that means the fed will not be able to ease as quickly and aggressively as we have gotten used to the past few cycles. we think the fed will set out the first quarter or two and watch that slack continue to accumulate before they can actually start easing and providing that backstop to the economy. kriti: i am glad you mentioned the word "using." it sounds like you are saying -- i am glad you mentioned the word

"easing." it sounds like you are saying it is kind of vulgaresque. when could we see market pricing in the next year? aneta: probably the third quarter of next year. we expect the first cut early 2024. we think the fed let the negative forces play out, wait until they see inflation rollover in a meaningful way, wages rollover in a meaningful way, and given the lack between growth and inflation that could take up to two quarters. we think they will start early 2024. jon: before we let you go, you alluded to the labor market. the dynamics right now change the scenarios you talked about as we await the latest report. can you talk about when you might see those shifts in the labor market, which has been, up

until this point, quite robust? aneta: every data point that we are looking at still points to continued expansion in terms of total payrolls. we are more constructed for this friday. we are looking for 320,000 jobs. the data will probably show there is 11.5 million openings, 5 million more unemployed. we are not seeing any evidence of deterioration. claims data, there has been an uptick but they continue to decline. yes, there are pockets of layoffs in certain industries, but those people being laid off are easily finding work elsewhere. data from crone does and home-based -- data from crone chronos and home data also

say the same thing. kriti: thank you as always for your time. coming up, natural gas prices are soaring. is this the macro hedge everyone has been waiting for? this is bloomberg. ♪

>> we get to a recession we would average $75 next year, i am talking brent. we do have severe supply constraints building up and in the case of europe deciding to go on with some of the russia oil sanctions debated the last two or three months, you could see prices potentially shooting up to $150. jon: this is "bloomberg markets

." that was the view from bank of america's francisco blanche. the risk is weighing on oil getting below $100. he was talking the lower end for brent to get around the $75 level, but the case for oil moving higher, he referenced $150 wti by the end of the year. goes back to what we heard from j.p. morgan coming into the week about the geopolitical realities with russia. if they were to take supply offline, may be in retaliation, you have to watch that story very closely. kriti: i think the range of prices is interesting. on the one hand, j.p. morgan saying the most bullish scenario is $380 per barrel. the bearish case was $65 a barrel which is where we were at

the end of 2018. even then, $65 was considered a good thing. times have changed when it comes to that dynamic. jon: and talking about even if you go into next year, and we had a conversation with our last guest about when that recession officially potentially takes hold in the u.s., the idea on citi's commentary that it could move toward $45. a lot of people debating that real-time. kriti: then you have to bring in how much of the oil demand is influenced by natural gas demands, particularly utilities in the states. natural gas prices soaring and people saying, let's switch to oil because that is cheaper. that brings us to the big take which focuses on the natural gas side, specifically in europe and how that plays into the new cold war. we bring in intelligence analyst covering the oil and gas space.

this trade-off you are seeing between natural gas and oil, from an investor point of view, seems to be front of mind. to what extent are these rallies actually at an extremely vulnerable place if we see a recession manifest? >> they are at a vulnerable place because if there is recession, there could be demand destruction. for now, the prices are high and we expect them to stay high in the near-term. the recessionary risk is the biggest threat. jon: i want to come back to russia in the crude market. we have talked about russia being the wildcard. how much of a wildcard is russia? talon: russia is the ultimate wildcard because they have europe. europe imports so much from russia and we have seen curtailed shipments to certain

countries and they have maintenance coming up, i believe july 10, and there are worries the nord stream pipeline might not come back on right away. they definitely have europe. some would suggest they are weaponizing the gas but it is up to $50 in europe which is 10 times the price in the u.s. kriti: what will it take to reverse these moves? you have the biden administration hustling to lower prices at the pump. what will it take to see some reprieve? talon: it is an indication there has been such a lack of investment in infrastructure in the u.s. and other countries. we do not have the infrastructure. we have seen a lot of long-term contracts signed, we have seen two final investment decisions in plants in the u.s., but these take multiple years to come online in terms of getting lng

to europe. the bottom line is we need more production, more infrastructure to get the output to export terminals to get more to europe. jon: quickly, as we were talking about with crude, that while the range of expectations. given the various scenarios that play out should we expect volatility to be the story in the natural gas market as well? talon: absolutely. volatility moving forward. if russia curtails gas, you could see gas shoot up higher than where it is in europe at the moment. i think the u.s. is relatively safe, specifically with the freeport lng outage. that keeps more gas domestically, that is why you have seen the drop in prices. but certainly volatility with russia. you also have to look for hurricane season approaching. any disruption to the supply globally can impact prices. jon: we will be watching

closely. thank you for your analysis. talon custer of bloomberg intelligence. we are watching the energy trade trading today. for kriti gupta, i am jon erlichman. this is bloomberg. ♪

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