>> recession is inevitable but i don't think it is imminent. >> i think europe is going into recession. i think u.k. is in recession. >> jonathan: there is nothing inevitable about this recession. >> are skeptical that we are in for recession. >> i think recession is priced in. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: good morning, this is "bloomberg surveillance." i am jonathan ferro together with kailey leinz. futures unchanged. this market will make your head spin. tom: we are focused on the prime

minister of the u.k., but the market is front and center. the acceleration, the convexity of week -- weak euro. jonathan: 102.24 and not far off from the 104 handle. the euro remains unviable this summer. that is some strong stuff. tom: a look at where we are now and what is focus -- what is important is we focus on 10 downing street. it is about the markets. greg said the markets are heavy institutions. jonathan: i do not believe you ever had marmite. you cannot bring that up. tom: this is important.

this goes to inflation, jonathan ferro's family living, what boris johnson is living, it is different over there than here. marmite is a savory spread made out of beer -- i don't get it. but tesco is taking it off its shelf. tesco is fighting back against reasonable price increases. jonathan: we can talk about that later. prices are up, growth is off the rails. we are expecting the uk2 slope with no growth next year. kailey: yes. he is talking about the dual challenges the u.k. is facing. inflation is rare, the boe wants to ramp that in. the question is how far can they go? that is why the moves in the cabinet, the potential of a new check to the coming i -- coming in, do you need the fiscal

support in order for the boe to continue to reign in inflation? tom: what is the difference between soon i quit the new guy versus yellen? jonathan: before we work on that, we have to work on if the new guy actively keeps his role. i don't want to get into british politics before we work out if this prime minister is going to clink on. a massive change from yesterday. yields unchanged on the 10-year come to 80.90. we have got to get used to this, maybe. 8% on wti in yesterday's session. kailey: goldman sachs saying that move was overdone but edward morse has a different view. we will get that take this morning.

prime minister boris johnson facing questions and parliament, that is 7:00 a.m. eastern time. i'm going to guess it will be brutal and summing -- brutal assuming we got this resignations yesterday. a cat has nine lives, how men political lives does boris johnson have left? he will be in the liaison committee this morning. how long will he be able to hold on? we will be getting economic data here in the u.s.. two data points to watch, one is the ism services number. expect them to come even more to 54. the prior month, it fell to the lowest level in a year. the service expansion is still happening, but at a slower pace. we are expecting about 10.9 million jobs available. that will take the ratio of open jobs to unemployed workers back down a little bit. a key indicator to watch.

especially as we consider the trajectory of the fed policy. we will get some clues when the june meeting minutes drop. what was the thinking behind it and what does that tell us about the likelihood of the move being 75 again this month? chairman powell said it could be 50 or 75. jonathan: thank you. the head of european fx strategy, i want to bring this quote, "the euro supported power of rate hikes is supported by the fact that the bond market is not trusted to stand on its own two feet. the euro remains unviable the summer." do you agree with that? >> if you asked me a few months ago, probably would agree with that. recent developments definitely

lending a lot of support to that argument. we have seen the dollar dropping below the level of-- i think we need a big story here. we're two weeks away from the ecb meeting in july. it seems to me we still don't have a consensus about not even the nature of the tool, the need for its existence. let's be very transparent. if the ecb wants to tim inflation and support exchange rates, and needs to do two things. these two things need to be combined. hi rate and come up with an effective solution.

the one is going to lend support to the other. if one of them is missing, that ecb cannot tame deflation -- tim inflation and cannot support the euro. i am worried about the speech that came out the last couple of days that showed there are a lot of concerns. i think the risk we are not going to get something effective and the market is going to be disappointed has risen quite sharply. tom: with great respect to the sacrifices of ukraine, can you prosecute a normal monetary policy in a time of war? vasileios: that is a good question. i think your question applies much more to the case of the bank of england as opposed to the european central bank. you cannot really hold the

dealer responsible but i think there is an element of responsibility in the european central bank. we are not talking about tightening policy. we are talking about removing extraordinarily accommodative on a trade policy. i understand this is a time of war and a time of war would require some financial conditions to be lucinda, but we have to be real about the fact that you have inflation running high and -- minus basis point. these things are totally out of touch with each other. kailey: you mentioned the bank of england, how do you put political turmoil with inflation running cart, growth expectation running slow and put it together as a thesis forster like? -- a thesis for sterling? vasileios: i say this largely

because the u.k. is not being -- idiosyncratic traps due to brexit. a lot of the slowdown is due to brexit which means the boe is between a rock and a hard place. what will boe do? i think they will try to keep a balance. it is one of these situations where i see losing in both cases. if they don't hike as much, sterling will lose on the interest rate. if they height -- if the hike, this truly will lose because the market is pricing a shopper slowdown. this is an economy that cannot withstand -- and that cannot tolerate very tight monetary policy. we have to remember the mortgage

markets in the u.k. is different than the u.s. two to five year fixed rates are normal in u.k.. you don't have 30 year fixed rate mortgages. which means that an important -- any point in time that our households that see their mortgages coming to an end and that -- prevailing interest rates. jonathan: this is a fantastic point. vasileios gkionakis of citigroup. a drip feed resignations from the british government. when you listen to people in the fx market, they emphasize the economy edited problems the bank of england has got over the problems in westminster. kailey: problems keep coming for the prime minister. you now have john glenn resigning. in the resignation letter says "i can no longer reconcile my commitment to the world with the

complete lack of confidence i have in your leadership of our country." how long can boris johnson holland? jonathan: you assume there will be others. the team has been promoting this all morning. in about 50 minutes, we get from the minister's questions -- we get prime minister's questions. it will be interesting to see about how the prime minister response to it. tom: how do prime minister's resign? jonathan: i don't think that is a dumb question. for this prime minister, i have no idea. if you asked me about anyone else, i would say the clock is ticking. with this prime minister, it seems every time we are in this situation, he clings on. the papers will tell you today it is different this time. how different? we will see.

did you want the marmot story? tom: it does not go well with tang. jonathan: marmite is good. tom: thank you. jonathan: futures negative two, we are down on the s&p 500. from new york, this is bloomberg. ♪ ritika: keeping you up with news from around the world. boris johnson is on alert at signs of a coordinated plot to bring him down according to a senior government official. two senior members of his cabinet quite on tuesday -- his cabinet quit on tuesday. this is the latest schedule, one involving sexual misconduct against a conservative member of congress -- of parliament. a shooting at an independence day outside of chicago, the

shooter has been charged with seven counts of murder. the 21-year-old man had probably planned the attack for weeks. he used a rifle purchased legally. in china, the covid zero strategy is being tested with an infections across shanghai raising the prospect of another lockdown. a highly infectious variant has started spreading in china for the first time. the secretary general of opec has died. mohammed barkindo was in his final weeks of his tenure as the head of the oil cartel when he died in nigeria. he oversaw one of the most turbulent periods of opec's history. mohammed barkindo was 63. 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.

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>> apologize and has set, it was the -- i apologize, in hindsight it was the wrong thing to do. i apologize for everyone affected by it. there is no place in this government for anybody who is predatory for abuses their position of power. jonathan: the walls closing in on boris johnson.

a series of resignations over the last 24 hours and they continue this morning. good morning from new york city alongside tom keene and kailey leinz. ms. abramowitz is back next week. she's not missing much. futures unchanged on the s&p 500 but the euro breaking down again, 1.0219. your two year, 284. that is the curve that is inverted. tom: whatever it is, there is an accelerant here. you need to emphasize the second derivative in place here, and acceleration to weaker euro to spread inversions. jonathan: had to support the euro without a turnaround in the european gas market? tom: you have got to get a bid. it is not just about the dollar, you have to get a bid across

various other currencies and that is where the euro is up this morning. john, e.m. is evaporating as well. it is a sideshow this morning. 10 downing street, lizzie is there. what is the prime minister doing right now? >> he is probably prepping for prime minister's questions. he had a goal where he focused too much on policy and not personality. what a week it is to focus on policy after the resignations of two of johnson top teams. tom: can you add lizzie from this for us, starting with gladstone and churchill as two

fossils who wanted to change the schedule, tony blair made a model. what happens with the first question? jonathan: sometimes it can be crazy. lizzie, can you go through the order of events of when this starts in 40 minutes and when we get to the serious stuff, when we hear the leader of the opposition a grill the prime minister? lizzy: you'll get the questions from the leader of the opposition first, johnson will respond, it is a back and forth. and then they will open the floor to mp's from other parties. you get questions from the prime minister's own mp's to give him an opportunity to say exactly what he wants to say. in previous sessions, there have been key speakers saying things that have been damaging to the p.m.. theresa may, david davis, big names coming up, coming on the

record how much the disapprove of the prime minister. kailey: we heard from john glenn saying he no longer has confidence in boris johnson's leadership. it is another after another. how many more resignations can he take before his leadership is untenable entirely? lizzy: about john glenn, it is perhaps not a surprise he is joining sona -- soon at -- sounak. it does not seem like worst johnson is going to resign, of course. he is called the greased piglet. jonathan: the what? lizzy: the greased piglet, able to wiggle out of situations. the other opportunity would be

for the convention to change the rules so the grace period is -- they threatened to change those rules could be enough to make him go. tom: we in america have a clear understanding of how a president resigns. it has to do with a congressman -- a congresswoman from new york explaining to richard nixon it is done. that is the modern era. how does the prime minister resign? jonathan: that is your exception, you have a handful of examples. this is normal stuff. tom: this is normal. jonathan: when you go to a general election, you don't vote for the prime minister, you vote for your mp. this is a parliamentary one. for the british people, do they still see it that way? is there a frustration at the next prime minister will be elected by a smaller pool of conservative party members? i was still on board with the

system? are people pushing back against it? lizzy: this is the argument one person was making yesterday. he has been loyal to porsche johnson. -- to boris johnson. he said even if someone replaces him, they don't have the mandate boris johnson would have -- boris johnson had in 2019. it will be difficult for anyone who comes in to replace him. in terms of where the british people are, don't underestimate how difficult it would have been for these ministers to defend what is going on with the mp allegations over sexual misconduct. not just on the broadcast round. that added to the cost of living crisis and added to already get. boris johnson, broken the law in office. it is mounting pressure on a johnson. jonathan: we will catch up to

you later as we count everyone down to the prime minister's questions in about 30 minutes time. tom: we need a civics lesson. i do this with respect for america. i understand there is primary voting in america. the fabric of u.k. politics is pictured by the conservative party -- politics is that he was picked by the conservative party. is it fair to say that he won by certain votes versus a general election of 20 million votes? jonathan: i think you can say both. ultimately, when you go to vote for your local mp, you know who the leader of the party is. sure, it has an impact, it is

just not a direct thing. when you go to put your signature, you don't put it next to boris johnson unless he is your local mp. it is very confusing, isn't it? i feel like we do this 10 times a year. tom: are we doing this more often? is this because of frexit? the last four or five years, the chaos of u.k. politics, is it normal? jonathan: i think a lot more people from the outside looking in because of exit -- because of brexit. tom: american politics is so calm. jonathan: that is true. maybe not. futures unchanged on the s&p 500. this is bloomberg. ♪

jonathan: a turnaround we saw yesterday. from new york city this morning, good morning. equity futures are positive on the s&p. on the nasdaq 100 come up 0.05. here is the bond market story. look at the difference between two zen tens. 284 on twos, on tents, 282. ahead of some data a little bit later that kaylee went through. look out for fed minutes.

when this fed met a couple of days before that meeting, we were all expecting 50 basis points. then things changed and there were articles about going 75 and they went 75. to what extent do these minutes capture this federal reserve? tom: you are bidding me here. -- you are beating here. i don't look at the fed minutes. i think they are dated. what matters is what the market is saying. not only are we not getting curve dynamics here, but what jonathan did not mention is that 30 year bond is migrating to 299. as you get inversion with a leveling of the word in the entire yield curve, that is being -- jonathan: i did not get there because you interrupted. tom: i guess that. jonathan: will beget 75 basis

points by the end of this month? tom: you think so, how? jonathan: we will see. credit spreads are higher. we would mike dowell to talk to us about that -- michael darda to talk about that. the year end forecast from hp cs, they are looking for 75. they go mildly bullish in german 10-year. here is the why. this rate hiking cycle does not go beyond this year. it will be shorter and it will be a lot lower. from the european central bank, a thorough of 103 .20. tom: the partition of the yield space is looking across nominal and at inflation-adjusted economics and folding it in to your belief in investment. joining us now is michael darda, chief economist.

on fire the last time we talked about the moment we are living in. are we in a nominal or inflation-adjusted space? which should we study? michael: i think investors should be watching the front edge of the inflation trade here which is collapsing. that tells us that nominal gdp growth which has been strong is likely to decelerate. that is quite good news on the inflation front. the fed is looking for these headline inflation figures to come down. it is not going to happen overnight but it will start happening soon. the market has shifted its focus and concern to the business cycle from inflation. the first leg of this selloff, the bulk of it, was from a rising treasury yields are pulling back with concerns of shifting to the recession. tom: general nitschke would put

out a -- we seem to be ignorant of how this could change. jim cramer mentioning how quickly you can get to disinflation. quickly can you? -- how quickly can you? michael: if we end up getting some good luck on the supply side shocks, that will help. nominal gdp growth has been running at double digits since the economy bottomed in 2020. that is to reverse and i think it will with tighter monetary and financial conditions and then it is just a matter of time in terms of inflation coming down. if the feds can get nominal gdp growth around to -- pace. we can argue how much that take mesh how much time that will take.

the fed should be looking forward to the five-year inflation rate even spread. that spread is highly correlated in a leading fashion to nominal gdp growth. slower nominal gdp growth, tighter monetary and financial conditions and lower inflation. that is how it works. kailey: lower gdp growth and not an outright recession? you think those fears are overdone? michael: there will always be a risk of recession out there when the fed is moving quickly and tightening monetary policy. i understand those concerns. i don't understand the recession at this point. there is fear that we will get two down quarters in gdp. you can have two down quarters of real gdp growth and not have a recession. the official arbiter of u.s. business cycle defines a recession of a period of falling reduction sales with income and

employment with the focus on real income and less transfers. it is hard to see the recession at the unemployment rate at 3.6%. if that changes, then the recession picture is coming into focus. jonathan: do you think market participants care about the --? no one is going to wait for that. what will they be focused on and how will they respond to that second consecutive negative print? michael: your typical market in a recession is just over 30%. we went down 23% in the first six months of the year. if we have already essentially priced in two thirds or more of a recessionary bear market, because investors are not going to time it and it is not a sure thing we are going into recession this year, do you want to be negative on equities or

more contrarian and optimistic? i would say the latter rather than the former. you are exactly right, the markets are looking forward. most of this collapse in equity prices was brought on by higher long-term interest rates. that is reversing so let's see if we get more stabilization. kailey: if you are saying we are not headed for a recession in the near term, is the fact that we have seen yields lower appropriate. if we do not get a dramatic slowdown, the fed could go aggressive for longer. michael: we want monetary and financial conditions to tighten. lower inflation expectations, lower commodity prices, lower commodity spreads. that means the fed's medicine is working. the risk is they don't recognize that and go too far, you get recession.

i don't think we're quite there yet even after a series of rate hikes. the fear is we are getting closer to that point. with growth slowing and the fed aggressively tightening, the risk of a downturn does rise. we are not quite there yet. we should step back, take a deep breath, and not be so negative on equities. we have priced in a lot of risks this year. we had almost a five multiple decline over a six-month period in the s&p 500. we have only seen five multiple points or more over six months four other times in postwar history. in every single case, the market was up strongly. tom: part of your charm is you talk about markets and what to do in markets. are you saying loaded the boat and go on? michael: i am not saying loaded the boat, i am saying be patient.

investors came into the year cautious, then now is the time to be buying and add into the portfolio. if they came in exposed and long and went down, don't sell now. it is too late. jonathan: mike, you are one of the best. michael darda there. sounding almost constructive. tom: that is way constructive. this is a tone they be the bulls are now -- a tone may be where the bulls are now. trying to construct after multiple shrinkage, where do you get in? how much do? ? you get in with? jonathan: the point mike just made, think about that. this fed, will it see things the same way? even if growth is decelerating

and you get this negative print for the second quarter but they see a labor markets that is pretty robust, is that a fed that goes on hiking? tom: there are some a movable parts there. simple formulas for recession are baloney. you are going to hear about it after the fact, the fed does not have that luxury. where i would go in a modern study of the fed is it. to labor and that goes into the jobs report. jonathan: i don't want to be dismissive of the nvidia -- the policymakers are going to respond to the data and how participants will factor that in and internalize what is happening. tom: the distinction is policymakers versus academic

papers, almost like jackson hole. in ber -- mber folding over a jackson hole type of attitude, something people read carefully. jonathan: where are we going to be when we get to jackson hole given things at the moment? tom: i got lisa these red cowboy boots coming in. jonathan: stylish on jackson hole coverage. that was a nervous laugh from kailey leinz. kailey: i have this vision of a bolo tie. tom: we can go bolo tie. jonathan: should we make that happen? we should make that happen. you don't buy me anything. i cannot wait for that. tom: do you like marmite? jonathan: you joke, knowing u.s.

that time, that could be the interview. the nasdaq is down. no drum in stocks. -- no drama in stocks. just waking up on euro-dollar. ritika: keeping you up-to-date with news from around the world, i am ritika gupta. in the u.k., boris johnson is fighting to stay in power after two top aides jumped ship. their resignations came after johnson apologized for the latest scandal involving allegations of sexual misconduct against a conservative member of parliament. the new chancellor made his name as the vaccines minister during the pandemic. in have the department, illinois, authorities have charged the suspect in the shooting at a fourth of july parade with seven counts of

first-degree murder. more charges will be filed in coming days. the 21-year-old could be sentenced to life in prison without parole. illinois no longer has the death penalty. european union lawmakers have -- labeling nuclear energy is green. that removes the last major barrier to potentially billions of dollars of funding. they will be able to tap into new money from -- but only when they are replacing coal fire stations. the uss iran is not serious about negotiating a return to the 2015 nuclear a court. it cites a lack of forward momentum. one of those demands is that the u.s. remove a powerful mercenary organization from a list of its terrorist groups. 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 am to take a group to, this is bloomberg -- i am ritika gupta. this is bloomberg. ♪

>> i am concerned with what is good for this country and what is not good for this country is the government. we have seen the mismanagement of the economy. we have gone from being one of the best-performing economies in the g7 to 19th in the g20. jonathan: that was christine anne jardine. i am a jonathan ferro with kailey leinz and tom keene. the nasdaq 100 down by 0.16. the curve inversion continues. 282 in 10 year. 284 on a 10 year yield, a little higher by a basis point.

euro-dollar intraday getting closer to -- handle. euro-dollar, more trouble ahead for people in foreign-exchange. tom: dxy finally vaulting to a 106 .90. a 107 dxy get you back 20 years. we will watch the euro as we get a 101. we are not there yet. we are massively off the script, which we can do before questions to the prime minister which will be in 12 minutes. we hope to bring you the fire of johnson and the labor leader. leslie vinjamuri, with her specialties, we can rip up the script and get a primer. has it ever been this chaotic? how did the get here? or is this normal back to early

tudor england? leslie: i am an outsider observing british politics over many years and my understanding of the u.k. is things often are dramatic and happen very quickly. if you think back to just after the referendum from theresa may to boris johnson, there are often very dramatic times. this is certainly one of them. it is very difficult to predict exactly how quickly things will change. it certainly feels we are on the precipice of a major shift. tom: you are an expert of the special relationship between the u.s. and the u.k.. i believe we celebrated that relationship july 4. we look at the special relationship and the question is

the prime minister stands before the house of commons, how alone is he and hollande is the u.k. in global political economics? leslie: it is a funny moment for the u.s. and the u.k. we have just come out of a tremendously successful nato, the adoption of a new strategic concept where the u.s. and the u.k. are at the forefront of repositioning and tumbling down on a nato's commitment to defending its eastern flank, supporting ukraine. the u.k. is active in that -- active in ukraine. we have had the tragedy of the shooting haven't park. britain looks at america and it does not understand how this has happened and how the u.s. will come out of it. americans are looking at the u.k., befuddled that the

leadership looks to be lacking a moral compass and in disarray and waiting to see when the domestic politics will hit the level that britain's internationalism has since russia's invasion of ukraine. these are difficult but not straightforward times. kailey: there is a question of when domestic policy will impact for policy. what about the continent of europe and how brexit may have exacerbated all of these issues going on on the island? leslie: the number one factor, you all know it very well, is that now the real economic impact of brexit is turning up in u.k.'s economy. that is affecting how people feel. if you added that to the sense that -- if you add that to the sense that the government is not

taking its own moral position on the policies intimated during covid. we had a partygate and for strength in recognizing the shortcomings of people his -- he has appointed. second part of the european question is the on revolved -- the unresolved question of britain's relationship to europe. we have been waiting to hear about this from boris johnson. they are also waiting to hear more from through sturmer. president biden is very concerned that good friday agreements are not undermined, that this relationship is secured. it is an unstable time and you add to that what looks like a leadership transition. it leads to very rocky times. what does this mean for leadership?

we have seen strong leadership by the u.s., u.k., and nato. everyone is looking at america's democracy, guns, abortion rights. they are looking at u.k. and asking what moral credibility do these countries have to talk about democracy and human rights on the global stage? jonathan: wonderful to get your views. leslie vinjamuri there of chatham house. 102 -- 1.02 on euro-dollar. could you imagine that a year ago? tom: let me get the chart up here. dxy, major trading partners, 58% euro. 40% yen. 12% british pound. the heavy weight shows dxy excluding out -- dxy excluding

out. this is not just about euro. dollar strength, as well. the euro falls below 1.0199. jonathan: kailey leinz, try reading the ecb. what are they going to do? kailey: i don't know. how much of this is a risk assessment story? you could say the euro is falling behind because the ecb is not being as aggressive. as a growth concerned, can the ecb even go that far to 10 inflation if the economy is coming to a halt? i don't know where that leaves christine lagarde or the exchange market. 1.0199 on the euro-dollar. jonathan: we have a lot to figure out. there was pushback against the anti-fragmentation talk at the ecb.

did you ever think we would be talking about strikes in norway? that was a conversation yesterday. tom: not only, but labor unrest at sas, the acclaimed carrier. will the u.k. we riveted on these questions to the prime minister? kailey: i think they were -- jonathan: i think they will be and we will be coming too. a weekly event with as little bit more spice, looking questioning from the leader of the opposition party. we will take some of that live next on radio and tv. this is "bloomberg surveillance." ♪

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>> recession is inevitable, but i don't think it is imminent. i think europe is going into recession, the u.k. is in recession, and >> i have to debate the u.s. >> we are skeptical we are in for an immediate recession. >> i think recession, although a mild one, is priced in. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: live from new york city, good morning, good morning. this is "bloomberg surveillance," ade