>> this is bloomberg surveillance with john keene, -- with john farrell, tom keene. jon: negative tenths and 1%. on the supply concern, quickly becoming the base. maybe this is a proven response. prepare for the worst. the most likely scenario.

what a tough call they have got to make. we are going to have to come out tomorrow. all i want to know, -- are they on the same page? i don't think they are. jon: in and around 200 basis points.

kailey: whatever happens politically and italy, the ecb has no control over. we have discussed that a few times. whatever the revenue is, you get hit with. i have a feeling that is going to be one of the most common themes. jon: netflix this morning of --.

zero basis of 2%. 101 and 91. kailey: the triple digits way lower than we have seen. mortgage rates have risen. building permits seeks to a cooler.

the housing market looks to the economy. who is going to be of against the early leader and prime minister. talking about a low earning. what does the outlook look like in the second half? jon: joining us now, jim --. inflation story, jim, are you

pushing back against that? jim: this year calling for input -- calling for inflation peaked are people who called it inflation transitory. the chairman was right. we understand what we do about inflation. the same applies to wall street. the story continues that inflation is a problem. it is going to stay a problem. i am on the fence. more to the point, it isn't going to come down anytime soon. the fed is going to have no choice but to stay aggressive. i still think all the talk about whether we are in a recession, i happen to think we are, is of secondary importance. what is of higher importance is inflation. that is not going to stop. a recession is not going to stop them. tom: going back to the 1970's

and their level of make reality -- the level of mediocrity -- you allude to nominal inflation to nominal gdp analysis, a nominal analysis of corporate revenue given new inflation. jim: a lot of people are talking about whether we create jobs with a recession. if we have a bunch of positive economic reports, how can we have a recession? the answer is not positive or negative. the answer for a lot of this is no it is not. that is where the first quarter gdp -- and that is the second quarter gdp. and nominal bases will have expanded. it just won't beat the inflation rate.

that is the very definition of a recession. kailey: you think the u.s. economy is already in a recession. where is that going to put them -- you have -- saying. jim: every rate cycle that ended, interest rates above the inflation rate. that doesn't mean we have to go to 9% on the first right. but we have to see -- take wall street. wall street scenario is the pce rate is 10%.

jon: that is a no one. jim, thank you. tom: there's a whole new tony

and calculus. i look at the fragmentation debate almost like an experiment. it doesn't work. you have got to have a study of what would be the constraints if they succeeded fragmentation? the only constraint i can -- is dynamism. i don't understand how fragmentation is anything but the physics effort to -- european growth. jon: you have got to work out

the next move for the european -- for the day. i have no idea if that is true or not. home purchase demand remains under pressure. the mortgage rate at 7.3%. not good news for new home sales. tom: john, it is real simple. starts versus multi family is a wild trend. this nation is moving to a render nation. jon: his mouth says physics, his suit says strawberry jam salesman. kailey: [laughter] jon: -- down 10%.

tom: marmalade, do you actually eat marmalade? jon: i will eat marmalade. tom: smuckers is the best. ♪ ritika: keeping you up-to-date with news from around the world. i am ritika gupta. on monday, former chancellor and commissioner talk -- he was short of the threshold that would guarantee him a spot. -- has been closing the gap. -- told the senate the coalition

can be rebuilt. putin has signaled that europe is not getting gas from the nord stream pipeline. he says unless a dispute over sanction is resolved, gas will be close. maintenance on the nord stream pipeline is set --. they say there is a 50% chance of a slump. the trial now set for october. you don't need four days to

prove that musk -- on his commitment. 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 ritika gupta. this is bloomberg. ♪

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>> to make it through the winter, assuming there is a full disruption of russian gas, we need to fill our gas storage is

faster. we have to reduce our gas consumption. this is a big ask for all of the european union, but it is necessary to protect us. jon: elsa -- with the european union preparing europe for a winter without gas. 210 -- on the nasdaq at 1%. six basis points lower to 29633. we were showing a little bit of euro strength. the euro-dollar down 20% of 10%. tom: negative nine right now. they may be look king -- they

may be able to look at global climate change. it is nothing but grim. some 299. they are living it the southwest. they are talking about in washington. emory holt joins us now on our new climate change frenzy. i guess the president is going to say something about it. people out of the southwest are going, are you kidding? tell us the character and quality of the job earning today on climate change. >> talking about the northeast, massachusetts, coal-fired power plant used to be one of the biggest in the northeast and now it is a hub for some of these -- that are going to be needed for wind farms. we are going to talk about -- they are going to talk about executive action. when you go into stop -- this is

right now the white house's wing. you look at the new york times today, the heat index, 80 million americans, about 20% in the united states living in heat levels that are not normal. it is happening in athens. there is a moment you can see they resonate. tom: they are cool, calm and collect it. everybody is talking at the same old, same all on climate change. the fear that climate change will diminish growth, what is the pushback? >> the president talked about the fact that climate change, or fighting climate change because it is an avenue for new jobs. a lot of renewable jobs are very

much so higher paid jobs. the president will use that that this is not going to be hindering in growth. when you think back at the potential of weighing this emergency decree, there is going to be walking a tightrope. the president coming out talking about this because what happened last week, senator manchin is saying the climate provision and the tax hikes are dead on arrival. but they still needed to support a 50-50 senate when other legislation like health care. if they were to go about and emergency decree, which would really get the president power, -- those kind of powers talking about may ostracize senator manchin. make sure that his party knows. she ran on the campaign that he is still committed to.

kailey: let's talk about the issues important for voters. i pulled up the survey of american people about what is the biggest issue facing the country, -- inflation far in the way of number one. how to hundreds of inflation in some shape or form question mark >> -- in some shape or form? >> what we are seeing in the oil or natural gas market --. . the other thing, bringing down inflation and wanting to bring them -- shorting to bring down the cost of gas, what kind of message with that send to the

same producers in texas that they at the moment are trying to produce more once that spr runs out? jon: what do you make of that? what will they say? >> today we are going to talk about the executive actions they could take. that is why they are still weighing this emergency decree. they need the help of every oil and gas producer in the united states. especially going into the winter. with everything happening in europe this morning, telling the consumer industries to cut natural gas consumption, they are trying to make sure they have enough oil and natural gas. they do in the united states, but they want to make sure they can bring those prices down. you cannot ostracize the industry. jon: we want to see that refinery in a few years time. tom: the last couple days

showing the water level at lake mead. you don't need a degree in science to know that it is absolutely grandma what is going on. some of those conservation efforts are being made, but between the colorado river and up to utah and wyoming, this is the absolutely critical. we are in a new place. jon: gas prices have been coming in every single day since there is the average daily gas price. $4.50 on gasoline. tom: they need to get back to three dollars for the democrats to take a victory. i get this is the idea at the moment. and in the heat of summer, it is important. a lot of suffering going on, you don't need to know that seeing what is going on in the united kingdom.

the climate change debate has shifted. for conservatives, it is about conservative arizona, conservative new mexico, conservatives southwest. in san diego, they are running out of water. jon: wondering if that is going to be a big part, given what is happening in europe. big reversal. future -10%. the s&p, unchanged. -.25 percent. coming right up. ♪

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jonathan: gains on the s&p 500. good morning to you. negative a 10th of 1% on the s&p. unchanged on the nasdaq. a bit more defensive, you can see that in the bond market. your 10 year coming back six basis points. the two here, lower by six basis

points. 3.17. we have been hanging out at these levels all week. none of that volatility going from speech to speech next week. tons of volatility in europe. euro-dollar and then we can compare the german 10-year to the italian 10 year. it looks like prime minister mario draghi may hold on. there is a lot of work to be done. that can spices -- compresses spreads a little bit. the spread between a german and italian 10-year around 200 basis points right now. then we need to talk about the ecb, prospect of a 50 basis point hike and a new bond buying tool. will we see the details of that tomorrow? russian gas.

europe is preparing for a winter without any. vladimir putin has signaled that north stream one could come back online, but as you know, this comes with conditions. will we settle this spat with sanctions and how much gas can pass through that pipeline? tom: rotterdam coal has pulled back over the last few days. not near february 24 and that explosion, but right up against a winter of agony. jonathan: you are trading those three things right now. ecb, italian politics, and factor that all into the story. tom: today is a snooze fest. tomorrow, she comes out and says we don't have a fragmentation plan. jonathan: that i think we have a problem, if they don't have a

plan. if they have a plan to cap things for now, but at some point, the market stocks to call your bluff. we can get you some single names. good morning to kailey leinz. kailey: netflix is one of the big stories this morning. we expected them to lose 2 million subscribers, but only about one million, not as bad as expected. the stock was down 70% year to date earlier but you are seeing some relief before the bell. other earnings movers, biogen lifting its full your outlook, but there was a disappointment in the pipeline, which is possibly why they are down 2.4%. baker hughes missing due to the suspension of business in russia.

that stock down about 4%. we are awaiting more earnings today. after the bell, tesla is reporting. facing a lot of headwinds from china in particular. we will look for clarity on that. speaking of china and their covid zero policy, due to an outbreak in macau, casinos have been shut. it looks like they will open july 23. tom: thank you so much. we are going to get away from the vanilla, stocks up, down, and actually go inside baseball and what pros are talking about in the debt market between a yield that yields and one that floats.

deborah cunningham, cio at federated, is with us. i see an immense focus right now on floating-rate paper. how big could the losses be, floating-rate floats up, prices down? >> that is the beauty of an instrument in the rising rate environment. it protects pricing as well. as interest rates go up, with a fixed rate security, your price goes down because it is not earning as much. with a floating-rate security, however, that interest rate adjustment assists in maintaining the pricing value. it is likely something that works well in a rising rate environment. tom: convertible bonds, when we

get into an optimal scenario, like we are now, are they priced up just because of demand? deborah: they absolutely do. my team, every day, wrestles with the question when two extended when two switch from fixed to floating. it is a timing situation in the marketplace. we don't think we are at the timeframe yet. however, we have done little chunks of that conversion as short-term interest rates have gone up over the last month. not putting big bets on anything but small reversals that we think would help extend the higher interest rates for a longer period of time with a fixed rate securities that we layered it on talk about what is predominantly still floating-rate securities, think

will be for the next nine months or so, interest rates increasing environment. jonathan: we saw a ton of that at the beginning of the year. seemingly nowhere he was credit. has that changed? deborah: this earnings season convinces people even more that credit is not challenging. the largest component of credit within the market generally the financial sector is at a peak from a credit metric standpoint. capital is high, reserves are high, losses are low, not reformers are low. that will change and there is a peak and be go down the other side of the credit curve, but for the most part, we have not reached their yet. even manufacturing firms, building supplies, different types of energy companies, they continue to be very high from a credit metric scoring standpoint. kailey: i hear from so many

people that things will not get messy enough in credit to cause the fed to blinken anyway. we focus so much on rate hikes, how large they will be, but we don't talk as much about the fact that quantitative tightening is underway. you see the impact of that has been negligible. is it about to become less negligible? deborah: it may be. i think it would be welcome in the context of increased treasury securities coming back online. we have had a supply demand imbalance in the treasury marketplace with those wanting less risk, seeking higher proportions of treasury securities. at the same time, supply has not been increasing. when we see treasury securities from a qt perspective start to make an impact and buildout. supply, i think that will be

healthy. on the mbs side, it may not be a problem there either as securities come back online simply because they can be used as collateral within repo transactions. when you look at the fence rivers repo facility, it continues to make records on a monthly basis. if there is additional mortgage-backed supply in the general markets, maybe the banks and broker-dealers as traditional counterparts come back online with that. i don't think it's a huge issue even as the fed ramps up that qt problem. kailey: unfed guidance, can we still trust it? deborah: we were a little bit surprised last month there in the blackout time period when all of a sudden we went from 50 to 75 basis points because of a mysterious media leak through the wall street journal. this past monday, two days ago,

there was considered to be may another mysterious week. people are having their antennas up now because of this one-time event that occurred. tom: jon ferro aged over those mysterious weeks. i think we saw some gray hairs payment deborah: a lot in the industry did as well. if the fed wants to regain confidence, they either need to use that as a tool more often and make it legitimate, traditional that speak washers, or back away from it and maintain that correct backup period. jonathan: deborah cunningham, thank you. now the ecb doing it apparently, as well. the guidance doesn't work if this is what you want to do. just quit doing the guidance. what is the point and it if you

are just going to make the call to days out in a newspaper article? tom: you look over this band of important dinners, i had a forgettable dinner with the giant of morgan stanley. he was absolutely scathing on the over communication and how it harms the anchoring of central-bank confidence. jonathan: this is the post financial crisis framework. it has broken down. it had a purpose in the low-inflation era. it was about convincing people that rates would stay low for a long time. this time around, i would argue it slowed them down in a massive way as they look to respond to something moving a lot quicker. tom: i just think it is over communication. jonathan: we are on the same

page. tom: i am just trying to talk myself out of the fed special. jonathan: should we have a limit on fed speeches? tom: kaylee can do the 9:00. we don't need to pack our bags, because we will lose the luggage anyway. i think kailey can do the simulcast with paul sweeney, we will go to the airport with no luggage. we can buy a toothbrush in frankfurt. jonathan: you are selling it. this is bloomberg. ritika: keeping you up to date with news from around the world, i'm ritika gupta. the house has passed a bill that would recognize same-sex marriage under federal law. it would also extend legal protections to all married couples payment that is a reaction to concern the supreme court may reconsider a ruling extending those rights.

the legislation faces long odds in the senate. president biden will announce executive action to confront climate change. one provision would steer dollars to communities ravaged by sheet. now the president is holding off an emergency degrees that would allow him to use sweeping powers on global warming. henry kissinger is morning president biden about endless confrontation with china. the man who helped to reestablish ties with the nation spoke in an interview with bloomberg. he said geopolitics today requires flexibility to resolve conflicts. tesla reports earnings after the close of the bill today. during the second quarter, tesla faced challenges including supply chain difficulties and lockdowns in china. 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.

>> there is not really an incentive to increase investment. that is why we remained structurally bullish. jonathan: energy aspects on the crude market. a little softer. 102.48 on wti. futures -.2% on the s&p. the nasdaq lower by -.1%. euro-dollar, 1.0190.

the russian president signals they could get some gas through nord stream one when it comes back online but there are some big conditions attached to it. tom: and real ignorance about engineering. will kennedy is with us. will kennedy and others build our world of hydrocarbons here at bloomberg, and he says we have to understand how this stuff works. the vast majority of people looking at gas flows, nord extreme, tossing around these phrases, their knowledgebase starts with putting gas in the car. let's talk about what these parts actually are. the gas flows in an unthinkable high-speed, and that has to be forced by enormous turbines.

it is almost science-fiction. will: that's right, you have these pipelines that stretch through siberia, russia, north stream one, under the baltic sea into northern germany and into the european gas pipeline network. when you pump natural gas, you have these turbine stations where it compresses the gas and forces it through the pipeline. those her blinds would look like enormous jet engines, similar to what you see on an airplane but at much greater scale. very complicated, highly engineered pieces of kit. what we are talking about now, the games about maintaining and repairing these turbines, that is what we have been discussing. tom: we make jokes about wd-40. it is an american spray silicon thing -- jonathan: we have that.

tom: you can use it to lighten up the marmite in the morning. i look at the engineering involved here, and it's about sanctions of highly sophisticated stuff. who makes the decision about whether it is ge or siemens or whoever that we unload those turbines to mr. pruden? will: it is being made at the government level. these turbines were made by siemens. they went to canada and they said we cannot send them back because of sanctions, so the eu stepped in and they made an exception. these enormous turbines are becoming instruments of international diplomacy. jonathan: help me understand what i need to look for tomorrow. with the ecb, when the news conference is, what to look for.

with nord stream one coming back online, i have no idea. i just know it is meant to happen at some point tomorrow. what will you as a team be looking for tomorrow? will: traders are expected to come back from their annual maintenance, make nominations, which is jargon for trying to book pipeline capacity for gas to flow through. they will say how much they want to take out of the pipeline and make those orders. tomorrow morning, we will look for how much gas actually comes. judging by his comments, it will probably come by tomorrow morning. the key thing is the volume of gas. because of the lack of the compressor that went to canada -- russia's story -- flows were only at 40% normal. traders will be looking to see

where that comes back from. not entirely clear where that will be. what is clear, pruden, gazprom, the russian government mocked it to come back at a reduced level. it gives leverage, turns the dial up and down as we get closer to winter. sometimes more, sometimes less. by the time you are presenting tomorrow, we should see what is coming through the pipeline. kailey: ursula von der leyen earlier said the eu is looking to cut consumption. then the energy commissioner said the gas cutoff may cause 30 bcm of a supply gap this winter. what do we need to match? will: it will depend on how much gas comes from elsewhere, how much lng they can get into the system, how they are managing bottlenecks.

also it depends on the weather, how much they manage to get into storage in the next few months. the bottom line is the numbers that ursula von der leyen put out today, cutting gas consumption by 50% this winter, that is a very big number and will require a lot of behavioral changes both from households and businesses within the european union. jonathan: really important stuff. thank you, will kennedy. by the time we come on tomorrow, we will have a decent idea what is happening with the pipelines apparently and then off to the ecb. kailey: does that change christine lagarde's decision? how this will economically play out? jonathan: this is difficult stuff. we have asked the question how big or small that window is for this ecb to hike. in the last hour, talking to percent?

kailey said really? tom: it is a huge ask. i'm going back to run rate nominal gdp. what is the terminal value of united states nominal gdp? optimists would say 4%, maybe 5%. could you say that about europe? i helping so. jonathan: the prime minister in london just signed off on pmq's. i understand his last words were hasta la vida. and stay close to the americans. some parting words from boris johnson. tom: he is in office until september? jonathan: no more pmq's.

i have no idea how this works. just because i have the right accent doesn't mean i have the knowledge to talk about it. i don't eat marmite. you do. tom: i tried it once. it was appalling. it was like that piece of sausage, full english. jonathan: the black pudding, with the pigs blood. i have seen you eat it. tom: can you get me some new tang? jonathan: this is bloomberg.

>> we are still in an environment where we had the headwinds we have had for most of the year. >> the key to continuing growth is the consumer. >>