>> that story continues that inflation is a problem and it is going to stay a problem. >> the fed is not done raising rates and i think we can't be too optimistic at the market level. >> we could easily get another negative gdp press for the second quarter of this year. >> it is a little exaggerated at the moment. >> at difficult situation to the bank of england ecb. >> this has " bloomberg:

surveillance with -- "bloomberg : surveillance". jonathan: good morning, ecb just around the corner. tom: and it is around the corner with a regional and global swirl. there's a turn you cannot ignore. in italy, the collapse of draghi in the government. it is more than normal dynamic, not just about the ecb. jonathan: it has been 4032 days since they hiked interest rates. i went back through the statement from 2011, july seven and he says it was warranted in the light of upside risk and

price stability. you know what cti was? 2.7% and the rate picture was very different. you've got a real sense for how much central banking has changed at ecb since draghi. tom: have had a natural disaster. i would suggest with europe and the heatwave we have had, continued covert concerns even with the tourist boom, they have got their own unique natural disaster there. this is not normal, they're making it up. as you mentioned earlier, who exactly is advising christine lagarde? jonathan: you got the ecb, italian politics, draghi resigning and then russian industry -- energy. the nord stream back online, from some this week, it's a tough spot. tom: the american arab --

airlines headline just out is important for europe because you are not seeing those headlines out of europe. double-digit modeling of revenue , compare and compressed to 2019. i don't hear those conversations in europe. j fair united yesterday -- jonathan: but there in -- preparing for tougher times. kailey: they are tougher times. they are having to pull back on capacity expansion plans for next year. they're trying to get destruction. airlines have been seeing it domestically and internationally, labor shortages and higher fuel costs. what that means for this year and next year is fewer planes and that is hard this morning. jonathan: much -- we must confront this. be sure one -- industrywide

capacity, record fuel prices, increasing possibility of a global recession, challenges we are already addressing. that's what united is looking to confront. they expect to be off a bull in three q. tom: i would say it is uneven and what i'm seeing right now, pm is really challenged here and distracted. as you say, near parity, the euro is stronger since the half an hour ago. jonathan: just sat at 1.02. a few changes around the ecb at this particular meeting and going from here. we'll look at that in the moment. equity futures down .2%, the euro positive by .10%. a quick word on crude, down 4.5%, 9.51 wti. tom: it is the second time down,

that's all there is to it. brent, 102 down. carol: -- jonathan: crude 95.96. kailey: but coming at 8:00 p.m., a bit from christine lagarde. she's facing multiple challenges especially as mario draghi headed in the resignation earlier, leading the spread toward 230 basis points. when we have a conversation about the anti-fragmentation tool they are hoping it will announce later, it is difficult. especially with a euro hovering around the weakest level since 2002 and a deteriorating economic situation making it difficult for the ecb. we will hear from christine lagarde at eight eastern time, it will lead of the program on

the open but in between 8:30 a.m. eastern, initial jobless claims. we have seen upper pressure since april, two is a 40,000 is what we expect today. as we look at the labor market, an important point to watch. on the earnings point, snap a someone one to watch after the bell. it could give an indication of what advertising trends are looking online in a slowing economic environment. they delivered a warning about that in may. the stock is down 67%. watch for that after the bell especially toward alphabet and next week. jonathan: some of those have been absolutely hammered, we will get to sharon, before you really they the boone, european equities, sharon mike itself.

>> -- tom: it off tiktok and -- get off tiktok and snap. sharon: in the markets, you got that. jonathan: you got to follow the ecb. how does europe avoid recession? sharon: got a 50-50 chance, i do think it is much harder, 70, 80, 90%. the ecb is potentially raising rates into a period where some of the indicators are coming down. we know about real incomes, given inflation -- import prices in europe, because of a very weak euro you were talking before, pushing up prices to 25% year on year, very difficult to avoid. tom: your research is absolutely

brilliant in acuity. it is just a stunning how you layout single-digit earnings growth. what is wrong with single-digit earnings growth? that seems like a good outcome coming out of a pandemic, the fiscal stock. can't we have a successful market with single-digit earnings growth? sharon: i think the problem is most investors are worried we won't stop at civil digits. we have had phenomenal growth in the first earnings season. the second quarter will probably be good, too. you're on your it will probably be double-digit earnings growth. and i think most can see that valuation is low, the market will pop up lower and we've got zero for example. in a typical recession, 20 or 30% of european companies, it is

a downside risk. that's the problem. kailey: you're talking about a recession that the ecb is looking to hate -- hike rates. it would be a good thing in syria, they have been waiting for rate hikes for some time. is it a good thing? sharon: yeah, if we are talking about rate hikes on their own, it's a great thing for banks. they can't do much when you've got negative interest rates, a great time for interest rates. if it were coming when economic growth is robust, the problem is we are already in an inflationary environment. and the risk is, just like in 2011, you start raising rates into an environment where growth is selling rapidly. the ecb is incredibly tough, all central banks are but especially the ecb, not just an inflation

problem and lower economic growth but sovereign debt as well. slightly positive for the banks but if you come out of this it will be either a mild downturn in recession, single-digit earnings growth and interest rates. if you manage to follow that, it will be a great outcome for banks. but worse than that, clearly not. jonathan: just briefly, what does this mean for what you want to allocate to europe, given the weight of some of the banks and indexes? sharon: and europe's defense, banks are not the big sector they used to be. neither is oil. banks, oil, energy, they used to be the majority of the european market. you swing back to the financial crisis, now the biggest company in europe are health care companies, big brand consumer names that are global. and global growth is pulling up

the middle, i'm not saying they are not there, but the other thing is currencies are coming down. the companies are global and make a lot of their money in dollars, translating into the euro, currencies in europe looks quite good. so companies with international exposure. the banks are pretty space. i think they will pay good dividends and rising balance is slightly good for them. jonathan: sharon bell of goldman sachs, the financial will have a tough kick even with the economy. health care on the stoxx 600 in europe, 17% plus of the index. compare that to the united states with the top waiting of information technology. health care 14.5% of the s&p. tom: and they cap come out we will leave the name out of it. one company, revenue up 9.5

percent, revenue from acquisitions of 2.5% and as you mentioned, the fx effect negative 4.5%. jonathan: are you going to name the company? tom: i'm not. kailey: that's the mystery. tom: it does not matter. this is the new mill you we are in. like the old one before my first gray hair. jonathan: the ecb, one hour away. tom: 10 years ago. jonathan: the big morning coming up. this is bloomberg. ritika: keeping you up-to-date with news around the world with the first word, i'm ritika gupta. the european central bank joining around the world in confronting inflation, not standing on the sidelines. they are expected to raise interest rates for the first time in 11 years. it may deviate from guidance such as an increase that doubles

the quarter-point. japan goes against the grain by leaving interest rates unchanged. they appear to be extremely wary of moving too quickly and taking the economy as it has done so in the past. inflation averaging 2.3%. the third time the gog -- the third time they've expected this above the target. attend a maintenance period, eu officials worried the pipeline would stay out of service for longer in retaliation to the opposition to the russian invasion of ukraine. russia has been curbing gas shipments to europe for months but the best they're still lying on the little that they are getting. subscriber growth in the latest quarter, deep discounts have led to gains. bills are getting more expensive. relieving concerns consumers are

pulling back on spending. 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 medically equipped -- ritika gupta. this is bloomberg. ♪

pres. biden: climate change is an emergency in the coming weeks, i'm going to use my power as president to turn this into

official government accident -- action through the regulatory power the president has. jonathan: that was the president, joe biden. from new york city, good morning. i'm jonathan ferro with tom keene and kailey leinz, elizabeth -- lisa abramowicz is out. as i futures basically unchanged, up 40.03%. the euro looks like this, 1.0189 on the euro-dollar, crude lower, almost 5% with negative 4.5%. $95 in about $.40. the headline from president biden come out there could be a call between him and the chinese leader within the next 10 days. tom: we will talk tariffs and we will have to see a hugely political move in washington and also hugely political in beijing

as they are flat on their back over mortgage angst in and across china. right now, chuck fitzpatrick is with us at bloomberg government. i want to talk about the pound from the modern age, from woodrow wilson to ronald reagan, to george w. bush and may be president who is a bit of an agent state. that is presidents in the summer doldrums of just trying to schedule out the summer to get to the fall. what is the mood, 1600 pennsylvania avenue, or what is the plan to get to the frigid temperatures of september? >> not sure there is much of a plan to get through the doldrums of summer given the administration has had to respond to so many crises. there is a sense of, i don't know if it is panic, but they feel they need to do something on inflation issues.

obviously the idea of potentially talking tariffs with china plays into that. the focus on russia and ukraine has been so significant. there has been a challenge of trying to set the agenda rather than respond. tom: that's exactly right. that is why we love to have you on, and to set the agenda. i have no idea at the white house, who is setting the agenda. is it the president? who is it? jack: i'm not sure anybody at the white house, including the white house on a whole is setting the agenda in washington. from those issues to the supreme court dobbs ruling and the sense that they need to respond to that, the dominant issues in washington are not things the white house scheduled. they are forced to respond to things. is the president himself who

determines exactly how they respond to that, which staffers of the most influential? each of these is not entirely clear. but i think the main take away from the summer is it is not the white house in charge of the washington agenda this year. kailey: let's talk about what the white house is in charge of, setting the president's schedule like when he takes calls with foreign leaders. we got an indicator he will be speaking with xi jinping of china over the next 10 days. we understand the talk of removing tariffs is aimed at messaging around trying to reduce inflation. how does that play with the american public when he is talking to a chinese leader who is accused of egregious human rights offenses in terms of the uighurs? jack: playing this out with the public is a challenge. there would likely be some pushback, given that in any bill that touches on china policy in

congress, there is a bipartisan motivation to play very tough on china. they add tough on china measures of every kind you can imagine into all sorts of bills. the pushback that would come to a conciliatory talk with xi jinping on tariffs would be maybe not even partisan, maybe bipartisan. it is a bit of a stretch logically to sell to everyday people, to say this is how our relationship with china is going to affect your pocketbook. it is something the white house may feel is necessary to do. but in terms of how it turns itself into political rhetoric and how they spend it to the public, it would raise significant challenges for the white house. kailey: another sensitive issue is taiwan. i got the sense from the remarks that the president is not too happy with the idea of nancy pelosi making a trip there.

jack: yeah, it is an interesting divide. policy try to do the trip in the spring when she got covid. there's the possibility she will do it in the august recess. biden said yesterday the military does not think it is a good idea. he did not say he is actively trying to stop her from ringing. but clearly the democrats have worked themselves into a corner where if poulos he out of what is seen as a plan to meet with taiwan, that could come across as conciliatory toward china, where as now you have this playing out publicly with the president and the speaker of the house is agreeing on exactly how they should approach taiwan. jonathan: thank you, chuck fitzpatrick in d.c. -- jack fitzpatrick in d.c. how long have we been talking about removing tariffs? it feels like weeks. kailey: think about the

conversation on student loans. a lot of talk, not a lot of action or decisiveness. jonathan: trouble in d.c.. it will be a call within the next 10 days between those leaders according to the president. if you're just tuning in, the prime minister of italy, mario draghi has resigned. nor should one is back online at 40% capacity. a lot of people say that comes down and gets lower and lower. that is the fear. the ecb about rates and something your focus on, anti-fragmentation. tom: are we going to pass the buck to the next meeting? or are we getting some form of definition? the spread, the difference in yield between spain and germany, italy and germany, there is hundred 70 of them but the bottom line is if the spread widens out, causing

more angst to italy, where do you get the word access? how do you figure out what excess spread is and what dou do at that moment? that is the debate. jonathan: what is wanted to and unwarranted, the conditionality around this. it is not clear to anyone if they've made a decision on any of that into this particular meeting. the fed decision around rates, 8:15 eastern, we could be seeing something we have not seen since july of 2011, a rate hike. it has been that long. the euro-dollar 10188, this is bloomberg.. ♪

psst. girl. you can do better. ok. wow. i'm right here. and you can do better, too. at least with your big name wireless carrier. with xfinity mobile, you can get unlimited for $30 per month on the nation's most reliable 5g network. they can even save you hundreds a year on your wireless bill, over t-mobile, at&t and verizon. wow. i can do better. yes, you can. i can do better, too. break free from the big three and switch to xfinity mobile.

jonathan: gains over the last 11 days, of 3.7% on the s&p 500. down just a little bit on the s&p 500. nasdaq unchanged. yields over the last three days higher. another two basis points. slow grind over the last couple of days. if you want a bigger move than

that, look to europe. good is that no extreme one is back online running at 40% capacity. the bad is that prime minister mario draghi has resigned. the spread is wider, approaching 230 basis points now. the ugly is the decision that the ecb president christine lagarde has to make at 8:15 with her counsel. a tough decision. euro-dollar at 1.0191. the reason so many people cannot get bullish on that one, so many people think even if they go 50 basis points over 25, they don't believe this ecb can put a long rate hiking cycle together. tom: how do you frontload into that original political experiment? jonathan: if you frontload, is

that it? when we get to september, italian election may be september 18. that is just a sideshow with what will happen potentially with russian gas coming into europe. i don't think this ecb can offer any forward guidance today. if they tried to, i don't know what it is worth. the unknowns around the european situation, i've never seen it. we are used to italian politics but you have the russian gas on top of everything else. tom: i'm going to be watching foreign-exchange. we have not even talked about yield curve control. the bottom line is you have em, yen moving out to 139. jonathan: i have called it operating ostrich at the boj.

head in the sand, hope that everything goes away. i came up with that. proud of that. looking toward the ecb decision a little bit later. let's get to kailey leinz for some movers. kailey: we have been looking ahead to the ecb decision so much, we have not talked about tesla, which reported after the bell. working through supply chain issues with the lockdown in china. elon musk says he is optimistic that the supply chain held. they also sold about 75% of their bitcoin stake. alcoa beating expectations. las vegas sands beating expectations thanks in large part to the recovery in singapore. 3.9%. the downside movers include

united, which was warning about capacity this year and next. they will not be able to wrap it up as much as they wanted to, trying to work through disruptions on labor and fuel. that stock is down 7.4%. american airlines this morning echoing that, saying capacity could be down 10%. finally, carnival, not an earnings story, but they announced a $1 billion stock offering. down about 12%. tom: every four months, don't they do another offering of some kind? kailey: they do but this could be one of the largest equity offerings of the year. tom: thank you so much. robert tipp joins us, chief investment strategist at pgim. looking at the clipping of coupon and gaining of total return through bond capital appreciation.

any of the indices say -12%, -14%. i have a bond from a toothpaste company that is -28. can you call all clear, given the distractions of the ecb and everything else, that the price will go up and yield will stabilize or go down? robert: let's start with a long-term good news first and then we can move back to the action today, the boj ostrich situation. let's start with your question. five to 10 years from now, the world will be older than it was in 2019. we will be in a moderate growth low inflation environment. part b. when you look back, when are you ever going to see growth and inflation higher than it is now? wherever we are on interest rates over the next month will

be a high watermark. it is tough to make the call. tom: is it a call of full faith and credit, investment-grade, or something more distressed? robert: we can see what is the government credit? full faith and credit, we see that treasuries are wide relative to other overnight bank obligations. we see this in europe. the credibility question coming in. is an italian government bond the same, to they deserve a certain yield proximity? that is something the ecb has backed into, pretty dangerous

territory, kind of like they did in 2009, 2010. jonathan: what are you expecting from the ecb today? robert: the 25/50 question and credibility, when you are locked down the bank of japan, it is easy to give forward guidance on where you think you'll be. with the ecb, once your expectations are well above zero, the only credibility you could have is by telling people what the reaction function will be. coming into today, whether they do 25 or 50, they have to be honest and say the inflation numbers are coming in higher than expected but the growth picture is more convoluted. people will understand that. they will say we will hike 25 today, if inflation is high, we will hike later.

i think the credibility is in depicting a reaction function that people can identify with. the two things people look at what the central bankers were, were they effective and could you understand why they did what they did? it is not about making promises or forward guidance that is incredibly durable. jonathan: do you think they are in a lose-lose situation? regardless of the decisions they make, it will be a mistake anyway? it seems like there is no optimal policy decision for them to make. robert: well, it is always a trial and error situation. personally, i think they made the error. when mario draghi came out with

it, it was a gamble. he didn't do a reckless policy there. he forced the european governments to institute, make certain commitments before they started these adjusted purchase programs. right now, they have luck on their side in some respects. it is a very progrowth environment. nobody is really holding fiscal constraints. they have the stimulus program which has loose constraints. there is chaos that gives them a little bit of leverage with you telling situation, but they should have never committed to this program without having a real good idea of what it would be. i don't know if people would recall, the snp was something that they tried but failed.

it was ambiguous and failed. jonathan: the sn it was all sterilizedp, what kind of explanation are you expecting about that in the news conference? robert: they always sterilize these, so that is an easy one to assume away. the real question is when you are buying the italian bonds, not the german bonds. what way or another, you are free riding on the credit of these higher rated countries in order to benefit the others, and that's tricky. they will be challenges. they got themselves into this, they will have to get themselves out of it. jonathan: great to catch up with you. looking ahead to that ecb decision, it: 15. -- 8:15.

they pushed it back 30 minutes. i don't know why. i still have not heard an lunation. -- an explanation. i have no idea why they did this, but they have done it. tom: do you realize how much lagarde would hate me if she heard me say that? jonathan: i feel like she hates us both. kailey: what about mario draghi? tom: serious questions about lisa. i don't know where she is. somebody said as she climbed kilimanjaro? i think that is next year. i don't know. i really don't think she has climbed kilimanjaro. have you done that? i feel it is really brutal. it is not routine. jonathan: you struggle to

breathe. would you like to do it with me? tom: i struggle to breathe here. jonathan: charity walk. kailey: i would definitely contribute. jonathan: you would not,. t come. kailey: i would not. tom: me, kilimanjaro? i'm trying to get beyond 59th street. jonathan: your decision from the ecb, 34 minutes away. this is bloomberg. ritika: keeping you up to date with news from around the world, i'm ritika gupta. the european central bank is on the verge of doing something it hasn't done in 11 years, raise interest rates. policymakers may deviate from their guidance of a quarter-point hike and increase rates by twice that amount. a biden administration official predicts a price cap on russian oil could take effect by december.

the b imposed alongside eu restrictions on insurance for oil before arguing a cap would give moscow a much-needed revenue and would also when the insurance ban takes effect. president biden expects to speak with president xi jinping in the next 10 days. the administration is considering whether to lift some tariffs on imports. at the same time, relations have gotten worse over beijing's refusal to condemn the russian invasion of ukraine. the slow down in the u.s. housing market is now hitting builders. d.r. horton reported weaker than expected quarterly orders. they focus on entry-level buyers, the ones most affordable -- vulnerable to the affordability squeeze. 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.

>> this world has plenty of room for competition between china and the united states and others, as well. that is really the kind of globalism we ought to be seeking, which is one of having strong competition with china and others. jonathan: leon panetta, the former secretary of defense. good morning. counting you down to any ecb rate decision, 8:15 eastern time. down 1% on the s&p. the nasdaq down slightly, we can call that unchanged. crude is lower by almost 5% this

morning. -4.6%. the euro-dollar, 1.0183. for those of you asking why 8:15 instead of 7:45? i don't know. someone said the ecb shipped was perhaps no clash with u.s. data. no idea. tom: maybe. jonathan: i have no idea. tom: one of the great france -- the reality is, i go into china, 1200 feet deep. the other china that we don't talk about, the entire other china in mortgage crisis. and the current joins us now.

519 miles north northwest of shanghai, that part of china that we never talk about. how is that different, why is it important to the government that this crisis is 519 miles from the pease hotel? enda: this cuts to the whole social core of contract in china. real estate makes up 70% of household wealth. when you have a situation where prices are falling, or you are paying for an apartment that has not been built and will not be built, you will have a lot of angry people. that is what's been happening across china across the country. over 300 projects, there is a mix of homeowners boycotting mortgage payments because the developer is not delivering. you have companies saying they

are not being paid for their goods by the property developer. junk bonds sliding to a near record low. so there is a whole confluence of pressures coming down on the sector, weighing on the sector that makes up 20% of total economic activity. it is series in terms of politically, the social contract, and economically. jonathan: there are some who are indicating that even if we reopen, we will not get that massive boost to growth from credit. pantheon said this. anyone hoping that we would see a dramatic surge of monetary easing from china continues to be disappointed. we have argued that much of the liquidity is being used to flog balance sheet holes rather than create new demand. can you speak to that? enda: there are a lot of variables here. on the one hand, the central bank is saying the markets don't need more money, which is why

they are reluctant to bring down interest rates and tip in more money. many would say that lower interest rates are not a tonic for china. the bigger picture remains, there is a very heavy cloud of the consumer right now, ongoing covid zero, the impact that is having. that cannot be turned around by what the central bank does. and then what happens with the developers goes beyond though interest rates. they are edging toward some kind of a bailout. we are having the first state backed they let fund coming out in hunan. those flats that are underway but had not been finished, those will be finished. look at what is happening in terms of getting these projects finished, how they will get money into these developers,

rather than what is going on in the money markets. kailey: what kind of position does this put xi jinping in the head of the party congress? enda: if you are looking at your bingo card last year, you wouldn't have households went on a mortgage strike is one of the risks facing xi jinping, but that is where we are. it is very serious because it goes against the social housing contract. you have the ongoing aggravation of covid zero. there is a public health dividend with that, also an economic cost. and then of course you have the whole slow done coming in the economy. there is a lot of pressure on xi. tom: one more question before we go to frankfurt. it is a totalitarian regime, and they have an ample set of tools to fix this. who do they focus on, the developers? enda: we are getting hints of

that. there is a state backed fund to help developers, but it will be getting money to finished projects. the regulator making clear that those flats that have not been finished, they will be finished. ultimately, the people who bought the flats will be made whole. the investors may have to take a haircut. jonathan: tell me what you are hearing, what is being reported in the mainland. any reports of social unrest falling over? enda: certainly signs of a lot of unhappiness. combine that with the mortgage boycotts, that is a striking move, a side of discontent. but we have not seen anything broader than that. that is why authorities are moving fast with this solution, make sure that these flats get finished and that the homebuyers are made whole. jonathan: wonderful to get your perspective on all of this. social unrest, the real threat

for the chinese communist party, which to his point, they are trying to address this before we even get to that position. tom: the council on foreign relations, preached quietly and a lonely, the fragility here is greater that we proceed. we look at xi as omnipotent. he is not. that is what she says. jonathan: others are joining that position in the last couple of months. tom: liz has been adamant that it is far more fragile than the western media plays it. it was my book of the summer, five summers ago. jonathan: i always forget. tom: my book of the summer five years ago was the frankfurt lunch. it is like a john cheever thing that starts with remove and then end with gin.

i think this is timely. we can bring kailey and bramo. francine can jet down. kailey: as long as there is gelato. tom: i will be there overlooking. jonathan: you are selling it to management. featured down .2% on the s&p 500. 8:15 eastern time, your ecb rate decision. it is about 20 minutes away.

so many people are overweight now and asking themselves, "why can't i lose weight?" for most, the reason is insulin resistance, and they don't even know they have it. conventional starvation diets don't address insulin resistance. that's why they don't work. now, there's golo. golo helps with insulin resistance, getting rid of sugar cravings, helps control stress and emotional eating, and losing weight. go to golo.com and see how golo can change your life. that's g-o-l-o.com.

>> the fed will have no choice but to stay aggressive. >> we should be prepared for if that needs to hike more than the markets are dissipating. >> in the eurozone's case, we