>> the fed has to do his job to get inflation down. >> the fed's hiking interest rates into a known slowdown in the market. this is something that they don't normally do. >> we have heard from a lot of companies that they are thinking the following environment is going to be more challenging. >> higher inflation and policy tightening raises the prospect of a pretty significant slowdown. >> we are seeing signs that global, growth is decelerating at a pretty rapid clip here. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: live from new york

city, for our audience worldwide, good morning. this is "bloomberg surveillance" on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. futures up 0.5%. said it a few times already this morning. what a week coming up. tom: it is a nice time to recalibrate. that has been my theme here. the fed meeting clearly the key thing. we remind lisa that she's doing the show. we've got a great set of guests coming up. the s&p 500 with a recent lift is a correction. it is down 10%. it is not that bad out there. tom: we are beings of -- jonathan: we are being supported by lower yields because the data is weak, so what are you going to trade, the week data, the lower yields? tom: i think earnings have surprised on the upside. there's a lot of people keeping score of this. i think julian emanuel is doing a great job on it, and earnings

have been ok. jonathan: is snapchat your bellwether? tom: it my bellwether. can we all get over it? jonathan: snap, twitter. looking ahead to alphabet, facebook or get they are the heavyweights for america and worldwide. lisa: 20% of the index is going to report this week, comprised of those five names which are going to be coming out on tuesday. how much do we get a sense of the slowdown in consumer demand that is going to affect some of the cash cows of the market, but have not been priced in? people have been really resilient and have shrugged off disappointments and earnings much more than in previous years. how much is this basically where valuations are versus real optimism baked into something real? jonathan: that pmi last week was terrible. i'm looking ahead to see if we get confirmation of that because that was pretty brutal. does anything change for the fed this week? teeing up a move in september? lisa: they will definitely go

75. that seems to be the consensus. they are by simply taking a 100 basis point rate hike off the table. after that, how much guidance can they actually give? what data are they looking at? how much are they going to forecast anything? jonathan: guidance is dead. takeaway of last week, for the ecb, too. tom: i thought that was the key thing for the ecb. we have not talked about tpi. jonathan: what did marcus ashworth call it, to predict italy? tpi? tom: the first thing i looked at this one was italian spreads, which i guess are ok is how i would put it this morning. jonathan: futures are ok, up 0.4% this morning on the nasdaq 100. yields are higher by five basis points. 2.80% on the 10 year. crude higher than 1%. euro-dollar, 1.0223. welcome back, bramo.

lisa: it is good to be back. today is going to be a huge game changer for a slew of reasons, the first being these big tech earnings we are talking about. alphabet, microsoft, meta, amazon, why is pinterest there? i am not sure. [laughter] sorry, i am just going to be honest. i know tom really likes pinterest. tom: dow component. jonathan: is that another bellwether for you? tom: it is, exactly. lisa: wednesday we've got the rate decision and press conference. how much do they talk about not only inflation and out of they are looking on at that friend versus what they are seeing in the on employment picture? how much can unemployment rise before they respond to that in addition to just combating inflation? this is a key aspect when people talk about when the fed might dial back rate hikes or even reverse some, which a lot of people are baking and for 2023. this week we get a slew of economic data. interesting on thursday, the

second quarter gdp print for united states, if it comes in negative, would mean a technical recession. we also get that key employment cost index on friday, as well as university of michigan sentiment data. if we look at what the fed is data dependent on, we have seen both of those indicators with respect to the right decisions, so maybe we will get some guidance for the following meeting in september. jonathan: i will just be focused on pinterest numbers this week. [laughter] lisa: me too. jonathan: sarah hunt joins us now. your line, this market what the weather in's places. don't like it. wait a few minutes, it will change. do we have to get used to that? sarah: i think we do. you have so many different crosscurrents going on in so many different forces acting on the market that you have these little moments where it is all about inflation, and then it is all about recession coming out is about the fed, now it is

about the ecb. i think you are just in a period of volatility because you have a lot of different things going on right now and people are focusing on them in different moments. tom: you have a great single line in your essay on snap, and the level of snark is off the charts. is snap really a bellwether? explain the massive divide you see now between substantial and persistent free cash flow companies and the rest of this noise out there. sarah: that is really the key. we have been talking about that since the beginning of the year. really, what you need to focus on his companies that have a business model that has been sustainable through a cycle because right now we have a cycle of things that are slowing. you can argue about whether or not is a recession or slow down. it is definitely a loss of momentum and we definitely see some problems in all of that. you are going to cut advertising, but are you going to cut it from google first or other platforms first? that is sort of where i was

going with that. it is not about trying to be mean to snap or get it is about saying if you're going to pull back on advertising, that is going to happen. but is it going to happen across the bigger platforms as much as across the smaller platforms? i'm not sure that is the case. lisa: how much are some of these bellwethers that are the big tech companies going to potentially shift the view in markets to be sort of a pivot point from the optimism we saw last week going into the recession that so many people expect? sarah: even though google had good numbers last time, the stock was higher and then came down. i think you are fighting to different forces, one of which is individual fundamentals for each of these companies, and the other one is technology as a whole versus interest rates. i think right now technology as a whole is suffering under both the interest rate cycle and the profitability cycle, but there's not a lot of differentiation on the investor side yet. i think that comes as we get further along. lisa: goldman sachs has talked about the strong dollar and how that is going to reduce

earnings-per-share by 1% to 2% in a way that perhaps has not been big in two valuations. how do you have value wait the dollar strength up until a couple of days ago and how that is going to factor? sarah: i think the faster, the hired the dollar has moved and the weaker other currencies, do people worry as much is about the currency translation issue, or do they look at the united states and see an equity market that is in better economic shape than some of the other equity markets globally? ultimately that will trump the factor of whether or not the dollar strong is a problem, but it is going to be in ways that people have not necessarily calculated yet. jonathan: awesome to hear from you. sarah hunt of alpine saxon woods. none of us around these tables thinks that snapchat or twitter are bellwethers, but ultimately it has certainly sharpened the focused, reinforced the focus on

alphabet and meta later this week. tom: i just flat out don't agree. granted, facebook has its own challenges. i get that. but i think the media conflation of all different types of tech is way off. jonathan: let me be more specific since you disagree. the ad revenue pieces of those two companies, that is going to be a big focus for a lot of people tom: i agree. and amazon has their new burgeoning ad business. joe feldman right about that five days ago or so. there's the big agile players. i get, that they are the future of advertising revenue, if you will. it is worth watching. look at apple. pre-pandemic, apple was fairly getting by with $59 billion of free cash flow. just early getting by. we are modeling on the bloomberg screen $109 billion for this

fiscal year ending this autumn. they are doing terrible. jonathan: cash machine. we know how well they are doing. tom: but we have quite to snap. jonathan: i don't think anyone is doing that. tom: i think a lot of people in the parlor game conflate all that stuff, and i just don't buy it. jonathan: snapchat and apple, two companies i don't think either of us whatever complete. lisa: i will let you guys work this out in the break, but i do think there's an issue here when you to start to see the cash cows. i'm glad you put that cash flow into perspective. what happens when one of those cash flow companies starts to discount items not only in china, but in the united states after seeing lines out the door? what happens with microsoft reporting earnings this week, perhaps to talk about why they have been reducing the jobs plan?

how much does this serve as a massive bellwether regardless of the cash flow that we know they have? tom: i don't think it is massive. i think it is at the margin. if you bring up the price of a product, unit sales go up. that is part of the elasticity of price down. we be the cello yacht of you it -- maybe they sell a lot of units in china. jonathan: the goal is to take some demand away, to take some heat out of the labor market. i would say seeing those big tech companies pull back on job openings not in their workforce, perhaps that might be seen as a desirable outcome. tom: over the weekend, every single conversation devolves back to rent. with the fed is really focusing on is taking the oomph out of the housing market. jonathan: stick here for a longer. that is shaping the debate about how far this federal reserve is going to have to go and why enter hollen horse is still 4%

year-end on federal funds. lisa: every conversation has to do with rent because tom tried to sell me an apartment to rent over the weekend. he actually gave me a tour and tried to get me to join in. jonathan: and spend more money on rent. a lot more money on rent. futures up 0.5% on the s&p. from new york, this is bloomberg. leigh-ann: keeping you up to date with news from around the world, with the first word, i'm leigh-ann gerrans. treasury secretary janet yellen said she does not see any sign that the u.s. economy is in a broad recession. she has told nbc that the u.s. is likely to see some slowing of job creation but said that is not recession. she also expressed confidence in the federal reserve's fight against inflation. the european central bank may not be done with big increases in interest rates after last week's half-point hike. the governing council number has

set the rate increase in september also needs to be quite significant. the ecb is trying to reduce inflation that is already more than four times it's 2% target. here in the u.k., liz truss says if she is the next prime minister, she would invest investment -- she would fund investment zones. her rival in the race is rishi sunak, who has pledged to crack down china's influence in the u.k. he calls the biggest long-term threat to britain. 11 musk is denying he had an affair with sergey brin's wife. the alleged affair took place in december. the newspaper says that the cofounder of google sold his investments in musk's company. musk says the story is untrue and that he is still friends with brin. global news 24 hours a day, on air and on bloomberg quick, powered by more than 2700 journalists and analysts in more

than 120 countries. i'm leigh-ann gerrans. this is bloomberg. ♪

>> i actually think that just the right thing to do is to raise taxes right now to take some of the demand out of the

economy. jonathan: larry summers, always popular. the harvard university president emeritus. i don't think that is going to be popular at all. on the nasdaq 100, up 0.5%. yields higher by five basis points. 2.8032% on the 10 year. data out of europe not great. german business confidence soft, rolling over. we are positive there is a -- positive there 0.3%. maybe the big hikes aren't done with the first one. we could get another one in september. tom: the parlor game front and center today. i just look at the pricing and see west texas intermediate, certainly a welcome sign. opper, barely look at that today, but copper in stasis. e.m. stored of -- e.m. sort of stasis on a heat wave may be ending across the coast this morning. annmarie hordern is in it, 1600

pennsylvania avenue, and joins us cool, calm and collected this morning. you try to figure out the plan for september. what is the plan? what is the urgency to change the bodies in the cabinet and the white house? annmarie: first, there is a lack of urgency at the moment for anything at the white house because the president is still in isolation, quarantining because he has covid-19. virtually he is joining meanings and everything, working around the clock. for september and october, it is really going to be about making sure that he is making this crucial domestic stop because they are concerned about the midterm election. everything from now on is going to be about the midterm election. you have the house on the senate rushing to get a number of those done before the going talk is recess because -- go into august recess because they know when they come back, everyone is

focused on getting reelected. tom: the former president may run. i get that. bring it over to the president of the united states. what do democrats want from their leader? annmarie: a majority of democrats, polled in "the new york times," do not want him to run. they think that there needs to be a new shift in leadership, and it is not exactly personal, but he would be in his 80's at he was going to be running again for 2024. they think they're just needs to be a new leadership for the democratic party. the issue you have, if the president says he is not seeking reelection, the set make his presidency a lame-duck? others like we saw on the washington post think it could give his words more conviction and you hear them whispering in

parts of washington how to prepare a future bet. tom: why is -- lisa: why is nancy pelosi going to taiwan? annmarie: we don't know yet for sure she is going to taiwan. she's taking a trip to asia, but the president said the military advised that is not a good idea. the fiery rhetoric continues out of beijing. this morning we heard from the foreign ministry spokesman saying they are getting strongly prepared for this visit. she clearly wants to make a stance about standing with taiwan. it would be quite a political statement. we've not had a speaker of the house go to taiwan since 1997 when it was newt gingrich, and at this moment there's a lot of issues, combative issues between beijing and washington. we should also note this is useful for xi jinping at the moment. he is struggling domestically with the covid zero policy, what is going on with the mortgage rates. a number of issues.

youth unemployment, and now he is able to deflect a lot right now on this relationship. lisa: it is also a soup when it comes to the u.s. religion should with china, but having to do with how they are going to do with tariffs, how they are going to do with the trade relationship at a time of increasing fraying, as well as a possible partnership between china and russia that has really ruffled some feathers. across the world, where are we in terms of the tariffs and lifting those to ease inflation domestically? annmarie: we still don't know. the end adminstration continues to say they are weighing it, but we have still no clear decision on what they're doing on what would be a smaller amount of trump era tariffs, consumer goods like bicycles, sweaters, etc. because their number one concern is inflation. many on the -- on the economic side say that is your number one concern. this is something you could do.

it won't be a lot of pressure, but it could ease some of that pressure. the trades are dusty trade -- the trade ca -- the trade czar and others saying that leaves us with less options in the future. maybe some news on that front soon. . jonathan: thank you. do your point, the tension with speaker pelosi and president xi, that's the oldest in the playbook, isn't it? lisa: how much is this going to benefit versus backfire? mark milley, the chief of the armed forces for the united states, came out to our chinese officials. how much is this aggravating some of the tensions that exist? they are going to be very

difficult given the conflict already happening with respect to russia's invasion of ukraine. jonathan: tk, what do you make of this? tom: everything is about the party congress. absolutely definitive on this. we are completely fixated on the permanence of beijing. the chinese aren't. jonathan: the vulnerability of president xi that comes up again and again. tom: way below the radar. it is something we have to be aware of. i don't have any strong feeling on taiwan other than it has been there since my childhood. the whole debate about it. but i think the real focus point has to be on watching china. we have given up doing that because we believe there a permanence to president xi. i don't buy it for a minute. jonathan: collin martin will weigh in on some of these things from the schwab center of financial research. ahead of that, futures up 0.6% on the s&p 500.

you sense a theme here. crude, a lift at 1.2%. tom: do i extend out to triple leveraged all-cash? i'm not there. lisa: how are you the acme of optimism, quadruple leveraged cash? you're going to tell us it is all about cash flow at these companies. jonathan: are you saying that tom's position and is you -- tom: jon, google. come on. a gazillion dollars of free cash flow. over double now. $74 billion. wow.

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jonathan: so accepting that interest earnings raising this week. a good week ahead for earnings, 20% of the s&p 500 reporting across five names. futures this morning up half of 1% for the s&p. the nasdaq, up half of 1% also. a big week of gains last week, the biggest coming back to june

about a month ago. in the bond market, we talked about this all morning, the growing tension between weak economic data and a hawkish federal reserve. is that desirable or undesirable? jobless claims planning for three straight weeks, really, really weak last week. ruth yields lower at the front end by 25 basis points. monday, up by three basis points. the curve just getting into bit steeper. the euro, more hawkish central banks as well. german business companies, terrible. yet we still have one point to make this morning, another big move. how much weakness is the ecb? tom: i am glad they are talking it up and i guess that keeps it going forward, but i think as we said through the morning, it is

20, 30, 40 years. this is different in 1994. they got to wait for the data. jonathan: which data are the dependent on? tom: politically, gas and all that. i think it is a much more gdp-sensitive analysis in europe then it is here. jonathan: just a little bit stronger. let's get some single lanes with lisa. lisa: we can talk about how to apply for a kitchen renovation. what i am looking at today are a slew of the big tech names being reported. apple shares up, alphabet, google up. not massive. but i am really looking for this week is how much of the earnings have been priced in. among the big tech, how much are we talking about desirability of

the iphone regardless of the economic cycle? regardless of any price increases? how much does that mean with china cutting prices and indicating something broader? also, we are going to hear from a number of economy producers. how much do we see the increase in the prices of iron ore increase in demand paired with the slow down that we are seeing in china, really come to a head with some sort of forecast? in this area, those up 3.3% today ahead of the open. exxon and chevron reporting on friday an issue as we were talking about earlier, tom. considering that the president has talked about price gouging, how much do they represent that greediness and profitability in a time when they already had several years up, despite the fact that crude is down at the lowest level going back to february? tom: thanks, lisa.

is going to be interesting to see. right now with the bloomberg index, the corporate index, the ig index down 13%, it is a good time to catch up with income strategist for financial research. colin, to cut to the chase, i'm opening the envelope, 3, 4, 5 months, even a year down in my bond portfolio. how do i begin to recover? colin: well, you need time, unfortunately. that is the one thing we are telling our clients. the good thing about bonds is that the prices should recover. that doesn't necessarily help if you are in a bond etf, and that is the most challenging aspect, because those prices don't necessarily need to run, and they might not recover anytime soon. that is the challenging part of what we are trying to tell our

clients. coming into this year, we could suggest a slightly lower mark. importantly, those returns are still down. the good news, yields are pretty high right now. this is an opportunity and frankly, we know that there are still a lot of clients, none of investors. tom: where in the continuum from apple is half a percent yield? let's say, for example, not taking part in the energy bill? where is the best value? collin: we do prefer investment-great over high-yield right now.

we are cautious on the junky issues out there, especially anyone distressed right now. what we are seeing in the earnings reports is the earnings are pretty disappointing. we are seeing costs everywhere rise whether it is labor costs, interest cost, or borrowing costs. all of those things are going to eat into corporate profit and the demand is strong right now. the value propagation right now, back below 5%. given all the economic risk for corporate profits, we would rather wait for spreads to move up a little bit or yields to move up a little bit for we are more excited about the high-yield bonds. lisa: we are watching the biggest monthly rally to april and may of 2020 when the fed unleashed its bazooka. how much is this a signal to the rally of something that is

giving the stock market confidence versus high degree of noise taking yields because they haven't seen it in so long? collin: i think it could be the latter. even in the risk is just a high number. the past month or so, we saw expectations surge about how high they were going to spite, and he did come down. they wouldn't necessarily need to hike as much. but we are just some concern for those risks that i mentioned before. the bond, we don't think we are going to 2008-2009 levels.

the upside to 200 300 basis points is likely to us. we would be kind of on the sidelines right now waiting for a better opportunity. lisa: it doesn't sound like you're particularly alarmed, especially when you said it draws a distinction for 2008 and 2009. bruce cashman of jp morgan said he is also looking for areas of leverage but not seeing them necessarily in credit markets. are there any areas in the debt complex that are different, that might have the nose if something could be more contagious and more difficult? collin: you know, we are really not seeing that too much here. it is more negative. we expect growth to continue to slow, and we talk about contagion, depth of the recession. we all think it is going to be that bad. we think is going to be more mild and should result in not the end of her scenarios or get

out of every type of investing. and again, the main point, we do think it should present opportunities later this year. jonathan: collin martin, schwab center for financial research. all three of them said they think we see the highest of the 10 year this year. that was it, close to 3.50. all three of them said that we have not seen the high-yield, pushing back against that 100 basis points over the last month or so. lisa: if you think about it logically, if you think about the credit spread representing the risk, why would it be contracting less risk heading into a recession, a weakening economy? that doesn't make a lot of logical sense. edifying what they are talking about, that would be the reason to push back. that said, if the fed has

cutting rates next year, how much of the reversal do they give to companies that are already well-financed into perpetuity? jonathan: you could make a call on how much damage is done in between the economy and what the stories will look like. tom: i would look at the damage done in bond portfolios. you and i have been talking about this from day one, bloomberg total return index. i just looked at one health care name down 22%. this is a triple, but it is a really high-quality name, 22%. now it is down only 13%. it takes five years of the present yield to makeup what you see. granted, that can happen shorter, but the bond-bear market we are in right now is absolutely real. absolutely original. jonathan: on the same page. the central bank is speaking a lot this morning. the governing council. we will know fragmentation when

we see it. that is helpful, isn't it? tom: great. you know so well. the project syndicate. i will put it out again, folks. he just simply walks through the foolishness of it. and he does it with respect. he is not bad mouthing anybody. jonathan: the most effective you never have to use. they cleaning carpet tool they don't ever want to have to use. tom: i'm sorry, these guys are just shaking their heads. jonathan: futures up half of 1% on the s&p and the nasdaq.

you know it when you see it. fragmentation. lisa. fragmentation. you missed a great one last week, you would be did. lisa: i like that. jonathan: are you just a little bit jealous that you were not watching that meeting? lisa: oh, yeah. jonathan: this is bloomberg. >> keeping you up-to-date with news from around the world with the first word news, the federal reserve will probably cut much more pain on the economy to get inflation under control after raising rates in june. policymakers are expected this week to improve another 75 basis point hike and they are likely to signal their intention to keep moving higher in those month ahead. now, a russian cruise missile strike on the port of odessa have passed a commitment to the

agreement on ukrainian grain exports. they also say shipment corridors -- russia says the missile attack targeted ukrainian military infrastructure. hong kong reportedly plans to reduce quarantine for arrivals. according to local media, one proposal calls for five days of hotel quarantine. after that, travelers would be issued the yellow health code which would prohibit them from entering high-risk areas. the investment banks are starting a global blockchain deal. the company is beginning its efforts in the middle of the so-called crypto winter. meanwhile, the price of bitcoin has plunged to less than one third of its record high of more than 68 per $1000.

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. this is bloomberg.

>> i think inflation is going to stay. some is going to get worse. the big question is, are we in a recession or not? you never know, you need to prepare for macro economic scenarios. jonathan: good morning, futures look like this. off the back of the weaker gains we had last week, yields higher by six basis points. the curve, a bit steeper today, at the long end.

euro-dollar, positive a quarter of 1%. early in the week, stay out of the heat. really good book. hopefully, you get more conductivity on the fed later this week. tom: i really can't say enough about that. stay cool out there, folks. right now, the temperature in china is freezing. lisa: rural china, that has been a trade-off that has been in the bond market. if you are looking for yields, where do you invest in the bond market? is that the u.s. market, where you do have extremely hawkish federal reserve and really take advantage of those interest rates? we are looking at the u.s.-china yield differential, when the line goes up. it goes over that zero point line. you do see that there is this

extra for u.s. treasuries relative to china. when it drops down, it is the opposite, and right now, it is hovering at zero. we are talking about this in the state at a time when people are hesitant to invest in chinese bonds. do you stay with the u.s. and perhaps lower yields? tom: right now, the bloomberg sheet asia economics correspondent, and a lot of things to talk about. i want to get out front in july towards the party congress believed to be november. this is the 20th, and the great distinction seems to be what will happen with president gee, and the symbolism of a general secretary or perhaps being a chairman as mao was in 1982.

tell us about a party congress in what they do with their fearless leader. >> every five years, members of the commerce party come together . then, they push forward for the next five years ahead. normally, it was expected that it would have marked the end of president xi's term. he won't be just getting that third term, it will be the language getting codified as well which will basically be can stating and as china's sovereign ruler. certainly, it won't be just a new term, it will be enshrining a place in the future of where

china is going under this new era. so will be a show of strength quite unprecedented in recent times. tom: is there an urgency to get to november? >> you would have to say there is. as you know china, is always hard to gauge what is going on with public opinion. omicron has really tested the covid zero strategy. we have the ongoing --. open-source social media, and of course, the geopolitical backdrop, lots of tension with

the u.s. and europe. i would say yes, the authorities are quite keen to get stabilizing and on the economy front, the ability to leave congress on a good base. i would say they don't want a widespread public health disaster, either, so that is worth thinking about. lisa: given the fact that housing is a huge portion of chinese economy, how much is this congress believed to support the housing market considering it has been crashing or there have been issues with the development sector, but also reduced with the leverage that would put the economy, and large part, through the housing sector. >> the three red lines, last year when the economy was going well, the leverage and the risk-taking, but of course, easy

open to regulations. we are seeing authorities move now with a loan that might be coming to inject money to reinstate developers and companies. of course, other measures are being taken with a window of forgiveness, an unusual feature of china's market. the authorities are moving on what is happening in the sector, and to your point, they really want to try to put that under congress. lisa: do you think people are overestimating or underestimating how much demand has slowed down in china with basic commodities, especially when one of the factors has taken some of the heat from these gains we have seen in prices? >> it is tough to call.

there are those who say china is turning a corner, and others saying look, things are still pretty bad on the ground. i think it is hard to gauge, but what i would say is the hole in the demand feels very real. jonathan: thank you. always great to catch up with you. lisa, if you're going to deliver 3% gdp growth any country like china, that is going to come with problems. we are talking about those problems. lisa: and how much we pay that into some of the slowdowns we've seen for gas and oil prices, but also with respect to iron ore, absolutely surged.

4.0% is the median estimate so far. tom: maybe a little bit under that, 5.8%. that is where every discussion starts. jonathan: when do you hear this? $89 off. from new york city, this is bloomberg.

>> what the federal reserve wants to see is that there is a trend that is down in nation. >> really understand that there is nothing that can damage their credibility more than sustained