>> the consumer is not as resilient as they have been in the past and that more sensitive to prices. >> stagflation is a precondition for a growth inflation. >> the world is changing. economic volatility is so much higher now. >> the market shifted completely away from inflation concerns to recession concerns. >> for most people, it looks and feels like a recession.

>> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: here comes another fed rate hike. good morning, this is "bloomberg surveillance" live on tv and radio. alongside tom keene and lisa abramowicz, i am jonathan ferro. we look for another 75. tom: bristol-myers squibb, adp, all that comes down to is it is better than good. you see it with google, microsoft, the world coming to an end at 4:15, 4:20, you get to the morning and guess what? they are up. jonathan: resilience given what we have seen. tom: i think this wraps around what chairman powell will have to say today. we are getting along. are we in the crisis as we try

to bring inflation down? the debate we are having on the show is fabulous. jonathan: there are things happening by umoja in this fed wants to see, maybe job openings come down, more demand coming out of the labor market. we want to see an adjustment in the housing sector. gasoline prices are lower. are we ticking boxes? lisa: the problem is if the market goes ahead of the fed, so much further than the fed would like. perhaps we are ticking boxes now, but i can happen in a somewhat sudden fashion. all the sudden the market turns and economy turns and the fed finds itself to type. how much -- too tight. there are signs that certain aspects of inflation are softening, i.e. walmart, without inventory glut, having to price it down.

jonathan: how do they acknowledge the weakness we are seeing in this news conference? how does that tee us up for september? lisa: they will look at the weakness we are seeing and say this is what we need to see but the inflation is still there and that needs to be how we combat. this is what people will be looking at after the fed meeting. at what point does the conversation change to how much the unemployment rate has to rise before the fed talks about the labor market mandate. jonathan: and is it rising when they get to september? alphabet is higher by 3.7%. on the nasdaq 100, up 1.4%. yields are in, a basis point or so. the euro showing a little bit of strength. crude back to a $96 handle.

lisa: natural gas prices in europe have surged to a new high. a weaker europe. here is what i'm looking at. pending home sales. this has been one area of absolute devastation if you look at how much the volume has plummeted in the transaction data. we got new home sales plunging to the lowest levels going back two years. at what point do we see an ongoing weakening that is not reflected in prices? it highlights how quickly the market is responding to what the fed is doing. 2:00, we get the decision, 2:30, a press conference. we get to speak to some wonderful guests starting at 1:30. joining us to parse through what we should be looking for and what the fed is trying to say. some of these commentaries have been more immediate -- more

accurate than the immediate knee-jerk reaction. earnings continue after the bell. qualcomm, facebook and ford motor, a complete selloff. how much has been priced in? we are not hearing the best news? they are not stellar earnings. a lot have been below average if you look at historical quarterly earnings. at what point do we just see a market saying, at least it is not the worst case scenario? jonathan: facebook has been an ugly story. bankim chadha joins us now. are we seeing signs in this earnings season of rising corporate risk aversion? bankim: so far, i would not characterize the earnings season as showing widespread or

broad-based signs of corporate risk aversion. if you take a wider look if we are going into a recession, what i would argue is we are doing so pretty slowly. i would put it as pretty surely but slowly. as far as earnings are concerned, as of yesterday evening, below average beats. s&p 500 earnings always beat by about 5%. we are running at about half of that right now and that will keep changing. the important thing to keep in mind since we are talking about recessions and we are concerned about declines, this is the first quarter in two years while the headline number looks lined at 6%, 7%, 8% growth, a lot of

that is coming from energy, which we know is all about oil prices. earnings are down for the first time year-over-year. you look at it sequentially, they are down by a good 3%. tom: what is so important, you and i could talk about this for three hours another -- and never run out of questions. i want to cut to the chase, sector analysis has to be critical. how do you choose which sectors to go into? you are at a table with someone foaming at the mouth about a weak dollar. forget about it. three years out, how do you choose which sectors win bankim:? bankim:you have to play the sectors according to your view on where you are at in the cycle and where we are going. the probabilities of recession have gone up. tom: what is your overweight sector? bankim: staples in the health

care. tom: united health care has a drawdown of 2%. nobody knows that. gloom, gloom, gloom. united health care is down 2%. that is the resilience, right? bankim: it is, but you have to keep in mind also, your question was over the next three years, i would not keep it stable in terms of your sector preferences. i think it is important to keep in mind that everything goes down in a recession, it is a question of when in the cycle. health care holds up but they do go down. if you look at sector performance across recessions, they outperform modestly because eventually they do sell off. lisa: i want to double down on

something you were saying that i think is truly fascinating. it will take more than misses, it will take that caution from c-suite to drive valuations lower. at what point do we know we have seen the caution? ford is cutting jobs, microsoft, google, everyone is basically. hiring expectations at what point does this qualify as caution? bankim: i would tee off on a remark he made earlier, things can happen suddenly. the way i would characterize it is recessions are inherently nonlinear events. many of the things you mentioned are pieces of cautious news and they are piled up into one. there is plenty that is negative. we are definitely drifting down

as far as the economy is concerned. we are doing so slowly. it means you are vulnerable to a negative shock but it also means the inherent dynamics at some point, some bigger moves in terms of an employer, idiosyncratic shock. so far, it is slowing down the hiring, modest layoffs, it is not a big, nonlinear event. everything is pointing in the direction of us going into a recession. jonathan: slowly but surely, or surely but slowly. awesome to catch up. just worked the numbers for you. apple's market cap is five times bigger than unitedhealth. tom: it is amazing. jonathan: thousand that just defeat your own argument -- doesn't that just defeat your

own argument? tom: what is stunning is united health care has not pulled back like apple. the 10 year annual return on unh is a stunning 28%, or apple is 22%. how money people watching to this or listening to this would see a boring hospital company will outperform apple, apple, apple? nobody believes that other than bankim chadha. jonathan: to binky 's point, his sector picks were defensive. tom: i am in the chada dow jones industrial fund. jonathan: futures up .75% on the s&p.

you were meant to step in and stop this stuff. lisa: i am enjoying it. jonathan: facebook coming up a little bit later. apple and amazon coming out tomorrow. from new york, this is bloomberg. ♪ leigh-ann: keeping you up-to-date with news from around the road with the first word news. i am leigh-ann gerrans. the federal reserve is expected to raise interest rates by another 75 basis points today. looking at the language of the fed's statement to see what it thinks of the path ahead. likely to acknowledge there are recent signs the economy is weakening. president joe biden will meet with china's xi tomorrow. the call will take place during a difficult juncture of u.s.-china relations.

nancy pelosi could visit taiwan next month. the first shiny city to impose a coronavirus lockdown has imposed another. wuhan has locked down a district of almost 1 million people after cases were found. people have been told to stay in their homes. for the second night in a row, the two conservative candidates to succeed british prime minister boris johnson were in a televised debate. they talked about the economy and each accused each other of pursuing policies that are morally wrong. the debate was cut short when the moderator fainted. credit suisse has tapped a veteran banker to be its new chief executive officer. there will be a strategic review of the bank and other

businesses. he will succeed the person resigning after two years of mark my scandal and huge losses. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

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>> you have the job market very strong, you have inflation still

running hot and at the same time you have gdp growth stalling out. the fed has to figure out how hard to step on the brake. that is a messy proposition. jonathan: "messy" is the right word. this is fed decision day. with tom keene and lisa abramowicz, i am jonathan ferro. on the nasdaq 100, up 1.3%. yields unchanged. euro dollar showing some strength. our attention right now on president xi. he is delivering a speech to local government officials. xi is saying the party congress has a major task for the next five years with the challenges the china faces and they are more complicated than before.

speaker pelosi's potential visit to taiwan. this is from mitch mcconnell, he basically said nancy pelosi not going to taiwan would hand china a victory. pressure coming from the other side of the aisle about the speaker actually going. tom: the headline here is it is july 27 fed day and she is scheduled for august at some point. we will have to see on that. two this fed meeting today, the divide of the middle class in this country, from the haves, we spoke to annmarie hordern on the great middle-class. the pew research people showed a poll ages ago, mitt romney-barack obama, a massive divide and policy of the haves,

the wealthy, and the have nots. the have nots are being crushed by a set of inflations. does your washington knew there is a middle-class out there? annmarie: both sides are trying to talk to the middle class. they say they have the better policies to try to make sure they can rejuvenate and boost the middle class. it is true, there is a bigger socioeconomic divide. you really saw it during covid. it grew larger and larger. those that have investments in the stock market or have good jobs, they were saving even more. their wealth was rising while others were losing jobs, did not have a lot of money in the stock market and were struggling. inflation hits everyone. everyone feels price pressure, inflation. it obviously hurts lower income

individuals and the middle class much more. tom: is it like bush saying long ago, it is the economy, stupid? is this how odd it is what the debate of the middle class with the haves inside the beltway? annmarie: poll aftre poll, it is inflation at the top of voters' minds. individuals usually go to the polls depending on where they are in terms of their grocery list, gas prices, etc. the vice president came out talking about how gas prices are now lower. today, the aaa average is $4.30. this election will be interesting because there is another issue at hand that the democrats will push forward and

that will affect women. that is of course women's reproductive rights. lisa: i want to focus on the gas issue because we heard a proposal out of the white house to potentially offer guaranteed purchases of gasoline, crude later on as they release some of the reserves. basically guaranteeing demand for a lot of big oil companies later so the increased production now. how do people respond to the new wanting of some of the tools this white house is using to combat gas prices. annmarie: i think the majority of americans do not really care about how it is happening. what levers are you pulling, who is increasing production. is it the kingdom? houston? they just want to see the price go down. i think that is broadly how americans feel. it is a difficult one for the administration because at the same time, they want more

natural gas production, more oil production coming out of the u.s. they want to see it coming out of the rest of the world. they want to make sure russian oil stays on the market. they are also pushing a clean agenda. it is very hard sometimes to get these oil and gas producers to want to sign up for infrastructure that takes 5, 10, 15 years of investment when what they are saying is we need your oil today but we religion not wanted in the future. jonathan: how did this thing about explaining what is and is not a recession begin? annmarie: i think it started a few days ago when the white house posted a blog on their website discussing what a recession is. it is clearly nervousness within the white house and the treasury about if we get a negative -- what people will say is we are in a technical recession.

that is not the definition, back to back consecutive quarters of negative growth. what they are worried about is how this will be talked about in the press and the media. if you do a bloomberg terminal search, the word recession is in the media. they are trying to get ahead of potentially bad news but the issue and the rest they have is they might have dug themselves a whole -- a hole. jonathan: we are talking about it now. down in d.c., annmarie, thank you. credit suisse is looking for a negative print tomorrow bloomberg economics is looking for a negative print tomorrow. you keep going through the names, pantheon, bank of america, there are a lot of names looking for it.

there are some names out there looking for it. tom: i will really look at what the pros are looking at. what we are hearing from pros is esoteric. the inventory build could be the swing either way. jonathan: underlying demand, what does it look like? lisa: how are they going to position this? housing prices, rent is climbing so significantly. people are facing bills that are unaffordable based on their pay. jonathan: brutal. futures up 9% -- futures up .9% on the s&p. jp morgan now seeing a recession in the europe. the new outlooks getting slashed by the minute.

jonathan: this equity market bond the day after the fair last-minute. we have rallied ever since. up .8% on the s&p. the nasdaq up by 1.4%, helped out by two names that we can build on in a moment.

in the bond market, twos, tens, 30's looking like this. i want to spend some time on the euro. jp morgan the latest look for a recession by year-end. we look for a combination of higher european natural gas prices, political risk to slow eurozone gdp. when it comes to the euro. they are not looking for 50 in september. two more 25 basis point rate hikes by year end, and then we are not. tom: the guests and people have coming up will lean toward that angle. what will bill dudley tell us this afternoon? jonathan: bill has made the point since june of last year that this federal have to do

more and go higher than people thought. tom: i just cannot say enough, when you do a debate to inform people, so ultimately they can make investment decisions on retirement plans. i was not going to retire but i'm considering it now. jonathan: later, it's important to point out, our feta show, but we were speaking to people who were right. mohamed el-erian, mr. dudley. futures positive. a couple names responsible for that move. lisa: microsoft and alphabet. they didn't come out as bad as expected, came out with positive forecasts. microsoft is up 3.3% ahead of the open. how much does this, the landscape for the other companies?

paypal holdings up 6.6%. elliott investment management has amassed a big stake in the company to accelerate job cuts. that is the other thing that i'm looking for, how many companies talk about job cuts as they look at a weaker potential scenario? shopify came out yesterday and said they were planning to cut 10% of their staff, about 1000 people. haves and have-nots. also looking at some of the other companies going to reporting including facebook, meta. jonathan: why don't you like it so much? lisa: up 2.4%.

i don't fit we should look at the tick by tick movements but what has been priced in already? down 50% year to date, so 2.4 percent is not really significant. but does this indicate at the bottom is in? amazon shares up 1.4%. apple shares up 0.8%. how much do we see the resilience in the physical goods at a time when apple is cutting pricing? tom: we did this earlier on china. apple on china will be a complete mystery. lisa: and how much does this replicate what we are seeing elsewhere or is this just a china story? tom: bowing out with earnings. no idea what they are other than i cannot afford a plane ticket. they are all about free cash flow. i remind campers, boeing is down

63%. it is not airbus, to say the least. right now we will go to yield. bob miller is the head of fixed income at blackrock. you are the perfect want to talk to about the fed debate, that they will act and then wait, watch for data. or they will act boldly like paul volcker. which do you think they will do? bob: today, i think chair powell will try to thread the new between the two but ultimately lean toward a slightly more hawkish, ultimately because it is too soon for them to tilt the message in a way that would be interpreted as dovish, provide

relief to financial markets. but i do think it is coming. lisa: do you think it's realistic to price in rate cuts as soon as next year? bob: the market is pricing in 75 today and then another 100 by the end of the year, then 50 to 60 basis point rate hikes later in 2023. i think that is way too clever to think that we will go to 3.5, and then be at slightly below three by the end of the year. it is much more likely i that we don't get to 3.5 and the fed stops sooner, but doesn't have to cut, or they have to go beyond 3.5 because inflation proves wildly more persistent. the current curvature -- we like that trait, we are taking the other side of it. lisa: which means you are going

short duration and into the short end. how is that playing out in terms of your investments? bob: we are long the very front end of 2023, implying a 3.5% terminal rate, short on the back end, and those cuts you are referring to. tom: from yield to inflation, inflation over to yield. if inflation comes in, maybe we get down to six or five, and we stop, what does that due to to the total return of fixed income? bob: first of all, year-over-year numbers will be tricky over the second-half of this year. there are some basic facts that push them up three or four months down the road, not pushing them lower as we begin to see in the spring.

we have had this view, and i think this persists. what the fed will be looking at, what the market will be looking at, is taking the annualized month over month prints. there has not been any relief there but it is coming. we think they will decelerate into the year such that core pce, the fed's preferred measure, is running on a two or three months annualized basis, running closer to 3% by the end of the year than the current level. we will have to take those shorter-term indicators, shorter time horizon indicators, and annualize them. that is where we will get comfortable that inflation is decelerating, or we will not get comfortable, as your comments about other speakers have suggested. lisa: meantime, people parse through the possible fed

scenarios, incredible pain in bonds. then the whipsaw rally we saw in the last few months. you are betting against that, saying that you are seeing a long and treasuries selloff in a significant way. how significant could that be as we whipsaw in the other direction? bob: i fear i have misplaced my steepener view. it is not to, tends or tends or 30's. the treasury curve offers modest value here. other places in fixed income that got to reasonable value a month ago but have since rallied in, like some of the investment grade market. part of the challenge for this year is valuations were so rich in 20, 21 due to the persistence of extraordinarily accommodative monetary policy, there was no

place for returns to go but negative. just a question of how negative they would be. now we have had this slaughter in the bond market globally, across all sectors of fixed income. at least a month ago we got valuations that started to look reasonable to us and we started to add. i think fixed income is setting up for a reasonably good 18 months ahead if we are right about that this operation in laois and. not rapid but persistent over the course of the next year. i think fixed income returns are going to be much improved. pretty low bar, but much improved over the next 18 months. jonathan: bob miller. pretty low bar because things have been out of for so many people. too soon he seems to be the takeaway. i am seeing in my inbox, too

soon to make the pivot. we have two more prints. we have the august 10 print on cpi, september 13, september 21 for the fed. lisa: if september is the time to make the pivot, is that too soon? at what point do you say there is enough data, especially because the concern out there is that the fed backs away too quickly and inflation expectations get on more. tom: how can you pivot without a constructive wheel yield environment? jonathan: i'm with you. tom: within normal finance, finance 101. what is important, you have to generate some fort of normative rate. you will not do that with a pipit in september. jonathan: we just had a hot core month over month read.

pretty tough environment for the fed to make a pause, pipit, -- pivot, whatever your choice of words. the nasdaq up 1.4 on this fed day. this is bloomberg. ♪ leigh-ann: keeping you up to date with news from around the world, with the first word, i'm leigh-ann gerran. bloomberg has learned the justice department is using a grand jury to investigate efforts by former president donald trump and his aides to overturn the election. it focuses on creating fake electors and pressuring former vice president mike pence to refuse to certify the biden victory. no comment from the trump camp. senate majority leader chuck schumer has told bloomberg he doesn't think there are enough votes in the senate to pass the big antitrust bill designed to

bareback the power of companies such as apple, amazon, alphabet. cosponsors have maintained they have enough votes for passage. deutsche bank warned it will miss a target for the year. a key profitability goal was getting harder to reach. we did talk with the cfo. >> the environment is worsening, hence, our own outlook for the firm. we do see a softening of economic conditions in the second half of the year, potentially recession, at this point modest. that is something we are preparing for. leigh-ann: deutsche bank did benefit from strong performance in fixed income trading which beat wall street in a volatile market. shares of paypal jumped in the market trading. elliott investment management is

building a stake in the payments giant. elliott plans to push paypal to speed up those cost cuts. 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 leigh-ann gerrans. this is bloomberg.

what if you were a global bank who wanted to supercharge your audit system? so you tap ibm to un-silo your data. and start crunching a year's worth of transactions against thousands of compliance controls with the help of ai. now you're making smarter decisions faster. operating costs are lower. and everyone from your auditors to your bankers feels like a million bucks. let's create smarter ways of putting your data to work. ibm. let's create

>> we forecast that growth in the euro area will slow down to 1.2% next year in 2023, but we highlight that in case there is a full shutdown of russian gas flows to europe. the downgrade could be much more severe by another zero point eight to two percentage point downgrade in terms of economic activity for the area. jonathan: at this point, anything in positive territory seems like a reach. the global gdp the imf has gone

from 4.4 percent in january to 3.6% in april, down to 3.2% this year. you can see the direction of travel. tom: they are managing it. everybody is doing it, nobody knows what the future is. major shout out to wto, 2%, 3% global gdp. jonathan: futures up .8% on the s&p. tech earnings pretty decent relative to what was expected. tom: when we travel to morocco for the imf meetings. jonathan: is that while you put that piece of sound in a rundown? tom: nasdaq up 1.4%. gets my attention in the heart of earnings season. regina mayor is with kpmg, global head of energy.

i want to go to the pacific rim. you had the joy of working with the pentagon. let's go global pacific rim. you are in the camp that pacific rim is one of the variables here. regina: asian demand will continue to grow, and that is driving up short-term lng spot prices. we are really worried about a cold winter and what russia is doing to the european continent. jonathan: i'm met a kpmg seminar, you have to give me a timeline. help me out with the x axis. is it a quarter out, three years out?

regina: i don't think it is that far out. i think it is coming in the latter part of calendar year 2022, and one of the pullbacks and prices is a temporary reprieve. the basic supply demand fundamentals have not changed. opec is producing under capacity, 3 million barrels a day, and we will see demand go up. i am, in triple digits through the end of the calendar year into 2023. lisa: let's paint this picture more. you are saying chinese demand will come back online ex-covid at the same time that europe could be facing a cold winter with noise stream one curtailed or cut off completely, based on the recent actions of russia. how much do these two stories come together? does the demand for crude replacing some of that natural

gas, and the demand, affecting prices into the year? regina: that is the story we are trying to balance. we are actually back to pre-pandemic levels without china entering the global mobility process, and we continue to have restricted supply. as i said before, there is no global spigot. i think we are finally realizing, it is coming true in terms of what we are seeing in the market, opec-plus does not have the extensive spare capacity we thought they might have to help us get through this. lisa: which goes back to demand destruction. have we learned any lessons from the previous couple of months about the price point that causes that demand destruction that people are looking for? regina: i was going to go to that point. we are at the price point where we should see demand destruction. because we have so much pent-up

demand during covid, we have not seen people stop driving and flying. some economists say a lot of those tickets were purchased three to six months ago, so we could see the dip in demand that coincides with chinese demand coming back into the marketplace, which could help us into the winter months. right now i am worried about a cold winter in both europe and the united states. tom: you are in melbourne, australia. i look at the gas prices in perth versus melbourne. it is expensive. it is nine dollars a gallon for gas. how is australia dealing with that? regina: i think they were calculating it was closer to 10. in the u.s., we had hit record highs of five dollars for a gallon of gasoline. they say that would be equivalent to us at 10.

they are not really feeling the bite here. we are dealing with wealthier countries that have insatiable energy appetites. they are able to move around the country and take advantage of what their prosperity brings, access to natural resources. i am down here proselytizing that the world needs more oil and gas in the short-term as we drive decarbonization of the planet. we can achieve both objectives, but let's not start of the resources we need for societal benefit. jonathan: very impressed with your knowledge of australian geography. pronunciation. tom: there is a huge distention between perth, on the west of australia, and melbourne. the way the pros look at this is

barefoot vibe versus grown-up. lisa: basically, he says alike that after talking to somebody from australia. jonathan: futures on the s&p up by .8%. the numbers out of alphabet supportive of this move this morning. ever been to australia? tom: i was supposed to go a couple of times. i went to singapore three times. i was told it was not worth doing. jonathan: euro-dollar, 1.01. jp morgan, goldman sachs. calling for a recession year

end. lisa: let's talk about natural gas. that has been so much of the focus in europe. you are seeing prices surge as russia is willing to use the supply of natural gas as basically a war tool, as they figure out how to gain leverage. jonathan: i love how you can say, all we can talk about is natural gas, and tom is talking to himself about australia. tom: it is a barefoot vibe. jonathan: i have no idea what that means. tom: i am not going barefoot in australia. jonathan:

>> we are go