>> we are going to see the

weakness spread into the broader economy. >> the market has shifted to bad news is good news again. >> that that is concentrating on a single mandate of the dual mandate. >> expectation for that could pivot in early 2023. >> it has proven it does the job. >> this is bloomberg surveillance. with jonathan ferro, tom keene, lisa abramowicz. tom: we will be here for the next eight hours. stay with us for a terrific set of guests. i have not talked to mohammed since nixon was president. jonathan: we will catch up with two people who were dead on. mr. dudley and mohammed. tom: diane swonk and the pulse of the economy. we will speak to alicia levine in a moment.

we have not talked about it this morning. 2/10 curve inversion, it is redoubling down. jonathan: the tension between the hawkish central bank at what is happening with the data. the data is getting weaker. you see it in claims the last three weeks. housing, hiring intentions. tom: getting ready for alicia levine. microsoft and google were terrible. it was just a mess. jonathan: the board for microsoft is resilience. if you were getting defensive and looking at microsoft to provide you some resilience, they demonstrated that they can give you that.

i would emphasize, a sigh of relief. tom: boeing will have important guidance today. idiosyncratic story. visa had a killer report along with american express. really indicates the two americas jerome powell deals with at 2:00. lisa: the two americas on main street and in the corporate world. the ones that have, the ones with the biggest war chest that you track, and those that are more speculative, growing quickly in the pandemic. you are starting to see them cut back and cut jobs. we have heard from a number of companies. how much does that become an escalating trend? tom: 2/10 spread, -27 basis

points. to me that is front and center. jonathan: equities up .8% on the s&p. 10-year yield lower by a basis point. 2.7959. the euro, 1.0138. i am getting a ton of emails. tell tk we are waiting for him to come to melbourne. great barefoot vibes. how much of this stuff am i going to get now? tom: 7:00, we are out there in the beautiful melbourne summer, which is january or february. jonathan: i am aware we have some audience down there. good evening to you. tom: we can watch cricket and fall asleep. alicia levine is with the ny

management -- bny wealth management. a prodigious mathematical foundation. with the mathematics of the moment, are there smooth curves and glide paths for someone with a three-your perspective? alisha: i wish it was the case. at the end of the year it would be a great thing to have but we have too many crosscurrents here. there are names that we got from large cap tech have largely stabilized and calmed markets. over all the equity market, we are treating about 4000 here, the equity market is already pricing in the fed pivot, the bond market is pricing in the pivot.

the earnings estimates are still not reflecting a slowdown, so those need to come down. i think the thought is that that will pivot on the first side of top-flight pce going lower because of the commodity price -- i think that is a little too optimistic. this is a different fed. i think that has been largely put to the side as a less tamarisk, not a central risk. jonathan: we still have a nine handle on cpi come into the meeting. we have to think about what has been unleashed in this economy. we received weakness in housing, housing related industries. a ton of messages about sherman williams. down by about 13%. early trading.

they say the shortfall in second-quarter results, demand pressures in europe and the highest inflation seen in decades. how do you think this weakness will profit out across the economy? alicia: really great question. what is clear, all those industries that benefited from the stay-at-home bubble are now deflating. the question is how much does that pass into the rest of the economy? this is what we have learned from earnings season. staple companies are doing well, they have pricing power, so inflation will remain higher from that. goods were in a bubble. if you are associated with travel or leisure or restaurant, your earnings are fine. the other thing that we noticed on the consumer companies, there

is negative linearity in the quarter. april was better than may was better than june. something to think about as the economy slows. these are big picture things that tell you that transition from goods to services, at some point, there may be a bubble also. it is happening awfully quickly, as you can see in the sector performance of the s&p. really complicated market. the vix is at 24. it is the bond market volatility that is still there. once the volatility subsides, it is hard to go in phase first. lisa: do you think the market reaction, the positive feel we saw last week, better part of this week is incorrect, and an accurate reading of her earnings that are not quite as positive

as they are being taken as? alicia: with the market reaction to negative news with the stabilizing stock price, that is a positive sign on the technicals. i do not want to ignore that. we have cut guidance by 40% and stocks are higher by 10%. that seems to suggest, in some sectors, you have already had the cut that is necessary to then go forward and grow from there. it has not happened everywhere. it has not had in large cap tech which is holding up the market now. tom: we have to get this in. deloitte says back-to-school supplies now are $621, up 21% from people pandemic. what happened? alicia: can didn't go to school

for two years. the same thing happening in travel. this is a celebration of life back to normal. that is where the wallet is going, certain services and parts of the goods sector. but you have to ask yourself what happens after that bubble? we have seen over and over again their earnings do stabilize and go back to trend over time. there have been about $2.4 trillion since the pandemic started and that has to come down to trend. we are marginally more positive. we still have a new goal -- neutral rating on equities. it is too hard to time the market. we do think the market is over expecting a fed pivot in the near term. once they made the policy error of being too easy for too long,

the chances of staying tighter for longer grow up. the markets have already rallied 10%, so what are you playing for? jonathan: that is just perfect. a celebration of life getting back to normal. alicia levine of bny. tom: i have to have a norris pencil. british pencils. they are gorgeous. did you use them in school? jonathan: i often forgot my pens and pencils. tom: they are expensive. jonathan: me going to school was not a celebration. futures up .8% on the s&p. looking ahead to more earnings out of facebook later.

apple and amazon tomorrow. this from the ac milan fan club in melbourne. we are waiting for you. tom: i am a member -- jonathan: i am a member. i have not attended any meetings. 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 gerran. s fed chairman jerome powell is set to deliver the largest back-to-back rate hikes since the 1980's today. investors will be looking for signs that he is open to smaller moves starting in september. policymakers are expected to raise rates by 75 basis points. president biden will speak with xi jinping tomorrow. the call will take place in a

difficult juncture with u.s. china relations. nancy pelosi's staff has not ruled out that she will visit taiwan next month. china has warned against the trip. china considers taiwan a part of its territory. the two conservative candidates set to succeed boris johnson battled it out on tv in a debate. liz truss and rishi sunak clashed again over the economy, both accusing each other pursuing policies that are morally wrong. the debate was cut short when the presenter fainted. the organizers say that she is now fine gerrans.. boeing increased deliveries of its planes and reversed its heavy use of cash. second-quarter earnings and revenue were worse than estimated. t-mobile has raised its subscriber forecast for the second straight quarter. the wireless carrier blew past inflation setbacks.

t-mobile let competitors by adding 1.7 million monthly subscribers in the second quarter. 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.

>> 65 is where one model sows we

should go. the market is a balancing act. we're looking for 95 by the end of august. it could get to $.90 if germany has not built up enough gas storage. jonathan: jordan roach. it is for decision day. alongside tom keene, lisa abramowicz, jonathan ferro. nasdaq up by 1.4%. euro showing some strength. 1.0148. yields lower, 2.7849. on the commodity side of things, no major damage, even with this headline, that wuhan has locked down one million residents. tom: it is not working. you wonder how that will fold into their domestic politics,

pacific rim recovery that everyone is talking about. lvmh more adamant of the hip they took in china. futures up 1.4% on the nasdaq. vix, 24.33 thank you to the viewers who corrected me that perth is not on the west near the pacific ocean. nick bennenbroek is from wells fargo. without question, in the foreign-exchange racket, is the most acclaimed for predicting in the toughest asset classes. you and wells fargo have global gdp 2023, 1 .6%. i have never seen that statistic. nick: it has happened.

we are very negative right now in our forecast. two reasons. these high prices are chipping away at the consumer. most of the major regions are seeing negative prints. we think it will be tougher to squeeze inflation out. tom: what does this mean for jerome powell and the fact, 3% is terrible global recession. you are way below that. 1.6% is a stunning statistic. nick: 3% is ok. i would say to percent is terrible global growth. how have they reacted? when faced with a hard choice between you have to get inflation under control or help economic growth, for now they

are still steering toward higher interest rates, higher inflation. we still see a lot of rate hikes from the federal reserve. lisa: we are looking at rate hikes from the ecb, higher gas prices, questions of supply there. how come we are seeing the resilience of euro after breaking through parity, despite the fact that many calls haven't going under that to 95? nick: currencies are always a relative game. as tough as things are in europe, they are also tough in the united states. with those nasty numbers tom was mentioning, we expect recession in both regions. the other thing is, for now, the european consumer, they are one of the few regions that has got slightly zero or close to positive income growth and high

savings rates. that will help the consumer for a while but that can only last so long. eventually we think the eurozone economy, currency both go down. lisa: what is the trigger for that? nick: probably what we are seeing in terms of the squeeze on these energy prices. in the euro zone, inflation is nowhere as widespread. core inflation just under 4%, but the headlines rate at 8.5 is all due to energy. it doesn't look like those energy prices will come to. eventually that will be the trigger. tom: link it back to foreign-exchange. explain how the dollar goes down or stays level as a safe haven asset given this gloom. nick: there is a saying, what goes up must eventually come down. that has to do with the interest

rates in the u.s. going up and then coming down to 3% or 2%. using expectation will be quicker from the united states. you make a good point. maybe an issue that prevents a massive slot in the dollar, but financial markets being forward-looking instruments, by the tommy get too late 2023, we will be less worried about the recession and will start to look forward to the hope of a better 2024. as we get the combination of falling interest rates and a better economy, that may weigh on the dollar. tom: you are out to 2024, and i am trying to get to next week. jonathan: are we still doing lockdowns in your world at the end of 2023, 2024? nick: i would say probably

lockdowns through the end of 22, early 23. in terms of the conversations we are having, by the tommy get to mid-2023, china's covid policy has relaxed to a reasonable extent, looking at more normal economic expansion. jonathan: thank you. you want to try and get out a couple of years, try and do that with china. that is a tough call. tom: i have never seen that statistic, 1.6% global growth. that completely reframes what the central banks can do. as lagarde would say, their degrees of freedom. jonathan: that economy has been locked down for two years, and we are talking about a third year. tom: you mention wuhan. i don't see any indication they are letting up. jonathan: a million residents.

lisa: how much does the political pressure get to them after a while, especially when there is expected to be some normalizing this year. in the crude market, if that demand comes back online in a strained winter. jonathan: speaker pelosi, is she going to time on? annmarie made the point a couple of times. you have to look at the domestic things in china to see why they are making a bigger flight out of this. there was always going to be attention, but it gets bigger by the day. futures up .9% on the s&p. this is bloomberg. ♪

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jonathan: a little bit of economic data coming out in america. mike mckee in position. futures positive .9%. let's go down to d.c. and cash app with mike mckee.

mike: good morning. some important number that will bear on third-quarter gdp. a lot of people paying close attention to what we are seeing this morning. the advanced trade good balance comes in at $98.2 billion, a significant decline from the 104 earlier. that will be good news for the overall second-quarter growth rate. retail inventories up to percent. that is much higher than the 1.1% last time. this may be one reason that walmart and others have been complaining their inventories are too large. durable goods orders just breaking in, a key for the fed. what is business investment like? durable goods orders up 1.9%, which doesn't tell you a whole lot. we are looking for the breakdown in terms of capital goods. nondefense, ex-air, the stuff that goes into gdp, up .7%.

that is more than twice than what was expected. it suggests business equipment shipped in the second quarter was up significantly. if you take the balance of the numbers that are out, and ex-trans up .3%, capital goods orders up half a percent, same as last month. businesses are still spending. it looks like all of these numbers will contribute to second-quarter gdp, will add to second-quarter gdp and maybe pushes that recession tale further out. tom: that will be the first question to jerome powell today, how does the fed interpret this positive data? mike: they will be sort of looking beyond it because this is backward looking but they want to see consumer spending holding up.

we will get that number on friday. they don't know what the services spending looks like yet. they want to see business investment stay strong. the trade deficit does come down. the strong dollar is a byproduct of their policies. inventories they cannot do much about. but we are hearing from retailers is they have to clear that out, which may be disinflationary if things go on sale. things to keep in mind if we get the gdp numbers tomorrow. jonathan: excited for your coverage later on. you will be in the news conference with chairman powell. tom: they all go earlier. importantly, 2/10 spread goes to greater inversion off of this data.

a new, wider inversion. jonathan: yields down about a basis point. tom: speaking to dr. dudley this afternoon, mohamed el-erian. we start with edward hyman from evercore isi. we are thrilled that he could join us this morning. your research note is classic, things rolling over. you harken back to cj lawrence. m2 is absolutely plunging. it seems out of another time and place. explain the importance of m2, the monetary aggregate, is plunging down near zero. ed: the growth is plunging, but

you are right to keep up on this. last year, money growth was about 30%, which is why inflation picked up so much. you could put it to different things, stimulus checks, quantitative easing, but now that has come down. i think that explains why inflation is slowing. right now we have about three months before the funds rate will be over the bond yield, which would be a classic inverted yield curve. you already have the 2/10 inverted. it looks to me as though the economy is doing fine right now, but it will slow, inflation will slow significantly. tom: there is a divide between

mohamed el-erian and bill dudley and lawrence summers saying we need an aggressive fed to get us anchored again in our price change. others saying calm down. they are going to move a look at the data. if powell observes the data, what will he see in six months? ed: it is really three-month that i'm focused on. six months is ok, too. i think the economy will be slower. unemployment will be a little bit higher. but importantly, inflation is coming in much slower than i expected. commodity prices, anecdotal is coming in. every day i'm getting evidence that there is a slowdown. an article today that airfares are back below $300. in three months, which is when

the fed will have the funds rate at 3%, i think they will be seeing slower inflation. the issue will be for our shop, for bill dudley, is there enough progress to slow down the rate of increase in the funds rate? lisa: have we already seen the shock in financial markets amid all of this negativity this earnings season, that stocks managed to rally with earnings? ed: first off, the fed has gotten a lot of bang for their buck. the drop in the stock market has pushed down consumer network, which puts a drag on spending. a pretty good chance, like you are implying, that this has already been discounted. i am scared to go too far down that road, because the fed will

tighten, and the question today is if they give a little bit of room to slow down the tightening in the next few meetings. lisa: what is the variable right now to me that we have not yet seen the financial shock, that it has not been baked in? if people are looking for a slowdown in earnings, consumer spending, a fed that tightens too much and that retraces. that is what a lot of people have been saying. at what point do we think that narrative is maybe different? ed: in three months. we are on a track that both end when funds get 23 and we will look around. the economy has been stronger that i think people realize. earnings were up by almost 10% annual rate. it looks like they will be up closer to 5%, quarter to quarter

annual rate, in the second quarter. tom: your attire is very good for the summer session. i know that you are wearing flip-flops. behind him is a spectacular boat model that looks like the 1934 endeavor. you are in the hamptons. the hamptons rental market has absolutely tanked. what does that symbolize to you? ed: i could go on on about 25 different examples like that. i am big on putting the dots together. i think the taking in the market in the hamptons in august is one side that we take into account that the fed tightening, slow down of the money supply, increase in the mortgage rates, decline in consumer network is

all having an impact. jonathan: we cannot complain when prices are up and then down. it is great that rental prices are down because they were obscene for so long. ed: for the record, i am not in the hamptons. jonathan: thanks for clarifying. tom: tom trying to wind you up. we love the addition of julian emanuel to the team. we heard from t-mobile earlier, the cfo. slight increase in bill payment delays. customers are feeling the inflationary impact. they are. tom: just as ed is talking, the 2/10 spread is out to 28. when priya misra said, if the basis points, i almost laughed

her out of the room. jonathan: we will catch up with her later. she is on the fed show. lisa: i want to sit on this t-mobile headline. people are waiting a little bit more to pay back their debts. it goes back to the conversation we are having about credit card debts increasing. how much do we see this coming at a pivotal point, where you see leverage buildup, at a time when consumers don't have as much ability to pay it back? the consumer is not that leveraged, based on history, but something to watch as the cycle enters the midcycle. jonathan: reading the tea leaves. bob michele will be coming up, alongside christian amani. exclusive conversation in the next hour. tom: we can follow up on that in

melbourne when we go. jonathan: i will see if they can have us. i will ask it in next hour. later, that that decides. all-star lineup. mohamed el-erian, diane swonk, michael caroli, jeff rosenberg. only one place to watch reaction and the drumbeat to the fed coming up later. it begins at 1:30 eastern time. leigh-ann: keeping you up to date with news from around the world, with the first word, i'm leigh-ann gerrans.. 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. the focus is on creating fake collectors and pressuring former vice president mike pence to certify the victory. no comment from the trump camp.

senate majority leader chuck schumer has told others that he doesn't think there are the votes to pass the big tech bill. still, the bill cosponsors have maintained they have enough votes for passage. in europe, natural gas prices soared again after russia tightened its grip on the energy supply. prices surged as much as 14%. it is now 10 times higher than usual prices for this time of year. gazprom says there is a maintenance issue. shares of spotify are rising. they beat a range of analyst estimates in the second quarter. the company also said it would cut hiring growth. they also took a $31 million charge for its decision to quit

a hardware device. 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. ♪

>> we look to see how revisions are unfolding in terms of forward earnings. what we see is a clear downward trajectory. we are not at the levels yet where we can say we have reached an all clear. there is more bad news on earnings to come. tom: he was absolutely lights out yesterday, takes a more cautious view of what this bed will do. we welcome all of you on a fed date. terrific set of guests over the

coming hours. 1:30? lisa: we will have to talk to your crew. tom: that cuts off the three-our lunch today. dow futures up 144. right now, kriti gupta. kriti: we are looking at the 40-day correlation between the s&p and the dollar. a chart that we go back to over and over again. especially important in light of alphabet earnings. extra emphasis on the dollar. the inverse correlation is now at -50. 50% of the time, you'll see that inverse correlation. it is at the strongest levels going back to 2011. back then, europe was in crisis, and what becoming a euro

weakness in dollar strength story. if you continue to see this dynamic, not as a result of the federal reserve's hawkish this, but the euro weakness, that is not good. tom: going inside baseball with gina martin adams. can corporations hedge their foreign-exchange headaches? it is difficult to do, not worth the effort. can they? gina: short answer is no. in some instances you can have a stroke of brilliance, but oftentimes it goes the other way. they don't spend a tremendous amount of time on it. the other thing with currency, not only is it tremendously volatile but also unpredictable. attempting to do so often does not work. and the market frankly does not reward it. you might notice the companies

that have mentioned the currency impacts, the market is looking through those impacts, focusing on core earnings. tom: she is 100% correct. gina, you are too young to remember this, but lifofifo. what is it and why is it such a big deal? gina: at points in the cycle where you have big swings in inventory, it can have a big impact on bottom-line. whether a company declares their inventory first in, first out, where they sell the items last in first, it is meaningful when inflation is accelerated so rapidly. it will be an issue for most goods sellers over the next couple quarters.

we are already seeing it impact the retail space. they are declaring inventories are too large. certainly, inventories were purchased at relatively high prices compared to the prices that they'll be able to charge for those inventories once they go out the door. that could be pretty meaningful. i think we will see this extend into semiconductor companies over the next several quarters, as we get products back online. will they be overlong but too much inventory? lifo fifo will make a difference. mostly it's about the inventory cycle. there are some pretty pro-inflationary fears. but to the extent company accounting can make a difference, particularly in this environment. tom: we lost half the audience there that was so boring.

celine sweatshirts are very fifo . first in, first out. lisa: let's talk about overall earnings season which has been better than expected when it comes to the overall earnings. beats have not been as big as traditionally, not as many companies beating. is there a takeaway that for all the doom and gloom, we have seen a bounce in so many of these stocks? is there a technical reason to be optimistic as alicia levine was saying? gina: a takeaway is we have priced in a tremendous amount of weakness. in particular what we have seen is a big divergence in performance between the companies whose stocks are down more than 20% year to date coming into earnings, and those whose stocks are down less than 20%. the company that have been beaten up more are clearly bouncing. whether they missed or beat, the

stocks are bouncing. we priced in a tremendous amount of weakness, probably more weakness than is emerging, but that said, you have the potential for surprise. it is mostly concentrated in the stocks that did not perform terribly poorly in the first tap of the year. walmart is the poster child of this. their announcement really shot to the markets. tremendous downdraft in the stock price. but walmart has held up very well so far this year, so it's a matter of expectations. expectations were extremely low across the board. where they were somewhat positive is in the stock that had not under materially. but over all of these are beating expectations at large and that is creating a little bit of a lift for stock prices. tom: thank you so much.

that accounting discussion was really quite good. this is new for so many different people. ian reports, always good on the bond market, he says the data that michael mckee reported on is enough to give a lift to gdp. lisa: what does this do for the fed? it comes after the report, so it doesn't mean anything for them, but you can extrapolate out there is enough resilience in the economy, and backward looking data for the fed to be strong, bold. indicate more to come. tom: if i go 75, 75, i think i'm almost in the vicinity of normal. today's 75, to be clear, is not a big lift, right? lisa: it is not a big lift when it comes to the overall rate, whether we have normalized.

we have not gone to restrictive yet. to give you a sense of scale and how quickly things are moving, two back-to-back 75 basis point rate hikes is something we have not seen since the volcker e ra. we would have to go back to the 1980's. tom: it is not a measure time. the only thing that is measured is the stock market reaction after people calm down once earnings come out. lisa: as you say, a movable feat. tom: spx up 1%. down lagging a little bit. dow futures up 166. stay with us. this is bloomberg. ♪

jonathan: equity futures are up 10%. stocks right now. >> everything that you need to get set for the start of u.s. trading. this is bloomberg the open with jonathan ferro. jonathan: we begin