♪ >> the fed is going to be late. >> i think the fed is imposing a severe slowing on the economy. >> they will cause if inflation is declining but they wont be able to if they are not achieving their inflation objectives. >> the fed as well as every other central bank in the world got it wrong. they said transitory. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: live from new york city this morning. i'm jonathan ferro. equity futures up .4%.

tom: what are we coming up and as inflation reports is centered on it. we are talking about what happened over the weekend. i think they are talking about a good jobs report, blah blah blah and there was that ism report which really showed a slowing economy out there somewhere, boom, up went equities. jonathan: payrolls got all the credit for the move in friday's session. the ism that came up about 90 minutes after the payroll port -- report is what really drove the yield curve into america much lower. lisa: there was this feeling in the employment report that perhaps you have a goldilocks scenario or soft landing where wages are coming in even though there is a strong report. the ism seemed to give a double

whammy punch saying you are going to have weakness. whether that is enough to stick through the cpi report on thursday and big earnings on friday this week, that varies. jonathan: chairman powell speaking tomorrow on the back of all of this data. we have got the ism on manufacturing and services in contraction. tom: overarching this and it is not the goldman sachs story. what i would really focus on is the dovetail here of not so much china, but on this monday, the pacific rim signals it is opening up. i would overlay that on the things we will hear from chairman powell. jonathan: number one, china reopening. they have dismantled the final barrier of entry. you can enter now without quarantine.

we are reporting here that they are at least considering wider budget deficits. have you see the move in emerging-market equities? that is a 20% moves, a monster move. tom: my litmus paper, the jd morgan series. it is not back up to where it was in 2019, but it is a nice move down and it has spiked up. jonathan: we snapped a weekly losing streak last week on friday with a big move higher. that move continues up .4%. easy sell. tom: they are out there. they are confirmed and again, this is not macro babble. this is offer earnings and such. jonathan: the yield was much lower on friday's session.

35967. lisa: and how much of that weakness saw price going up. how much is really driven by europe? also, this incredible rally isometrics. the strongest first week of the year going back to before 1990. today, we get a sense of central banks speak ahead of powell. i am curious to see both sides of the atlantic and how they are dovetailing with perhaps a better than feared winter. austin officially becomes today the official chicago fed president. u.s. president joe biden is expected to be with over nor --

president over door in mexico and justin trudeau. aftermarket kicking off the earnings release system, the holiday of bank earnings, we are going to be getting jeffries. all coming out on friday after a to mulch was year. some of the worst returns when it came to profits from banking, from their bread and butter going back to 2009. jonathan: thank you. joining is now the head of u.s. equity strategy. let's start there. the bank earnings this week, what are you looking for to get a broader read on what is happening here? lori: we like hearing a lot about what is going on with our

corporate clients. i care a little bit less about the actual bank earnings and more about those tidbits. i pulled up this morning looking at my bloomberg at the performance. financials have done pretty well on a relative basis. i never like that set up with financials have outperformed heading into earnings season because there is usually not that great of a set up. tom: i'm fascinated by the interviews we have away from her expertise talking about by quality. are there quality small caps? if somebody says in a big cap area i want quality, can you say that in mid-caps and small caps? >> you can, it is on a relative basis and you don't necessarily have the ability to come in and make the argument and see our top quality small-cap is better than your top 20% quality of large caps. but within the small caps space, you generally tend to find

stocks with better r.o.e.'s, positive earnings tend to outperform over time. you really have two different worlds, the micro-caps that have no liquidity, nobody trades them or pays attention to them but they have that kind of upper echelon that does have some pretty good quality. those typically get to be pretty crowded by small-cap managers. one of the reasons i love small caps right now is that upper echelon of market cap is pretty reasonably valued and we don't get an opportunity to buy those high quality small caps like this all that often. lisa: how concerned where you buy the ism print we got on friday? supposedly the strongest one coming in in contraction? lori: whether or not this is a recession, something close to it, something that smells like it but is not quite one, whatever it is, we need to get it done, get it started from an equity market perspective and obviously there is a human cost to that but for me market pricing perspective, markets

typically do well in negative gdp years and don't do well in slug's gdp years and that is historically because markets cannot usually handle that. they just want to rip off the band-aid and get back to business. i think certain parts of the equity market have been pricing in a plunge in ism manufacturing for quite some time. the services side is really what has been feeding the inflationary fears. i do think we needed to see some damage there. really to get this inflation narrative under control once and for all. lisa: we talk about what has been priced in. that has been one of the big question marks. you took a look at how can indication services stocks accounted for 95% of the decline last year on the s and e. tech is still overvalued by some measures so how much more damage is necessary in that sector to become appealing to you? lori: i think tech is an area if

we do get another bout of market volatility in the first order and i do think we are probably going to see that once reporting season sets in, i do think tech is going to have a problem because i think that is where some of the earnings expectations do still need to be pulled down. we need to put that market bottom and before we can really get to a point where you want to buy the tech sector there. we got back to this quality issue because if i take a look at all of the s&p 500 sectors and rate them in terms of quality, that classic tech sector software semi-hardware, that really ranks as the highest quality part of the s&p 500 so you might not necessarily get supercheap valuations before investors will move back in. you probably need to get more certainty around valuations than what you have before you really see sustainable buyers come back. tom: spent the weekend trying to calibrate the gloom. in economics, we are seeing a lot of gloom. are you seeing in investment and the linkage over to finance, are

you seeing a lot of gloom from rbc capital clients? lori: we do. i spent a lot of time in december overseas talking to non-us based investors. i would say what was surprising to me is the sense of gloom was probably not as dire as i would have asked acted and not quite as dire as i would have seen just from talking to u.s.-based investors. still pretty low, but i got the sense that talking to non-us based investors, they were starting to set opportunities out of the u.s. and were still concerned generally the u.s. was overvalued but i was hearing a benign discussion coming out of european-based kylie -- clients in particular. that was something that surprised me and made me feel like in certain corners of the market, really start to see the gloom receipt a little bit. that is something you do tend to want to see a market bottom. jonathan: you get the feel that this is the year you get the international performance. tom: we said the same thing 12

months ago. jonathan: thank. just fantastic. big week ahead. speaking of the gloom, gloom on goldman sachs 24 this morning. latest reporting indicating 4200 jobs could go. 34% had cameras up at goldman. tom: was that different than tech? jonathan: we are talking about where the excesses and where the excess needs to be removed. tom: 49,000 employees, three is what, 7%, 8%, 6% or so? normal this time is a 3% or 4% clear up. that is just healthy for the industry. peter had a good chart this morning showing the differences between the major banks holding it together and other more entrepreneurial shops like goldman sachs really off the

mark and that is why you are seeing this this morning. jonathan: you mentioned that normal clear out. goldman had not had that normal clear out in the pandemic. it was avoided and that is why i think a lot of people think this number is larger because you have to think of what did not happen. lisa: the calling of the ranks. it is interesting that more than one third of those cuts are going to be from the core trading. tom: a rumor surveillance is going to have a one third reduction. jonathan: which one of us is it? lisa: is there something you're not telling me? please do elaborate. maybe in the break. futures up .4%. this is bloomberg. ♪ lisa: the capital of brazil is

recovering from an insurrection by thousands of supporters of former president your bolsonaro. riders ransacked congress, the presidential palace and the top court in brasilia on sunday. it took hours for security forces to regain control. the new president is bowing to prosecute the rioters. in el paso, a confrontation between president biden and governor abbott. since president biden took office, the u.s. has experienced a large increase of migrants trying to cross the southwest border. british prime minister rishi sunak meets today with union leaders behind the strikes that have hobbled the country. sunak is trying to avoid further walkouts. humans want immediate pay hikes. according to the guardian, he may be open to a one-time payment to workers. china is trying to change the

narrative that nationwide protests prompted president xi jinping to abandon the covid policy. the leadership started relaxing covid restrictions before the protest began. on sunday, china reopened borders that were largely shut for almost three years. goldman sachs set for one of its biggest rounds of job cuts every. goldman is expected to eliminate about 3200 jobs starting midweek. more than one third of those will likely come within the core trading and banking units. this is bloomberg.

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jonathan: over the weekend,

rioters ransacking presales capital. thousands of supporters of the ex-president storming the presidential palace testing the leadership of president desilva a week after he took office. phenomenal scenes over the weekend. tom: the imagery was really extraordinary. i would suggest it is a story still unfolding. what i did find interesting in the report was how many of the bolsonaro crew, the leaders seem to be in florida or seem to be in the united states. you wonder about the convenience. jonathan: we want to be clear that the former president denounced this and did not like what he was seeing and said that peaceful protest is one thing but going after the institutions and breaking and is quite another. tom: bloomberg with a huge contingent down in brazil and we will have reporting throughout the day. it is a story moving by the hour right now. she is moving to mexico city, annmarie hordern traveling with

the president. i'm going to cut to the chase. and beside the sweat over immigration, over migrants and all of that is local. with the people of texas or arizona would say is president biden, you are from delaware where in one study they had a count of 30,000 unauthorized immigrants and texas had 1.6 million. how does this president deal with the local focus of this issue of immigration? >> immigration will be top of the agenda as the president meets with andres manuel lopez obrador, the mexican leader none very much locally as amlo. the president is on the heels of visiting el paso. he got off the plane and was greeted by governor abbott with a handwritten letter saying the president is $20 billion to

short and two years too late. this has been the constant criticism of the republican party that biden has not put this as a central focus. his administration does seem to be doing that coming to mexico on the heels of a new immigration plan which i have to say is getting criticism from both sides. not just republicans that it does not go far enough but democrats who also say it is he -- inhumane because under this plan, 30,000 more a month could come from poor countries where we see high levels of an -- immigration like venezuela, nicaragua, haiti. if they do not go through the proper channels and just go to the border, they will be sent out and human rights groups say that undercuts asylum laws. lisa: and this has to do with the extension of title 42, the controversial outputted to place under former president trump and the question of who to expel. there is an issue of the need for workers and i wonder how much that is in the conversations that president

biden is talking about with his co-parts from mexico and from canada. how much is that a focus? >> it is a big focus because you have had the top three business communities from canada, mexico, the united states putting out a statement saying that this is what we actually need in terms of also seeing the electrification of the grid when you want electric vehicles. so much of these components are coming from mexico. when you think of around material like lithium that really china has the control over in terms of the global stockpile, some of that can come from canada. you have these groups coming out and saying we need to move past some dispute. huge on the agenda is going to be an energy dispute between the united states and mexico also, canada has taken issue with it there's also potentially

protectionist issues with the dairy industry in canada. these are disputes that are going to come up. when you look at trade and potentially the workers that could be needed amongst these countries, it is huge and at trade specifically i read was about $3 million worth of goods a minute being traded between north america, canada and mexico. i know you asked about employment. that is going to be more of an immigration story between all of these three countries but a lot of that has to do with the fact that these three countries are so intertwined when it comes to their economies. >> and possibly more so. how much is moving toward near shoring or for ensuring to move some of the trade away from the pacific rim? >> it is huge. mexico has really taken a bite out of this idea of near shoring. the fact that the united states also wants to diversify company supply chains away from asia and mexico feels like they are in a top position to do that

especially when it comes to components for automobiles. last year alone, boats were up 260 6% going from mexico to the united states. this is something mexico wants to bring to the top of the agenda because they think this is a place where they can become more of a top spot for american businesses that would normally look to asian markets. tom: i want to talk about the border. for all of our listeners and viewers, this is the thing of most interest. are there republicans making inroads? is mr. abbott making inroads on the border as we move to the next election? >> let's about republicans at the moment in terms of they have been very critical of the biden administration but i've also said they are happy he has finally gone to the border. this is the first time the president has visited the border of his administration.

he did say or send vice president kamala harris while he was campaigning. they have said he made inroads by going but they say it is too short and does not go far enough and they think this administration needs to go further and needs to be more of a hard-line administration allowed going back to some of the trump era policies that the biden ministration, many of them were scrapped on day one. also talking about over the weekend, there was big news in congress. one of their first agenda items of the house is to potentially impeach the homeland security secretary. this is going to be a huge fight going into 2023 and so much of it has to do with also the present election of 2024. for republicans, this is issue number one when they are campaigning. jonathan: we will catch up with you in the next hour.

we have a speaker of the house and i imagine and a couple of months, we will be talking about the debt ceiling risk around all of this. really undermining and underscoring the fact that we have division between parties and division within parties which is going to make it very difficult this year to come to an agreement. lisa: did you read all of some of the provisions that were put in there to weaken kevin mccarthy for him to win? the 15th about? the 14th vote in order for him to become speaker of the house? basically anyone can attend his leadership in just one vote. we don't even know when the debt ceiling debate will really come to the floor. some projections have said july but others say probably sooner than that. so where's the leadership to get some sort of deal done given how weekend? jonathan: the earliest ally, the latest, october. crunch time is going deeper into summer. tom: crunch time as they are.

i've been busting her chops on this, but i think she has been dead on about this time is different. we have heard that before, but simply, this time is different after the concessions the speaker gave. jonathan: is the market response to any different. tom: no. could change on a dime? lisa: that note from goldman they are talking about pointed out that perhaps we won't see the move and treasuries. that perhaps where we will see this is growth and growth will get impeded as uncertainty starts to bleed into certain programs and public programs that need to be financed on an ongoing basis. it could progressively have some sort of weakening factor over time. jonathan: the question remains, wendy start caring about it. i will have the same conversation with a couple of investors later. lisa: right now, people are just exhausted by it. tom: i grew up with some of this in my household.

it is a moral crusade with some of these conservatives. jonathan: 2011 repeat? tom: not willing to repeat that. but it is a moral crusade for a group of people now holding the speaker up. jonathan: in the next hour, coming up in about five or 10 minutes, we will catch up with the micro strategist at ntm partners and chief economist. your two-year up about three basis points. ♪

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jonathan: lisa is singing kesha. tom: watch some american football yesterday, i watched the lions and packers. stayed up way too late and had the marginal beverage and it was great but we should have like they do where you you go to the burger king ad and they still show what we are doing. jonathan: you wouldn't be able to hear lisa saying.

futures on has simply positive. really strong gains to close out last week on friday up more than 2% on the s&p for a weekly gain. a weekly game of 1.5%. you can thank not so much the payroll support but think a sub 50 services ism. in the bond market, that meant yields cap like a stone. trying to bounce back this morning. euro-dollar going to be interesting to see all things central-bank independence suite. tom: you are selling euro, i like it. is it inflation wednesday? jonathan: cpi thursday.

jp morgan on friday. is 3900 uneasy sally? with both consensus so aligned and you're familiar with what that is right now, it is a big dip in the front half and rip in the second half. everyone is starting to wonder how this view could be wrong. that is the message from morgan stanley coming into this week. tom: certainly pushing against it internationally. let's link all of this together. we can do that with michael darty who has been a wonderful supporter of what we have done for years. i want to do a 60,000 foot question. how linked is the economy to the

markets right now? are they two separate entities? or is there a tight linkage? >> thanks for having me on. there is a tight linkage, but it is nuanced. if we think about last year what happened, the economy was growing except interest rates were shooting up dramatically so that compressed valuations. i think the challenge for the stock market this year is really going to be on the earnings side. we know growth is slowing. if we tip into a recession, you could have a fair amount of earnings weakness. typically, forwards earnings estimates are above actual realized earnings. in the very short-term, falling rate structure will lift stocks. we saw that last friday, but the earnings have to be there at the end of the day and if that does not happen, the stock market is going to run into trouble this

year. tom: surveillance research shows our people are indexed up. is this a year where being selective and active really matters? >> i think this is going to be a volatile challenging year for the equity market. if you are indexed up as a retail investor and you are in it for the long haul, don't even worry about what we are saying. you just have to ride it out. if you are going to be benchmarked year-to-year, quarter to quarter, i think it is going to require some foresight in understanding where we are in the business cycle. lisa: i want to go back to that quote john was reading. this question of softer than expected let that front and rip. would this be a movie would sell because you don't see the fed

letting up in its inflation even with softer than expected data in the wage front and on the services side? >> that is exactly right. the fed is actually not data-dependent. they are path dependent and have essentially chosen a policy rate and the goal is to get there and hold that level in place for an indefinite period of time, most likely the balance of this year unless the economy crashes or financial markets crack in order to be a short inflation is going to come down and stay down. that is not a set up for a soft landing in my judgment. what do you expect to hear from jay powell? at this point, to the words not even make an impact on markets going their own way? >> i think they matter in the sense that the fed is really focused on some of the stickier measures of inflation. we did see markets respond

favorably. the fed is on -- also focused on sector inflation. inflation is going to be coming down this year. i think there will be good news simply based on the lag impact and tightening the fed has already done. if they are really focused on slow-moving variables, you have a set up for the fed to over tighten monetary policy and a recession to ensue and that is the direct message of the yield curve. the policy rate is above the two year yield now all the way out. a sustained deep yield curve inversion is not a soft landing story. it is kind of interesting that wall street strategists were tripping over themselves on friday to declare the soft landing based on a one market -- one-day stockmarket rally. i think if you read the credit markets and their historical forward-looking power, i think

we have to be concerned about that story and more braced for a downturn this year and it may not be short and shallow. i think that is sort of the definition of how you could get into a deeper downturn than what most people are talking about. let's talk about the sustainability of what we saw on friday in the labor market report. do you think it is sustainable to expect ways to back off with unemployment down to 3.5% and not climbing higher? that is a good question. those wage numbers tend to be pretty volatile but there were some other interesting aspects of the report. one is that we have aggregate hours worked down on a seasonally adjusted basis. typically before you end up with a lot of layoffs, hours are cut back. it seems like that is happening now. you also have temporary help

payrolls down five consecutive months. that is actually a leading indicator for overall job creation. i do think we are seeing signs and you mentioned the ism services index as well plunging to a level that only one time in its history have we seen it current levels. i think there is accumulating evidence of a slow down and that is what the fed wants. they want to go restrictive and hold so growth falls below trend and a negative output cap is created. that is the intended policy. that is a policy that essentially describes a recession. it is not a super positive message, but sometimes it is necessary to deliver it. let's finish up with how chairman powell might address that tomorrow. as you know, without getting too

deep, it is all about emphasis. i wonder if the emphasis will be on we are getting closer to being sufficiently restrict the. >> i think definitely. the markets know they are getting closer and essentially have priced in a terminal rate around 5%. a lot of the fomc officials have said that is there figure. think powell is just going to reinforce this idea that they are slowing down now in terms of the magnitude or rate rises but they are not ready to stop yet so they really want to get to a level that squeezes the life out of lagging indicators of inflation. that is what financial markets and the business cycle are up against this year. this was awesome, thank you, buddy. just picking up on a weakness in the jobs report on friday. stirring up the toxic room. and ism manufacturing services.

i'm glad you bring it up. let's go there. that was incredibly negative stuff. tom: you wonder, does it carry into this week and it all hinges on inflation thursday. i am sorry. i don't have a strong opinion, it is not for me to stay it, but inflation thursday really matters. jonathan: we could cut up the hiking cycle three ways. one is the size of the cycle each so let's deal with the first point. are we going to get that step down again to a 25 basis point hike in early february based on the data we have seen so far? lisa: we heard that from randy on friday because he was basically saying this gives them the leeway to buy insurance. that is how he characterized it. whether or not that will make it a low or high that they end up

on is a very other question. you have this rhetoric with a lot of people saying they have to go pretty far. they're looking for the 25 basis point move off the back of some of the data we have seen but the overall labor market resiliency may introduce the risk or raise the risk that you extend the hiking cycle so maybe you drop down but ultimately, if the labor market remains where it has been but ultimately there is the risk you extend the hiking cycle. tom: yes. that is the risk think a lot of people have and there are people that say we are long ways from that. i would point out to your scenarios i am less worried about 25 and 50 and all of that. the length of time that we stay at a certain level and this harkens back. we are not saying happy new year today? jonathan: no, we are done. tom: -- said look, inflation is

falling dramatically. that is from the former vice chairman of the said and that is the metric we have to look at. jonathan: we have touched on the debate coming into 2023. many people sitting trying to price in the process -- prospect of rate cuts. tom: have to be careful but to me, it is all in excess. jonathan: can you push it out? tom: who was good at this was geithner her. he was very good saying all we are going to do is push this thing out. jonathan: you know who is good at this? mike schumacher. 50 minutes away. equity futures up. from new york this monday morning. this is bloomberg. ♪ lisa: results president is

bowing to prosecute rioters who stormed the country's top government institutions on sunday. the insurrection by thousands of supporters of the ex-president follows months of protest since the conservative leader lost by a razor thin margin. on capitol hill, new house speaker kevin mccarthy is rallying republicans with promises to cut spending and strengthen border security. still, in order to in the position, mccarthy had to give up more leverage. he promised a rule change that would allow a single lawmaker to call for a vote to oust the speaker. russian president vladimir putin's plan to squeeze europe by weaponizing energy looks to be fizzling. mild weather and efforts to reduce demand are helping. gas reserves are still nearly full. europe is likely already through the worst of the energy crisis. richard branson's virgin orbit

says it is on track for britain's first-ever space orbit tonight. it is plan between 9:40 at 11:00 p.m. and will deploy nine satellites for a range of customers. apple exported more than $2.5 billion worth of iphones to india from april to december. it underscores how apple is accelerating a shift away from china. global news 24 hours a day on air and on bloombergtechtv take -- bloomberg quicktake. i'm lisa mateo, this is bloomberg. ♪

this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. >> it is not that fed wants fewer jobs, they want lower wage growth because they are worried about persistent inflation, 70%

to 80% of all of the cost of our production in the u.s. is related to jobs and wages. if that is going up really fast, that can make it very difficult for inflation to come down. jonathan: apparently bad news is good news for this equity market. your equity market building on the gains of friday on the s&p 500 up by .3%. you will hear from chair powell tomorrow. goldman sachs, the latest from them. more than 3000 jobs this week to cut. one third of its core trading units. >> given we are changing monetary and economic conditions very quickly, and that is certainly having an impact of slowing down economic activity so if you're running a big financial services firm, i think you have to assume that we have

some bumpy times ahead. jonathan: bumpy times right now. tom: no question about it and there is an immense divide between what they're doing and what we are seeing from the major banks that they're always trying to compare themselves to. we are going to dive into it when the earnings season starts friday after inflation thursday. jonathan: with j.p. morgan and i think goldman next tuesday. tom: we are going to be a lot smarter into wednesday and thursday of next week. what i would emphasizes how fluid the situation is and at the heart of it is who do you want to be. sonali basak joins us. is the heart of the matter that goldman sachs wants to be more like bank of america and j.p. morgan? 300 basis points a year behind them. sonali: i think it imply the big move into consumer banking from the beginning there have been a

lot of doubts about how big they could get. the idea was that for this moment to really be a stable part of the bank, a stable force as a lot of the other businesses, trading and baking were very cyclical. it did not get to scale quickly and now they are on track to lose about $200. tom: let's move forward into the gradebook on goldman sachs. everything happens at whatever the breakfast place is on madison avenue. they are going to go in there to a booth and they are going to sit down and say, am i right? we have a $2 billion loss in goldman sachs banking echo those conversations never happen at goldman sachs. sonali: of course not, because they did not have this unit to the scale five years ago. in the beginning, i remember having conversation and so much of the purpose was to diversify and lower the cost of funding. but the cost to do that, markets are still giving you 335.

most of the large banks have not budged among .01%. so it costs a lot to get customers. there is big reporting from liz hoffman that showed you it was not all just the decisions they made. they hit a lot of hiccups along the way. one interesting one being an issue with a vendor. i thought that was very interesting attention as goldman expands. how do they expand not just to meet the consumer but to keep their existing client happy. lisa: how much of these cuts really are just delayed attrition? sonali: a lot of that is definitely true because in the pandemic, they were making so much money. even this coming year, even with profits falling off, they are expected to post their second best year by revenue. i think we have to quickly change this discussion because 3200 people is a lot of people.

it is not 2008 style cuts, but more importantly, with them cutting 3200, morgan stanley cutting another 1000, yet the start to ask where the capacity comes from because there is nowhere to higher out of the firing. lisa: there's also this issue of all of the people getting laid off, will this bank be smaller than it was in 2018? some of the tech companies there is a level where we are trenching to or are we just paring around the edges to a much bigger footprint than they had pre-pandemic? sonali: with 3200 people, i don't want to say that is a small number, but to the point you're making, you don't go back to 2018. they have hired a lot of people that are not just at the very top level of senior banker because they have so much work to do. if your member, even the young people that brought up the cost base of $50,000 a pop. you already had fixed costs rising and revenues on the

precipice -- tom: john and i were there and the waiter came up to us and whispered in my year, specs. is this just unloading the failed equity efforts over the last 24 months? sonali: you had this exuberance really getting out of the system. there are tons of people that are excited about that. the fact that the spac waves over, the crypto boom is done. this idea that maybe you might see some distressed opportunities come back. you might have interesting credit opportunities come back. jonathan: can we sit on the work environment for a moment. do you think there is going to be some grit that returns to wall street? i think a lot of people think things have gotten a little bit too soft. do you think a bit of great returns? sonali: 100%. i was talking to some younger anchors over the last week or

so. tom: i'm shocked. sonali: at this point, i am a decade older. the conversation was some of their friends don't want to stay in the business. some of them are the most excited they have ever been in their career because they realize this is the time that might make their career if you can get through this cycle. this is a time where you're not talking to the banks for money, but the private equity guys. those are the guys still lending. tom: this is important. why is wall street any different than any other sector? money is not free anymore. jonathan: i think the fact that tech is also in a bit of trouble changes the game on wall street. the hiring managers at these big banks felt like they were competing with what was happening in big tech and i think the reason why the community has so much leverage is because these banks could not offer them the upside that existed elsewhere. the fact that you get the return of discipline, putting tech in

trouble i think changes the game on the street as well. sonali: you also have to ask about the consumer because they had a lot of trouble last year in the face of higher interest rates. if you look at the rest of this year, consumers still have stimulus. this to have the student loan moratorium that is hundreds of dollars a month they are not paying that they can use to pay down credit card debt and other things. i don't not that is a great idea. lisa: i bet you they are all in the office and nobody is in their pajamas anymore. sonali: they might get away with the lululemon on the way to the gym but on the way out, they better change. [laughter] jonathan: that was the perfect segue. thank you. the latest out of lulu, margin pressure. lisa: exactly. you are seeing shares plunging because they do expect margin

contraction after so many years of expansion. now seeing that revenue at $2.7 billion versus the estimate which was about the same ingots still, earnings-per-share coming in much lighter and how much is this a story that is going to be a feature throughout all of the retail sector? jonathan: nike down by 1.5% off the back of some of this. tom: it is going to happen. this is another earnings season that mike wilson unfriendly, everybody else is talking about. you mentioned she might are -- schumacher coming up. the basic theme is it is going to be very selective. whether you're talking economic or investment analysis, the choice set seems to be shrinking rapidly. lisa: the company now expects it will further leverage selling general and administrative expenses and their basic idea

here, where are they going to cut costs? are we going to see the labor market being affected by margin compression as a way to address some of the potential pitfalls and profits? jonathan: we are going to slant on lulu. i think you said under armour was down as well. sports retail getting hammered at the moment. tom: i have the license to train jogger. after you buy four pairs of those, do you need a fifth pair? jonathan: do you own lulu? tom: of course i do. i do have the license to train jogger. jonathan: i would not walk with you either. the senior portfolio manager at invesco solutions joining us in just a moment.

from new york, this is bloomberg. ♪

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>> the fed is going to be late. >> i think the fed is imposing a severe slowing on the economy. they won't be able to at they are not achieving their inflation objectives. >> they are still nowhere near target. >> they said oh transitory, transitory, transitory. >> this week how much more do

you want cpi? live from new york city this morning good morning for our audience worldwide. alongside tom keene in lisa abramowitz . tom: china reopening oil up 3% gets my attention. brent crude $81 a barrel. jonathan: we saw the bond market as well a lot lower. we have economic data and spare a thought for chairman powell who's going to respond to this tomorrow. lisa: will it matter? a lot of the fed officials have been saying the same thing they have more work to do. we are seeing soft landing, we are seeing this perfect ending with prince that might suggest things are not as strong. people are saying you need to

see the softness in services and the reason people say that is because wages are coming off but the neighbors on the headline number are still strong so people are talking about a soft landing. again, does this matter? how much does this indicate what's coming? although you are seeing earnings starting to trickle out probably more than mike wilson. jonathan: let's talk about the upside risk. the risk we have seen in em equities. but more than 20%. big moves we are seeing here. tom: the gentleman from princeton, the former vice chairman sit here is the reality china is reopening, pacific rim. we have a must listen, must watch for global wall street. this year will not just be the

united states. jonathan: coming up very shortly, less than a month ago constructive risk and dm international specifically. equity features right now up a third of 1%. yields a little bit higher by three or four basis points. 359.48. 106 point -- 3.5948. tom: may be showing strong. i'm going to take that jay polonsky who i know, j won't get up for disclosure. jonathan: i haven't spoken to jay for months. tom: he shouldn't be punished on the win of it. he couldn't predict a china lockdown. it's over. jonathan: and he is getting what he wanted. tom: business class to

shanghai today. $34,000 one see, nonstop. jonathan: seriously? tom: this is united. full disclosure, i have family in china so i want to get over there but i'm going to monitor that and watch it come down to something intelligent. jonathan: can you meet halfway? tom: eight is under collegial discussion. jonathan: if you want some consulting i am available. lisa, we worked that out. lisa: i guess that will be the negotiation in the break. central break president that 12:30 p.m. and the on the others of the atlantic huw pill speaking. how much do we get a sense of them pushing back against the

excitement around a soft landing type of scenario? do we get a signal they are excited and they are going to well but -- welcome this slowdown? we also get the three amigos summit. all joining together in mexico city for this north american leaders summit. very much on the table. the immigration question around the place but also when people are talking about moving manufacturing to local areas how much do we get a sense of some meat behind that versus the contradictions the people have with where the trade policies should go? kicking off the earnings the scene for the baking industry the fourth-quarter results a question mark ahead of the jp morgan how much do we get a sense of the cutbacks that we saw that we were just talking

about forces where the profits are going to be where are the opportunities? you start to get more dislocations, perhaps more distress. jonathan: unreal. portfolio manager, wonderful to catch up with the as always. they say there is a bull market somewhere always. they say right now it is an emerging market can that continue? >> i think it can continue. a great set up due to primary major courses china reopening if it is a global event but it is certainly relevant. we have a very attractive dollars cycle coupled with the peak interest-rate. we all know it's the best time to the emerging market. in the fed is closed at the end of its cycle when the dollar is

depreciating and extremely expensive and in this particular case china reopening. so the constellation is very supportive for the foreseeable future. tom: in you are going to tell me that it varies client to client but the bottom line is if you're going to make the call and go into international, do you pile in or do you go with the measured amount? how big is the conviction? >> from a technical standpoint, relative to the united states the condition is very high. from a term perspective the commission has to be mitigated. let's not forget the yield curve is 100 basis points. the recession is not a question of if it is a question of when. it could be 12 months away or more when the recession comes,

the high market which is the nature of your question the high data market suggests emerging markets will suffer. within that scenario we will see markets with a bias towards smaller capitalization. and the dollar will shine again. my point is from a tactical standpoint, sitting on bearish defensive traits for too long it is a very expensive proposition. the way we position it for investors is finally diversify into intruder -- any international equity. in favor of u.s. equities which have outperformed for 15 years. lisa: how much of this hinges on the weather and the weather in europe and the situation with respect to china and not seeing necessarily a dramatic increase in their imports of natural gas? >> may be a little tactical

nature of the call. i wouldn't call it necessarily to dependent on the weather i ciber you are going with this. it seems driven in measurements. consumer across the board are bouncing back up. the weather expectation, the energy crisis may have driven us to recessionary or depression like consumer sentiment i think the skew of the risk of the downside here is more mitigated. europe is seeing the benefits of the currency valuations which on the margins begin to feed very well into future earnings. not so much dependent on the weather but rather the cycle of

bearish sentiment in europe seems to run out of fuel. jonathan: i was questioning you about that, thank you. also questioning the story this just said last week. the next big story will be loss of growth in response to tightening. on that side of the business went on to say this is not yet priced with markets. we say point --boyt. i think we lost the point somewhere in all of that you get the picture that may be that china reopening what we are about to confront is a deceleration in the economy. lisa: which i think is the technical issue which we just heard about. perhaps this is a tactical issue of things being oversold and

over pessimistic but it doesn't necessarily mean the all clear is being signaled. jonathan: tom the reopening story without a doubt. suggesting they will get a wider budget. i know you want to continue this. lisa: suddenly you are getting both prongs trying to reopen and stimulus basically upgrade or allow us to increase some of the deficit spending in order to buoy. tom: let's buoy ourselves by talking about the translation a moment. i think it's primarily football this weekend. there are so many different leaks going on over there i'm told we have a derby of some kind. jonathan: there is a northland derby. recently, after the world cup i'm just like so out of sync in

the middle of the season. tom: yes for you it must be difficult. jonathan: i'm just ready to get back into it. tom: my issue is i got tackled on the street by supporters. jonathan: i saw that. tom: it's not just one guy there are's -- there's a lot of people. jonathan: what do you say about tom: it? tom:i say it's a derby we say no it's a darby. i'm not smart enough to know if we should stay but aren't we there now? is an epic debate right now? jonathan: whatever the subject, football, markets, politics. lisa: exactly. tom: but -- jonathan: from new york, this is bloomberg. >> keeping you up-to-date with news from around the world i'm lisa mateo. the capital of brazil is

recovering frying -- from an insurrection. raiders ransacked congress, the presidential palace on sunday. it took hours for security forces to regain control. new president is failing to prosecute the rioters. in el paso, texas a confrontation between governor greg abbott and president biden. abbott handed the president a letter about stopping unauthorized immigration. the u.s. has experienced a large increase of migrants trying to cross the southwest border. in china trying to -- china is trying to change the narrative on protests to abandon the covid zero policy. according to a timeline published by the official news agency the leadership started relaxing restrictions before the protests began. china reopen borders that were largely shut for almost three years. the european central bank this

strengthening the case for more interest rate hikes. it predicts that wage growth will be very strong in the coming months. the ecb says it reflects robust labor markets that haven't been laid -- effective affected. bloomberg learns goldman is expected to eliminate about 3200 jobs starting midweek. more than a third of those will likely be within its core trading and banking units. global news 24 hours a day on air and on bloomgerg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

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>> we have had some positive forward-looking conversations over the last few weeks. i am hopeful that we will be

able to build upon those conversations to do the right thing for the american people. clearly we are going to have strong disagreements at times but we can agree to disagree without being disagreeable. that is what i believe the american people would like to see. jonathan: that right there was the house democratic leader speaking to nbc over the weekend. good morning to you. your equity market building on the gains from friday. yields are high by three basis points. 3.5911 in friday's session. wage growth came in a little bit softer. your next big stock for this market chairman powell tomorrow we hear from him at 9:00 a.m. eastern time and it is cpi thursday a couple of days away. tom: cpi thursday is a huge deal. we launched right into the earnings on friday.

it's going to be a real backlogged end of the week. we are going to talk about new hampshire which is the dragon entry cap photo of the united states at one point. we described what it did to his new hampshire it is unmentioned among the three amigos in new mexico city always up to speed she is our washington correspondent. annemarie, i think the whole conversation is sanitized with a huge arrest three or four days ago on the opium battle. i taken issue with opioids, fentanyl, all the other jargon that is soft peddled. this is about heroin. what are they going to do about the tragedy of north america. >> as you just alluded to this comes on the heels of the mexican authorities arresting el chapo's son. this was a huge coup for the

u.s. and there was a lot of pressure on the mexican government to crack down on the drug cartels and one of the biggest drugs that is trafficked by this individual, and some of these are tells is fentanyl and that is why you have a huge amount of individuals paying close attention to the amount of narcotics because it is not just highly addictive but it is lethal. the individuals dying is rising. you have a senator from west virginia rating over the weekend --writing over the weekend why i care so much about the border is the increase of fentanyl, what that means. tom: jon ferro has talked about it being a bipartisan issue. what are we going to do about it? >> it is a bipartisan issue and i think when you talk to both sides of the aisle they want to

see more funding when it comes to the drug enforcers. also the fact that especially when you talk to, you see some of the plants the administration wants to put forward is more resources and funding to these local governments whether it's mexico or other areas in south america so that they are investing in the fact that potentially more people are not going into the jobs of supporting or being part of a cartel. when you saw the kidnapping of el chapo son you can almost see these are military states within a country. lisa: the focus for you is mexico city and perhaps joe biden for everybody else, people want to understand the aftermath from the ratings bonanza which has been the negotiations over the speaker of the house. there is a question over what the ramifications are for some of the concessions that we saw from have it -- kevin mccarthy to become the house speaker what

is the projection of what this gridlock will look like among republicans? >> will you can even talk to republicans like representative gonzales who talked about c-span ratings is going to continue even little procedural, i would call the plumbing of congress, the plumbing of democracy they're going to have a vote on the house rules. all of this evaporates from the headlines and is pretty much american public ignored. now this is prime time, days spent on this and the next big fight, we should not they our meeting at 10:00 to discuss who is going to get top positions on committees and who is going to stuff the committees. the next big fight is going to be the house rules packet. again the plumbing that is normally ignored is becoming another big fight. you had representative gonzales

worried about defense cuts. then you have an of the representative of south carolina talking about how she doesn't like how it went down and she doesn't know what the informal list is that speaker now kevin mccarthy was able to do in backroom doors. she doesn't like these gentlemen handshakes and but that could mean. you will have democrats united against the packet but some absent teens -- absentees from republicans. my point is when we get to must pass issues like the debt ceiling there is going to be major fights. lisa: we were talking earlier about when it martyrs -- matters for markets. we always get some certified that goes to the last hour how much are we going to see a different tenor this time around? when should the markets start caring about ramifications and what would they look like? >> i think the markets should

start caring. i think they should've started caring last week but this is going to come to the forefront in early this summer and of course we have federal spending with the fiscal year ending september 30 what the republicans want is the fact that they want negotiations to be about raising the debt ceiling, concessions on federal spending they want a cap on 2020 for spending. chip roy said everything is on the table. this is going to include defense. at the same time, you have the administration saying that when it comes to the debt ceiling there will be no hostage taking that was the word from the president's press secretary yesterday. i would say these fights are all pretty starting to happen now. he was part of this in charge and see he said we need to get it now.

this is going to be a big debacle. tom: very quickly, annemarie, when mccarthy turns to the democrats what happens? >> i'm not sure you're going to see that, tom. i'm not sure you're going to see this individual even though he has a very slim majority turn to the democrats. he's going to have to in terms of getting concessions but it's going to be hard for him to get democrats on board. to get the speakership there is not a provision of one member convoked to vacate that means one individual and we have seen of these call for a foot of confidence on a speakership so he is coming into this position incredibly weak. jonathan: annemarie, beautiful place you been there much? mexico city? tom: years and years ago.

it's not the same now. jonathan: were going to talk about lulu just briefly before we get into tom's routine in mexico city. lululemon down by almost 13% if you are tuning in. the sub will give you more details on this but lisa the margin story the stock at least getting hammered. lisa: that is after they reported that her than expected earnings. they saw demand coming up. this is a margin question this is a cost question when do we start seeing the ramifications of that in the labor market? jonathan: isn't these the story? lisa: people are expecting lululemon to be the norm. how much is this sector specific, industry-specific, perhaps a suit going back to the office specific i don't know. jonathan: there is a story here, tom.

tom: be careful. jonathan: really underestimate the amount of earnings damage that will take place. tom: i differ to the brilliant people we have i'm going to go right up the income statement and say some of the gross margin that you see here in lululemon is just very simply the revenue dynamic. jonathan: we will throw in the bond market as well. on this program looking forward to that after a big move in friday's session. your tenure, 3.5893. 4/10 of 1%. ♪

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jonathan: massive week ahead. cpi on thursday, j.p. morgan earnings on friday. we look like this on the equity market up to 15, 16 points. futures up 10%. adding to the gains on friday. the weekly losing streak we have seen on the equity market, going back to november on the s&p after friday's gains. tom: the jumble of it, it speaks volumes versus the audit dow it

is i'm going to provide on vix. it has been remarkably static but that's what i'm watching. they need to see a 20, i see 19. we are not there yet. jonathan: i will get to that in just a moment. 20 basis point move on friday. for two -- 4.2640 also a softer send as well. if you can throw in lower rates and china reopening story this is what you get. what is the opposite lisa: of a toxic brew? lisa:soft landing. jonathan: from the lows of october are up more than 20%. there is your bull market. tom: that is on a relative

basis. usually maxi -- m xc -- mxef. lisa: is any of this because of a recovery in indigo economy? tom: it's just a run from gloom and stasis. jonathan: if you can get the china reopening story they conceal that with the deficits. you can get lower rates, you can get a weaker dollar. this is where people want to be. whether you want to stay there that's up to you. lisa: perhaps this is more tactical than long-term. that is what we are seeing this morning at least the hence out of lululemon we are talking about the yoga pants for a while now but certainly throughout the morning there is a question about where some of the margin compression came from the revenue is up between 25 and 27%

ahead of the previous target range. so the actual revenue is above expectations but the gross margin is expected to contract for the fourth quarter by about one percentage point versus the prior forecast of widening and and spansion -- expansion. how much of this as an expand as the materials cost more, the rent costs more where are these going to go other than in the profit margin. jonathan: basically what you are saying it is not a topline story it is a bottom line risk? lisa: correct. this is what the fed was hoping for something's got to give. in order to remain competitive they get revenue that is above estimate they are continuing to sell but the costs are bleeding into what they can to come. jonathan: the fed tomorrow, cpi

on thursday and investors looking for more sized pressures. in our view the implied terminal rate will respond about a hefty print on core cpi as to a week one for the two prior months we figured that a weak print would prompt a bigger market reaction. mike shoemaker. tom: pulling in the economics. in his recent note it is extraordinary in its nuance not only the united states but also the transatlantic and mx as well. that is the heart of the matter. jonathan: it is the mentor. exceptionally acute notes. mike your note says higher yields are we all going to die if we have higher yields? >> i hope not.

at least not quickly, tom. it's interesting when you think about the move on friday. the bond market has been so volatile for the past six month site wouldn't think too much out of one days move. a lot of progress and inflation that it is not yet time to signal if it is all clear for bonds. tom: if we signal it into the return the answer is down china or miss with a little bit of a bounce if you call for a higher yield does the blended total return index seek new lows in price? >> it depends where you look, if you focus on the front end you still get positive returns. you got such a high-yield if yields were going up it matters but it won't knock out the four plus coupon. in the tenure very different story. lisa: how much are you going to

expect the market to move to a higher expectation of a terminal fed funds rate as they start to realize the fed is serious about what they are saying? >> it's going to take a while and the problem is the fed credibility is not very good. if you go back to december of 21 take a look at the terminal data, take a look at the fed for 22 it was less than 1% that didn't work out. at all. i think the market listens to chair powell. he has been talking tough for four or five months. let's see if the fed hikes in february, march. the market is going to give the fed not much credit because the forecasts have been so poor. lisa: we have been talking about this and questioning how much we have to care about this. we have been talking about the debt ceiling debate and at what point, the bond market will care about a defiant -- default.

what is the expectation? is it on your radar? >> we are more concerned than we would normally be because of the pandemonium in washington with the market has seen this a lot of times. don't care about the debt ceiling until three, maybe four weeks. the maker of lot so they care none, none, none a bunch. we are not there yet. i think it takes a while. tom: i look at the total return index and i know guys like you are dealing with the spread and relative yield analysis. deborah cunningham was on last week and she stopped this show with clip a coupon year. if we preach last year's carnage in the total return index we go back to a price of 2016 is that feasible that we can see a second year of price trauma in

bonds? >> lester was incredible, tom. thinking about the moves relative to where the year began blowing away forwards i think that's very tough to imagine not impossible because things have been so strange but think about monetary policy for the ecb or the fed. 6%? something like that? that is much less movement this year then we had lester. for the ecb may be it goes 100, 150. i could not really shocking the market as we had a year ago. i think the idea, hopefully the chance to repeat something like last year is pretty small. lisa: you think bonds will offer an offset to the potential risk in the case of some sort of downturn? >> i think it's a really interesting point we think about the correlations between bonds

and equities for most of the last 10 years you have this case where bonds would provide the balance. lester and her recently it's been no, yields are down this is good for stocks. we had this on friday too. we don't have it yet but i think it will take another quarter. jonathan: great to catch up, mike. two mike's point the equity market response to bloomberg rates and the equity market response. the second part of the story comes little later so do you want to buy risk to sell readings on manufacturing and services? rates have coven but after that you have to trade about earnings. lisa: how much of it is expected? you hear about the whisper numbers. how much is that really going to set the bar pretty low and have companies jump over the hurdle particularly in areas like tech.

jonathan: for those of you thinking it's down. he says this, we continue to think fed concern about loosening financial conditions unappreciated hawkish risk including a 50 basis point hike on february 1. a goes on to say this is even more the case after the dramatic decline in treasury yields just last friday. tom: the move in yields i think is part of that power game. he was early on this and stayed with the call and the nuance of the terminal rate i guess we will hear about that from powell. you have to believe we are going to be reframe the q&a. the parlor game of rate cuts, i have never seen this or we are going up and i get we are measuring going up.

but then when we come down -- jonathan: if that makes sense. tom: the total return index i take a huge issue with the financial media where they quote yield, yield, yields. lisa, you are a pro at this. i'm not. i'm looking at the total return. we bring any price on bonds. lisa: it was bear market and bonds. the issue i have is people talking about the fed and we have this better than expected deceleration in inflation and people cheered. the ecb came out with the report saying wage inflation is going to probably prompt more rate hikes. they are becoming more hawkish. tom: what is the number on rates? lisa: they are saying it's good to be bigger than expected. they are concerned about where the momentum is coming from. core inflation came in

above. this is struck tough by the market. tom: i go to the history of the united kingdom and france where the labor and rest, we have two separate groups of nurses striking in the five boroughs of new york. jonathan: i saw the same thing. tom: this morning. that's real. jonathan: the return of labor leverage, labor power. tom: how do you run a hospital without nurses? jonathan: with great difficulty, tom. jane foley is going to join us. it's a big move. up fortunes of 1% and china taking down the final barrier to entry. tom: final barrier. come on, print the money.

we will talk to ms. foley about that. jonathan: can you print the money? lisa: $35,000 that's what i was expecting. jonathan: $35,000 is that business class of first? tom: business, i don't know. jonathan: i thought you checked the prices? from new york, this is bloomberg. >> keeping you up-to-date with news from around the world, i'm lisa mateo. found to prosecute rioters who stormed the country's top government institutions on sunday the insurrection by thousands of supporters of the ex-president follows months of protests against the conservative leader by a razor thin margin. he is calling for federal intervention. on capitol hill new house speaker kevin mccarthy is railing republicans with policies to strengthen border security. mccarthy had to give more

leverage to the parties right wing he promised a role change that would allow a single lawmaker to call for a vote to oust the speaker. president biden declared a state of emergency in california because of flooding caused by heavy rain that clears away for federal assistance. the state isn't bracing for another storm beginning today 5-7 inches of rain are expected with some areas getting up to 10 inches. global news, 24 hours a day on air and on bloomgerg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo, this is bloomberg. ♪

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>> by the time the fed is done by the middle of the or maybe even higher i think nobody is talking about higher. what if inflation doesn't decline?

what if it stays high we have to get use to it all this year in our view. jonathan: she thinks rates could go well through 5% and have a look at 550. we get a recession at the back half is that depressive enough for you or what? s&p looks a little something like this half of 1% chairman powell tomorrow, cpi thursday, j.p. morgan on friday. little bit high by three basis points, 3.5874. euro a little stronger against the weaker dollar. the king occurred, 76.40. kidder -- consideration of doing that wonder why crude be the year ahead. tom: just as a convenient number everybody got that wrong last year it is about the timing.

the key factor, it's got to be china opening. jonathan: without a doubt. this is year three of pandemic economics. ask them for the year and oil forecast because oil has a habit of making people look silly and at some point have something very wrong on this china reopening story. tom: i hope powell addresses this in his q&a. we are going to shift from an odd supply-side dynamics of economics over to a traditional demand side analysis. we are not there yet. jonathan: i hope it's that simple. when it comes to china i don't know if this leads to supply chain relief or dislocations off the back of a booming demand. lisa: this is what people have been talking about. when do they start requesting more natural gas imports? he said the chances of starting to import of lng is going down

because the are going to cheaper types of things like coal. pipeline gas, domestic production. they may not even begin to do that. tom: we will have to see. we are going to go to the deepest part of what we see on equity bonds. it is the foreign exchange market. we do it with their mates heritage of being on the others of making commercial transactions. jane foley, wonderful to have you here and timely as well. at the bottom is dollar bulls do not give up why should the dollar not give up as we see weaker dollar moving into a trend? >> i think if there ever was a year to hand over to economist this is going to be the year. there are so many different combinations to argue the issues

that are at hand. i think particularly positioning out i think we've got to look at the events before us through the prism of positioning in the last few months over the year into this year. is the market selling off on its long dollar position the going into the fundamentalist with the market no longer long dollars and the market very long euro. that's got to color some of the news we've had particularly around the fed. tom: you do this differently because the heritage of your bank. you do a lot of hedging, a lot of business transactions. is there a dollar bet -- fact on the other sides give a? >> there is. the answer to that is yes. if you look at the reasons for the selling of the dollar in the last couple of months it is surrounding peak u.s. and of course the fed.

the fed remains pretty hawkish i think we can argue this both ways will the fed cut interest rates this year? will it not? there are views out there but this is going to look different when the market is no longer long. if we look at what has been ramping up at the year end long positions over the last couple of months this is all related to the gas price. about the european economic outlook but again the news foot is going to hit differently with the markets already long euro so i think what we are in for his choppy trading as the market reacts to this. from now this position of not long dollars and. long euros. lisa: what is the range you are looking for? >> i think the range is going to be large and this is a new world here and i will go as far as to say the volatility we had in recent years was a function of

very cheap mining in the wake of the recent years. i think all investors are much more exposed to economic fundamentals. they have to look at economic fundamentals. money is more expensive and i think that's going to make a much more choppy environment. probably not just this and lester but probably in years to come until we get cheaper money again for whatever reason. i think we can see euro-dollar maybe one .8, 1.9. i think we have a lot of choppiness to come. lisa: you raise a lot of good points which dated this market response to. we saw inflation prints in europe. that had a lot to do with the energy prices not with respect to core inflation. we see the ecb coming out and

saying they are going to hike rates more if they see potential momentum in inflation. what is the market responding to aside from just the strength because of the better than expected outcome with the winter and energy? >> the market response to what it wants to, it sees what it wants to see. it sees the hawkish and us from the ecb and the fed and in terms of the european data we had last week the headline numbers were coming, yes they are going to come lower. lower energy prices and because of base effects as well. these core numbers were higher. this does make it an unusual data because labor markets are so tight. this does mean that this sector inflation could remain more sticky. this is what central banks are worried about. this is why they maintain this hawkish rhetoric. were going to be cutting

interest rates, they may not be. we have to wait and see. tom: are we going to make some money before arsenal this weekend what is your high beta em pair right now? >> we have seen people go shorter, i think that's probably going to carry on. if you talk about the aussie, traditionally high-risk trade within the g10 and that's no longer an energy exporter. the differentials are narrowing. i think that means australia is no longer going to be seen as a sort of high-risk. they could perform quite well this year. jonathan: interesting. jane, thank you. just published moments ago give us the recipe, give us the

recipe, the ingredients for a significant rally. here are three of them. the fed stops tying. earnings and or valuations reached the press levels that reflect recession. a historically stream level oversold as a mystic tactical conditions. at the stranger we have none of the above. tom: so none of the above what is important here is he is a bolt and pushing against that right now. jonathan: futures lisa up for tens of 1%. lisa: how long can it last? it leads into some of the earnings. tom: i don't agree with individual companies moving this thing around. they are doing what they are doing and they are struggling. isn't nike one we saw like three weeks ago? lisa: they are not struggling this is the interesting fact. they are increasing revenue at

27%. they are doing wonderfully. the problem is the margins, the actual profit is coming in because of the expenses they are not passing along to consumers. can you get a better economy and worse earnings from companies? this is the inverse of what we've seen over the past acre -- decade. jonathan: you know you are in trouble. lisa: it's not trouble. tom: when my hands start going. horton's hands are worse. [laughter] jonathan: mexico city, beautiful. global director on fixed income. a little look at the bond market after a massive rally on friday after the act -- back of weak data. tom: the license to train joggers $128. jonathan: depends on how much it is.

are you wearing them now? tom: no. ♪

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>> by the time the fed is done you will have to raise rates at least 5.5 by the middle of the year, maybe even higher. >> i do not think 5.1 or 5.4 is

that big of a deal, it is how long we stay at lowndes those levels -- stay around those levels. >> whether it is closer to five are closer to six will depend on the strength of the labor market. >> we have not seen a significant tightening in labor markets. >> we have a tight labor market but let's recall that recessions begin when labor markets have reached their peak. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning. the most interesting monday on the way to thursday with important inflation data. china reopening. what i know, the bloomberg financial conditions index for chairman powell is going the wrong way. we are almost back to the accommodations seen before jackson hole. jonathan: for that reason, not my opinion, but the opinion at citi, the fed has more to do.

it'll be interesting how he responds to the data we saw on friday, not just the labor market report but also the sub 15 contractionary surveys for manufacturing in america. tom: vishy tirupattur coming up in a moment. michael schumacher says short-term corrosion's debt durations acting radically different -- short-term durations acting radically different. jonathan: lisa mentioned the european central bank singling were rate hikes. the ecb is acknowledging we are probably in a recession in europe right now, yet they still want to hike interest rates. that tells you something about this moment. tom: i was making fun of how financial media looks at the spread market and the difference between high-yield investment grade in full faith and fretted, but what are those dynamics?

lisa: you have seen in easing in financial conditions and that has been a theme through risk assets. spreads coming in pray directly. the high you saw in october was 1% above where it is right now. that is how much we have moved down, 1%. how much is this going to give the fed ammunition to keep hiking rates? this is the interesting question. because the market has eased and is more excited about the growth prospects and not the risk of fed rate hikes, does that push the fed to do more? jonathan: -- tom:'s pal going to move the market today? jonathan: tomorrow. i have no idea. it is always about emphasis. he is the chairman. in his last news conference he said we are not sufficiently restrictive yet, and the second thing is we are getting closer.

what does he choose to emphasize? the getting closer part or the fact we are not there yet. we heard from jim bullard last week and he said we are getting closer and everybody's said we're getting closer to sufficiently restrictive. do they know what sufficiently restrictive is? for a lot of people we might have been near 100 basis points. lisa: lori calvasina said the dirty secret out loud where she said she is surprised with some of the questions that have nothing to do with inflation. people are looking for anything other than that to talk about. economists said we have no idea, we have been terrible with inflation. perhaps people are throwing up their hands. tom: to get in front of the importance of thursday. the 18th is retail sales, the state of the american consumer, which falls into the gdp gas. those are the signposts around

the way. jonathan: this is what the equity bulls want come unemployment at 3.5%, growth resilient, and inflation to profession -- inflation to soften. is it sustainable to expect wage growth to accelerate and unemployment not to climb? unemployment dropped to 3.5 and wage growth softened. connect continue? -- can that continue? it is way too early to make that call. lisa: can you get a perfect soft landing and still see stocks do poorly? jonathan: there's a huge difference between what the market doesn't what the economy does. tom: i am going to focus on the data and go to the data dependency. speaking of data, let's do it. brent crude at three point -- at 3.2%.

the story is the resiliency in equities. equity futures up one third of 1%. a massive rally on friday. the biggest weekly gain on the s&p back to late november. you can say thank you to the ism reading. that survey was dreadful. the job seven points. the biggest drop since the start of the pandemic. business activity orders dropped the most since 2020. yields fell off a cliff off the back of that. it was just about payrolls. i would say it was hardly about payrolls at all. tom: right now we will get further guidance from the depth of the fixed income market. vishy tirupattur joins us. when you and mike wilson sit down, he is on the equity side, you are on the bond side, you of

the mother of all debates, that is the heritage. where are you and mike wilson most on the same page right now? vishy: i think john just hit the nail on the head. this is what mike and i talked about. it is not the payroll data. the most interesting thing being the average hourly earnings below expectations, but the most important data was the ism data. the ism data, both for services and manufacturing rose significantly, suggesting broad-based demand. this is very much the point mike and i see the economy slowing significantly. in terms of the fed outlook, is our economists have the fed

doing 450 or 475. the most important thing, it is not that important to me. what is important is how long they stay there. how long they stay in a distinctive manner. that is what is consequential. the fed is indicating they're willing to put up with pain, and some of the data gives them additional impetus to stay elevated much longer. at the risk of significant slowing in the economy. that is the outlook you're looking at. jonathan: with that in mind, we hear from chairman powell tomorrow. how do you expect them to respond to the survey data we have seen so far? vishy: i suspect he will acknowledge inflation is heading south.

there is plenty of information to show that. we will also see some slowing of the economy, there are significant indications on that front. i expect him to say we want to accomplish slowing the economy and the pace of inflation down, and this is going along the lines -- lisa: you think the rally has gotten overdone in the long end? vishy: our team did a call of going low on the five-year point. when we think it is time to go along, i think the trade works whether we are having a soft landing or a hard landing. in both those circumstances i think being long five-year treasury works. the overall point being if we have a significant economic

slowdown and earnings recession it is bad for equity earnings and at the same time the probability the fed would be looking to cut would start to get in price to the market and that bodes well for the fixed income. all of that comes back to this year being the year of fixed income. lisa: a lot of people are piling into this consensus trade of long investment grade bonds, saying it will perform better than equities and any currency pair. are you piling on that train? vishy: i would not say we are piling on. i would say the rest of the world has piled onto our trade. we have had an early call for high-quality credit as the trade to be in and we stick by that. jonathan: i love by you. great to catch up. vishy tirupattur of morgan

stanley. it is always funny when they say we were first. mike wilson of morgan stanley probably feels the same. this is what mike has to say. he said more downside ahead, he thinks the downside could be as much as 20%. just last week we caught up with him. this morning he wrote the following to start the week. with both the sell and buy side, a massive dip expected in 2023 and recovery in the back half. he goes on to say we think it is in the magnitude of the move lower, led by much weaker earnings and a fed committed to fighting inflation and for that reason i do not think anything is ever easy seller and easy by. lisa: this is the most interesting part of this call. it is not the direction, it is the scope for the downturn that is most interesting.

tom: i will say the market is fragmented into the zombies, the less profitable's, and a select group that probably will go through all of this without breaking a sweat. the heart of the matter is the inflation call and that is why thursday is so important. you get a disinflation area trend down to whatever level, that is the key part of the equation. jonathan: you know who is taking thursday off? lisa. very early to take a vacation. very early in the year to take a vacation. she just screamed at me that i'm going skiing. if anyone deserves that you do. lisa: thank you. jonathan: your equity market

higher by one third of 1%. lisa m.: keeping you up-to-date with news from around the world with the first word, i am lisa mateo. the capital of brazil is recovering from insurrection by thousands of supporters of former president bolsonaro. rioters ransacked congress and the presidential palace. it took hours for security forces to regain control. the new president is vowing to prosecute those rioters. president biden is in mexico where he will meet with the leaders of mexico and canada. that summit is aimed at easing tensions over migration and drug smuggling. president biden faces lyrical pressure over unauthorized migrants from latin america. the ecb is strengthening the case for more interest rate hikes. it predicts wage growth will be very strong in the coming months. the ecb says that reflects

robust labor markets that have not been substantially affected by the slowing of the economy. in new york city more than 7000 nurses at two major hospitals went on strike. the nurses at mount sinai say staffing levels and private-sector facilities are inadequate and pay should be higher. the pandemic led to the high turnover and forced hospitals to fill gaps with expensive travel nurses and push their margins negative. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪ we need more ways of connecting with customers, fast. i know some consultants with great ideas. can they help us improve our digital experience? absolutely. they've invested over $2 billion in tech. that could really help us manage inventory. and save us a ton of dough.

then let's take back our market share. checkmate, chess heads. girls, i said “bedtime”!

>> i think the fed is imposing a severe slowing on the economy and recovery from that will be strong. there will be cyclical leadership but we have not found

this in the economy. you probably see the recovery within 2023 but not sooner. jonathan: that is the dip in the first half and the rip in the second half. i'm sure he will not appreciate being consensus but for 2023 it is kind of consensus. equity futures up one third of 1%. futures rallying on the back of gains friday. yields battling back from an aggressive move lower following payrolls in the negative survey reading on services in america. a big drop from the previous month. yields up. china dismantles covid zero, crewed up more than 3%. 76.25. brent with an 81 handle. tom: as lisa mentioned, we are done saying happy new year. it is over. it is the 30th in a bursary a

bloomberg radio and tv last week. what that means is we parachute in worldwide almost 200 of our executive directors in key staff that make bloomberg surveillance go. their people inform us each and every day. this morning's chosen victim is will kennedy, executive editor for energy and commodities. normally starts his day at the crack of 10:00 a.m. and k in it 8:17. china reopening. new demand. do we know demand elasticity and responsiveness, or are you guessing this as you go? will: we do not know in china. it is an important question. in the big cities the worst of the first wave is over and people are trying to think what that looks like. refiners get quotas about how much oil they can import.

there are quotas running 20% ahead of where they were. tom: bringing in 20% more than what you thought? will: 20% more, which is a signal the government expects a big jump in demand. clearly we know from reopening's and other parts of the world people really want to fly again. you have the chinese new year coming up and people have really been watching how busy those airports and roads are after three years of lockdown. a lot of pent-up demand. lisa: where that demand gets filled is the question. is it going to come from crude or the supplies or is it going to become from gas and coal in australia, cheaper sources of energy? will: when you talk about china and energy the answer has always been all about. i think that means more of all

that energy. when it comes to crude, that is what, when it comes to people flying and driving, that has to be crude oil. the gas question is important for the global market. gas imports have been depressed. that is one of the reasons why the energy crunch has not been as bad as some people feared in europe. if they start importing lng on a serious scale, that could quickly end some of the softer gas prices we see in other parts of the world. the end of winter is insight. jonathan: i am surprised -- lisa: i am surprised as i start reading through the situation in europe. in europe they are getting more imports of natural gas that they want, they are getting more deliveries. is it more driven by demand-side or supply-side? will: europe has caught a lucky

break with the weather. it has been exceptionally warm start to the year and it was a mild first half of the winter last year. that has suppressed demand, combined with energy-saving measures, combined with a lot of factory shutting down and coming production, europe is in a much better place. gas has already been ordered. those stockpiles are much more full than people expected. 91% full in germany. much higher stock prices than you would see in winter. that is depressing. i do not think people should be complacent. they will have to refill stockpiles without any russian gas at all this year. that will be hard to do and a cold snap at the end of this winter, it could change. jonathan: has any of this change the investment decisions of the

exxon or the bp of this world? will: at the margins, perhaps. we saw pretty big number out of bp for how much they will invest. we got high inflation. i do not think we've seen any wholesale investment. interesting to see what gas projects get invested in in the u.s. this year, what contracts get signed, which will allow people to develop more lng export terminals or projects in places like africa. we might see it in gas. i think oil -- investment seems to remain depressed. jonathan: you get the sense the europeans have changed their mind over anything? will: i think european politicians would be happy to see investments in the u.s. and africa they will not shout it from the rooftops, but at cop 27 in egypt

there was controversy about the german chancellor -- on the other hand talking to african governments about whether they would like to sell gas. i think there's been a subtle shift. tom: are you going to be able to get back in time to see tottenham and arsenal? will: the question is do i want to. tom: that is really what matters. jonathan: thomas basically asking if he can come with you. will: i will be back on saturday, just in time to see tottenham win. jonathan: checked the prices. tom: call them up. jonathan: i look at some of the arsenal tickets, completely sold out. my friends were members said to get tickets this year is almost impossible. tom: i was thunderstruck on my last visit, the number of arsenal fans. they are huge. jonathan: we do not have that

develop secondary market in the u.k.. they try to keep it in-house amongst the membership in a way in the u.s. if there is a big game and you have the money, there is a price. tom: what is javier blas thinking about? what is he fulminating about? will: he would admit the energy has not been as severe as some people predicted because of the weather, but he would tell you it is not over yet. jonathan: i think he has been phenomenal highlighting the hypocrisy of politicians. some of the politicians might be shouting about it from the rooftops. do not follow the rhetoric, follow the decisions. will: the other thing worth watching his metals. they really benefit from a chinese reopening and chinese investment.

stocks are very low. you are talking about softening inflation. commodity prices have softened but there are areas where commodity prices could come back sharply. tom: to look at lme or chicago copper? will: most people still look at lme. jonathan: with us all week? tom: you will come back tomorrow? will: anytime. jonathan: will kennedy out of london. a phenomenal commodities team. tom: in the intro i mentioned the executive editors and this goes back to a guy named stuart wallace and justin carrigan, and we made a commitment years ago that we would own this up against good competitors. commodities is a world business. the fallout of 10 and 15 years of investment is to have a team

where there is a whole bunch of other people grinding away at this. jonathan: crude up to about $81 a barrel, more than 3%. wti up 3.2%. tom: i met will at the dorchester miners convention. jonathan: he would be the first to tell you lme week has changed a lot. not what it once was. coming up, krishna memani. looking forward to speaking to him. we get you down to the opening bell in america. ♪

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tom: we say good morning to you. lisa abramowicz and tom keene here. an important day for goldman sachs. we welcome all of you this morning. we look at a set of anticipated layoffs at goldman sachs. we will follow up on that. right now we have futures up 20, dow futures up 121. there is an equity left but it

is accompanied with a pullback. higher yields this morning off the huge lower yield movement we saw on friday. in the foreign exchange market, the dollar gives it up. i should point out yuan, 6.78 off the china news. right now on the economy, on what we saw on friday and the adjustment forward, she is with adp. most locked into our paychecks of any company in the country. she is their chief economist. nila richardson. i want to focus on what adp sees , not your proprietary stuff, i do not need the state secrets, but with the advantage of your payroll knowledge, what did you learn friday and how does it amend your view forward? nila: we learned that over a

million clients are still hiring rather aggressively. we also learned that hiring intensity is coming from small and medium firms blocked out through a lot of the hiring in 2022 come out manned by larger firms when it came to benefits and wages. the third thing we learned, this is important when you talk about the next steps for the fed, is wages are moderating. they are not moderating quickly enough to make even a 2% inflation target seem reasonable at this point. they are still quite high. double what they were going into the pandemic. there is a lot of work to do when it comes to wages and getting them down to a tolerable piece of growth that meets the fed target. tom: jon ferro has emphasized the ism numbers. they show some sloppiness. how do you define a soft

landing. if you do not like the soft landing where are we going with the optimistic outcome? nila: to me a soft landing is a landing you can walk away from. the economy is strong enough it looks like it will do so. we got a goldilocks report on the sixth. we got a report where you still saw strong jobs growth and moderating wage growth. that is the perfect scenario for a soft landing. the question is will that trend continue. what people get wrong is all of this is cyclical. it can be controlled by a slightly higher interest rate. much of what we are seeing in the labor market is structural. if you look at the hard data you will see growth over the next decade is expected to be half of what it was the previous decade. that means labor shortages are persistent in the specter of higher wages will be with us for some time. lisa: if i were going to put about one that, are you saying

the hope of a soft landing based on the print we have friday is more wish than reality? i am saying the door is still open, but that door swings both ways. we still have a robust labor market. 3.5% unemployment rate. that is a strong labor market. you are seeing initial jobless claims barely above 200,000. that is a strong labor market. that is a labor market also at risk of higher wage pressure at every turn. the idea the fed can get to this terminal rate and then pivot, to be that door is closed. i expect to see federal funds rates higher for longer because the labor shortage aspect of the labor market is not going away. lisa: people point to services ism that was weaker than expected. then areas like the housing market that have seen incredible

disruption in terms of how much prices have come down. certainly the volume of sales. how much more is there to go and some of the industries that have been first hit by the tightening fed funds rate? nila: let me point out that housing, the issue is more structural that it is cyclical. it is not just higher mortgage rates. people have bought hyacinth -- have bought housing at much higher rates. what we're seeing in a housing is a lack of inventory. that hits a supply issue that is been an issue for a decade, and that supply issue is likely to get worse. that is something that is structural. to get back to your question, we cannot expect the labor market to behave in a uniform way. this is a very fragmented market. you are seeing interest-rate sensitive sectors like manufacturing starting to slow. we have seen firms that over

hired last year like information technology are starting to slow. at the same time, when one door closes another door opens. you see that in the jolts data. there are firms waiting in line to scoop up that headcount. tom: that is where i wanted to go. i don't know if you have any interior knowledge. there is a tech hemorrhage going on right now. to those people find jobs? nila: it is too soon to tell how quickly they find jobs. i think that underlies your question. how quickly do they find jobs? we do not expect them to be part of the long-term unemployed of six months or more you see in other segments of the population. it is how quickly they are observed. my feeling is those skills are readily absorbed, not necessarily in tech, but in

other sectors of the economy that benefit from advanced tech and data skills and software development. some of these technologies that were important during the pandemic have now gone mainstream, and companies are more likely to need tech talent in the future. i expect these numbers will be quickly absorbed, though it is highly disruptive in the short-term. tom: this is really important. lisa, would you agree with me this is in the zeitgeist, there is a lot of carnage in technology, but there is an american job economy. may be on a stock basis or the hopes of a tech stock boom, but it is not like they are out into nothingness. lisa: which is the reason why we have not seen it in some of the numbers. at one point we start to see the destruction and the numbers we are seeing in certain

industries? could we see a recession without an employment rate that picks up all that much? nila: if we do it will be the weirdest recession in u.s. history. i start from first principles, the jobless claims numbers. those numbers are low. unemployment at a 50 year low. there could be some softness next year and we could see weaker hiring next year. the fact firms are still hiring when all expectation is the economy is slowing, slowing significantly from last year. definitely from 2021. that makes the hiring more remarkable. it tells me that what we are seeing is impervious to rate hikes. there is something more going on and companies still need to hire and find qualified talent. lisa: you said you think this will push the fed to raise rates to a higher level for longer and keep it there for longer than people are expecting.

can you give us parameters of what you are expecting and when it will be felt by an economy that has been resilient. nila: i don't know if the fed path is through the labor market. i though -- i know the narrative is if we -- we can crush wage pressures. that will lead to lower inflation. i am not sure that is the path. i think what we need is to see more people enter the labor market. what that means for the fed is it is not just a monetary response. it is a fiscal response. it is a retraining response. it is a get people into those interviews, which means federal and local support. the idea the fed can do this alone and fix the in flavored margaret -- and fix the labor market and get people back into the labor market is idealistic.

the fed can only stay in its lane. i would expect to see a federal funds rate over 5% and i would expect them to hold for a bit of time. through 2023. tom: thank you so much. neither richardson of adp. -- nila richardson of adp. now the anticipation of normal january change at goldman sachs. lisa: the culling of the herd as they return to something more normal after not laying people off during the pandemic, because it did not look good to lay people off and because they were going gangbusters. tom: we mentioned tony dwyer -- western canada. i know them from their acquisition of adam harkness and hill out of boston years ago. maybe that is where tony dwyer

came from. the company is so upset with their stock prices it -- they want to take it private. not that they are a zombie, but the senior manager things the stock prices are unacceptable. lisa: we have not necessarily see in the huge amount of corporate buybacks may people were expecting which has been a big question. how much is this going to take place? did i say one thing about nila richardson? we have been asking about the potential for a debt ceiling debate, what the effects would be. she was saying the potential for growth and decelerating inflation comes from that fiscal and sponsor -- that fiscal response. more targeted immigration policies that will not get done if you're looking at some of the gridlock in d.c. tom: i will look at the data.

i go back to this. jane foley i thought was brilliant on the volatility we are all living day-to-day. for me, all you can then do is fall back on the data and the eeco screen becomes the most important tool i have going forward. lisa: it is a choose your own adventure eeco screen. is a choose your own adventure number of data points. there is something for everyone. when does it become a trend? we will not know until it is too late. tom: stay with us. futures up 22. are we buoyed? lisa: we can say buoyed. lisa m.: keeping up-to-date with news from around the world, i am lisa mateo. brazil's president is vowing to prosecute writers who storm the country's top government institutions on sunday.

the insurrection by thousands of supporters follows months of protests since a conservative leader lost in a razor thin margin. president biden has declared a state of emergency in california because of flooding and mudslides caused by heavy rains. that clears the way for federal financial assistance. the state is bracing for another storm. five to seven inches of rain expected. richard branson's virgin orbit says it is on track for britain's first-ever space launch. the takeoff of a modified boeing 747 jetliner with the rocket under its wing is scheduled for between 9:40 and 11:00 a.m.. deere has reached a deal with the american farm bureau to allow farmers and ranchers to repair their own equipment.

it gives farmers access to diagnostic and repair codes as well as manuals and product guides and authorizes them to buy tools directly from john deere. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

the first time you connected your website and your store was also the first time you realized... we can do anything. cheesecake cookies? [together] the chookie! manage all your sales from one place with a partner that always puts you first. godaddy. tools and support for every small business first. >> this is a market that is split between soft landing and hard landing scenarios. where the consensus expectation

around declining inflation leads the ability to fed to pivot. tom: jeffrey rosenberg at blackrock with a chat on the jobs report and onto the ism number, which was grim -- not grim, but difficult. it gives us the up equity market we saw friday. futures up 20. we will do three things. will get to serene entourage and -- moments ago the united kingdom considering the sending battle tanks to ukraine. they joined germany, france, the united states. lisa: search warfare, people describe it as that, the effort to support ukrainian troops. there was a story in the new york times about how others who have a gripe against russia are

joining the fight in the ukraine. there are troops coming in from other areas to try to support the fight. we shall see as we enter a colder period. tom: battle tanks needed at goldman sachs. cut to the chase. is this about dumb decisions? is it about the bank? what is the back story leading to 3000 plus layoffs today? tom: is a type -- >> it is a touch harsh. goldman sachs is shedding rivals , but it is hard to pin it down on mistakes. consumer banking has not gone great and they have outlined a retreat. you have to look at the fact that through the pandemic they did not do the usual underperformance and they have had a big jump in the headcount

under david solomon. you've seen headcount increase 33%. the total is 55 now. while there planning 2200 cuts, that works out to 6%. ensure numbers it is one of the biggest exercises goldman has carried out in job cuts. tom: does the leader have the partnership support? >> partnership might complain about a variety of things, but you are emerging from a very difficult 2022. goldman sachs was still a better performer than almost all the other -- way bigger than the bigger consumer banks heading into 2023. if you have a load of completes, it feels little misdirected if it was targeted at david solomon. lisa: a lot of people see the job cuts as a positive.

they are an equity investor and see this as trimming some of the expenses. will it be received that way after next tuesday? will the earnings bear out this is a good exercise to prepare for a leaner future? >> earnings will definitely show you why they needed to do something like this. they are not going to meet that for the year 2022. they will barely tread water. it is somewhere in the 14% to 16% mark. they will say we do not judge that, but shareholders do not necessarily look at the long-term although they would like to think at what they do. when the numbers do not match, they want to see management taking action. that is why you see them going ahead and saying we are tackling the uncertain environment, we are tackling ballooning expenses with this measure. lisa: we know dealmaking has been slow, we have seen investment banking slow. we talked about the spac is no longer easy money.

how much is this because of loans that have remained on the books that had to do with mergers and acquisitions made during a better time, and now having to accept losses? how much is due to turmoil in the markets going awry? >> their industrywide trends goldman is not immune to. let's not forget asset management. you've had a big decline in asset prices. a year ago there was a massive boost for goldman sachs. that help them increase their revenue. that gain is not going to be there. if you have this consumer banking experiment, a division they will unveil which will have pretexts losses. it is still more than 2 billion. it is still a problem. lisa: did you like how he did

that? he called the markets that little consumer banking experiment. tom: he is so smooth. what about the 3800, the 3200, the count, they will have a regiment that says they worked at goldman. will they get a job right away or is this going to be in hr's for these people? >> we are all talking about how investors and shareholders will react but this is a very human process. you will have 3200 people go out into a very difficult 2023, even though they say there is a word for talent. his argo mention on the banks them a big not be cutting as many jobs as goldman sachs. i will point out one thing. as bad as number is it is hard to see there is good news, there is little bit of good news. management were talking about cuts that should be approaching 4000.

that is for the number is finalized. that is a small bit of good news. lisa: we hear big tech companies lay off a significant portion of workers. we used to hear there was a word for tech talent in the banking industry. how much are using the banking vortex for again some of the text spot -- the tech staff being laid off. >> let's look at the cuts this week on goldman sachs. all of the conversations with our sources indicate a number of those hits will be affecting people who are working on the tech side and the engineering side. if you not just build a digital back for the future without ramping out aggressively the child these two products without staffing up on that front. it is a place that are right for cuts. lisa: is everybody back at their seats in the office? is being in person important? >> one thing has been clear,

there is been one bank adamant about everybody in the office. goldman sachs has been at the forefront. tom: did they lose people because of that? >> one would hope not. i do not expect that big a factor in cutting jobs. tom: other guys at goldman sachs having a tantrum because they have to darken the door five days a week? >> we certainly heard a lot of complaints over last couple of years. right now they do not have a vein for those companies. tom: you are working four days a week at home. >> i come five days a week to the office. lisa: of course he does. tom: sonali basak does not do that. lisa: yes she does. everybody works hard. being into the office does not impact our hard people work, but there is a shift in the culture

to being in person. tom: we do this into january, into the earnings of banks. he will be most busy on the movements on global wall street through the coming days. it is a different january in new york city. strikes by nurses, the turmoil on wall street, we are post the pandemic, but it is a different january. lisa: this is the first year we have a sense of what the post-pandemic reality will look like. last year was still recovery. this year is different. this year is reset, people go back to the office, and face something that will be a very mixed picture economically. tom: economically but also politically. i would suggest with all of the school drama maybe we get to some normality we have not had.

we will pay attention to this and our local people with these nurse strikes. that is a big deal for new york city. lisa: especially because we are headed into the trifecta of illnesses. it is a disaster, and people do not seem to care, it is just like you are sick. look at that. there is this coming. morgan stanley, one-time senate candidate, exits the firm. tom: that is a big deal for global wall street. he is the chief officer of morgan stanley, there are three if not four people under him. everybody is a young turk. this is interesting to see. lisa: a 28 year advisory to james gorman exiting the firm. tom: stay with bloomberg. good morning. ♪

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jonathan: good morning. equity futures are up. the countdowns the event starts now. >> everything started. this is bloomberg the open with jonathan ferro. jonathan: we begin with the big issue. what a week. cutting jobs and of earnings. the latest cpi around