mark: welcome to the bnn, bloomberg and bloomberg audiences. i am mark crumpton with first word news. kevin mccarthy wants president biden and senate democrats to sit down with republicans as soon as possible to discuss controls on federal spending and limiting the nation's debt limit. republicans have been demanding deep spending cuts as the price for an increase in the federal debt ceiling. but the president and democrats what the limit to be increased without conditions. german chancellor olaf scholz says he is sure his country will avoid recession this year as it faces down russia's energy

squeeze. he spoke in davos in an interview with john micklethwait. he also told john his country will continue to support ukraine for as long as it takes against russia's aggression. but it will not send heavy weapons without consulting with nato allies. nepalese authorities have begun the grim task of returning to families the bodies of victims of a flight that crashed in the foothills of the himalayas sunday. they are also sending the aircraft's data recording to france for analysis as they try to determine what caused the country's deadliest plane accident in 30 years. 70 of the 72 people were killed, two remain missing. global news 24 hours a day on air and on quicktake by bloomberg. powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg.

jon: i am jon erlichman. kriti: i am kriti gupta. the stock market is shrugging his shoulders when you look at the s&p 500. down 0.1%. the dow jones is where you see the pain. down 1%. goldman sachs dragging down the benchmark but it is also the bond market. look at the 10 year yield, only hire two basis points. earlier today it was higher by six or seven. intraday volatility certainly in play and the dollar moving in sync. to me it is the commodities story.

inching higher and higher on the chinese reopening story. jon: we are watching the energy trade. broadly speaking the quarterly snapshots are going to be important this week. we are getting them fast and furious. he talked about the weakness in goldman sachs -- you talked about the weakness in goldman sachs. but on the others of the fence we have seen that morgan stanley stock price up more than 7% today. diversification the keyword as the management business has been helping out. it is interesting and a busy week for technology. we will get netflix later this week. roblocks is up 13%. beyond goldman sachs we are seeing weakness in travelers and storm related claims. kriti: the earnings story is

driving a lot of the trade today. from a macro point of view one of the major focuses is the world economic forum. bloomberg speaking to major leaders, including bridgewater's bob prince. he discussed the trajectory of the economy. bob: the next shoe to drop is a decline in the economy and a contraction in the labor markets. the core issue with inflation is wages. jon: we will see what happens on the jobs front. the results of data on the economy in canada today as well as fresh data on the manufacturing picture in the u.s. let's bring in mike mckee for more perspective, international economics correspondent. there are signs of both inflation easing but also specifics on where inflation might be headed between goods and services.

what is your takeaway on where the economy sits? mike: as a minor indicator in the united states, it suggest bob prince's view that recession is necessary might have some support. the new york fed's empire manufacturing survey totally collapsed today, falling to -32.9. that is the worst since the worst of the pandemic. it rivals what happened during the great financial crisis in 2008. new orders collapsed to -31.1. this is what matches up with canada. prices paid fall a lot, 33 from 50.5. maybe the cumulative tightening is having an impact on inflation in the united states. what is happening in canada? a big drop in headline cpi, 0.6%, since the year-over-year lowered. core did not move nearly as much

but the idea of headlines coming down has people thinking the bank of canada is going to go ahead with another rate increase. but they may be able to go on hold if this trend continues that we are seeing in the canada and united states of inflation easing off. kriti: let's push this forward. you mentioned the bank of canada coming out next week and then the following week the fed. the ecb is right after that. is this a one-way street to the end of the tightening cycle? is that the direction central banks are headed? mike: as of today, it looks that way. you go back to when paul volcker was running the fed. we had three months of declining inflation and the fed started cutting interest rates and inflation shot up again. the fed was forced to raise rates again and then we went into a second recession in the 1980's. all of the central bankers know

that lesson and they are not going to be interested in going too fast to end this. they may dial back there increases and they may be getting close to the end, although the ecb has farther to go. but nobody is calling it quits yet. kriti: something we will keep an eye on. mike mckee, thank you as always. let's continue with that conversation. julia coronado, president and founder of macropolicy perspectives. thank you for your time. you heard mike talk about anything can happen. the jury is out but what are the odds, in your opinion, of that kind of second peak when it comes to inflation? this is not just a one-way street? dr. coronado: i think the odds are pretty low. i think we have gotten accumulation of evidence that inflation has turned the corner in the u.s. and globally. some of that is the commodities story. commodities cooled off in the second half of the year and despite the chinese reopening and upward pressure, they are in

lower ranges. all prices paid indexes across the manufacturing spectrum, freight, shipping rates have all normalized to very close to or at pre-pandemic levels. and we also have seen the labor market cooling off, not weakening, but we have seen nominal wage growth start to moderate. and then we have seen that feedthrough into core inflation across goods and some areas of key services. i think it is broad enough that it looks like it has staying power and central banks are still tightening policy and fiscal policy is not necessarily stepping in and providing a big impulse. you have a tighter policy backdrop for the macroeconomy. i think we are seeing consumers return to price sensitivity. they have more goods and services to spend on now. they have just their labor

income to rely on. that makes them a little more choosy. they want some bargains and deals and we saw that with a very promotional holiday season. so, i think we have turned the corner. of course, i do not expect the fed or central banks to sound the all clear anytime soon. but in another couple of months they will feel good enough to pause. jon: against that backdrop, the other question people have had is what does the growth picture look like for 2023 overall? and recession constantly comes up. but based on what you are saying in terms of u.s. recession, is that on the horizon? julia: we do not have recession as a baseline in our outlook. it is possible. we have seen weakness in the goods sector as consumers shift their spending. and there is a tighter policy backdrop, but the moderating inflation that comes as the

supply-side function of the economy improves is an offsetting tailwind and should provide a boost to purchasing power, staying power. it is not like we are going to see a surge in growth but it provides a stability to a more modest growth backdrop. the way we are seeing the outlook is we are going to unlock a new phase of the expansion that is less fueled by policy and more modest in scope, but falls short of recession. kriti: julia, if you are saying that is not your base case, i am curious as to what kind of timeframe you are looking at. capitalism at some point, there will be recession in the next 10 years. do you have any idea where it is going to happen? julia: geographically or from a sector standpoint? kriti: from a time standpoint. julia: always hard to predict.

usually a recession is not just a function of policy tightening but also imbalances building up. in a way that a lot of economic resources are leveraged, and that is one of the positives of the pandemic. it was an external shock, came out of the blue, hit an economy that did not have obvious imbalances. we are seeing crypto -- you have been covering that coming down from the stratosphere -- housing is going through a correction that needs to happen to set housing on a sustainable course. but beyond that there is not a lot of excess borrowing or leverage or missing allocation. it is a pretty balanced economy. that is one of the reasons we think we can have a second phase of this expansion. when did those imbalances develop? that is anyone's gas but i

think we have -- guess but i think we have some years ahead of us. kriti: julia coronado, thank you for your insight. contrarian take. pretty interesting to have. we will turn to china as it turned out they were more resilient. stick with us. this is bloomberg. ♪

>> clearly, the oil demand out of china has been down during the pandemic and they will use coal and liquefied natural gas,

but they will use oil as well. that is the case for upside in commodity prices, a strong return of the chinese economy. kriti: this is "bloomberg markets." i am kriti gupta with jon erlichman. you are listening to the chevron ceo speaking at the world economic forum with lisa abramowicz. joining us for more insight on the story and with the latest numbers show about growth, demand and commodities is john and fernando. fernando, i want to start with the market trade. it feels like the consensus is the idea china reopening will be ultimately bullish for the oil market. but how do you price that in when the numbers, case count and death count out of china are still up for grabs? fernando: absolutely.

that is starting to become more consensus now. if you look at the pre-pandemic levels, or 2021 levels, they were around 600,000 barrels a day higher than in 2022. that is almost 1% of the oil demand globally. if we see a pickup on those imports, it could have a significant change to the oil price. as mike highlighted, there is an issue with supply. that is one of the issues we called out for several months now which we think will show up in the second half of 2023 as shale disappoints and brazil and opec come shy of expectations. that can lead to the prices going higher and throwing a wrench on lower inflation talk. jon: i am bringing tom into the conversation. this is a big conversation point

for those who are bearish on the equity market for 2023. as china's economy comes back, maybe it fuels commodities, but complicates the ability to tame inflation we have seen signs of easing price pressures. where do you weigh in on how that plays out? tom: that is the big question. fourth-quarter numbers out of china overnight were a little bit better than expected but still painted a picture of a very weak chinese economy continuing to wrestle with covid zero. our expectation is that that is going to be the short-term story, but the longer-term story looking into the second quarter and beyond is going to be quite a strong chinese recovery. we have penciled in chinese growth of 5% and the way things are looking risks to that are

firmly tilted to the upside. that raises the question, if china is coming back, how much commodities are they going to buy? what does that mean for energy prices, fernando's area of expertise? and what does that mean for global inflation? there is a lot of uncertainty but as a preliminary attempt to answer the question, we have done model analysis and that suggests if china accelerates from 3% last year to around 5% this year, that is going to add significantly to global oil prices. and global cpi could add nine percentage points to the total. kriti: one of the calls making waves on wall street today is jeff curry's call when it comes to the oil price. one of the pillars of his view is back in the great financial crisis, you did see this massive investment from china and that

helped pull prices. he is creating a parallel to that package we saw out of china to the reopening today. is that a fair comparison to make? tom: so, it is a striking comparison to make. in substance, there might not be a huge amount of difference. but in terms of process what happened in 2008 and what is happening today is pretty different. 2008 it was a stimulus story. it was the premier saying, we are putting $4 trillion into the economy and that catalyzed a much larger amount in bank lending. this time around if you look at what china's government is saying, not much there. may be a little from the pboc and fiscal policy but the real shift is the shift from an economy which is locked down to

an economy which has opened up and all that means for demand. jon: helpful context as always. that was tom orlik and fernando valle. great to get both of your perspectives. time for a quick break and when we come back, we returned to the world economic forum and we will hear from jane fraser on why she expects mild recession this year. this is bloomberg. ♪

jon: this is "bloomberg markets ." i and jon erlichman with k group kriti gupta. citigroup expects expectations for global growth to slow to 1.7%. the ceo jane fraser discussed that outlook in davos with david

westin. jane: what we are seeing is different countries at very different paces. you cannot speak in generalities. we expect to see a rolling series of country recessions, but short of anything crazy happening geopolitically -- and this time last year we would not have predicted what happened in ukraine -- you have seen the tails. you have seen the over optimism from some about soft landings and the economy doing well. but equally, you have seen the severe downside also coming in. i think the general view in the states, one that we hold at citi, his we expect mild recession largely driven by the painfully persistent service inflation. it is coming off but it is still pretty high and we expect to see central banks continue tightening as a result. but the vulnerabilities that amplified previous recessions

around the world are not present. banks are in good shape, consumer balance sheets are in good shape, corporate balance sheets are in good shape, and i think that omens well for a mild recession when they come rather than once we have to be worried about. david: do we know the state of the economy? there is a lot more in private behind closed walls since the great financial crisis. a lot has been moved out of banks like years. are we confident we know the situation? jane: to the extent anyone can be confident. we serve clients across the spectrum, not just those in the public markets. we certainly see healthy corporate balance sheets across the board. our net credit losses in the last year, i have never seen them so low.

i think this omens well in our m&a. the number of dialogs we are having with ceo's about transformational m&a is enormous. not quite the pipeline it was last year, but it is a pipeline that is prices have become more reasonable and corporate balance sheets are in good shape, ceo's are thinking transformation more than you might think. despite the fact that there is also an adjustment to the reality of more mild recessions ahead. kriti: you are listening to citi ceo jane fraser speaking with our david westin at the world economic forum. she predicts mild recession whereas, on the shelf, we had julia coronado say it is not part of her base case. jon: it is going to be an interesting debate to watch because we have already seen a willingness on the part of

investors to get into those hard-hit names from last year. you are seeing that again today. discretionary and tech standing out, showing confidence among investors. kriti: meanwhile, the s&p 500 unchanged. the real action is in the dow. more markets coverage ahead for . for jon erlichman, i am kriti gupta. this is bloomberg. ♪ it's official, america.

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romaine: markets pressing the pause button at 4000 on the s&p 500, coming off a decent rally the last 2.5 weeks. romaine bostick alongside katie greifeld, who missed her flight to davos. katie: there is no snow in new york. it looks ridiculous when i wear my fur trimmed boots. romaine: you must but