>> this is a rally, no doubt. >> the danger is we are falling into the same traps the markets fell into at the start of 2022. >> we are more disruptive on 2023 venmo star. >> we are seeing some sort of regime shift. >> financial conditions have been easing. i don't think you can make a case that people are going to spontaneously increase the rates of savings. >> this is "bloomberg surveillance." jonathan: live in new york city, for our audience worldwide, good morning, good morning. this is bloomberg surveillance. alongside tom keene, i'm jonathan ferro. equities up around .1%.

what is that banking about? -- banking about? tom: the bank of japan. let's start with retail sales. it is retail sales wednesday. mckee will be by to address that up. that is 70% of the american company. jonathan: united airlines beating arrays after the close yesterday afternoon. united airlines today -- and i want to be very specific, year-to-date since the start of 2020 32 weeks ago, the stock is up 35.8%. tom: they have heritage here, and then meet -- and maybe that has to do with the news from davos. dovetailing into what to expect from retail sales is the chinese driving the message. tom hancock last night around 9:00 p.m., writing up the message from xi and his associates, china is open for business. jonathan: we have this debate

over recession and recovery, but let's talk about the context, which is a central bank decision from the boj. unchanged. one more meeting to go for governor kuroda. tom: tonight at around 7:00 p.m. we will get inflation data for japan. it looks like it could be about 4% top one -- top line inflation. among the 45 headlines this one caught my attention from a guy leaving this experiment. regrettable that sustainable inflation not attained yet. if you are pumping 4% inflation in japan, you have sustainable inflation. jonathan: he has had 10 years and he is throwing pretty much everything added. what can they do? pretty much on the whole bond market, don't they? i'm joking. they are close to half the bond market. tom: some of those tranches they own all of it.

it is too early for the math of it, but the answer is they surprised in december. shocked this morning by doing nothing. that is what central banks are that. then the next 16 weeks out when the market test them. i go back to the bank of england here, whatever decade that was in. this is the market trying to break kuroda. it is tough to bet against the markets here. jonathan: he is pushing back today. that currency had a 2.7% move against the japanese yen. a it into the bond market. 10 year treasury yields lower by about seven basis points. equities just a notch higher by .1% on the s&p. crude, we will keep an eye on this. wti up 1.9%. tom: every time i look at the

screen, once a day, twice a day, brent crude is up. when do we round up to 88? jonathan: microsoft. reports from sky news in the u.k. that we could be getting 11,000 job cuts out of microsoft. we had one interesting call on the south side. first bearish call on the stock in three years. three years we finally get a sell on the stock and it comes from guggenheim. an individual like guggenheim said this. most investors see microsoft as a stable business that can weather any storm. it has vulnerabilities, some of this -- some of which could be exacerbated by this macro slowdown. no one is immune. tom: i would folded into goldman sachs and that they have all of their labor challenges. i believe they had expenses go up. you still have to run the place. maybe a different mix of people at microsoft, the idea they are

to diminish their labor, item five. -- i don't buy. we can kick off our program with thanos vamvakidis. bank of america securities. can we start with that doj nondecision. how does that set things up for march? thanos: the bank of japan likes to surprise investors. most people were expecting them to move. however, they are on a sustainable path. they have opened pandora's box, we expect it will remain above 2% this year, and although they are right not to start a proper normalization cycle, i inc. they don't need unconventional policies anymore. the market believes this is a market of time where at some

point this year there will be targeting bringing rates back to zero. tom: a major shout out to the telegraph, which featured this chart yesterday. it is real simple. there is the yield chart in red. for those of you on radio all you need to know is a so-called again swap care -- yen swap pair has exploded out. that is highly unusual in the case of this chart. it is as if the market is speaking to mr. kuroda right. what is the power of the market to tell the governor of the bank of japan what to do? thanos: i think at some point you have to start a sustainable increase in the house. this is what led them to target that in the first place.

particularly if inflation is sticky the market will keep expecting that the bond rate will need to move. what they are doing, i think, will be sustainable. soon they will realize they cannot defend this target anymore. they like to surprise markets. maybe they will do it when the market least expected -- least expects it. the market has a very strong belief that they are moving in this direction. what they did in the holidays has led to the situation. tom: 40 headlines that came up with the bank of japan today, the biggest shout for the street was the lowball on inflation. where they are looking sub-2% for inflation. i have a print tonight 7:00 p.m. where they are looking nationwide 4% top line cpi.

are they lowballing inflation, and are they going to get to a point where they have a massive negative real gdp because nominal is not there and the inflation rate is elevated? thanos: you're right. on the one hand inflation pressures in japan are not as strong as in the rest of the world. a lot of it is imported inflation, but core inflation is also increasing. they have to be careful. on the one hand they were trying to inflate the economy, but they do not want their inflation above 2%, because down the road this could create fiscal problems. that is why i'm arguing they don't need to tie themselves to what other central banks are doing. they should strike the right balance. especially if inflation keeps surprising to the upside compared to their forecasts. this will allow them to move in this direction. jonathan: next up for the boj is

in march. next up for the boe is february. there was some speculation yesterday there could be a step down after the next hike. some pushback from an ecb official in davos this morning. where are you on the trajectory for ecb rate hikes? where do you see the terminal rate in frankfurt? thanos: 3.5%. we see 50 dips in the next two meetings. i was surprised with the headlines yesterday. i thought in them at the december meeting the ecb gave a clear message that they will do whatever it takes to fight inflation. inflation is still high. i think they have to stay the course and continue hiking. if anything, it is for an even higher terminal rate than we .5%. jonathan: thanos vamvakidis

there. a brief break of one away. tom: what is the view? 110, 112? jonathan: my moment on the ecb is that there is some division emerging. there could be a conversation about stepping down from 50 to 25. there was clear violence -- clear guidance from christine lagarde that they would do 50 for the next few meetings. tom: i'm not doing forward guidance after this week. you don't have a glide path and europe as defined as the united states. i'm not saying we are going to do percent here, but there is this real belief in disinflation in the united states. i don't hear that in the united kingdom. i don't get the glide path of it that i get -- jonathan: they had two problems, didn't they? one was inflation was too high,

one was inflation was too weak. they are certainly better compared to where they were. we spoke to chancellor schultz yesterday. schultz was clear, we can escape recession in germany. tom: that is a manufacturing dynamo. there are a lot of other places like that within europe. i would say the same nominal gdp worry in europe is the same as in japan. the math is nominal gdp less inflation equals real gdp. the financial media goes to real gdp all the time. i don't agree with that. jonathan: see 2% and here than out say we can get to 3.50% and maybe they will have to go higher, all of this stuff was on thinkable, and here we are. tom: i think the unthinkable is

here. the elephant in the room to the salvation of europe, the salvation of japan and all of the other worries out there, is a burgeoning china. that was the single message out of davos yesterday from the chinese. jonathan: have you heard from brammo? she is skiing this morning. tom: i talked to barry last night. it was 3:00 a.m. their time. jonathan: what did you learn? tom: i said, she is there singing "sweet caroline." jonathan: after a few drinks or just turned up and started singing? tom: barry protects the innocent. jonathan: good for her. i'm pleased she is having a good time. tom: ♪ sweet caroline ♪ jonathan: don't we have music rights? can we play some of that? tom: egot neil diamond to sing at fenway park that is pretty good. jonathan: ok. lori hein is coming up in the

next hour. from state street. futures up about .1%. this is bloomberg. lisa: if you up-to-date with the first word, i'm lisa mateo. janet yellen schip -- sat down with her chinese counterpart today in zurich. it is her first face-to-face meeting with liu. ellen said misunderstandings must not make relations with the countries worse. inflation in the u.k. in december. consumer prices rose 10.5% from a year earlier. inflation is five times higher -- then the bank of england's target. the central bank has raised rates nine times in a row since december 2021, and another rate hike is likely next month. in ukraine the country's was among those killed when a helicopter crashed. 18 people died and 29 were injured.

no word on what caused the back crash. microsoft has joined the ranks of tech giants scaling back. bloomberg learned of the company plans to cut jobs in a number of engineering division today. the layouts are said to be significantly larger than another round of reduction in the past year. 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'm lisa mateo. this is bloomberg. ♪

this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. 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.

>> i would like to sit down with all of the leaders in have a discussion. the path the democrats are going, they are going to go bankrupt. let's find a place where we can protect medicare, social security for future generations. let's put our house in order and make the investments we need to make america stronger. jonathan: oh, the politics of the american that -- debt pile. your favorite. equity futures right now on the s&p -- tom: cornwallis had not even made to london before we started. jonathan: yields higher by seven basis points. good morning to you.

in the fx market, euro-dollar, 1.0844. positive .5%. crude up 2%. tom: brent, 87.36. every time a look at the screen, it is pennies higher. jonathan: having a look at triple digit crude by the year end. tom: in sacks that this is what you do when you are bankrupt and have to employ people. no shock after the party congress, china is open. jonathan: one thing that has taken me aback, just to see these moves in the airline stocks so far this year.

35% move on united. united yesterday eat in a raise. the guidance they took -- they put out was way above the street. tom: that would be -- we are going to talk about united, united van lines. there are times when it is not about the zeitgeist in washington and about one strategist giving pause. gregory valley a does that this morning with a note devoted. -- devoted to the state legislatures. this is the washington post. bills will be introduced tomorrow by the left, by progressives, in california, connecticut, illinois, maryland, and washington state to bring up the taxes and even generate a wealth tax. they can't do that in washington, can they? annmarie: there is going to be no changes to the tax laws in washington.

especially when you have a republican-controlled house. we did have a democrat-controlled house, a democrat-controlled senate, and still most of the trump-era tax cuts have lived through. there is no way they were going to be any changes when you have the gop in charge of the house. but you make a good point, tom. these progressives cannot get any of this done through congress. they are going to do this and act congruently with each other across states. this comes from senator elizabeth warren. this comes from her playbook that you don't just tax income, you go after people's and -- go after people' as well -- people's wealth. this is something that is going to resonate with many members of the public. tom: the demonstrable reality is, here come the moving vans. that is what he says, verbatim. this has been proven to florida and other states as well.

annmarie: florida, arizona. there has been an accident at times from people from these very high-taxed cities. about those living in new york city. tom: oh, really? [laughter] annmarie: you have incredibly high rents. you compound that with the fact you can, for most people, start to work more remotely, we saw that exodus to florida and potentially it will continue. i know you are laughing. tom: i walked by pharaoh's desk and he has a map of texas out on the desk. jonathan: i tell this story to everyone. when i was moving here seven and eight years ago, the accountant offered a service to relocate so i take this call and i think, i'm going to pay lower taxes in america. this is great. he says, the federal income tax will be x and i'm thinking,

great. no, we are not done. what are you talking about? tom: this is so important. the summation of the many taxes. jonathan: and then the property taxes on top of that? the question i keep asking is, how do you retire in some of these states? tom: folks, we have an announcement today. january, 2024, bloomberg surveillance from london. jonathan: is that right? i could talk about the taxes around houses. annmarie, this administration, a majority of congress could not close the carried interest loophole. what are we talking about. annmarie: that is why these progressives could not close carried interest loophole. so obviously the private equity lobbyists got on the phone and

could not even get that done because they had such a slim majority. most democrat lawmakers want to see that closed, but the fact of the matter is we have seen them try to do a lot of the trump-era tax cuts. they couldn't do it, so now these progressives are saying, ok, forget it. we are not going to work on this in washington, d.c.. we'll just take it back to our local politics, and they are doing it through state legislatures. this might not end up having legs, but what it does do is, it is a fire in the public debate, and this is something that many people agree. they do not think the rich pay what president biden would call their fair share. i'm not talking about people who pay their income tax. we are talking about people who have amassed a mass amount of wealth. especially during the pandemic. it also comes on the heels of this ox family report talking about the fact there has been this increased number of billionaires while we are seeing

more people dealing with higher inflation, hunger around the world, etc. jonathan: on the latest in washington, d.c., that debate is not going anywhere, is it? tom: she is getting a little beltway. and etc. that is so beltway. jonathan: very d.c. annmarie, thank you. can we talk about property taxes? we might as well. in the u.k. we have stamp duty, right? you pay this tax upfront, and is not that big compared to what you have to pay annually here in america. once that is done you are done, and then you have council tax. which is a nominal sum. a couple of hundred pounds, based on how valuable your houses. i don't think people outside the united states realize how high property taxes are. even after you have paid your mortgage off you could be paying tens of thousands of dollars a year just to live in the house

you are -- you supposedly own. tom: what is interesting within the urban landscape of the haves , which is the bloomberg world, the premium you pay for grass is a stunning. the difference in property taxes real estate, suburbs and all that, versus condos. jonathan: it is insanity. i used to think people want to florida for the weather. that is not the story. tom: good morning to everyone down in florida. the first person that went down after saint augustine was founded, doug cass. [laughter] grandpa cass went down there 80 years after the pilgrims. jonathan: are we doing the show from florida? tom: london 2024. i can suffer miami. jonathan: simon french is going to join us from punter gordon.

the s&p positive almost .2%. the bank of japan, unchanged and setting us up for a really interesting final boj meeting. yields are lower by .7% on a 10 year. laser focused on what is happening with crude. 81, you can call it 82 on wti. and we are having a little look at 90 on brent. ♪ avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh

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jonathan: two hours away from retail sales in america. the s&p up almost .1%. likewise on the nasdaq 100. if you take a trip to the bond market, yields in by seven basis points on the 10 year. maybe you can think -- think the boj for doing absolutely nothing. dollar-yen, a one percentage point move. it was close to 3% in the dollar's favor. just a brief break of 1.08 on a

report that maybe we get a downshift in the next couple of meetings. we have bounced back today. plenty of speculations about whether we get that downshift. a governing council member wade in early on. -- weighed in early on. >> we should expect to raise rates at a basis of 50 basis points for a period of time. her words are still valid today. jonathan: her words are still valid today. 50, 50, 50, tk. tom: that is the theme out there, but what is changing in, is that everything is changing. i don't note how to strap -- how to extrapolate united airlines, but why should the ecb be left behind? maybe that will give them some cover. jonathan: in the near term

things are better. if you listen to goldman, germany escapes recession. you listen to the ecb, who is convinced that germany can escape recession. what i want to understand from the europeans is whether the situation we went through this summer, last summer, whether we repeat that act this coming summer approaching next winter. tom: someone to help us with that, simon french. the british media particularly running some thoughtful essays. thank you so much for joining us today. at the margin it seems like europe is being buffeted by good news, including china reopening. has gordon shifted the 2023 euro call? simon: no, we haven't. we went into the year thinking that the behavioral response across two parameters would play out in terms of a dynamic behavior. one of those, first of all,

energy usage. i think jonathan gave a good tee up. internet winter one are the dynamics? you are seeing quite significant behavioral changes in terms of energy consumption, which is there is no reason why that cannot be amplified. the second thing we are seeing in core results, not just across europe, is that signs now that households, which have paradoxically strengthened their balance sheets over the last two to three years, starting to divest more rapidly in the u.s. then all the way through the cycle, but we are starting to see the data in europe suggest the back of q4, where it was thought a slamming shut of the european wallet was not that bad. we saw those behavioral changes. look, we are still early days. there could be a new year hangover. tom: we are talking about the

glide path on interest rates. i'm going to call it the zeitgeist understanding. in the united states we come down. we don't aware to. maybe not to percent. is there a consensus understanding of the disinflationary vector in europe? simon: no, there isn't. you're ecb commentary, what you have been alluded to, it reflects the national interests of the national governments in terms of how their economies may have quite different experiences of stubborn core inflation, just going to be the headline piece of data. perhaps not on our screens each morning, what in terms of what is going to affect the ecb response from each of the governing councils' decisions. the fact we have amongst investors a very different view as to whether we have a glide to 5%, 4%, 3%, there are a number of people who think we will see

active disinflation by the middle part of 2024 versus those people -- and i think i said in the latter camp -- who expect quite a lot of stubborn, sticky inflation, because a lot of corporate are trying to rebuild margins, trying to delay the pass-through they could not do in one go because of the price shocks of 2022. therefore they are going to pass them through in 2020 4, 2025 as part of building their corporate margins. jonathan: can we talk about who is in the driving seat at the european central bank? i got the impression with president lagarde it felt like the bundesbank was back in charge. that was the most hawkish i had ever heard her in a news conference. what did you make of that? simon: that it was going to be data-dependent. it was hawkish, but as always -- this is far too clever an audience to fall into the belief these are conditional statements. for years one policy was left to

the zero bound, we were talking about when we were going to leave that. now we are talking about a platform through to an eternal right, it was conditional to how the data evolves. the fact that we have now in davos this week different takes on that data, is that there is a turf war going on as to how you interpret that stickiness of inflation. jonathan: there was a phrase that echoed in december. it was sufficiently restrictive. if you had asked me what was sufficiently restrictive for this ecb a year ago i would say they would struggle to get to 1%, 2%, not 3%. i thought this market would collapse under the weight of what they are doing. that hasn't happened in the way many people anticipated. why do you think that is? is the bond market more resilient than we thought it

would be? when do you see sufficiently -- what do you see sufficiently restrictive with that in mind? simon: that is very honest. i would also put myself in the camp you are in. i didn't see this. we have to have a degree of humility when appraising what comes next. in terms of why we haven't seen the level of, if you like, market capitulation in the face of a rising rate, there are two things to know. there is a delayed pass-through. monetary policy has famous lags. have we seen the full impact of monetary tightening? no, i don't think we have. the jury is still out in terms of long-term economic impact. but -- and i've written quite a lot about this -- potentially a return to a higher risk-free rate as a nice side effect to productivity improvement. the type of thing that has undermined economic growth. tom, i know you have talked

about the impact of financial repression on productivity. intentionally investors -- and i've talked to investors who see the corollary of a high rate of a return to more normalized levels of productivity. that may be one of the explanatory factors. tom: this is really important, folks. this centers on things corporations change. if there is a misjudge i would suggest it is led by the american, the pacific rim consumer as well. could panmure gordon some together -- sum together? simon: if you take the data points in terms of the excess savings throughout the pandemic years, the u.s. consumer has begun quite a considerable divestment phase.

the savings ratio is normalized and is starting to under shoot. there is still a stock effect that can support spending. europe -- and i include the u.k. -- is on a much more delayed pathway. but it circles around to consumer confidence, to sentiment. the degree to which balance sheet flights from consumers is dressed the fact that the labor market remains strong. you think u.k., you don't need as much of a rainy day fund for unemployment because you think the labor market remains strong. those indicators are robust. that allows a divestment cycle to support the consumer. if the labor market starts to turn then we get a very different response function in terms of consumers and we will see corporate reporting replicate that sentiment. jonathan: simon, supersmart. it has been way too long. let's do this again soon. simon french of panmure gordon. tom: there are certain core economic words that endure

across decades and centuries. he alluded to one, which is incentives. you cannot have societal incentives if you have financial repression, where tyree's are flat on their back. it doesn't matter what country. we have identified through the great financial crisis the financial repression of so many to save the financial system. we are coming out of that. gravity has returned, and that is the emotion and volatility you see here. jonathan: as we have said, the return of discipline as well. i talked about it in the last couple of weeks as well. you think about what we had over the last decade, tom, exceptionally low interest rates, monster bond-buying programs, and low and stable wage pressure. low and stable labor costs. and what did we invest in? cheap taxi rides, cheap food delivery -- tom: you are on fire today. jonathan: a whole industry to

get us to do this, stare at our phones so they could sell commercials. tom: good morning, mr. musk. there is that an incentives as well. frankly, heading toward my book of the year in economics, it really emphasizes this dearth of investment is an outcome of r minus g is a negative number. to your property tax escutcheon, this comes in from jon. he is on the seashore in new jersey. he says, you will love new jersey. that is the land of the property tax. thank you so much for sending that seaside in new jersey. jonathan: are you suggesting we should do the show in new jersey? tom: i was just on tucker, we

say good morning to john tucker. john tucker knows new jersey finance. he has got it down cold. he says, you would look good in summit, new jersey. jonathan: i will take a mess. nothing against summit, new jersey. i just can't do the commute the commute kills me. i can't wake up at this time and do the commute it's got to be a 20 minute window. tom: i don't have a drivers license anymore. jonathan: you and i both. what did they say, you don't drive, you are driven? you know? rj gallo is coming up. he's not going to weigh in on any of this. boiler up. tom: that's good. there are two teams, then up north there is another team, notre dame cathedral or something like that. boiler up is it still the west, i think. the west of indiana. jonathan: this is bloomberg.

♪ lisa: keeping you up-to-date with the first word, i'm lisa mateo. kevin mccarthy is calling on democrats to engage in talks over raising the federal debt ceiling. republicans, i'm control of the house, have an demanding steep spending cuts. president biden wants it raised without conditions. that raises concerns of a u.s. payment default. the bank of japan gave investors a moderate jolt yesterday and today. the central bank cap its policy settings unchanged, maintaining its negative interest rate and keeping a trading band for 10 year bonds. there have been some speculation that the boj would change its policy. amazon is set to kick off another round of job cuts. the company announced this month it was laying off more than 18,000 employees among its corporate ranks. the latest round is set to begin today. it will affect mostly the retail division and human resources.

global oil markets face a bigger sue plus -- surplus this or -- this quarter. according to the international energy agency world supplies will -- will exceed consumption by about one million barrels a day in the first three months of the year. the agency does not expect to see demand growth in china until the second quarter. 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'm lisa mateo. this is bloomberg. ♪ ♪

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>> you are going to see some margin price here, some revisions down. now is not the time where you lower guidance. the economy is still ok. ultimately we are going to see some downside. we are going to see some sort of pain, whether it is economic,

earnings, or macro. what we think is ultimately you were going to get to 4200. jonathan: that was chris harvey there. joining tom and i just yesterday. tom: he and stuart kaiser, i think, have led. jonathan: equities positive point 1% on the s&p. retail sales in america coming up later. crude approaching 90. wti, having a look at 80 two. -- 82. tom: i think it is valid to say we are approaching 90 on brent crude. i don't have a chart in front of me, but there it is. it is that simple. petroleum on the march, and so much of that because of china. which means it is an annual visit in davos, the meetings of the world economic forum, lisa abramowicz they are just in from the piano bar. let me get my surveillance watch

out there and look at the time change. lisa abramowicz with one of my fame -- my favorite people. faith birol. lisa: i am here with the executive director of the international agency for energy. there is a question at the time when you are the busiest ever of trying to get a handle on energy markets. i was speaking yesterday with chevron ceo and was saying he could see a market -- he could see emma court argument for oil prices going to $150 or $50. faith: i'm sure he knows what he is talking about, because he makes money or loses money, and i hope he is good about markets. when i look at the markets in 2023, there are many uncertainties. if you ask me, which is the biggest uncertainty i would say it is china. the reason is simple, last year for the first time since 40

years, chinese, oil, and gas demand declined. it never happened in the last 40 years. this year the chinese economy is reopening, and we may see chinese economic growth strongly. if chinese demand for oil is strong, it would put up pressure on the prices. so, chinese for me, the biggest uncertainty, followed by oil-producing companies -- countries' policies. lisa: sticking with china for a moment, do you have a sense of how much coal, how much crude they have stockpiled to get ahead of a reopening that could dampen how much activity could translate directly into demand for crude? faith: i think it will increase this year. the question is how much. there is no question i don't

believe they've -- leave if there is a reopening that goes smoothly, the chinese leaders here and in china claim, it may mean that the chinese oil demand will increase, unlike last year. it means it will be the biggest driver of the global oil demand, because while you look at it in a normal year, about half of demand growth comes from china. the other half comes from everybody put together. therefore, china's oil demand will ring about 900,000 barrels of additional growth to the markets. lisa: you just put out a paper that said we are oversupplied right now. that there is more oil than there is demand in the markets. how much would it take to change that? faith: the cushion is not as big as the consumers of the world would like to say. it is a tiny bit.

if the chinese economy surprises us on the higher side, if the economic growth is 5%, 6%, that cushion will disappear quickly. therefore we should not be relaxed to see that the oil markets this year will be comfortable. this would be more on the optimistic side. lisa: are there any lessons taken from what we saw in the summer of last year with respect to demand destruction? what level the price has to get to in crude where people stop buying and there is a national ceiling? faith: it is depending on the country. it is different in the united states, for and in europe, different in india and lower-income countries. if the prices come down to around $75 it is a good signal for the consumers. lisa: that they will continue to buy, but higher than that not so much? faith: especially for the

developing world, which is the most important one, because their financial muscles are much weaker than north american or japanese consumers. around $75 a becomes difficult for them to absorb that increase in prices. lisa: do you feel the needs to be more investment in fossil fuel companies that have been abandoned in the past couple of years for esg-types of priorities? faith: when you talk about the united states, i don't think the oil companies difficulties to invest in terms of availability of the money. they have a lot of money in their pockets, and i think what they would prefer, is instead of investing may have preferred to pay back to shareholders. if you look at last year, 2022, the oil and gas industry revenues, in a normal year it is

normally $1.5 trillion. last year they made $4 trillion. nobody can say they don't have enough money to invest. they do not have the intention. they pay back to shareholders. lisa: we have been talking about the potential for an upside surprise with respect to demand. what if there is a fairly deep recession or even a mild recession. how much could oil prices fall from here just because of people hunkering down and not being as active? faith: it depends on how deep the recession is, how wide the recession is. if it is a mild recession i don't think we will see a big drop off in oil prices, as we have seen during covid times. it would definitely put downward pressure on prices. but i do not believe that china, the largest oil importer in the world, would go into recession. hopefully not this year. lisa: how do you think the refilling of the strategic petroleum reserve, potentially

starting next month, will affect pricing? do you think this is going to be a swing factor in 2023? faith: i don't believe so. i think the u.s. government will make it in a careful manner so it does not create a major challenge for the oil markets. you should not forget, over $100 and -- over $100 is good for the u.s. the entire world should be very happy that spr -- about spr's. lisa: faith birol. sending it back to you. jonathan: you are missed over here in new york city. lisa abramowicz alongside faith birol in davos. tom: i said, i think this was italy, and i think this was

turned around. jonathan: i may have been that guy sitting next to you during that. do want to pick up on the commodities of story? that live from goldman. you cannot come up with a more bullish concoction for commodities right now. he went beyond crew. tom: you have been out front on copper. jonathan: 11,500 is the number he is talking -- he is looking for. tom: we heard from simon french. why is this bad news? we are reopening off of a global medical event, and to me it is all plus, plus, plus as it gets us back to normal incentives, and heaven forbid, moderate is prized in some general equilibrium. jonathan: we are still trying to figure out how much comes about from the revenge spend we are expecting from the chinese consumer and whether we go back to some of the issues we were grappling with last year. i go back to the same question. supply-side relief because the factories get going to focus

capacity again, or supply-side dislocations? tom: i would suggest there is a heritage, a cultural heritage in china to work. it is got nothing to do with the parting and politics. this goes back centuries. they have a work ethic mike -- ethic like no one. you have to be optimistic that their work that out on a truly micro-battle. can i bring up something that axios just published? jonathan: you don't need my permission, you know that. tom: gdp passes, barely, what are called the national boards. they are like the cfa exam, but for doctors. flunk rate is about 15%, 18%. chat gpt passed all three. jonathan: so basically the whole of this country is doing its work on chat gpt? tom: they tell you what to do. jonathan: with chat gpt, is that

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>> this is a rally, no doubt. >> we are falling to the same traps. >> choppiness, but we are working's truck to for 2023 than most are. >> we see the pressures of inflation, of interest rates. >> financial conditions have been easing. i don't think you can make a case people are sprinting asleep going to increase the rate of savings. >> this is "bloomberg surveillance." jonathan: retail sales data

coming up in about 90 minutes. good morning. this is "bloomberg surveillance" on tv and radio. equity features up a couple of tenths of 1%. are we rallying into a recession or into a recovery? tom: always doing good work at etoro he. kneels it with rally and -- this is the seventh bear market rally and that is normal. that is what happens. all of a sudden it is not. everybody has an interpretation of how you get there. jonathan: jp morgan does not want to get on board with this rally. they published yesterday. the top line. we remain cautious on risk assets and are reluctant to chase the rally as recession risks remain high. it is already in the price and terms of inflation moderation or

potential for a soft landing. a lot of good news. tom: i will go with all of that and it is subject to change. it is the data. one of them is coming to is here in 80 nine minutes. jonathan: part data and soft data. headline data, great. wages a bit softer. all that good stuff, great. look at the survey data. tom: it was grim. jonathan: the ism was dreadful. manufacturing and services. a real gap emerging here between what is happening with markets. tom: this idea that china pushes against all of this. it pushes differently in europe. i'm with people that suggest the china effect on europe is underestimated and will probably be larger. you heard that yesterday with the leadership in germany. it is percolating right now. jonathan: and pushback from the airlines.

united airlines on the top and bottom line in the last 12 hours. they raised their guidance. shredded their guidance on the streets. the stock is up 35.81% year-to-date on one single name. airlines have performed terrifically. i was looking at the luxury names with jamie my producer. up 15%, 16%. how does that work out? it is up 15%, 16% this year so far. tom: that is gucci? jonathan: lvmh is flying as well. tom: unl margins for the pandemic, 16 percent, 17%. they are well on the way back to normal. it will take longer to heal. jonathan: prices are high, supplies are constrained. they are doing ok. that is the take away for the

airlines at the moment. tom: we move along after the pandemic. the world does get in the way. jonathan: someone is surprised that the stock is up by a third year-to-date. tom: that is the china plan. jonathan: equity futures up .2% on the s&p 500. a little on the nasdaq, by a similar amount. held up by the boj decision. tom: i would go with that. there's a knock effect from the bank of japan. they have an arch rule. it's an all the histories of the central bank. they love to surprise. if they moved on yield curve control today, that was widely anticipated and would not have surprised. jonathan: in march, his last meeting. were you surprised? tom: ben emmons writes it up.

i have quoted off the bloomberg terminal. topline inflation japan tonight. 4% inflation. i never thought i would make that statement. jonathan: it was as high as 131 earlier in the session. now only .7% higher. weaker japanese yen on the currency pair. joining us now is lori heinel at state street global advisors. fantastic to catch up with you. are we rallying into recession or recovery? lori: it depends. we are rallying into recovery in we will hit a soft landing and we hope the fed will engineer a soft landing in the u.s. the jury is still out. there is a lot of pressure on the fed to continue inflation. it always comes down more moderately. they will have impulses to continue to risk leading us into a recessionary environment.

tom: can you find value in active management now or do we still hide out according to theory and index funds? lori: it is serving investors quite well. we have been managing our overweight to equities pretty considerably in the last couple of months as we watch the data. we are currently slightly overweight equities. places like high-yield and other avenues where we are looking where spreads are and thinking about the future trajectory. we think it will start investors often this period. tom: what about staples and discretionary? lori: we are favoring discretionary right now. you are talking about some of the areas like luxury goods, air travel. we think those are more valuable in terms of the reopening trade in china, the impulse for consumers to have a propensity

to spend. jonathan: the rally has been unbelievable year-to-date so far. euro stoxx more than 10% at the close as of yesterday. do you think that can continue? are there sustainable tailwinds or is that a big relief rally off the back of the fact people are saying the recession, make the economy stagnate? perhaps the ecb will not be hiking into recession but into 0% gdp growth. lori: we have been trumpeting europe for a while. they have been overweight in the equity markets in europe and underweight in the u.s. throughout much of last year. we were thinking -- we were early to realize the energy crisis would not be as big a deal because they were taking steps to mitigate that. as we heard, the reopening trade for china is on its way. we have been in favor of europe for many months now. jonathan: how do you play that

story? lori: it is consumer discretionary but also financials. there are manufacturing companies look attractive. it has been resilient in the face of some impulse to slow down. there's also a bit of a value trade play. we see the value stocks be a lot more attractive in this environment. tom: what is the distinction of the u.s. juggernaut of the last 15 years versus the burgeoning em trade? how do you study that? what is the thing our listeners and viewers should look for in saying u.s. domestic or international? lori: there are a couple of different things from an international developed market standpoint. we think the short-term favors non-us equities. again, they were relatively undervalued. sentiment is very strong. the makeup is different than it is in the u.s..

not nearly as dependent on the highflying growth stocks that have driven much of the past rally. when you talk about emerging markets it's a different story. there are a lot of vulnerabilities. we like the china reopening trade as part of our basis for overweighting broadly the asian markets. other places there are concerns about covid. still concerns about geopolitics and concerns about whether the long-term growth prospects remain. tom: when does the tech derby start? jonathan: microsoft is next week. netflix is coming up soon. apple on february 2. two years ago, we were talking about visa cash is the be-all and a lot of stocks and now we are talking about layoffs. i don't buy the gloom of the layoff story. how does use of cash change for big american companies? lori: the question is where do you find growth you can invest in? we have underinvested for quite a long time in the u.s.

we have focused more on labor. now there is a tension between can you continue to have cost increases and continue to pass this along to the consumer? can you carry the labor if you're not going to have topline growth? a lot of companies are grappling on a micro level with how they think about that and continue to grow growth. we are all pursuing growth. there levers are smaller and more limited than some other sectors might have. jonathan: wonderful to hear from you. lori heinel of state street global advisors. what a difference a rally makes. all of a sudden the tone totally changes. tom: i will go without. we saw that in the first three weeks of the january. it was like a blur. rtant is the idea she alluded to that in this -- there are fewer things to choose from.

one thing for everybody is one in doubt microsoft. with the layoffs anticipated and the challenges all of a sudden even mother microsoft. jonathan: we will see if it's a head fake or the real deal. tesla off this morning. this was yesterday on tesla. a huge move to cut prices by 20% in some regions. a lot of investor in questions -- investor questions about tesla. the reason is because the street views this as a much-needed strategic poker move to go for the masses, aggressively go after consumer demand and a soft macro, near-term merging pain for long-term share gain volume. our small margins are your problem, tom, seems to be the takeaway for the bulls. tom: technically it is a disaster. it is a bounce. anyone was say it is the

musk bounce. it's between support and resistance in late 2020 as well. they avoided with this announcement moving down to a sub 100. tom: do you think lisa will push back against the gloom over at morgan stanley? tom: i leaned forward. jonathan: that's in the next hour. tom: move the space heater away for me, thank you. jonathan: live from new york, equity futures on the s&p 500 up a couple of tens of 1%. this is bloomberg. ♪ >> keeping you up-to-date from news around the world with the first word, i am lisa mateo. janet yellen called a meeting with her chinese counterpart candid and constructive. she sat down with vice premier for more than two hours. the treasury department said she looks forward to traveling to

china in the near future. inflation in the u.k. dipped in december for the second month in a row. according to government figures, prices rose 10.5% from a year earlier. inflation is five times higher than the bank of england's target. the central bank raised interest rates nine times since december of 2021. another rate is likely next month. in ukraine, the interior minister was among those killed when a helicopter crashed near the capital city. 18 people died, 29 were injured. no word on what caused the crash. twitter's daily revenue has fallen 40% in the last year. that's according to the website the information. a senior manager told staff more than 500 of the top advertisers had caused their spending since elon musk took over. microsoft is doing the ranks of tech giants that are scaling back. the company plans to cut jobs in

a number of engineering divisions today. the layoffs are said to be significantly larger than other rounds of job reductions in the past year. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

>> there is certainly a risk to it. given the dynamics we have with the u.s. congress, there will be tensions around it. we hope we get the job done, move the debt ceiling, what is needed. tom: the first managing director at the imf. from new york city, good morning to you all. let's check out some of the market price action for you. briefly, equity futures now up by eight points. retail sales a little later. 8:30 eastern time. yields look like this, down seven or eight basis points. 347.20 on the 10-year.

some fed speak a little later. atlanta comes up at 9:00 a.m. after the economic data. then you will hear from philadelphia at 2:00 p.m. eastern time. 5:00 p.m., the dallas fed. tom: i look forward to harker. he's an interesting game. he's got a real linkage. you mentioned the empire never yesterday. jonathan: dreadful. tom: there's a heritage with the philadelphia fed having the pulse of business structure. not just big business but across all regions. jonathan: how much weight should they put on the survey data coming in? really weak over the last couple of weeks. tom: retail sales will be go beneath that headline data. . annmarie hordern is in washington. she knows into office there was discussion with people who are strategist. there was a wonderful, spirited conversation with lawrence freeman of king's college.

he wrote in the ft yesterday this oba new and different war. it was followed up in the washington post by mike o'hanlon on north korea. he also talks about a new and next war in ukraine. how will this war change? annmarie: what we are waiting for an terms of the news on this war is whether or not germany is going to send these battle tanks. olaf scholz would not answer the question yesterday when they sat down in berlin. he will be attending davos. people expect them to announce whether or not germany is going to send these or allow others to send these battle tanks, because they are german-made. he's consulting with his allies. he spoke to the president yesterday. that is something ukrainians are waiting for. they want more of this -- more

military weaponry. we did get notice from the netherlands yesterday. the prime minister confirming on bloomberg business scoop that they will send a patriot missile. you do see movement in this direction. all this comes as the fighting is getting incredibly intense, especially as russia's making inroads. today, the topic is going to be about the interior minister who fatally died in this helicopter crash. tom: what's important here, the idea of friedman talking about it is a winter stalemate. mike o'hanlon saying the days of incrementalism, which you have reported on from day one, they are over. do you buy this? that we move beyond stalemate and incrementalism? annmarie: potentially. what i think you will see and everyone talks about is this protracted war. this will continue.

i think we have talked about this a lot. what we saw in ukraine before this started and not everyone paid attention to was eight years of fighting in eastern ukraine. what is difficult at this moment is it doesn't seem like the russians want to negotiate any sort of cease-fire. russia will not leave without that land they have already technically in the russian doctrine annexed. they say it is there's, as well as crimea. this is a no go for any political leader in ukraine. tom: let's bring it back to the domestic front. what is her power to dictate our incrementalism on ukraine? annmarie: kevin mccarthy made that famous saying when he said it is not going to be a blind for ukraine. he had to walk that back. what you do see is more military support needed going to ukraine,

whether it is patriot missile's or the bradleys, the tanks going to ukraine. these tanks when they were developed for actually a response to the soviet tanks the bmp's, the infantry fighting vehicle. the data states obviously cannot do this alone which is why you see calls from the u.k. sending tanks, from france, and the one we are waiting to drop is germany. jonathan: we finish on the latest from the treasury. there was a meeting between secretary yellen and a top economic official out of china. the chinese vice premier. when you hear this read out and this line -- when you hear this from the treasury, the so-called readout from the u.s. side, yellen had candid and constructive conversation with the chinese vice premier. what does that mean? annmarie: it feels like there is a lot of abstract or maybe word

salad being used here. you brought this point up yesterday when we heard from the vice premier in davos talking about a china that doesn't want to see protectionism. i imagine the "candid words" secretary yellen used was about that. very much so on her mind is debt relief for africa, especially like zambia. that will be a key part of her trip. the last line is incredibly important. secretary yellen welcomed her upcoming trip to china. not just sec. of state antony blinken, which we know will be now going to china in early february. yellen will be at some point heading to beijing as well. jonathan: spending a lot of time in beijing at 23. tom: i feel that very strongly. jonathan: annmarie, thank you. retail sales in america.

after that -- just before, we will catch up with bob michele at j.p. morgan asset management. veronica clock from -- clark from citi as they make the push that we will get more highs. we underestimate how far this federal reserve is going to go. tom: you talk about the strategists, the optimists and those less optimistic. what i see pushing against it now is the vix which acts differently today than a recent days. 19.15. getting down to an 18 level is not noteworthy but there is. 23.18. jonathan: really interesting interview here at bloomberg yesterday. it is possible the fed will not initially do enough because the labor market proved more resilient. that is his takeaway at the moment. the one thing that can unravel the market and my biggest concern. inflation does not come down until wages do.

wages don't come down until employment claim arises -- unemployment rises. tom: that is classic bob michele. he's sitting with jamie dimon on this for the annual letter. everyone else's like bad news is bad news or good news is good news. michael is like good news is bad news is good news is bad news. jonathan: i think after the payable report we got this idea of this disinflation. maybe wages could come down and unemployment does not need to climb. i wonder if that is a quirk in the data. tom: my problem with this is it is by definition nonlinear and we don't know the nonlinearity of that. you come down from the horror of x months ago when you get to a certain level and then you recalibrate. you re-hedge your bets. i think we have a clear idea of those levels here versus what

simon french said about europe. they don't have a clue. jonathan: my frustration around recession. i talked about this yesterday with troy at fs investments. we keep talking about recession as some kind of binary event. a line in the sand. you don't cross it, everything is ok. you have to throw out that word and talk about what we mean by it. tom: amateur interpretation of that word. jonathan: precisely. tom: rj gallo is coming up from federated hermes. ♪ girls... the chess club has gained an edge on our bake sales. we need more ways of connecting with customers, fast. i know some consultants with great ideas.

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jonathan: equity futures trying to bounce this morning. a snapshot of the price action stateside. equity futures look a little something like this. you don't like stateside? tom: no. jonathan: what do you prefer? tom: just say the colonies. jonathan: i don't think that will go for my career in america. tom: keep it up, jon. jonathan: the nasdaq .25%. the 10-year, 30-year shaping up as follows. yields coming in two or three basis points. we come down seven basis points. 347.20. maybe you can blame the boj this

morning for doing nothing with her yield curve control. maybe a move for his last meeting at the bank of japan of march. the dollar-young way off session highs -- dollar-yen way off session highs. positive .6%. a brief break of 108 yesterday of the back of speculation. maybe we get this step down from 50 to 25 for the next couple of meetings. some pushback this morning from one ecb official. positive .4%. that is a stronger euro and a weaker dollar on the euro-dollar. we are an hour away from retail sales data. ppi expected to slow in the month of december. federated hermes and rj gallo weighing in. "inflation will keep trending lower in 2023 from its still elevated levels. declining goods prices, improving supply chains, lower

commodity prices, a strong dollar -- that's interesting -- benign inflation excitations, slowing growth and moderating job growth should drive down inflation." tom: a trend we see right now. from the u.s. economy and frankly on a global basis. talking it up in davos with francine. an important panel as well. joining us is mr. gallo. what's important here is to know that when you work with steve roth you have a long-term perspective. delete your note by saying, guess what? it was the worst year since 1788. you are guaranteeing us 1789 was better than 1788. if we go back, the great common feature of 1789 was the red sox still needed a shortstop. that was the linkage back there. you can tell that the steve. rj gallo, what are we going to do here this year? does 60-40 in the bond market

recover? rj: good morning. the answer to that is yes. the disaster in the bond market last year was profound. you have to go back hundreds of years, as tom mentioned, to find a day when treasuries performed as poorly. we think this year should be much better. as you noted in my peace, inflation is on its way down. the economy is slowing. jonathan was talking about the soft data for services. flashing signs of yellow, if not read. all those -- if not red. that suggest high quality bonds will produce positive returns after the negatives of last year. that is very helpful for diversified investment strategies. a 60-40 is built on the idea that bonds and stocks don't move together. last year they moved in lockstep. diversification will start

working again this year. tom: if that is the case a lot of it has already been done. what will be the forces to keep this train going into the year? rj: the bond market started off with a very favorable tone. our expectations are coming forth on the tape. i don't think that is all we will get. one thing about fixed income, and this is the boring part of fixed income, it is the income. the fact you get a yield that each day cruise as each day takes forward. that does not happen when yields are close to zero. now that the 10-year treasury is between three and four, you have corporate bonds that can yield five or six, you actually get income that supports your total return. you were not just banking on price changes. when yields were extraordinarily

low, that is all you had. you had to have prices stay higher or you were going to be decimated and ultimately we were. now bonds are returning to a somewhat normal level state. tom: framing the great debate we are having this morning. we come in and disinflation and they will be a point where we stop this inflate -- disinflation. now the really heavy work begins. how will markets respond at that break in the curve, that kink? rj: in the last 20 years we have already -- almost become trained to expect turns in the economic cycle are dramatic. the global financial crisis being exhibit a. the covid disaster being exhibit b. we have not had a typical recession and quite a long time. we anticipate this will be a

more typical recession where the fed's extraordinary tightening of monetary policy disinflaes and they don't have to drive target rates back to zero. that is what happened. target rates went to zero. you go from a binary state. everything is ok. everything is a disaster. we think there have been recessions in modern history. 1991. 2000 to 2001. it was challenging but you did not have target rates going to zero. you did not have double-digit rates of unemployment. something like that is apt to happen this time. markets don't have to crash, don't have to surge. returns will be moderately positive this year. moderately positive does not assume the target rates go to zero. the markets have to behave in a more normal fashion than what we have seen the last two crises.

jonathan: you are more constructive. delete line that underpins all of this, the foundation for some of the constructiveness's inflation will keep trending lower in 2023. you went through a list of things that go in that direction. declining goods prices, improving supply chains and lower commodity prices and a stronger dollar. how does china pose a reopening pushback against a few of those things -- china's reopening push back against a few of the things? rj: the commodity prices are the ones to keep your eye on. things move fast these days. commodities declined sharply last year. certainly helping the disinflation story. china's abandonment of zero covid has been a stark reversal from the multiple years that preceded. the markets and we were surprised to see how quickly the chinese authorities walked every thing back.

there is no doubt that should boost commodity prices. however, there is a favorable element from china's reopening with respect to disinflation. continued unkinking of global supply chains. getting people back to work is apt to continue to support the disinflation story even if commodity prices are likely not falling, as we have seen so far in 2023. actually rising is a will. -- oil. the china reopening story is not a single variable. it has effects that should boost commodity prices but also should help with the disinflation process with respect to supply chains and production. jonathan: forgive me for jumping in. what does that mean for goods prices? a lot of people look at goods disinflation and are getting comfortable with the idea that some of that is becoming

entrenched. i wonder if the china story leads to further goods disinflation because factories reopen in a more material way, or we get a good of returns inflation off the burst and demand we are expecting. rj: great question. the uncertainty is high around this. those at federated hermes who specialize in watching china, we think some of the economic response of the reopening story and what that might do to global growth and what they might do to inflation is a little overplayed. the ability of getting china back to work, to smooth out the supply chains, that's a key variable. one of the main challenges that prompted the global inflation story have to do with production interruptions and supply chain kinks. china coming back online is obviously going to help that. yes, inflation is not going to

get the single benefit of the reopening story. on the other hand, we think that part of the china reopening is being underplayed. this is an uncertain time. when in world history has an entire economy gone from covid zero, attenuated production, to reintegrating as quickly? we don't have a lot of history here. we are still optimistic the disinflation story takes hold and goods don't have to rebound so sharply because of the china reentry because they make a lot of the goods. jonathan: it has happened twice in the last three years. that is the issue right now. that is why the next year is so uncertain. we have the united states and europe, two major, major economic regions and china state shut down. we sat here and million times and said, can you imagine of china reopened at the u.s. and europe? how much more problematic that might have been with the commodity issues we experienced.

tom: i give credit to china realists who were politically attuned to the be-all and end-all. i give richard haass immense credit on this. they had to go through the party congress in the morning after things started to change. jonathan: things changed with the protests as well. we had protests across the country and all of a sudden it was off the back of the protests. tom: the elephant was the party congress. that is great on 1789. i don't remember it. he was on his way back to the colonies from -- to london from the colonies. jonathan: retail sales report in about 50 minutes. tom: it is very germane to new york we had nurses strikes. this is something percolating. what does the medical industry,

the medical section, 20% of the american economy, what is the disinflation tenancy there? there is none. they will be a payback for covid. he saw the nurses say beware of medical service inflation. jonathan: citi was still leaning towards 50 from the fed. the rest of the market going towards 25. we will check in with veronica the next hour. the next hour looks like this. retail sales 8:30. a bunch of data. we catch up with bob michele from j.p. morgan asset management. then we get the view from citi. fantastic line of right here on bloomberg. ♪ lisa: keeping you up-to-date with news from around the world. kevin mccarthy is calling on democrats to engage in talks over raising the federal debt ceiling. republicans now in control of the house have been demanding

deep spending cuts as the price for increased limit. president biden once it raised without limits and that raises concerns over a payment default. the bank of japan gave a modest goal today. the central bank cap's main policy settings unchanged wednesday, maintaining its negative interest rate and keeping a trading ban for a 10-year bonds. there was speculation the boj would change its policy. india may have already surpassed china as the most populous country in the world. according to the world population review, india's population was just under 1.4 2 billion at the end of 2022. that's a little over 5 million more than china. on tuesday, beijing reported the first population decline since the 1960's. mortgage rates in the u.s. felt to a four-month low last week. the rate of a 30-year fixed loan fell 19 basis points to a little more than 6.2%.

that helped applications soared by almost 28%. although the data can be volatile around the holidays. amazon is said to kick off another round of deep job cuts. the company announced earlier it was laying off more than 18,000 employees among his corporate ranks. the latest round will begin today and will affect mostly their retail division and human resources. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪ inside, outside, big or small, angi helps you find the right so for whatever you need done. with angi, you can connect with and see ratings and reviews. just search or scroll to see upf on hundreds of projects. and when you book and pay throug you're covered by our happiness it's easy to make your home an a

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>> i'm convinced this will not happen. we showed we are able to react to a different situation. i think no one really expected

there would be a complete stop of the supply of russian gas to germany and europe. we succeeded. jonathan: the german chancellor speaking with editor-in-chief john micklethwait in berlin. can we sit on that firmament? i totally agree. if you told me a year ago what would transpire, if you told me the invasion would take place and ultimately russian gas would be cut off to europe, this is not the winter i expected. it is not the winter i think anyone expected. even two month ago people were convinced we would get that recession for the euro zone as a whole and for germany in particular. now we are dumping those calls. tom: i'm not going to comment to say except what i observed in the press, a long winter. jonathan: and the next winter, too. tom: i am not clear on the all -- there on the all clear angle. there is no stalemate.

lawrence friedman talking about it. the work continues into the winter. jonathan: a lot of this was luck. the weather was far more in the europeans' favor. i said yesterday there's a difference between good and bad and better and worse. this was better than expected. i don't think anyone in europe thinks this is good right now. tom: we want to emphasize this with someone who should be in davos. the belvedere. damien sassower briefing ceos on the reality of emerging markets. he is definitive with bloomberg intelligence. it is the china recovery for real? others are percolating. do you buy it when you look at brought e.m. statistics? damien: look at the gdp data. everyone inspected it to be under 3%. they somehow got that extra 1/10

of a percent. tom: does indonesia data confirm the enthusiasm over china? damien: it will be thailand and south korea first in four months. we see activity tomorrow from indonesia. asia is a little behind the curve. malaysia is inspected a by 25 tomorrow. there is activity going on. if you look at em currencies as a proxy this year, it's been nothing short of spectacular. the agent dollar index is up almost 3% this year. every em currency with the exception of peru and turkey are up on the here and up big. thailand and south korea up. tom: i'm not some fancy guy like damien sassower. hideaway express em enthusiasm? which asset class is a proper way to express em enthusiasm? damien: fxi, the china etf everyone is buying hand over

fist is up 11% this year alone after being off. on low liquidity, relatively light volumes, it does not take a lot to move the needle. that has been a big macro. i'm not a believer in it. jonathan: i think you touched on something that slipped under the radar as you joked about whether that -- where to that three handle come from. a lot of people thought whatever. they will tell us whatever they do want china gdp to be. i'm willing to look through whatever the data looks like for the next couple of months. i expect the data to get better. that is the view of most investors right now. how much better do you think that's going to get? do you think it last very long? damien: the real data points are the credit markets. you have a look at the the china banks. they will not make their capital. they are threating to not make their capital call. there are all these defaults.

if you look at country garden bonds, they are up 30% to 40% this year alone. it's been a moonshot for all of these high-risk, high volatile assets on late volume. tom: was it a pure and simple bailout by a totalitarian regime? damien: light volumes, low liquidity. it does not take a lot to move the needle. what we have learned is -- i don't know where china fits in your portfolio. that is the reality where we are. i don't agree with a lot of what is going on. i don't agree with the numbers. tom: royal dalton. jonathan: let's talk about the revenge we can expect. luxury goods players are flying. if we had this conversation a month ago, the china reopening is not the china that shut down. we are seeing the barriers to entry for the property markets in canada going up.

the governor of florida wants to do the same. how will this capital be deployed this time around? damien: how sticky is the money? if capital controls go up, that is a concern. speculators comes in. what happens if things go horribly wrong? they've all had for the doors and what happens then? does beijing put of the gates again? that is the risk when you are investing any emerging-market. i don't think it is going to happen. it is the china new year. we are getting set for the spring festival. it is the year of the rabbit. a lot of people mistake me for brad pitt. he's a rabbit. albert einstein is a rabbit. jonathan: i have never heard of this. tom: save the show. david papadopoulos is our surveillance bookie on horseback -- horseracing. there is no other discussion.

it is not cowboys to the super bowl. real football talk? giants-eagles. damien: i think it is going to be a close game. the nfc east has been tightly fought all your long. dallas still in it. i think that san francisco game will be good. they have got -- it is fairly. they have -- philly. they have aj brown. it will be a tough call for big blue. jonathan: and rogers -- anne rogers? damien: i would love to see aaron rodgers and green. tom brady, this one looks lovely for him -- ugly for him. most people think this is it and he will hang it up. aaron rodgers has some life in

him. i don't think the packers will let him go. tom: in the promenade was the man -- the shop. is america going to buy with the middle east? are we going to abscond with premier league football? damien: are we going to enjoy it? i think it is happening. tom: who owns news cancel -- newcastle? jonathan: the saudi's. damien: lisa did a great interview with the chap from being. it's expensive. u.s. owners want to run the team profitably. middle eastern owners, they don't care about profits. tom: what do the kansas city royals of the premier league do? how do they respond five or six teams to the madness damien is describing? damien: what's interesting about

chelsea and has a spirits with the dodgers. he is putting players on seven to eight year contracts. traditionally in real football you have a 45 year contract. that can go one or two ways. the player's favor because they can demand higher wages or demand a transfer. it can go on the team's favor. you can get rid of them after a couple of years that they are no good. these baseball contracts are much longer. we are talking decade contracts. bringing that's a real football could be interesting. there is a change emerging from the u.s. leadership who are trying to run the club's little differently. taking a young player and putting them on an eight-year contract and you end up paying them less than maybe would otherwise would. damien: i think that is smart. the nfl is very different because the violence of the game in the activity. it is a health issue. i complete the agree with you. i see soccer players -- excuse

me, football players getting paid with long-duration contracts. tom: jim says ask john who's going to buy mann u. damien: i don't know. i think a liverpool transaction is more interesting. i wonder if ny sports are looking at this and thinking it is time to go. made the money. let's get out. doug you get the feeling they don't think -- things are maybe a little choppy? take the middle east money and get out. tom: we got through this. jonathan: that's great. we did not talk about rough and adult -- rafa nadal out of the australian. tom: damien sassower, thank you so much. futures of 14. jonathan: lisa shalett from morgan stanley is up next.

>> it feels like you have conflicting signals and a muddled outlook for many. >> should we start to see a recession? >> is in mild recession or is it something worse?

mild recession is a word your hearing over the last few days. >> the composition of growth is improving. even though inflation is moderating, real economic growth is accelerating. >> this is "bloomberg surveillance" with jonathan ferro, tom keene and lisa abramowicz. tom: an inflation guide, consumer guide matters to the fed. jon: just how strong is this economy? is it running towards recession or global economy -- or global recovery? look at the survey data, things look pretty terrible. empire manufacturing yesterday, dreadful. manufacturing and service is not great. that is the debate right now for a lot of people. are we coming into a year

dominated by growth slowed down off the back of monetary policy tightening or a year we get a global recovery? with the bank of china reopening? ? tom: imported micro data points we see in 28 minutes, that is the elephant at the world economic forum meetings. optimism from china and their leaders they are back on the page with the west. jon: optimism and some of these stocks as well. luxury in europe, rip it, airlines in america -- high yield spreads tighten 60 basis point so far year to date. the last couple of weeks. high yield rallying. something has got to give. either survey data bounces back. tom: i agree with the soft and hard data. retail sales, price matters. inventory overhang across all sorts of categories of retail

sales and price reacted shocked, they moved jon: units. jon:jon: disinflation people hope continue. we will see how sticky that is rated is there a challenge emerging for the goods inflation story on the back of china reopening? tom: micro data, damian sassower left us in the last half-hour, liverpool swag is on sale. it has been that bad of a season for liverpool. that could fold right into retail sales in the united states and the united kingdom. jon: bob michele, men during -- managing director of jp morgan. can you talk to us about the risk? bob: i cannot get 2006 out of my mind.

the fed raised 420 basis points. here we are today they have raised rates by 425 basis points. and then they stopped. was it enough or wasn't it enough? it took a while for things to slow down. ultimately it ended in the financial crisis. but they got to five point -- they got to 5.25. we are still -- china is reopening, the housing market, although prices are coming down, competition for housing is still very alive. jon: how concerned are you when it comes to this rally we are seeing in the last few months? bob: we have been a part of it. we thought at the end of last year the markets were right for rally. i was out meeting with lots of clients at a lot of places. a lot of them were telling me they are going back into the bond market for the first time in a while and they didn't mean a year.

a lot of them meant for the first time in seven to eight years. this is the first time they have been in the bond market since the financial crisis. there was a lot of money waiting to get into -- they are right for a pause, the market runs a bit more and it pauses when the fed pauses. tom: i want to go back to 2006 and your observation pre-gmc. under the observation, saying the gravity has returned to the system. the dynamics harking back to 2006, what i remember then it was the overshoot in real estate. it was hugely advanced comic usually inflated, down we came and overshot through the law of regression. are we going to see that this year with bonds where the yields, price moves so much we overshoot in certain ways? bob: the overshoot in real

estate occurred because the ample supply of low cost money was around everywhere. that has happened the last couple of years. that costless liquidity has been sloshing around for a few years. we have only recently started to remove it from the system i get concerned there will be an overshoot. we are concerned there are bubbles out there that will burst. it is hard to identify them. the one thing we are sure of, the only way this ends is with the recession. you have to have a recession's cool things down and reset. tom: lisa room was talking with kevin dots 's and made clear this is a different shadow bank than 2006. nevertheless there are shadows within the banking system. how does that involve jp morgan?

bob: by definition shadow banking is shadowy. we needed to be concerned about that. there is a lot of shadow banking that has occurred in the private capital markets that have financed a lot of things that may have made since two or three years ago. they make sense today? are there write-downs coming there? tom: are there write-downs? are there equities and private? bob: we look at capital in total and private credit transactions. for sure there are going to be restructurings, exchanges. tom: is he talking about me and you? jon: i don't think so given that is a public company. can we talk about what is happening in private markets can reintroduce in public markets? i am told repeatedly high yield is stronger. the quality is much higher than it was five or 10 years ago, especially in the last decade.

you push back against that knowing the risk in private markets could spill into public markets? bob: i have heard those arguments before every single recession. this time high yield will hold. we have to remember, the high-yield market got started in the 80's when it became public and investors could get invested in it. it has not been around for a long time. there have only been a handful of recessions. every single time headed into a recession, it holds well because this time is different. every time in a recession, credit spreads blowout to a minimum of 800 over. yes, it may look higher-quality, but when default start to hit, when the economy goes into recession, when corporate profitability comes under a lot of pressure, investors reset that market. the one thing i worry about this time that is generally different is the amount of investment in the private credit markets.

if you start to have problems there, you start to get restructurings to faults, exchanges that are in the 20% neighborhood, investors in those spaces may only have the public markets as their relief valve. jon: you sell what you can, not what you want. there is a question that has just been asked on the bloomberg terminal by asus driver, could you ask bob what is different this time versus 2008? we know the fed has qe and they know how to use it, the risk of credit was real back then, not anymore? how would you respond to that? bob: what is different this time is everyone is on the lookout for a bubble. is there complacency or not? we have all been expecting a recession. it hasn't come yet. there are a lot of reasons it may be pushed off into the back half of this year or maybe into next year.

and you have new tools out there. one of the problems is while we have qe, we are also running qt now. that is an experiment we haven't lived through before. we are living through history. we don't know how it will be written but we shut down the world for some period over the last three years. and now the last of it is just starting to emerge and return to normal. and we have got to adjust for all of that. it just seems very aspirational to me that it is all going to end in a soft landing or we reset and move on. jon: nothing about this is normal. bob michele, asset management chief investment officer and head of the global fixed income, currency & commodities going to be sticking with us. we can squeeze in some sport. what is going on? your beloved little floral -- beloved liverpool. bob: last year with the bond

yield market, if liverpool had gone off the rails, it would have been a disaster. right now there is a bond bull market. money is coming into the market. i can live with some restructuring of liverpool. i like what -- did. he played the younger players. tom: i am the amateur here. does the world cup screw this up? the pots are playing in cloud. liverpool, some party say the least. the arsenal, they are in the world cup. but in the middle of the season -- jon: it has disrupted me. tom: has it disrupted solid? jon: we have restarted the season. stopping for a month would disrupt the momentum of the highflying teams. that hasn't happened. tom: i am learning every day. bob: they pulled it off.

it was a great world cup. tom: is that a darby? liverpool chelsea? jon: there is another team called abington. bob michele is going to stick with us. veronica clark from citigroup coming up as well. live from you in new york, this is bloomberg. ♪ >> keep you up-to-date with news from around the world with the first word i am lisa mateo. treasury secretary janet yellen -- maybe later this year in washington. treasury department hinted at the plans after a closed-door

meeting held. u.s. officials said the two exchanged views on macro economics and financial developments. u.k. inflation dipped for a second week in a row. consumer prices rose 10.5 percent from a year earlier. inflation is higher than the bank of england's target. they have raised interest rates nine times in a row since december 2020 one. another rate hike is likely next month. in ukraine the countries interior minister was killed among those when a helicopter crashed near the capital city of kyiv. 18 people died, 29 were injured. no word on what caused the crash. global oil markets face a bigger surplus this quarter than previously expected. even as china reopens. according to the international energy agency, world supply will exceed consumption by about one million barrels a day in the first three months of the year. the agency doesn't expect to see annual demand growth in china until the second quarter. christoph joining the ranks of

tech giants scaling back. bloomberg has learned the company plans to cut jobs in number of engineering divisions today. the layoffs set to be significantly larger than other rounds of job reductions in the past year. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪ this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

>> gdp is more resilient than expected. inflation will probably repeat in this semester. first on headline and then on coal. jon: getting very constructive for the cdp. that was the french bank --. equity futures on the s&p down by a third of a percent. yields lower by eight or nine basis points on a 10 year. 34 610. if you're waking up wondering where is the boj news, the news is there is no news.

potentially another move may be in march. tom: festivities 9:00, 10:00 last night, wall street journal, everyone publishing on it. i get the calendar of rodema -- the calendar tonight, we will see in the japanese cpi, nationwide. the bloomberg survey is a stunning 4%. unimaginable. i don't understand the inflation headlines we saw a day ago versus what we are going to see tomorrow. they don't dovetail. jon: when he handed over the ranks, was that mission complete or incomplete over the last decade for him? tom: his experiment was successful given the cards were dealt to him that he reflate it the system. ukraine, all the rest of it, china, covid, he reflate it the system. he can say i did that. but it is for the wrong reasons.

he reflate it -- he reflated without consistency. sustainability. jon: where has that 10 years gone? tom: i sat in the bottom of the bloomberg building in london, the old one and he and i did a panel. yen was 906i think at the time. he said something brilliant as lord o'neill would do. i moved at the yen market in real time. it was lord o'neill doing it. but that was a long time ago. 216 percent debt, they have 18% of france's debt. japanese, only 8% of france's debt. jon: the boj pays a significant amount now.

tom: bob michele with massive history. jon: waiting for us to shut up. tom: sets it up nicely. the dysfunction and the flows of capital debt is tangible. you see it with japanese and other percentage of debt. you have an inherent fear with your strategy when you see ratios like 260% where another nation owns 8% of france's debt? bob: i have so many thoughts on the bank of japan. they missed an opportunity. i would have done something today. and keep the process going of getting to something that looks normal while the rest of the world is doing it. we talk about the top end of the band is have eight -- is .5%. the target is actually zero and official rates are -10 basis points. there is a lot of room to get rings looking somewhat normal while you are printing 4% inflation. then start the process of transitioning the bond market

out of the boj hands into public hands. into private investor hands. get that process going. as i am saying that, i also get concerned about what that means for assets in the rest of the world. because many of us in the markets for a long time have known that japan is the mother of the carry trade. japan finances carry trade's, the u.s. market, european market -- tom: explain carry trade. that is jargon. what is a carry trade? bob: a carry trade is to use the very low cost of funding into japan and take your capital at your cast -- at your cash to funding and send it to somebody like me to invest in the u.s. bond market, in the corporate bond market at yields of 4% or 5%, or higher. you are enjoying a much higher yield than you would have

staying. jon: these changes we are seeing in the last month, potentially in march would change how you do business on behalf of other people who want to invest abroad from japan? bob: we are already starting to see signs of re-appreciation. we are starting to see clients that had money in the u.s. market, start to take it back and put it back into the japan barn -- the japan bond market. when you look at u.s. ad sets hedged back again, you are at a yield significantly lower than where the jgb market is varied a lot of it is the dynamic of the inverted yield curve in the u.s.. that is pretty punitive. the bank of japan has to be careful how they wind all these things so they don't create this frenzy of reappreciation. they can be consistent without creating a frenzy. jon: a part of me thinks, great,

price discovery returns, we can start calling these places markets again. then i look at the size of the balance sheets and i think there is a real stock affect that is going to exist for a long time. there are two ways of looking at it. this is the final anchor around the neck of global bond yields. that should have some real consequences. the other way of looking at it is we still have these massive balance sheets, ecb, federal reserve, boj, they are going to be around for a long time. which is it? bob: it is both of those. this is a conversation i am having a lot with our clients. we think we have put in a secular low on bond yields. the end of the secular free-for-all in costless capital. we are in trend that will return the cost of funding to something that looks historically more normal. at central bank rates, bond market rates, something that looks more normal.

it doesn't happen all at once. you don't go from 0 -- tom: over that time continuum, what is the variation? we have to be in three month libor? bob: it took 27 years to get the funds rate from 27% to 0%. and you had a series of lower lows and lower highs. we are seeing the mirror image of that. we are going to have a series of higher highs and higher lows. every three to 500 basis point shift in the cost of funding for central bank rates will have an impact and then they will have to come back and take some of that back and they will start up again. jon: you and i have talked about this before, a huge thing you are at the forefront of, you are saying it is going to take several cycles to unwind what we have seen over the last several decades. can you tell me what is changed

in the secular story over the last 30 years and why you are projecting that out the next several cycles? what has changed, what is that parol for story that is going to unwind all of this? bob: one in the develop market, after the financial crisis we were all sitting there saying, what do we do with all this housing stock? the baby boomers are rolling over into retirement and the millennials are too young. the 91 births at the time were 17 years old. 13, 14 years hedged -- 14 years has now pastored the 91 burst -- the 91 births are 42 years old. they are hitting their peak earning, saving, much like the baby boomers did in the 1970's. it suddenly all the housing we didn't finance -- we didn't invest in after the financial crisis, we need it back again. there are some real capital expenditure plans out there.

defense, infrastructure, health care, education, those are things a new emerging population of millennials, xyz, whatever you want to call it, they are going to be willing to spend and invest in. jon: this is wonderful from jp morgan. veronica clark on the other is going to be joining us. retail sales data moments away. reaction from bob michele at jp morgan, up next. morgan, up next.

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jonathan: economic status just moments away. s&p looking like this. positive 0.9%. economic data dump coming up in just a moment's time. michael mckee will break that down. 10 year yield lower by nine basis points. 3.4537. michael cove we are just getting the numbers and we are expecting a decline in retail sales. he certainly got one. the expectation was for a 9/10 fall. the question is where to be come in with the retail sales control

the number to pop-up. here are the ppi numbers. down half a percent on the headline. the expectation was down a 10th. x food and energy is down 1/10. the ppi for final demand at 6.2% for the year. the core for the year, 4.6%. the core matches but the final demand was expected to be 6.8%. another decline in an inflation indicator that is going to look good for the fed. here are the rest of retail sales. x auto and gas down 7/10 of a percent. that had been expected to be down 3/10 and was down to tenths in november. it looks like a very poor month in retail. i will let you do the reaction to this while we get details.

jonathan: we have a downside surprise on retail sales which is the wrong kind of downside surprise. we have the right kind on ppi. features right now a half of 1% on the s&p 500. we do see a bit in the yield curve, down eight point on the two-year. down another 12 on the 10 year yield to 3.43. lisa: bloomberg -- tom: bloomberg pops out to a stunning 3.5. we have to educate the public, including me. retail sales are inflation adjusted. with the disinflation out there and the ppi disinflation out there, does that make the gloom of retail sales less gloomy? mike: they are not inflation-adjusted which is why you have to do that. what the government does is put retail sales numbers in the categories that they would trot

into the overall gdp and deflate it from there. you have to look at these numbers and think they are going to be lower than we anticipated. here is where some of the weakness was. so down 1.6%. that is an important number. food has been coming down. gasoline goes down 4.6%. gas prices have started to go up again into january so that is interesting to follow going forward. food and beverage stores flats with food prices down a bit. clothing down three/10. you are asking yesterday about clearance sales, maybe it is time for you to go shopping because those prices are down a little bit. non-store retailers down 1.1%. it is a broader category but where you would find amazon, walmart and online retailers. then food services and drinking

places down 9/10. that is the one service industry in retail sales that is sort of the most discretionary spending we have there. it does suggest that people pull back in december all across the board in terms of spending. jonathan: thank you. downside surprise on retail sales, the ron kind. the right kind of downside surprise on ppi. basically where they were going into the print. yields still low on the 10 year by 11 basis points. 3.4354. a rally at the front end again, around 4.13 on the two year. just pulling back. tom: this is j.p. morgan asset management before we move on to economics. help us with what the bond dynamics right now signal about the parlor game of 25 basis

points or 50 basis points. what you and i never saw, the streets gaming out rate cuts. what part of eurobond world do you look at to to gauge 25 or 50 the basis points? bob: i was replaying a life the inflation data which has stopped printing .5, .3, .7 permit and is now in .4. the impact of a year of very aggressive central bank tightening and quantitative tightening are starting to bite the economy and they are fighting hard. things are slowing down. i think the fed has good reason to raise rates 25 basis points at the start of february and pause. if for whatever reason, they want to do another 25 in march as insurance, it feels like we

are a meeting or two for a cost. then let us wait a quarter or two and see what the impact of all the tightening has done. it is a signal to bond investors who have been trying to find backups. you are not in a get that. jonathan: is that the whole of fixed income? bob: where we are seeing money come into the bond market, it is going into aggregate bond fund. investors are making this decision, get me into bonds or going into a general witness a poll fund. the space is going to appreciate the securitized markets, the organs market -- the mortgage market. the one thing i did get wrong, which you have been polite about, is the high-yield. it has been rallying like crazy. but the data says it is not quite as far out. jonathan: with that in mind, how

much weight would you put on the recent survey data which indicates things are slowing down quickly? bob: businesses will respond to that and start to invest less in their business and start to save. it becomes self fulfilling, all of these things suggest recession is on the horizon. jonathan: this has been great. equity features up 0.2 percent. if recession is on the horizon, the credit market is rallying into it. the 10 year yield on 11 or 12 basis points to 3.43. the two-year yield down to 4.13. tom: these are movements. it is about the hard data. i know it gets revised. i do not have the data appear. there are the revisions. for example, the control group, i do not have a revision on that yes. mike mckee was telling us the revisions were less than retail

sales that we saw in the previous month. us get the economic look. john, veronica clark can frame for us the citigroup conundrum which, i believe is mr. holland worse discussing 50 or -- esther hollinghurst discussing 50 or 25 basis points. jonathan: veronica, thank you for being with us. have been leaning towards his ideal we get another 50 basis point move. doug challenged do you think the view is that the incoming information? veronica: it was a close call going back a week ago. certainly what we have heard from ever sense. i do think the market could be under appreciating the chance the fed would undergo. i think the fed is misinterpreting -- the market is misinterpreting the fed's commitment. tom: we are all slaves to the

data. every fed, every history is data dependent. you guys got out front of this in the data has backed up to citigroup. what is the data that matters to you. less to february 1 and much more to look onto what we see may 3 or june 14? veronica: the most important data is still inflation data. i would bundle on with that wage data. maybe we have seen some signs that are slowing but you saw such a tightening market that i would not expect wages slowing back to something consistent with 2% inflation. inflation data should be the fed measure. some details we got this morning will matter for that. we are still expecting stronger core pce than what the fed has. tom: are you going to reconfirm

50 basis points? veronica: i think that is still on the table. he also would not necessarily of just how high we think rates will end up going, even if it is not 50 in february. we expect the fed will hike for longer. jonathan: she stuck to the script. that was great. veronica clark, citi global markets. when do you make of that? to be go another 50 and then terminal rates will be higher than people think it is? bob: i do not think there is anything in the data we have seen over the last month to get the fed to go for the. i think they have opened the door to continue to dial down the pace. i think 25 is pretty much in the books. tom: this is really important and goes back to bauer and the fabulous orchid citigroup. michael for a house called a

u.s. potential gdp. is there just a dampening there that i europe on the jp morgan that -- that i hear on the jp morgan? jonathan: you are going to cause trouble between the asset manager. [laughter] bob: i think he is a brilliant researcher and economist. tom: his potential gdp call was subject to percent at the time. that is how you get your point of the great moderation ending. did i do ok there? bob: you did great. jonathan: if you cause trouble on citigroup, do you think they're going to come and change the call? [laughter] tom: which wall that i just climb over? jonathan: we have been waiting

to catch up with jay who will join us in 60 minutes. tom: i happen for you have had? jonathan: i have him. what a morning already. we are going to talk. some cuts and microsoft tom: two they played differently in the fa cup? jonathan: you play different players. play the younger players and that the hungrier younger players. tom: who was the defense that is still good from belgium? jonathan: virgil van dyck. he has not had a chrysler aids -- crisis at all. world cup disease. is that what you call it? tom: yes. [laughter]

jonathan: i am working overtime. from new york, this is bloomberg. ♪ lisa m: keeping of up today with news from around the world. house speaker mccarthy is calling on democrats to engage in talks over raising the debt ceiling. republicans have been demanding deep spending cuts. president biden wants it raised without conditions. that raises concerns of u.s. payments defaulting. in san francisco, opening arguments are set today in elon musk's trial reclaims he defrauded tesla investors. the claims had to do with his tweets in 218 -- 2018. mortgage rates in the u.s. fell to a four-month low last week. the rain on the 30 year fixed loan fell 19 basis points a little more than 6%.

that helped applications sort by almost 28%. the data can be volatile around holidays. the world's biggest oil company is confident demand will pick up this year. saudi arabia ceo spoke. he says he sees promising signs in demand both from china and the aviation market. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. ♪ ♪ the metaverse is sometimes called the next version of the internet. when you get beyond all the hype about the metaverse,

what practical applications do you see for businesses? there is certainly a lot of hype involved with the metaverse, but we at ey are very much focused on helping our clients realize business value from the metaverse in three areas mainly. the first one is to help them increase and enhance customer engagement, for example, by establishing a virtual lounge. the second one is to increase efficiencies within the organization, for example, by using it for training. and the third one is to generate revenue, for example, by offering payment and lending services to buy virtual land. these are early experiments, but we believe that the business case will continue to strengthen as the technology matures. ♪ when you automate sales tax with avalara, you don't have to worry about things like changing tax rates or filing returns. avalarahhh

ahhh >> in the united states, we are obviously fighting higher interest rates but we are doing it from these perspective of the economy that was quite in shape. during the pandemic, people

stayed at home and saved $2.5 trillion. the extra money was in the banking system. they have been spending that money and that has been keeping the economy performing better than people expected. tom: source men. he is with blackstone and 18 executive officer. far more than anyone i know, a student of linking into economics. with his blackstone group front and center across america, there has been a commitment a huge debate about the future of america wrapped around private investment. after the retail sales, we have futures of 13. a modest lift. i am watching the vix very carefully. it is at 19.08. that is a substantial change from a few days ago. the 10 year yield comes in a

huge 11 basis points off the shock of tepid retail sales and revisions. the two-year yield comes in seven basis points. we are watching brent crude at $87.23. our guests say watch the shadow banking system. kim spoke to professor rogoff at davos about shadow ranking and overinvestment into private equity. there is real debate about this. lisa abramowicz in the meetings in davos drove this conversation forward. private equity away from the markets. the shadows. not for shadows descending across davos now as the sun falls. i think it falls down to france or italy. i cannot remember which. [laughter] the answer is the shadows of shadow banking are front and center. lisa: for shadows, if you look

at some places are not so shadowy. i was just on a panel with the head of the first central bank and he is very concerned about the shadow banking, the nonbanking markets. i did speak with the former co-chair of bain capital who retired yesterday. but he hates the r word. he is going to be stepping down but going to be an advisor. i asked him if we have already seen keith private equity and whether we are in for a significant downturn. >> if you look at private equity returns, most firms are shooting for 18% or 20%. the private equity model works and puts capital experts with other experts who drive these companies. i think we are still only in the early endings. it is a great business model. lisa: you can see it being 18-20 percent in that period as well. what about in china and other

areas a lot of people are pushing into and seeing a lot of value? are you as well? >> we have had a fantastic asian market as well. japan is a fantastic market because they are now embracing capitalism. i met with the prime minister a month ago and he is pushing back. have to rejuvenate the economy. they have more free markets and capitalism. we have been fortunate because the japanese respect those who are trying to build a large market. we stayed in asia and built a large presence. lisa: you only boston celtics and are interested in the chelsea football team but did not win that debate. are you looking to push further into the football arena? >> our venue is looking at many teams. we to buy a great club stay disciplined so we can invest over the future. my fear is some prices are getting so high that there may be dis-investment.

i want to have a great club and be able to win. you have to be competitive and budget having money to make it competitive. lisa: that was steeply you go. to answer -- steve pagliuca. tom: michael maibach, the president of the chief executive officer of --. they have the thermometer. the name of the panel by the way was bramo does davos. there is a the monitor impulse. what is the davos thermometer this year? lisa a: i would say soft and shallow. shallow and short would be the concept of it. the consensus around what people are thinking about a recession or lack there of. my first question was are we going to get into the recession? the head of the first central

bank said no, even though they are going to raise rates further. other people are saying the same thing. michael may bought of mastercard says data is not so any downturn from spending. there is tension between the belief you can raise rates more and continue with dynamism. i know retail sales suggest there is softening but it has not been reflected in the tone we are hearing from central bankers and this particular event. >> missile and appeared to bring back reality -- mr. zelenskyy appeared to bring back reality. how was ukraine greeted today? lisa: a lot of people are trying to figure out how much it will take. there is a role? about how much longer school drag on. at the same time, the book -- the focus is on china and then

reopening. and the question of what that will do to inflation and what that will do to growth at time of increasing tension. underpinning every conversation is the tail risk people see as an escalation in a war that russia has waged on ukraine. that is less a conversation right now than china, the reopening and what that means for inflation. tom: i will say the headlines we saw was very much indicative of china reopening and the meeting with secretary yellen. in the coming hours and days. what is amazing is how this indoors across the pacific rim. you have the filipino president attending as well and others. what is the feeling of asia opening up? i think it is underplayed. lisa a: i would agree. i think there is an incredible amount of optimism. underplayed is the reliance on the west and particularly on china to reopen to get the

economy going. a lot of the optimism we are hearing, how much is hinged on china reopening? we are talking about deglobalization and unhinged in the west from the east but it is not that at all in reality when it comes to conversations. tom: full disclosure, i got an email and no that was not lisa's gulfstream at the photograph in zürich of all the fafsa -- fancy people's plans. what does esd look like at this year's davos? tom: a lot of people saying they will recommit and continue to finance. it is still a big piece. the question i have is what is the role of investing in fossil fuel companies when you are trying to prioritize esg? i was speaking with the ceo of the biggest sovereign wealth fund in the world about that. this mandates a way to diversify

away from fossil fuels but they are still investing in diversified will companies and energy companies, trying to affect change. there is still a feeling that there is a place for investment in the energy and oil complex, while also pushing for esg types of mandates. tom: did you get briefed on that by the ceo of chevron? did he stepped in to talk about the future investment of hydrocarbons? lisa a: they are big on this because this is ultimately their future. i hear your skepticism. it is a feeling of how quick is it going to be at a time when you still need fossil fuels to get going. tom: lisa abramowicz, it is the meetings the world in davos. her coverage will continue with her team in the coming days. our coverages about retail sales. ppi a little quiet. i guess you will see in six

hours a stored disinflation and may be a next words adjusted by the fed from 50 basis points to 25. thank you to andrew hollenhorst. i am sure will have statements out overnight. really appreciate her attendance today as well. i do want to point out, and this is important that the bloomberg day on radio and television i need to guide you to this evening. after you have forgotten about economic finance and investment, they will remember in japan without question the inflation report of the day that is out of japan. will we see headline inflation on survey of her percent? 's a with us. features of 14. the vix right on the cusp of 18. i will say better than good markets. this is "bloomberg surveillance". ♪ vancing flight for future generations.

♪ welcome to a new era of flight.

jonathan: yields down, stocks up. the countdown to the open starts right now. announcer: everything you need to get set for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. jonathan: live from new york, coming up. microsoft planning another round of job cuts. united airlines a raise. you begin with a big issue. recession or recovery? >>