>> i think people are banking too much on the fed being more modest. >> we think we are still a long way off from the fed really signaling any sort of cause. just pause. >> we don't think we should be pricing in cuts for the year. we've only just got to neutral in europe. >> we don't know if the rate cuts will come in 2023, it could be 2024. this is bloomberg surveillance. tom: good morning, everyone. mr. farrow is in london and lisa

abramowicz is finally back from switzerland. i'm here in new york and we know we are not in this equity market. the bottom line is equity markets are up. lisa: how do you get faith that this is something sustainable? that is the question as it's led by the riskiest assets whether it's the emerging markets or europe versus the u.s. it's a reversal of what we tom: tom: saw from last year. we will talk in a global basis in a moment. i will go back to ralph ankum who was with us and he said there was a bottom in october and that's a lonely view. lisa: i like how you put technical analysis in its pit -- in its place which is one piece of the puzzle. the momentum, how does that fly

in the face of doom and gloom? there is temporary optimism that people have. tom: you can see the economics and the fed babbled through what you see in the charts. i will say it's a boring january screen and futures are at negative 80 but there is lots of incongruent teas because we are coming out of a pandemic, china is opening and there is massive uncertainty around the october bottom. lisa: european economic data has come through to a surprising upside. in the u.s., it's the opposite, it's been disappointing on the margins. you start to see some weakening especially with leading indicators. when can you expect divergence in europe outperforming at a time when people are under invested? will that be the winner this year.

tom: there is a ton of economic data out there to day and the recession fears are tangible and yet they are not yet in the statistics. lisa: not yet but some people might say they can look at the gdp number and might rethink that but you see enough momentum in the labor market. tom: february 1 is a fed meeting and still have to piece together the fed special. will jonathan be back from london by then? lisa: i will have my people talk to his people so i don't know. tom: we watched it last night. we drank the jonathan arrow kool-aid. three years ago, we wouldn't know and there we were watching scoring a magical goal. futures are negative nine and

dow futures are -71 and the vix is under 20. it's off that strong market yesterday and off that strong market friday. a massive short squeeze out there as people exit the gloom as best they can. we are both watching oil, rent crude is 88.17. lisa: especially with the oil price going up, where do you see that optimism percolate to other instruments out there? 9:45 a.m., u.s. snp global manufacturing and services and composite pmi for the month of january. early this morning, we got some data out of europe and it was better than expected with the private sector growing at a faster clip than people expected. do we see the same thing in u.s. services? that will be interesting.

1:00 p.m., $42 billion of u.s. notes. there is a distance that continues in markets with people not having faith the fed will go through with what they are saying which is going to 5% and yet, the fed keeps doubling down. tom: who buys the auction? lisa: traditionally, it was the primary dealers responsible for taking down a certain proportion or anything that wasn't sold to independent buyers and institutional investors but they've taken on a smaller and smaller stock is institutional investors have been playing in these auctions. microsoft and texas interest in -- instruments will report. how much cloud computing are people still investing in? that's what i will look at because that's a reason why this

stock has underperformed as much as it has. tom: let's get to a global conversation with the mobile head of research at standard chartered. is it legit this time? is at the moment for em and international equities? >> one of the things we learned coming out of the global financial crisis was that when markets start to recover after march, 2019 -- 2000 nine, those were beaten the most which recovered most aggressively. we are seeing a repeat of that today with emerging-market equities and emerging-market currencies, its credit and it doesn't necessarily reap choir a lot from the central banks but perhaps to stop hiking and take away the monetary tightening risk and the easing of financial conditions that brings with it. i think there is an element of

short covering but also an element of people getting back risk on their books. tom: tell me about the dollar dynamic at standard chartered. do you believe in a persistently weak dollar is an overlay for equity markets globally? >> i think that's right. we believe last year, the dollar put in a medium-term peak. i would observe that we have already unwound about 75% of last year's dollar growth so we have done this very quickly. in the short-term come the dollar probably consolidates those losses and some of the foreign currencies that have recovered quickly probably stabilize but over the medium term as the fed stops liking and financial conditions ease, we expect investors and other participants to allocate a larger share towards foreign exchange. lisa: how much of the european that is tied to the china

reopening? >> i think it's a part of the story. it's a good point but you also made a point earlier in the show in the sense that people have been structurally underweight european assets, people have been structurally of the view that your would underperform economically. as we see now, we are seeing upside surprises in the data. the fear of the energy crisis is turning out to be less threatening than expected. there is a good case for europe to at least outperform some of the downbeat expectations as we come through a more mild winter and a reallocation of those assets that you described earlier. lisa: we are seeing that germany is set to forecast economic growth at 0.2% this year which i find compelling considering so many people were expecting recession. tom: this is data to be reported

tomorrow -- perhaps it has leaked out but we are positing that wednesday, we will see that 0.2% in germany annual inflation which is a little bit better to grow by 0.2% versus a contraction of 0.4%. lisa: how much further can things go? how much can we see more on the euro-dollar to levels that people thought were not possible. the u.s. could have passed the peak at certain levels. >> i would be a little bit cautious with levels around 120 or above in the euro. i think that makes generous assumptions about the trajectory of their recovery when it comes. we have an above consensus view

on china gdp for this year, 5.8%. most of that escape velocity will come in the second half of the year. for europe, it will be a slow and steady recovery but as you pointed out, just meeting the downbeat expectations may be enough to ring capital back. tom: the sophomoric way to look at this is it's a zero sum game of china going up and we go down and i don't buy it. if we get a lift of the pacific rim where your expertise says, that will lift all boats on the first order? >> absolutely, take it from two different angles. the first one is south east asia is expected to grow 5% this year. if you've got that a 5% and china at 5.8%, that will lift a lot of economic sentiment around the world. it's not a zero-sum game.

if china is improving and in the is improving, that should ultimately help the recovery in trade as well and i think that -- and i think that will be a net positive for the west as well. tom: thank you very much. i want to reframe this a we are careful -- bloomberg report today ahead of time according to people familiar that the german economic statistics will get official data from the government tomorrow. it's important that we talked about flipping from a negative statistic on a monthly or annual basis to a positive statistic to go from contracted to the word grow is not a small matter. lisa: are we just taking away some of the growth from the next year? honestly, how much is this saying that perhaps germany will grow a little bit this year but will rope less the following year than previously expected.

if you get the dynamism now, do you get the real reduction in an nation and the conviction to fight that in the same kind of way? tom: they have a war going on over there and i cannot go crystal ball gazing. i don't think the ecb can go to crystal ball gazing either. lisa: making a prediction right now is difficult but that's with the german government is expected to do well upgrading the forecast this year. there is a shift in germany to may optimistic growth. stay with us, this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world, poland has formally requested germany's permission to send its german made leopard tanks to ukraine.

that's after weeks of pressuring germany's chancellor to drop his cautious approach to delivering the tanks. german law requires approval for the reexport of military equipment. the u.s. justice department is set to sue google as early as today. the case has to do with the search giant's dominance over the digital advertising market. google controls most of the technology used to buy, sell and serve online advertising in the company has argued that the market is a crowded and competitive one. in the u.k., more evidence the economy probably has slipped into a recession. british companies have signaled that output has dropped at the fastest pace since the start of the pandemic. the government's budget deficit rose to a record with soaring interest rates jacking up the cost of debt service. in half moon bay, california, police arrested the suspect in a mass shooting with seven people killed in one wounded at two nurseries. the 67-year-old suspect was believed to a been a worker at

one of the locations. an 11 person is not died from the shooting at a dance hall in suburban los angeles. that suspect killed himself. twitter has been hit with two lawsuit for not paying rent. according to the filing by its landward in san francisco, the social media company held to pay more than $3 million monthly rent for december and january. the cramped estate and u.k. file the suit against twitter for its london location. 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.

>> we do not have different rules for democrats or republicans. there are rules for the powerful and powerless and the rich or poor. we apply the facts and the law in each case in a nonpartisan manner. that is what we always do and that what is weird doing in this case just and that is what we are doing this case. tom: he is more average than the average attorney, merrick garland speaking on documents and the treatment moving

forward. for all of you worldwide, we will revisit that. the governor california simply calls it tragedy upon tragedy. what i've noticed in washington is we have peru's the papers and listens to the politicians and anne-marie, thoughts and prayers are out the window. nobody is talking about thoughts, nobody is talking about prayers. we have had multiple mass killing within hours. they happen to be of an asian persuasion and its one and all the same. where is the bipartisan support to do something like there is bipartisan support to do something about china? annmarie: it's just not fair. the house and previous congress is passed a bill which was looking at more gun control that

they had the votes in the senate. we spoke to the congressman of california yesterday. i asked him about the shootings. until you have this bipartisan suit for like you are asking for, there is not going to be any big movement when it comes to guns in the united states. that's where it right now. i'm not really sure how much more the pressure could be. you had the uvalde shooting that was last year when children were killed in elementary school. you had to shootings last night in northern california on the heels of a ballroom shooting and these are asian americans who were celebrating the lunar new year. this is all you are hearing from politicians our thoughts and prayers that the doesn't seem to be any action on how you change

this culture in america. tom: troubled individuals seem to be geographically's right out and politically spread out area you can suggest california has low republican ledges says registration. in washington, how to they synthesize the shooting in california versus a shooting where trump won by 20 points in the south, what's the difference? annmarie: it's this right d of gun culture and mass shootings, it happens in america are blessed of political affiliations. in california, there are questions about the weapon that was used in the ballroom shooting. that kind of weapon is banned in california. this is really troubling for individuals in california to see

if they may progress. clearly, nothing will change unless it's federal. tom: it's a delicate conversation. i did that forever international audience. in my travels worldwide, people are stunned by the frequency of this in america. lisa: it's a tragedy at a time when there seems to be some sort of upset -- that stasis in washington. we are talking about the debt ceiling and what kind of pushback are we getting and what kind of intel in terms of what cuts are required to get the government functioning again and illuminate the debt ceiling debate? annmarie: it depends who you asked because the democrats say they will be no spending cuts, they don't want to be held hostage to spending cuts. the republicans definitely want spending cuts and they want to look at the budget and they want

to keep the next fiscal year cap at the previous fiscal year. they want 130 billion dollars shaved off the budget. where does that come from? this is something that republicans are debating amongst themselves. what we saw during the rally of the speaker vote is that one of the things that was on the table being discussed was potentially cuts in defense budget. it seems like all spending is on the table and republicans want to look at that. lisa: what is bipartisan in terms of a good area to cuts? are there areas you have fat to trim? annmarie: i'm not really sure because at this point, there is so much spending that individual groups are rallying behind, i'm not sure there's one issue that could be bipartisan at this moment. everything feels very partisan

in washington. even defense, maybe that could be one, democrats and republicans were able to look deeper because, for a while, there was always democrats wanted to cut defense spending and put it more towards domestic and now you have republicans looking at difficult time to discuss defense spending when the united states is sending military aid to ukraine. even that moment in time, in the past, you might think to events is an area but it doesn't look like it now. tom: thank you very much. we don't look at ge the way we use to. lisa: it has a different kind of picture but they just reported earnings and it came in disappointing. they expect that he adjusted eps

at $1.60-two dollars. you can see the reaction in shares which are down i have a percent raises questions about how much you will see an ongoing bifurcation with the manufacturing side continuing to be in the slump we've seen for a bunch of months versus services. how much does this divergent how much does it converge? tom: i wouldn't build too much into this because it's clumsy right now. there are three units in three separate companies. whatever the strategic vision is, it's a stream of headlines and summer disappointing including the $1.60-two dollars but i will suggest a level in this earnings chart is off the chart lisa: $400 million of separation costs, you are also

looking at the expectation of high single digit revenue growth this year as we dig through the earnings, how much do you see the margin compression after last year? tom: this has been done before. aerospace has a nice lift. double digit growth which is better than expected. the level of noise here, this is tear a company apart and put it together again. the magisterial book on the collapse of ge, they say this is a company that doesn't have the presumed financial stability of ge finance that was the

wonderful heel on the boat years ago. lisa: the idea of the industrial complex is we are about to get halliburton. they are reporting earnings ahead of the bell so how much do we see similar softness versus the opposite story especially as people invest so much in the conflict in europe and beyond? tom: microsoft is off dishes out later today and technology earnings are wrapped around fed day february 1 and two. s&p futures are down -11. jonathan ferro will be in london with simon french. this is bloomberg. ♪

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tom: good morning, bloomberg surveillance. jonathan ferro will be with us and moments with simon french. we will try to find the earnings that speak to the underlying economics and the path forward for the nation. you can do that with johnson & johnson out with earnings. this is the first real earnings report i have seen where we had strong dollar foreign-exchange adjustment and now we are in q1 of a weaker dollar.

there will be over whipsawed down the income statement for dollar dynamics for multinationals. lisa: what stands out is the resilience despite the volatility. the decline you saw and fourth-quarter sales were driven by that foreign-exchange adjustment area as well as reduced covid vaccine sales but still expecting earnings-per-share to come in above estimates. if you look at each particular segment, you can see trying to offset r&d expenses which are going down, they came in below expectations and administrative expenses came in below estimates. this is an issue of cutting expenses. tom: sales come in a little bit light in the last 90 days. with disinflation, the bright

lights of inflation create revenue. if there is disinflation, the lights are not as bright. lisa: how much can they not raise prices as much but at the same time, can they cut costs more because there is less pressure and are we starting to see that? it's not just tech and not just banking. lisa: r&d expenses, this is not catastrophic but it's there. tom: futures are negative seven and now -13 and doubt futures are -86, the vix is 20 .10 and oil is 88.26.

lisa: he is paid in dollars. tom: i don't understand that. joining us from london, an important conversation, jonathan ferro with this this morning. jonathan: i was asking the floor manager if it's to late to unclip the mic and walk away. tom: good morning. jonathan: simon french, the chief economist joins us. a little more than 27 billion starring -- sterling. should i be concerned about that? >> if you think the retail price index by which your government debt is indexed, running 13%, it will stay there. if we got to look at the pathway for cpi, i think that will fall

dramatically. this is a transitory -- in the context of servicing the government debt, the rpi coupon will fall away quite dramatically by this time next year. jonathan: the public sector is asking for more pay, will they get that pay rise? >> yes but not one that keeps pace with the rate of inflation area the strategy here is from the u.k. strategy -- from the u.k. treasury. they want to smooth the one-off impact of providing the potential spiral stimulus which is a 15% increase. they recognize that we will be

in an effective inflationary via an -- environment this year and you are trying to buying off the smoothing of that inflationary pressure. jonathan: look for the euro zone pmi this morning. you've got the german government coming out and releasing its projections tomorrow and we are reporting that could be positive for this year. there is a conviction that germany can escape recession but can we have the same confidence in the u.k.? >> we can, albeit for the same reason there is a bearish consensus put in the u.k. back in november, those factors have not in an considered. back in november, they saw eight successive quarters of contraction. that is the longest recession with one bank and will they

upgrade from that position? you will still see a recession but much shorter and probably much shallower because they condition their forecast in november with the gas price twice the level of the gas price today and that makes all pricing in wholesale markets for u.k. energy and feeds into real income squeezes. 2000 miles to the east in the ukraine, will dictate whether that continues and maybe we will have this conversation again at the start of may. it will be a moving feast. jonathan: let's talk about the bank rate. at the end of last year, things got crazy and i over and market prices got to about 6% and governor bailey pushed back against that and now we are at about 4.5%.

is not pushing back now so is that an endorsement? >> it's an implicit endorsement. the bank of england was pretty open back then and didn't agree with what they put into the provisional forecast this white they went back to say we are more happy with this growth forecast. my challenge is is very well conditioning but if you don't believe it, the debate over whether we should be conditioning by the dot plot is probably a conversation we should have again to keeley if it frames expect tatian's, investment decisions in terms of capex. going back to the market in february with a more realistic

assessment is a welcome thing, maybe the damage has already been done. jonathan: the risk has spread between what they are projecting and what the market will happen, where are you on that debate? you say they get through five? what will take it there? >> core inflation is more relevant. i look at the elements of the core inflation picture, wages and rents that i think will remain pretty stubborn. the part of the dot plot that i think is working, i think the long-term assessment where the terminal rate is painfully too low at 2.5%. the real mark is when the fed starts to ramp back up. it's been a moving feast going with what the market can absorb but that's where the big move comes from with the pathway for

the next year. jonathan: deutsche bank is predicting we will get 200 basis points worth of cuts, maybe more. where do you see it coming up to? >> probably 100 basis points higher. 2.5% in a world with very little of the disruptive forces pricing power that's been introduced across the private sector. there would be structural forces moving up long-term, not just in the united states. we talked about what that doing to the euro zone. these are pan continental forces pushing up the neutral rate. 100 basis points is probably where i think the fed will and with their long-term assessment by the end of the year but they

have to take that journey by feeding into the market. jonathan: what do you tell clients? >> we have healthy skepticism. everyone can understand the policy narrative around higher rates but you have to see that and there's been healthy debate whether deglobalization is happening or whether it's something that's easy to talk about when you delve into data, it might not be shortened as much as maybe it could. need to see whether these dynamic sections play out not just on the basis of sell side research but in the really, me. jonathan: eb versus the federal reserve? >> the ecb.

jonathan: thank you, is good to see you. that is three people i've asked over the last 24 hours who they like more and all three say the ecb. tom: i'm glad you are asking this question. it goes back to nominal gdp and i don't see with or without war how they can do that? jonathan: to simons point, we haven't got a crystal ball we don't know where the economy is going but relatively speaking, it's better than it was three months ago area we will see that from the german government tomorrow. tom: new accommodation in the united states and still remarkably restrictive in europe which is a remarkable distinction. jonathan ferro will continue in london through the morning and through the week as well.

it's a company from the past but there is a difference. with minnesota manufacturing, it is 3m and lisa has been a believer. this is not the minnesota mining complex. lisa: it's down three point 5% after missing the forecast for the earnings share and talking about cost cuts and ongoing macro economic uncertainty. that's been the theme with many earnings we've seen. tom: dow jones like companies, there can be times of reconciliation. futures are at negative nine, from london and new york, this is bloomberg surveillance. lisa: keeping you up-to-date with news from around the world with the first word. new tensions between the u.s. and china, the biden administration has confronted

beijing overstate own companies that may be helping russia's war effort in ukraine. the biden team scenes evidence of non-aid being sent to the kremlin but no one involved is commenting. in finland, the performance or says the government may reconsider whether to move jointly with sweden toward membership in nato. that's after the turkish president raised new objections to sweden. the finnish foreign minister says the primary action is for the companies to join nato together. in the u.k., the labour party would work more closely with the european union as part of a reset of its policy. the foreign secretary will outline the plan today. some suggest labor could win the next general election. the fbi says hacking groups linked north korea still wonder million dollars in cryptocurrency last year. the hackers targeted the u.s. based lot chains nationalist harmony horizon.

it software that allows crypto tokens to move between different blockchain's. those bridges became a target for hackers last year. a digital asset firm, gemini trust is limited another 10% of its -- is eliminating 10% of its workforce. it remains pressured by a months long industry slump in the fire 10% of its staff last june after crypto prices plunged. 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. ♪ every day, millions of things need to get to where they're going. and at chevron, we're working to help reduce the carbon intensity of the fuels that keep things moving. today, we're producing renewable diesel that can be used in existing diesel tanks.

and we're committed to increasing our renewable fuels production. because as we work toward a lower carbon future, it's only human to keep moving forward.

advancing flight for future generations. ♪ welcome to a new era of flight. >> we are focusing on employment and earnings. those of the obvious benchmarks.

i think the other issue we also take issue with mark is the degree of cuts, the rate cutting into the market. tom: jonathan ferro is in london. a lot of european dynamics there as we continue that discussion. in earnings, lisa and i her sorting through it to me, it's all about a softer revenue line. we had the shock the last 12 months of maybe an organic company of five or 6% delivering eight or 9% revenue growth and it makes everybody feel good but it's gone. lisa: it depends on the industry. how much will you see the cuts is the theme of this particular earnings season. we've seen it with three m and j&j be there estimates but they still are cutting back. we also got raytheon technologies.

they beat expect tatian's although going forward, maybe not necessarily. in every single segment, it's a motley picture we are getting. tom: motley picture. joining us right now to speak of the dollar and as he well knows, it's not about up or down, it's about the times where you pause. this is the one financial media likes to talk about. it makes for good ratings. >> i think we are in a dollar consolidation period. and we had a big move since last year and a has to do with the drop in the rate of change of inflation. the thing we don't have as global growth. if you look at earnings expect tatian's relative to risk, risk

-- earnings expectations relative to risk. they priced out the stagflation premium but now we need to see growth delivered to get a leg lower on the dollar so it's about stabilization now area tom: walk us through the earnings, especially multinationals. as a general statement, what did the massively strong dollar due to the american companies last year? >> it has a negative impact like it would and equities of the stronger dollar, earnings they have becker lower because the euro is weaker and they are reporting lower earnings. it has a negative impact on commodities with the dollar stronger's of those things are partly going in reverse but we haven't seen the change in expectations around earnings

that would calibrate the risk sentiment and optimism we have in markets. lisa: you are saying it makes for great ratings whether the dollar goes up or down. that's pretty specific. tom: gets the republicans fault. lisa: is there a linearity to the dollar chop? >> i think we are out of the linear moves in fx. part of it is we are very bearish for the dollar in q3. i think over the next month, most of our models are macro based in says the dollar should be 2% stronger. in q2 and q3, we see the frontloading of better economy, a slowing u.s. economy and the fed is moving and the doj is

more hawkish than the red -- and that boj is more hawkish than the fed. that is frontloaded and i guess it feels nonlinear because we have the euro basically going to $1.15. by q4, what will matter is we don't think the fed will be cutting this year. we think inflation will be sticky but right now, we're treating the delta on vision so toward the end of this year, things will probably be stickier in terms of levels of inflation. part of it is the linearaities are gone and we are dealing with smaller cycles that will be more volatile at least for the next year. lisa: we were talking about how some of the traditional drivers that people follow like central bank differentials were kind of breaking down.

now people are painting the same story that the bed is probably going to hike less than the ecb this year and that the european scenario seems to be better. is that enough to get beyond the $1.15 in the euro? >> the macro volatility is here but the factors driving it are different from this year to last year. last year was about carrie and momentum and you have not seen a momentum model make money in years. the inflation momentum itself is a macro factor was in the u.s.. those things if you take away the inflation, what matters is value. what will drive fx that carries over from last year's commodities. countries that are exporters and importers, european trade is better.

your japanese terms of trade are that are as well as korea. the cost of things they are importing are getting cheaper so the constant driver in fx will be in terms of trade in terms of trade and commodity but now we are trading the extreme overvaluation of the dollar which is bullish for emerging markets. tom: jonathan is in london. he says he is looking in chelsea at sw3 at 10.5 million pounds. which way does this cut for sterling? >> the way we look at it is i feel every region has currencies and they are tiered. the euro is top-tier for this yeari and the swisse is probably second.

you don't want to be seen with them. tom: some of my children are third tier. >> for sterling, the way we would think about is it has massive stagflationary risks. the thing that is interesting that it's highly correlated with risk itself. the way we are characterizing the world is that as things improve, the euro will outperform sterling because it's closer to china but anna did -- on a big dollar down move, sterling will go up because the u.s. dollar will go to down. i think the euro sterling go through 90 but sterling is outperforming other currencies closer to the dollar. lisa: talking about the different tiers, the bank of canada, the decision that used to be a nonstarter that is now a forward indicator for where the

u.s. will go, what are you looking for? >> i think it's more about the trading rather than the bank of canada providing an impulse for the rest of the world. the data has been pretty good. we tend to look at the employment numbers as a monte carlo simulator which is random but the trend that has been solid is that corinth nation remains sticky but came in ahead of expectation. we think the bank of canada still has the ability to hike rates and be more neutral and suggest they could still hike and go on the sidelines so that uncertainty is what can be very powerful for currencies. we are looking at this to trey to sell new zealand by canada largely because we are looking for a week inflation number out of new zealand and you can have this recalibration were once the central bank goes from 75 down to 50, bank of canada is going up .25 to the rate of change is

the key angle that one goes down and one is stepping up. the bank of canada gets kind of exciting this week. tom: we will have you back here to talk about that. i think we have learned about -- a lot about chelsea. i thought the real estate listing has unusual width. jonathan is looking at up property near arsenault. it's like the kitchen of thomas more from from a few years ago. lisa: we appreciate you being with us. tom: jonathan sent me his real estate list. lisa: i'm just looking at some of the reactions to the earnings we been getting and wondering

whether we will see this cost-cutting continue. tom: stay with us, this is bloomberg. ♪

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>> i think people are banking too much on the fed being more modest. >> we think we are still a long way off from the fed really signaling any sort of pause. >> we are at the end of the hiking cycle but we don't think we should be pricing in cuts. we've only just got to neutral in europe. >> we don't know if the rate cuts will 2023 so it could be a

2024 issue. >> this is bloomberg surveillance. tom: good morning, jonathan ferro is in london and we welcome all of you at earnings central. microsoft this afternoon, 3m, j&j earlier. a different ge as well and i want to go what the sell side will do. joe feldman an arab dead about an hour ago took his price target down on amazon. he kept in outperform rating. he was speaking about the cell say it -- about the sell side 90 days forward. lisa: how much of that was baked in even with potentially less revenues? that's the argument for not -- for a lot of bulls out there. tom: verizon comes in south of

497. there are too many other things to talk about. let's talk about bonds. equities listen to bonds and bonds are speaking. lisa: bonds have been speaking to disinflation and perhaps the fed not having to go as far as people previously thought which is the reason why there is a sustainability that perhaps we are seeing the bottom, that all the pessimism is baked in which is why you are getting a push by the bulls in the phase of earnings. tom: that pushes the back of gloom, the short covering and what about after that? to me, it's fascinating once the shorts are covered, do we go back down in the equity market? lisa: this is the technical go and th analysis -- the technical analysis of tom keene. lisa: julian emanuel walked in

and i have a question about china reopening. there is a lot of pushback about how much demand could come back online to offset some of the pressure. tom: the bull case for china is scale. i will never get this -- one of my offspring said dad, you don't understand -- there are 14 pittsburgh's in china. that's the most intelligent thing ever heard about china. lisa: i'm learning a lot about your family, the tears of children and cash flow. it's a good point. tom: the answer is we don't understand the size of china. lisa: which is the reason why the demand picture could be constructed for the world economy. tom: the vix is coming from a 22 level. we will talk to julian emanuel about that in a moment futures

up -10. . lisa will give you the economic data. oil is simply resilient in a china scale kind of way, 88.37. lisa: when does that become an issue in terms of demand destruction? we are not there yet. 945 a.m., we get a read on the pmi u.s. manufacturing and u.s. services for the month of january. we got pmi out of europe that came in better than expected at the beginning of the day. do we get a sense that is happening in the u.s. with services turning south the u.s. will sell $40 billion of 2-year note. how much are people buying into the story that the fed will not do as much as they say? how much conviction do people have behind that?

this is a huge earnings day and we been talking about verizon, gm, microsoft really kicks off the tech earnings. microsoft is really underperformed, they lost about 20% over the last 12 months and only up about 12% this year even with the tech outperformance. how much does it give a boost to their outlook? tom: microsoft matters, tune in this afternoon. we have julian emanuel back here because we didn't understand a word he said. i want to go to the fact that we protect the copyright and i will not send you out -- earnings edge and this is what he is brought to evercore every day. the granular nature of where we are and i want to know what

disinflation is doing to your granular research note. >> the revenue line is coming in and that's really the story. who are the companies, where the pockets within sectors that can actually hold the bottom line given the fact that the top line is decelerating because inflation is coming in? tom: one of our charts is a short squeeze chart. we have had a massive short squeeze but then what? how do we get through that after we take out the negative bets in the market? >> we are within this range in the s&p for the last two months. it's this tug-of-war between the view that inflation decelerates more rapidly than people expect.

ed hyman is looking for two point 5% inflation in 2023 which is very polish on balance except for the fact that part of the way you get there is a recession. when you think about the ism and you think about the leading economic indicators and the money supply contracting, they are telling you that recession will happen. lisa: to the point of seeing lower earnings and upgrading the four cast -- the forecast, how much is -- how much of that gloom is already priced in? >> the reason the market has gotten off to is good to start as it has is you look at bottoms up consensus and it started the gear at 200 30. everyone knew that was a fictitious number in our number is 206. in talking to our clients, the buy side is looking for more like 200. part of the narrative around this short covering, among other

things is that that number could creep higher. lisa: we were talking about the announced cuts we've seen in technology companies as we get a slew of s&p companies reporting earnings and there is a similar tone, will that be the theme to get you excited? >> cutbacks have rewarded stocks these last several months but there is a finite aspect to that. when you look the way reports are coming in, there is only so much you can do to massage your bottom line if your top line is decelerating. tom: ed hyman has always believed in mixing in economics with fundamental analysis and technical analysis. there is a heated argument

yesterday about lonely call, was there a bottom constructive in october? >> what it comes down to is if there is going to be a recession in the next 12 months, the answer is no. if the recession is going to be postponed because we have such an accumulative level of savings and china's reopening, the labor market has confounded everyone, down 27.5 at the low in a sober was the average of 100 years of non-recession. tom: can you call the 6.1% china gdp call over american optimism? >> our china guy took his number down to 5.9 because the fourth quarter of 2022 is going to be better than expected, reported

better than expected. it is less a direct effect on the u.s. economy and more a psychological boost. you look at the greatest names in corporate america, one of which is reporting next week in between the fed and the unemployment report and if those stocks do well because china is doing better, that's a wealth effect in the u.s. lisa: the theme over the last couple of days and weeks is people are moving toward europe as in outperformer this year. do you buy that with the china reopening affecting that region? >> we do and the interesting thing is some people might say the ecb is now the most hawkish central bank in the world and that is probably true looking at the next six months. you are absolutely ridding the psychology of negative interest rates and that is a massive

positive for equities long-term. tom: big tech story this morning 's from our crack federal reserve team. this is something mr. hyman is looking at and he has experienced. we have a debt limit fight. does it mean the end of qt? does it radically adjust fed policy? >> it certainly ups the stakes with regard to what the chairman will say on february 1. there is no question he will be asked about that. part of the full case of the last month is that there are cuts priced in the back half of the year, lots of cuts. are those only going to be in response to a debt ceiling debacle or are they a consequence of an economy that would be turning? is really an open question. tom: earnings season, what is

your earnings edge? >> it was a sloppy season, much more closer to the pre-pandemic normal, numbers are coming down. at the index level, not as important, it's all about picking stocks in this environment. tom: thank you so much. we will continue with lots going on. the vix is not giving me much now and i'm watching oil at $88. jonathan ferro is in london and he will have further conversation for us from london. one dollar 24's sterling, good morning, this is bloomberg surveillance. lisa: keeping you up-to-date with news from around the world with the first word --0 > poland has formally

requested germany's permission to send the german-made leopard tanks to ukraine. that's after weeks of pressuring germany's chancellor to drop his cautious approach in delivering the tanks. german law requires approval for the reexport of the equipment. the u.s. justice department is set to sue google as early as today. the case has to do with their dominance over the digital advertising market. google controls most of the technology used to buy, sell and serve online advertising. the company has argued the market is a crowded and competitive one. in the u.k., more evidence the economy probably has slipped into a recession. but his company signal that output has dropped at the fastest pace since the start of the pandemic. the government's budget deficit rose to a record, interest rate subject of the cost of debt service. in half moon bay, california, police arrested the suspect in another mass shooting. seven people were killed and one was wounded at to plant

nurseries in the 67-year-old suspect was believed to a been a worker at one of the locations. and 11 person is now died from the shooting at a dance hall in suburban los angeles. the suspect and that shooting killed himself. general electric forecast profit for this year that missed estimates. the slimmed down manufacturer will strengthen its focus on aerospace at a time when there is demand for air travel. this will be the first year ge won't have its out care division which respond this month. 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. ♪

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>> it can't be negotiated over whether or not we will pay her bills. not to do so would have devastating economic consequences so i believe in the end we will find a way around this and congress will act in what i believe is a shared bipartisan responsibility to raise the debt ceiling. tom: secretary of the treasury tells mr. biden what to do in economics and finance, bramo

tells me and jonathan ferro what to do on a daily basis. futures are -11. the dollar is fractional, the euro is $1.08. we were talking about a $1.15 euro, a stronger euro. lisa: that's the consensus in europe. that might be in underinvested trade. tom: on the debt ceiling and debt limit and the wonderful story on what it does to fit policy, maybe this time is different. anne-marie porter and joins us from washington -- hordern. forget about 2011 and the memories of a challenging time, how different is this time from other times? annmarie: we actually don't know

yet. a lot of what you are seeing is grandstanding so we don't know, is still early days. we know the treasury is using special accounting measures and this summers when it will get difficult. the reason why everyone is concerned that this could be different when it comes to the debt debate is because this is already a different congress. electing a speaker usually makes no news but this time it's the main headline at the start of the 118 congress because you have a group of rebels holding speaker mccarthy accountable. he says he will work out backroom deals and if he doesn't do that, they have a one motion debate so that's why politics have become difficult and you have to given to both these sites because they are drawing the battle lines now. thank you have the senate republicans who have raised the debt ceiling last time.

there was a little bit of back-and-forth but there was no drama. they are saying hands off, this will be speaker mccarthy and this will be his debate with the white house and the democrats. tom: new hampshire cuts to the chase. you are talking about a ballet from 50 years ago and valliere says nondefense discretionary spending -- if he says that one more time -- what we can decide in the white marble of capitol hill, spending is 16% of outlays. are they going to go after entitlements? annmarie: they might say they are but it depends who in

republican party you were talking to and asking about this. that can also show blowback from the population, their constituents. this is what senator manchin was talking about in davos. you will scare people if you say you were going after social security. it remains to be seen what the republicans want to cut. they want to get in a room and have the conversation about spending to be clear, we have a debt because of both parties. there has been spending on both sides with tax cuts on the republican side, spending on the democrats side and that's why we have the position we are in now. lisa: can we see extraordinary measures being taken by the u.s. treasury department. secretary yellen is in africa, why? annmarie: she is in africa partially not just to shore up

alliances this administration has in africa but also this is a geopolitical play and she talked about this on her first stop which was senegal and talked about the fact that russia is not helping the african economy and is making it worse and she talked about how china is not a friendly and good lender. what you seen from russia and china, the two countries have made inroads in africa and it's an interesting time for secretary yellen to be there because south africa at the moment had just had sergei lavrov invited and now she is on the heels of that area this is a geopolitical player. .and africa will become important as they electrify their grid. china can get minerals and natural resources there. lisa: when you speak with business leaders in the united states and europe and they are excited about the reopening of china, re-accelerating a push

into their and you hear the u.s. saying chinese companies are helping russia's efforts and chinese lenders are not necessarily good actors in places like africa and south america. have you put these two stories together when you have a business community warming backup to the world second-biggest economy and an administration that has bipartisan support to move in the other direction? annmarie: it's a very difficult conversation. it's a different and difficult conversation when lawmakers talk to businesses and when those businesses want to spend and get campaign money to certain politicians. what you see in washington is they want to make sure they are controlling that competition with china. the business community wants to go full in and it's difficult. there will be difficult conversations but at the same time, secretary yellen met in

zurich in his talk about how china is not a good actor when it comes to africa and we have the story today from peter martin and jenny leonard talking about what the administration is confronting in beijing and they want to make sure they are ascertaining this correctly but they are potentially seeing each chinese company eating russia in not lethal military and economic aid. this is really coming close to the sanctions line. this is already worrying the administration because beijing and moscow said before the war they have a no limit friendship and this is going to be vladimir putin's last friend in terms of the might. tom: thank you so much. we are talking about user cash. it's the linkage of bonds to equities and who's getting the

best easy cash. halliburton flat on her back for years. the stock has gone from like 25 to 30 in the dividend pop of 3%. use the cash for share buyback after options compensation to executives. there is a dividend left and you wonder if we will see more of those. lisa: we have seen the dividend play in fuel producers. they are throwing out money that they don't know where to invest long term. tom: exxonmobil, yield of three point 2%, five year net growth back to the gloom of oil 3% per year dividend growth doesn't get it done. i wonder how the metric will go. let me give you this one statistic --

they've only got 60 billion dollars of free cash flow to decide what to do with. lisa: such a tragedy for them. it's the story of halliburton but oil majors more broadly. when i hear about people being lit on energy companies and stocks, regardless of where the price of oil goes, that's the reason why, because of the free cash flow they will pay in dividends. tom: can i suggest that the british do this better than we do. we say 60 billion but they say 60,000 million. i can grasp that much better. lisa: then do it that way. tom: jonathan ferro is in london and we will get to that, good morning. ♪ welcome to a new era of flight.

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>> bloomberg surveillance in london in new york. mr. parent was important conversations. the 9:00 hour window. be better than what you are seeing right now. we are going to get right to it. julian emmanuelle with us, drew matus coming up. i want to slow it down and talk about the first blush. jp morgan, bank of america, apple, amazon. that describes earnings on financial tv. there are other companies.

lisa: it is a motley picture of cost and dividend growth when you look at some of the energy companies, and others that are traditional businesses, cost-cutting in the fore. raytheon came in softer than expected with their expectations. splitting into three different units. how much do you start to see more of these, spinoffs, readjustments, job cuts? shares are up about 1.2%. tom: jamie dimon said the hard work of running a company. lisa: how much do we see the rationalization of parts that we did not see during the era of free money? a little bit higher than estimates. 3m was one of the most important earnings reports we saw. you saw the foreign-exchange

headwind, which may turn into a tailwind. but also cost cuts. they are cutting costs across the board. shares lower by 5% due to a disappointing earnings forecast. verizon shares were disappointing, trailing the estimates on wall street. down 2.7%. tom: we can do this on the terminal. you have some presets on all of that -- i don't know how they did it. i have a guy that helps me out on this. sometimes while we are on air. verizon, 10-year total return, 5% per year. is that acceptable? lisa: in this area where inflation is higher than that? i want to flip it on its head. we are talking about apple and its results. much is this tied to perhaps not

as much demand for certain mobile phone services, broadband, how much of this is eating into the glut that we saw in the pandemic? tom: stock selection matters. this is a wonderful moment, hallmark for us after the pandemic. drew matus from metlife joins us. dutta comes in as an optimist. drew matus is also an optimist, looking at the american economic experience as glass half-full. who invented this? at ubs, a guy took a bunch of young turks, and they won so many awards over so many years, matus had to get an adjustment

on his house. they were that good. what was it like at ubs years ago, you and julian emanuel? what was it like working for dr. harris? >> it was a matter of following the data and see where it leads you. don't be quick to dismiss things that go against your narrative. even if you are wrong, you are not run by much. if we look at the current environment today, the narrative of recession, as much as it is the consensus call, it is the one that makes the most sense. tom: you beat me up once. sometimes you wear a bowtie. you said hi frequency data matters. the mother of high-frequency data numbers now is jobless claims. drew: that is when we are having

double to explaining. if you look at other series -- ism is one of my favorites. both of them are now below 50. the service sector one has only been around since 1998, but if you look at history, anytime those are below 50, we are in recession. maybe the debate should be, are we in a recession, and something is holding up the labor market, and how long can the labor market holdup for? lisa: if this is recession, isn't optimism warranted because it is not that bad? drew: it is, but this could be the first step. there is a calendar in the corporate world, and it is not the earnings calendar necessarily, it is the planning calendar. most corporations plan out their hiring and headcount year, 2, 3 years in advance, and every year

adjust. the weakness became more pronounced, concerns about corporate margins became more pronounced in the fourth quarter in the middle of that planning process. do you rapidly accelerate that process and make some mistakes, or do you follow through on the planning process and execute at the beginning of the year? i think that is the lag we will see in the labor markets. lisa: as someone responsible for metlife's investments, you go with your gut when others are going in the other direction? drew: i am not going to my gut, i'm going with the data. the ism data is, i think, compelling. economy wide margins are actually in decline. when they been to decline, what kind of decisions are being made in the c-suite's?

history of the series, all time low. does that strike you as an environment where people are gearing up for the hiring story? lisa: so you are not buying stocks? drew: if we look at the most relative value we have done, treasuries, resis, all those look good. we are very involved in private corporates. we like private abs. to be frank, cash is compelling for a lot of people right now, and it is complicating a lot of people decision-making. you have people on wall street making investment decisions who have never had cash as an alternative that actually yielded anything. tom: i want to go to 2022.

some say it is original, some taken back to -- and the bond market. will you have to switch your assumption based on the carnage of last year, or can a conservative pile of money heal over six months? drew: one of the advantages of working at a firm like ours, it is the length of time you have to consider when making an investment. it naturally lends itself of not falling into the idea that this time is different, that things are sustainable, when they are not. it can lead you to think, we have to be prepared for a lower rate environment for a long period of time, but is this going to be the new world order? of course, the answer is no.

investing over a long enough time horizon, it smooths out what may seem like big clips and valleys. they actually look a lot less impactful when you take a step back and look over a long enough horizon. tom: what is your gdp call? give us a window, are you sub 1% real gdp growth, can you be more constructive than that? drew: we are at 0.3%, recession starting at the second quarter, following through the end of the year. we expect the labor market will weaken with the release of the february and march data, and april and may. lisa: do you think that we will avoid some sort of financial accident that everyone was talking about last year? drew: i don't see the need for it to take place, but as you said, you have a lot of people who have never had cash as a realistic alternative to the

investments you can make. lisa: what is your cash holding versus what it was six months ago? have you been building it? drew: that is not something that we do as an insurance company. you bring money in and you put it to work. we are very in the weeds and credit, making sure that we like the things that we are in, comfortable with the credit risk we are taking. when we do a relative value assessment, you have to assess cash. that assessment has been improving because the rate of return on cash is improving. tom: you have talked about the dots. are they efficacious or should they be discarded by the fed? drew: they will be cutting rates well before inflation drops anywhere close to 2%. they are telling you that, not me. yet, everyone assumes they will not do anything. they will be able to sit for a

long period of time, even as the economy withers. i don't think that will be the case. tom: wonderful to see you. somebody who has been with us for decades. drew matus with metlife. what did we learn? lisa: that cash is an alternative not necessarily to put your money but versus equities, bonds, credit, and with that does in terms of placing a higher bar with risk. tom: i learned how many people watching can encourage a 36-month perspective. i would say single digits. we have become addicted to some people, three days, nine months is long-term now. 18 months used to be long-term. guys at metlife are three years. lisa: people would say it is harder to predict short-term debt long-term. i feel like it is harder to do longer-term than it used to be.

people are less certain about whether we have a more protracted inflation or whether we go back down to something we are used to. that is the argument on the long-term. tom: so much of that is coming out of the pandemic. let me do a data check. not much going on here. 10-year yield has been unchanged for a month. lisa: if viewer rights in, tell tk we don't do that anymore. 60,000 million is not a thing anymore. tom: i am still stuck with windsor, albert, victorian. oil, 88.67. lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. new tensions between the u.s. and china.

the biden administration has confronted beijing over state-owned companies that may be helping russia's war effort in ukraine. abide in sees evidence of nonlethal aid being sent to the kremlin. in finland, the foreign minister says the government may need to reconsider whether to move jointly with sweden dort nato membership. this after the turkey president raised new objection to sweden. the finnish foreign minister says the primary option is for the two countries to join together. in the u.k., the labour party would -- the foreign secretary will outline the plan today. some polls suggest labor could when the next general election. the fbi says hacking groups linked to north korea stole $100 million in cryptocurrency last year. according to investigators, the hackers targeted horizon bridge,

a software that allows crypto tokens to move within different blockchain's. those became a target for hackers last year. homebuilder d.r. horton is reported weaker than expected quarterly orders. it's all morning that housing market pressures may persist into the key spring selling season. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo. this is bloomberg. ♪ 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. can they help us improve our digital experience? absolutely. they've invested over $2 billion in tech.

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>> if you focus on china, that is the main destination of exports by iran.

we have been in contact with the chinese authorities, will continue to take steps to sanction those involved in the import of iranian oil. tom: robert malley of the state department, special envoy to iran. i will not waste a lot of time because every minute is important for jon ferro in london. futures, -11. loyal getting your $90 a barrel, but there is a richer discussion of commodities, including jon ferro's analysis of copper. an important conversation this morning in london. jon ferro with kona haque. jon: thank you. i want to talk about copper and aluminum. absolutely flying. year to date, copper is up more than 11%. aluminum, 10%.

kona haque joins us now. big picture question. how commodity intensive is this reopening going to be in china? kona: that is the big question. i sense right now it is very sentiment driven. china reopening the lead up to a lot of pent-up demand, just like it did in the u.s. and europe. in terms of actual manufacturing intensity, i feel like china's commodity imports are still pretty good. their stock levels are quite high right now. potentially the copper rally is running ahead of itself in anticipation of more to come, but we have to be patient on that. jon: when you hear people say 11,000 500, you are pushing back? kona: short-term we may have run ahead of ourselves, but i agree, copper fundamentals are tight. supply-sider looks like there is still a huge amount of capex

required but i don't think we are at crunch time now. right now it is very sentiment driven. jon: when you look at the marginal increase of dollar gdp, is that something that has declined? kona: i think china's reopening is significant but it will be a different china. the structural changes that we've been seeing, population decline, the property sector is no longer as hot as before, manufacturing slowdown, there is no longer that push to go back to your point about intensity of consumption of copper. i just don't think it will be as strong as the 2010 rebound. jon: talk about where you do want to be. where you i want to be right now preparing for the demand that will come? kona: i think commodities are a good place. copper and ali have slightly gone ahead of themselves. crude oil is justified.

bite now, ahead of the february for the ban on russian products, china has a huge role to play in. they will be importing more crude in order to meet that gap in terms of product exports. mobility in china is just starting, and that will be very oil intensive. i like crude oil very much. to a certain extent, ags, as the chinese go back to restaurants, behaving as they could and in lockdown. that could be good for beef, feedstocks. jon: triple digit crude back on the table? kona: just about paved and may touch 100. jon: we are all trying to figure out how much of this we import to the u.s., europe. do we import higher prices from what is happening in china right now? kona: there is a potential we see an uptick in commodity prices, but for the reasons i mentioned before, i don't think

we can sustain higher, because the rest of the world is moving into recession. we are a bit too china-centric right now. we have to balance that out with the fact that the u.s. and europe are slowing. jon: when you say the rest of the world is going into recession, who do you mean? kona: good question. the bond markets are telling us that europe and the u.s. are going into recession, maybe a mild one, but the yield curves are pointing to that. don't look at the stock markets. there everything is rosy. if we look at pmi, u.s. pmi is coming out today. if those show continuous contraction, i think we are looking at a recession. even if it is mild or not, it has to be taken into account, and that may have an offsetting balance to china reopening. jon: the markets are better in europe. one thing we have not discussed is europe is still projecting

0.5% gdp growth for the year ahead. why are we not talking more about stagflation? kona: actually, if you talk to some hedge funds, they are talking about stagflation. in a stagflation environment, you want to stay long some commodities, but you also don't want to be in commodities that are economically dependent. in that case, ags can do well. no matter what happens to the economy, you meet a certain level of agricultural foods. some people like agriculture in their basket as a good hedge against stagflation. jon: you prefer a long and soft commodities as opposed to long and base metals. kona: good one. yes. jon: that is the year ahead conviction call for you and the team. kona hack, thank you. the point that is most important

to us and our viewers, listeners, is just how commodity intensive this reopening will be in china. you can see the sentiment story, metals are flying. copper up more than 11% to date, aluminum, 10%. will that be backed up with real tangible, physical demand later this year? tom: flows are critical. i want to give you a small understanding of that after what we saw with the president trip to mexico. somebody handed me my tang from pueblo, mexico. this is a tangible tang example of the kind of commodity flows. i didn't want you to ask kona about tang, but this is the import/export dynamic. jon: i'm not sure that that is what she was talking about. those are from san miguel, to be precise.

check it out sometime. tom: the great bloomberg commodities team, we don't do enough on commodities. futures, -10. dow futures, -90. you say to yourself, what could topple the apple card? you have been good about the ambiguity of china opening. if it cuts the wrong way, you get a super cycle commodity lift. nobody predicting that, but there it is. if you get that, it changes the story. lisa: i was speaking with the head of the sovereign wealth fund of norway, and he was saying that this is the worst case scenario for risk assets. china coming back online, re-accelerating inflation, leading to the stagflation

outcome that jon talked about, and nothing goes well. he is tied to the market have to has to be vulnerable to it. it is fascinating, this risk case that people are not talking about. tom: commodities, industrial metals, aluminum, but if you get them to lift, that has to be good for the system. i don't see anyone predicting out-of-control commodities. r.o.e. modeling in commodity commodities? lisa: i want to bring this up because this headline just past about ford in talks to sell a car plant in germany to china's uid. this is fascinating after the layoffs that ford was announcing in germany. how much do you see this? china increasing their presence with respect to the demand for german auto manufacturers at a time of increasing political tension. this has been one of the biggest

conundrums. the political side, people are talking about pulling back from the west and east, greeting divergence, but businesses are going in the opposite direction. tom: what was your take on labor dynamics and investment dynamics during your trip to germany? lisa: they have to see china's sales. that is one of their major businesses that they have, and they will cater to them. one detail, different kinds of cars so with mercedes in china because most people have drivers that can get a mercedes, so they build a bigger backseat. tom: yes. you accommodate as you can. seriously. we have to talk about this later. the basic idea here is that they are a bipartisan anti-china feel

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>> we are very much in this policy narrative. >> you see a disconnect between

market expectations and the fed's hawkish announcements. >> as time progresses, we will see those fed rate cuts. >> 25 basis point rate increase and that will cause no recession to occur. i think people are too optimistic about that. >> i think the goal of the fed this year is to be boring. i think they are in track for it. lisa: welcome back. this is bloomberg surveillance on bloomberg radio and television. the earnings parade ramping up. the member is meeting the road i would say with actual earnings from actual companies to understand what the economic picture is for them right now. tom: i'm in the school of jamie dimon and brian moynihan. listen to american business. what we have heard this morning

is diminished revenue growth, normal. disinflation coming in. company to company, failed business model. the word you are using this morning, the motley crew. every earnings star we are and will tell a story. lisa: job cuts for some, cost cuts at others, raytheon cutting and concentrating certain efforts. you have certain issues coming to the fore as companies are challenged. what does this say about the gloom that is priced in? you are seeing a motley picture on that front, too, with different price reactions. tom: we are moving forward with the china reopening. i will throw this out there, with the new globalization that was barely touched upon in davos. lisa: this is to me the most

important issue that we were talking about last year, the divergence between the east and the west, the idea of repopulating supply chains. that is not happening. we are seeing that time and again. so, what does that say in terms of where business revenues will be derived from, how important china's reopening will be? tom: microsoft leading off this afternoon. some of the fed meetings, and that the bigger names like netflix. all of that wrapped around the commodity dynamic. lisa: how much will china coming back online because some sort of reignition of inflation? we have not talked about that much. today we are seeing a softer tone, but yesterday was telling. tom: two days in a row.

the quality of the rally was whoa. lisa: especially with leading indicators coming in softer than expected. the s&p breaching that 4000 mark. remember when people thought that was way off the mark. down today by about a quarter percent, but not much given the recent news. euro strength fading just a touch. 1.0860. mark mccormick earlier talking up 1.15. tom: the idea not about strong dollar, weak dollar, but just pause and churn, and maybe that provides stability. we are coming out of the pandemic. what kind of normal are we going back to? to me, that is a huge theme for the first half of the year. lisa: the other thing that i see

is european strength, everyone piling into this story. the strength of europe. i do want to question this narrative. at what point does a colder winter, more demand for commodities, pressure a your region that is under pressure for headwinds? do you pile onto this trade? >> we have seen a pretty strong decline in the u.s. dollar. a lot of that had been to the benefit of the eurozone. if we are relying on the weather, what will be uncertain is the opening in china. with the lunar new year and uncertainty about how long that will last, a lot of things that are holding up that european trade right now, in our view are

iffy. we are not ready to go neutral or even overweight yet. lisa: is that a long dollar call or is that just hunkering down in u.s. assets, waiting for the turmoil to pass? brian: it is more of where we are putting the assets instead. being more overweight u.s. mostly just an overweight to fixed income generally. more of our eggs in the fixed income basket starting at the end of last year and going into this year. you may have to revisit that. we had been talking about bonds overstocked from a valuation perspective, but given the run we have seen in bonds, neutralizing that may make more sense. tom: i want to point out, one move we have seen underreported in financial media, natural gas, the core u.s. contract down 63% from the august angst we had.

nuveen owns the high ground on muni bonds and fixed income, careful management of fixed income investments forward. how does your world change now that money costs something? libor is up and we have a legitimate risk-free rate. brian: the muni market, the number one concern we have, there will be less issuance. you have states and localities that are flush with cash. they were borrowing money when it didn't cost much. with interest rates higher, you'll have these areas that are more reluctant to borrow, issuance will be constrained. that will be positive for holders of municipal bonds. there is not as much paper out there but that issuance will stay constrained for a while. on the flipside, as long as you have industries moving up, you have a reluctance on retail investors to engage.

with rates falling, more retail investors getting in. the playground is a little safer now. tom: 40, 45 years ago i was shaving one day a week, the last time that the cubs won. john templeton said there would be a shortage of bonds, in municipals, investment-grade. will there be a shortage of bonds? brian: we don't see an outright shortage. there is still a lot of paper out there. we know that that is undertaking onto tape tightening. there will be a moment when the fed stops hiking and starts cutting, starting that program, so that could also be a liquidity adding measure. we don't see the shortage just yet. also we are in a different environment than just after the financial crisis when there was a shortage of high quality paper because everyone was hunkering

down. if we feel like the environment will be better this year, not as much demand for those government bonds, higher quality municipal bonds, the things that people flock to when it looks like the macro story is falling apart. lisa: tom was talking about earlier about how quantitative tightening might be ended early because of the debt limit debate, the disruptions foisted on the market from that whole drama. do you see that as a likelihood? brian: i would not call it a likelihood but a possibility. i think the fed wants to stay as far away from this debate as possible. sick retail yellen did the fed a weber. i think the fed does not want quantitative tightening to be tied in any way to the debt ceiling debate but also not to the ongoing monetary policy conversation. they have always kept this at a

higher level. balance sheet maintenance they see as a secular issue as opposed to cyclical. they want rate because to be the focus, but no question they have a window to stop rate cuts, which we think will be later this spring. that is the logical time to end qt. that may come sooner rather than later especially if we are hit with that debt ceiling debate in the summer. tom: what does the inflation-adjusted yield do this year? brian: you have a combination of continued disinflation but that has been priced into the tips market. we see nominal rates falling somewhat, which would be a lower real 10-year rate, as markets are looking into a put into a rate cuts in 24, as opposed to a mix of rate hikes, pauses, cuts in 23. i think we end the year lower but not a lot lower. we don't see that economic

collapse recession scenario. tom: thank you. what is so important there to me is the idea that we are hearing from mark mccormick and brian, may be the path, boredom, where everyone gets to settle down. lisa: some are saying, even if the bond yields that are settling out at a higher level than a year ago, even if they just settle out, that would be enough for people to go back to capital markets to raise money, to have conviction. that volatility in the benchmark bond yields causing turmoil in risk assets. i want to point out one thing. 3m announcing disappointing earnings. they said they plan to cut about 2500 manufacturing jobs. it is spreading on the margins

away from technology companies also to real industrial behemoths that have to rationalize their size in a new era. tom: david rosenberg writing, saying recession "is a lock." lisa: the question that we heard from drew matus, is it priced in? tom: what kind of recession? i would suggest it is a recession for a large but finite part of america. there is a whole part of america that will just slip by, as they always do. jon ferro in conversation with kallum pickering, berenberg, in london. this is bloomberg. ♪ lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. poland has formally requested germany's permission to send its german-made leopard tanks to

ukraine. this comes after weeks after pressuring the german chancellor to drop his cautious approach to delivering the tanks. german law requires approval for the reexport of military equipment. u.s. justice department is set to sue google as early as today. the case has to do with the search giant's dominance over the advertising market. google controls most of the women used to sell and manage online advertising. in the u.k., there is more evidence the economy probably has slipped into recession. british companies signal output has dropped at the fastest pace since the start of the pandemic. meanwhile, the budget for the government rose to a record. rosen interest rates have jacked up the cost of debt service. araiza came out with a profit outlook that missed estimates. the largest u.s. carrier's free promotions to lurk customers articulate toll on margins.

verizon has been losing market share to at&t and t-mobile. johnson & johnson is forecasting stronger earnings for 2023 than expected. that comes after a year in which the farm division was hurt by falling demand for its unpopular covid vaccine. j&j will rely on other drugs this year to drive growth. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> we think china's reopening will be good for the chinese stock market. we are bullish there. but it will not sincerely drive earnings revenue in the u.s. that is why i said earlier it china is basically 3% of the s&p 500 revenues. even if it is a faster reopening, it will not move the needle in the short-term. tom: mike wilson with morgan stanley. the distinctions with china and the united states. we will get to jon ferro. i want to make a note of the

world-class bloomberg news crypto coverage. emily nicole is in london, she was a religion major, which makes her perfect cover crypto. she has a story out where i have no clue what she is writing about. it is about binance and their mixing collateral and funds of customers, including your kids. lisa: i think there into the roblox currency. the real issue is how far that will go in terms of the fallout, regulation or oversight of the collateral. and then for people who want to take their money out of certain platforms. tom: we can go to jon ferro in

london with the always interesting kallum pickering. jon: i have to start with an apology. taking a lot of heat from this in the last segment. aluminum. you did the english version, i do the american version. thank you. kallum pickering, senior economist at berenberg. this from bnp paribas in the last 24 hours. soft landing has been the catchphrase for a young 23 but it will go out the window in the same fashion as transitory inflation did in 22. do you agree with that? kallum: i think there are risks to the scenario. the dangers in market is starting to price in lala land. we have two risks to worry about. there is the global energy price shock. in the u.s. and europe, does not seem to be playing out as aggressively as markets thought. then there is the reaction to

that which is tight financial conditions from central banks. this energy shock hit tight labor markets and credit markets out of covid. the danger here is we think, if the first risk is not so bad, central banks cruise to inflation at 2%, we don't get anything severe with the recession. history suggest that central banks really get these calls right. the danger here is that we forget central banks make these kinds of mistakes and then end up in a mess in the second half of the year. jon: what is the mystic this year, doing too little or too much? kallum: i think too much is the bigger mistake. once you have reacted late to inflationary pressure, it is difficult as a central bank to justify pausing while you still have signs of inflation. a good example, take the latest mix of u.k. data, clear measures of economic activity were weak through january and february.

but november, services inflation, wage data still edging up. these price does reflect what will happen in the economy three to six months from now. central banks should indeed pause whether or not you can do that with inflation. jon: let's talk about the u.s. situation. 190,000 jobless claims. what does that data tell you? kallum: labor market data reacts with underlying fundamentals. the reason why the phillips curve was so appealing for 30 years as an economic policy model is because governments and central banks thought if we create inflation, we will have strong employment data. that still holds. you have a high inflationary environment. in nominal times, economies are racing ahead. this encourages strong labor demand.

i don't think we are heading into a severe recession. business cycle dynamics are not late cycle. this is an early cycle economy that has been intercepted by this big exogenous shock, and central banks have reacted, but it is too early to say that recession will not happen as a general rule. i think all the pain is yet to come. jon: we had a couple of earnings reports this morning. d.r. horton in the united states, purchase contracts through december down 38% from a year ago. 3m, job cuts. i'm told a reopening will be happening in china. what do you read into these right now? kallum: that seems to be the effect of the tight financial conditions on economies, rather than the initial energy shock. this is where we have to consider the lags we are dealing with. the energy price shock for the u.s., u.k., and europe, it is

really a trade shock. we have the energy we need, we just pay more for it. there is not much of a lag between high price and economic activity. but there is a lag between what central banks do an economic activity. there is an unusual window where the first shock is not as bad as expected, things look fine, but that we are looking for the monetary shock to come through. that is why the housing market and labor market data are important. those are major triggers for monetary policy. we fall into this trap where we think everything is fine, but in fact, we have made the opposite mistake to what we made in 2021 come easing too much. jon: if we price and what you call lala land? kallum: the risk is we price in this lala land situation. it is not inconceivable but conditional on certain things happening. the main thing is that central

bankers don't make a mistake. the other thing have to keep in mind, we are out of the great moderation world, where inflation was trending to the downside, central banks could make a one-sided bet. stabilize growth and trust that inflation will remain low. we are now in an inflationary environment, aging population, fiscal activism, which means monetary policy is asymmetric in the opposite direction. we worry more about inflation risks than deflation risks. central banks face a trade-off between growth and inflation. we would not be worried about recession now if central banks had reacted. if we were just happy to accept this inflation risk from oil and gas shocks, we would avoid recession. but central banks say that we will put economies into recession to control inflation. to the extent this gas shock is not hitting as hard as we thought because demand is stronger, that may mean that we

need to go further. jon: that is what we're hearing now. more complicated than what these markets lead on in the early weeks. tk, are we pressing in lala land with respect to what people expect later this year? tom: southhampton-newcastle, can you make it? kallum: we can make it. tom: take the surveillance car. fill it with petrol. lisa: it has been downgraded from the jet stream to the vehicle? tom: in london you have to do that because everyone is on strike. the strikes are for real. jon: they are. to see the a bids workers join in -- ambulance workers join in is pretty remarkable. i want to be clear, there are people that support this, until something happens to you, and

then you have a different opinion on those strikes taking place. tom: do you think ferro is doing the matt miller beard? jon: let me defend myself quickly. i get the feeling that matt miller paints and colors his in. this is just stubble. i get the feeling that he gets paint on in the morning. tom: he has a stylist there. jon ferro, thank you. interesting european activity through the week. stay with us. this is bloomberg. ♪

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tom: bloomberg surveillance. futures, negative seven early. the vix, 20.06, giving nothing as well. what a conversation yesterday with lou tilly of wilmington trust. serious philadelphia fed credibility, working for the philadelphia fed with insect punic knowledge of the importance of philadelphia to give us a diverse view of what businesses are doing.

it is a mouthful. the philadelphia fed nonmanufacturing activity index. i don't know if we are going to get this right at 8:30. it was a -17 number earlier. we see some other regional data be pretty grim. lisa: empire manufacturing last week was pretty devastating. this is the reason why some people are saying this is recession. you are not seeing that and how it is bleeding through in the markets. tom: we will get that up. that sometimes happens with the regional data. s&p pmi, 9:45. jon ferro will have that from london. you can pick this economist, that economist, this or that strategist, but it helps to have a chief economist.

truly expert at linking the earnings and profitability dynamics of american corporations into our greater american economy. steven wieting joins us right now. i love in your research note how you say there are beats out there, a bang up fourth quarter, but you are not all on board the american recovery. how painful will those corporate earnings announcement be throughout the year? steven: there is something to adjust to later. it looks so much in the analyst earnings estimates that the fourth quarter was the recession and here we are with the recovery. it actually looks a little bit like that in financial markets. it would be wonderful if that was the truth. if we were not on the leading edge of a hit that we are going to have in profits.

of course, how markets treated last year are not anticipating this to be some kind of profit bravado. we don't have 20% declines without something. but if you look at the estimates , they fall at a 50% annualized rate. this is like setting a hurdle that a toddler could be over. most companies will beat those estimates. then they are putting all of that promise of the future that the year will be a growth year for ebs in the out quarters. as soon as the april through june quarter, there is a substantial gain. there are some complexities. when you beat your earnings estimates, it is easier to hit those later numbers because of the levels they are at. but the idea that this is all behind us in the economy, i don't think that's true at all. tom: how do you participate? i will assume citi wealth management is not all in cash

like a triple leveraged cash fund. how do you participate if you are not all in cash? steven: we have to live with the ups and downs of equity markets. we had three rallies in excess of 10% since the fed started tightening. the real rally, turning point for the economy, the beginning of a new recovery is likely to begin this year. 2024 could be a stronger euro for the economy. do we think we should already be discounting this recovery? no. we are playing it safer. our largest overweights are in firms that are the most consistent dividend growers and pharmaceutical shares that have low cyclicality. i think is very near term period before we see the january employment report, probably see the fed deliver a hawkish 25, is probably going to be a period where we have to settle back a bit.

again, that does not tell us to time the market and be all out of equities, but we are ok with a short covering rally, low quality shares, just missing that for the near-term. lisa: how much would you lean into oil majors in particular because of that share buyback story, not necessarily a call on commodity prices? steven: it is a full waiting despite a poor cyclical backdrop. we think a lot industrial materials companies will see earnings downward revisions, weaker activity this year. i would say that petroleum generally is pretty well-positioned for a week period for the world economy. the downside may be $70 in the brent price, and what will probably be a mild global recession. literally, the u.s. economy will have some significant job losses. we don't believe that sales declines will mean real job declines. we are not just talking about

job openings. even with that said, opec has cut production early. supply sources around the world are recovering slowly. i think this will not be a particularly bad cycle for energy. lisa: meanwhile, you mentioned the fed, and we have been staying clear because they are in the quiet period ahead of next week. but there is this question inherent in a strengthening financial conditions index. stocks rally, bonds rally. at what point does this push the fed to do more than what people currently expect, simply because this makes it more difficult for them? steven: i think the fed cannot entirely ignore the fact that real data, two months decline in industrial production, two months decline in retail sales, two months decline in total hours worked, all of that survey data that you mentioned are softening.

plus, we are seeing a deceleration in inflation. we have a decline in money supply. yet, the fed will not be satisfied. unfortunately, i think that is their mistake, as you heard from the earlier guest. there are still pipeline affects on the economy that are coming. the problem for markets is they cannot ignore the slowdown in the economy that would change the fed's view. the fed in all likelihood will try to weigh against the easing of financial conditions. will they do that by tightening more and harming the labor market even more? they probably won't. but they will leave it to markets to sort out. there could be more corrections ahead because of that. tom: that is a critical distinction, if they are going to leave markets to sorted out. at the end of the day, do the markets tell the fed what to do with its understood asymmetries? steven: when i think about the

message of the bond market, the treasury market is saying that the fed is already at an unsustainable funds rate, particularly now that they shrink their balance sheet $450 million dollars. that did not happen again. ultimately, the fed will get this forecast. but again, it is predicated on the notion that our labor markets, demand for labor will fall now that we have skyhigh inventories and massive declines in home sales to reckon with in terms of labor markets. the fed will get the message from markets. i believe the longer-term bond market is telling the fed the right message. i do think they will say, like they said in the minutes, that markets have misjudged their reaction function and able ease quickly. that is not what they are going to do. i wish they would pause. tom: you don't tell that to what

andrew said the other day, going up from 25 to 50, but then you get to a level, and then mr. whiting's comments, they stay there. lisa: they do believe it will restrict growth, that the fed will induce something more significant. stephen, how much are you using longer term treasuries, longer-term debt, as a ballast in uncertain times? steven: we are overweight long term treasuries, underweight markets like japan, again, because we believe the correlation between stocks and long term treasuries, equities and long term treasuries will break down. portfolios will work with barbells of high risk and low risk. at the same time, it is the belly of the curve that is offering real yield, so we have larger overweight's there. this is not to be negative in

the long run, we cannot get too cute about when markets can recover, but we are not going to load up on a lot of cyclical risk. interest-rate risk we think has peaked in the markets. we don't have to worry about long bond yields going to six or seven, but we do think there is a price to pay to keep 10 year treasury notes at 3.5. lisa: do you care about the debt ceiling debate? steven: i think it is highly likely to be resolved. the debate over the house speaker role probably overstates the amount of risk. there are multiple ways to address this. there are some ways in which we can cause a disruptive period. losing the house speaker role, not preparing in advance efficiently for this. it can be a market concern. i doubt that it rises to 2011 levels of worry again. tom: steven wieting, linking in

corporate america to the greater american economy. he is with citigroup. i look at this and it comes down to the original time we are in, a pandemic. drew matus was very good about -- pandemic, in some ways, we are out of that, back to whatever normal is. i have nowhere -- no idea where we are in the continuum. lisa: he thinks there will be more and deeper layoffs. we saw on the margins it is spreading beyond big tech today. i do take a signal from 3m, what they are talking about on the margins. the question is, is this a marginal transition as they try to preserve most of their employees? tom: i think it is simple. you go to the bloomberg screen,

you take the headcount, and take a percent that you have. anything within 2% or 3% is normal. 4% is where you begin the debate. what we are seeing in tech, which is much higher percentages, particularly zombie, nonprofitable companies, that is maybe not mobile see in the 3m world. may be there percent will be lower. lisa: julian emanuel said if you are seeing lower revenues, you cannot cut your way out of that. tom: that is where i am with disinflation, lower revenues. futures deteriorate, -21. the vix alligator -- elevated. stay with us. this is bloomberg surveillance. lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. new tension between the u.s. and

china. the biden administration has confronted beijing over state owned companies that may be helping russia's war effort in ukraine. they see evidence of nonlegal aid being sent to the kremlin. no one involved is commenting. in finland, the foreign minister says the government may need to reconsider whether moving jointly with sweden it for membership in nato. that is after the turkey president raise new objections to sweden. the finish more and minister says the option is for the comfort -- for the two countries to join nato together. the government expects europe's economy to grow by .2% this year , instead of the contraction it predicted in october. the updated forecast will be unveiled on wednesday. half moon bay, california, police arrested a suspect in another math shooting. seven people were killed and one wounded at two plant nurseries. the six to seven-year-old suspect was believed to be a

work at one of the locations. meanwhile, and 11 person has died from a shooting at a shooting at a dance hall in los angeles. the ceo of live nation testifies today before a senate committee about novembers taylor swift ticket fiasco. the concert promoter learned valuable lessons when it's ticketmaster site crashed due to massive demand. the hearing will focus on competition in the live entertainment market. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo. this is bloomberg. ♪

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>> i have to stress, october 13, tom.

the dow had an intraday price swing of 1500 to points. since that october low to the december 13 hi, the dow is up about 21%. the s&p is up 18%. so there has been a nice recovery. since then, the market has been consolidating. i think we are making a bottom long term in this bull market. tom: the cmt co-founder. cannot say enough about the decades of experience he has. i was shocked about how he didn't mince words. he picked the bottom. lisa: he sees it to be sustainable. tom: we will move forward on that in the coming weeks and days. this is really important. we need to get a briefing. it was very important that we find a guest qualified. if you go to microsoft's website, they talk about cloud

computers, apps, gaming. we said, mandeep can't do this but there is chat gpt. have you used chat gpt? have you looked at it? mandeep: i have. it is great for certain use cases like when you are looking for a code snippet, something that is plug-and-play. it is great because it gives you a concise answer. tom: you have real world experience. you are not an expert on microsoft, but there they go, diving into chatgpt. what will they do with it, what is your guess about what they will do? mandeep: they are thinking of it as a feature that can be a part of all their products, whether office or the bing search engine. it is still around and it is

making $3 billion a quarter. if they can fix bing and take share from google -- tom: this is the heart of the matter. bing makes $3 billion a quarter. lisa: those people that get the computers, when they search, it automatically goes to thing, not because it is preferable to google. but if they have chatgpt, that can boost the business. does that give you a sense of where revenues will be derived? will that be in ai, ai driven industries, more than anything else for the tech companies you cover? mandeep: for microsoft, it is not just search. their office products can also get smarter. that is where you will cai come into the fold for all sorts of things. every software company right now is thinking about how do i add that intelligence layer which is analytics but can also make that experience better.

over all, it's a good thing for the industry. lisa: i cannot talk about this without feeling uneasy. as a mother of children in school whether there is a debate about whether to use chatgpt, teachers are figuring out how to get around it, adjusting how they give tests in college. how much will there be pushback in the way that it disrupts the entire method of evaluating each other, the use of humans? mandeep: even with social media, there are so many downsides of using it, but we found a way to make it viral, integrated into our everyday lives. we can argue whether it is good or bad, but there is an element of using social media. the same with chatgpt. the fact that it can consume a lot of data,, with intelligent answers, the processing power is used in a way where you could not do this before. that is where you will uncover a lot of cases.

on the health-care side, it could be huge processing large amounts of data on the edge. lisa: with respect to hardware and software stories, but the technologies of elon musk's of the world will be on full display. what are you expecting to see as we see the revenge of the real economy as we been talking about? mandeep: even autonomous cars have to become a reality. there are a lot of doubters, will be in a phased approach, but you can see the progress, where we are going in terms of just making that car a lot smarter. that is where you are seeing a lot of custom chips, can process real-time data. that is what i mean by processing at the edge. a lot of companies have talked about it. the question is how you can integrate it into a product that is used for a good purpose rather than plagiarism. tom: i don't want to embarrass you on a private company but you are up to date on twitter, the

fabric of san francisco. lisa mateo says they do not pay their rent. there is no conference call, but where is elon musk labor day of this year, where is twitter? mandeep: twitter right now is bleeding revenue. they lost almost 40% -- that could be a good thing for the other digital at companies that are struggling. right now we are going through that phase where ad pricing is down a lot, and there is no hope. advertisers are pulling back. apple's privacy changing is hurting. tom: he is getting very good. he didn't answer my question. where is elon musk labor day with twitter? mandeep: i think twitter needs somebody else to run the company. i don't know who that will be.

he cannot manage both. we are seeing that in the results so far. lisa: we are talking about a host of different companies. twitter is private. microsoft, tesla are public. how much pessimism from your point of view has been baked in? how much are the layoffs really going to upset that? mandeep: estimates have come down mid single digits for large tech. i don't think it is pricing in that extreme scenario where the second half will be disappointing. the consensus seems to be we have a second-half recovery. if these companies are cutting now, trying to preserve margins, that tells me it will not recover that quickly. but again, it will vary by sector. lisa: do all these techie types find new jobs? mandeep: i think so. given chatgpt and all the stuff on the auto side, they will find something. tom: chatgpt, i thought he

nailed microsoft. lisa: this is the issue. how much can it replace search engines and create a real competitive push against google and the others? this is the upside of it. the downside is because your kids do not know how to write essays because they just use chatgpt. tom: the schools will adapt. you will see it in the colleges and down the system into secondary education. lisa: they are trying to adapt already, asking more personal questions. chatgpt could probably nail your personality down better than you on any given day. not only that, but you have people who are asking students to write by hand again to get away from this. tom: i could go into my cursive rant. we don't have time.

futures to tear it -- deteriorate -23, three days in a row, and then the boom comes in. lisa: despite the data that indicates some softening, which we saw for the philadelphia nonmanufacturing. softer but still negative. prices paid just tanking for this particular metric, which highlights the disinflationary push that people are talking about. tom: there is a research paper i believe out of barcelona looking at instantaneous inflation. they are saying we are there right now, 2%. it is not like tang, measuring inflation at the moment. the bottom line is, we are there right now. lisa: what happens if you have

that this inflation, but you have inflationary bursts that come up as the frictions are sustained? how does that inflationary environment adjust to more volatile? tom: we don't know. do we have any fed speakers? lisa: it is the quiet period all week. tom: the point is, they are flying blind, flying original. drew matus said today, the idea that we are coming out of a pandemic is this uncertainty that we are living with. lisa: we are readjusting to a new normal. will it be yet another new normal by next year? tom: two days on ,ferro in london, this is how it works. on the ground research. i think he will be here in a moment with our 9:00 show.

i will be on radio with paul sweeney. futures deteriorate -21. good morning. advancing flight for future generations. ♪ welcome to a new era of flight. seems high. seriously? it's just a bike. wait. they make a treadmill with an intuitive speed knob? yeah. want to try? 92% stick with it, so can you. start a 30-day home trial today. terms apply.

+ jonathan: live from the city of london for our audience world wide, equity futures are down about a half of 1% and the accountant to the open starts now. >> everything you need to get set for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. ♪ jonathan: the s&p 500 is closing above or k for the first time this year with