>> it is the backbone of the u.s. economy. we are seeing a clear loss of momentum. >> the labor market was obviously starting to get a flavor of that. >> the danger is that we have higher rates and it lasts longer than what the fed is looking for. >> we do think early 2024. >> it is going to be a recession, but a mild recession rate -- recession. >> this is "bloomberg surveillance." tom: good morning, everyone. jonathan ferro in london. set for the weekend and a fed meeting coming up next week. we welcome all of you here on

economics, and investment. the chancellor of the exchequer, speaking at our bloomberg offices in london. lisa: still you are saying that jon is responsible for some of the proposals out there. this is going to be curious to see. especially how much he is going to get behind him after the turmoil of last year. tom: i love this idea. a catalyst for prosperity. i think that is a post-brexit angle. we will talk to anna edwards about this after a conversation with the chancellor. i'm going to look at the data and i don't know what to make of it after, what is this week? the surprise for the bears. equity up all week is the key word. lisa: let's tie the ideas together. and what we are seeing in markets. it is money out of the u.s., and to everywhere else it is to europe, emerging markets.

we saw a record flows to the emerging markets, to europe. how much can i continue? is this something that can be sustained? tom: i want to get to jon ferro with this important guest, mr. oppenheimer of goldman sachs. to me the headline item, the vix under 19. lisa: start with week is and gains. that has been the theme of the week. even if you do see potentially negative news the market can rise above it by the end of the day. tom: -- real yield -- dollar churning, dollar may be a little bit weaker here. we have to go to sterling. sterling brief on a friday morning. lisa: yesterday after the bell it was about intel and the earnings that came out that were disappointing. today the earnings -- to push it forward, today we get chevron and american express. this is also the lead up to

apple, amazon, and alphabet. we are getting the real economy this week. we are getting the tech economy next week. this is going to be key in opening the path for the index. u.s. personal income spending and core pce -- i keep focusing on that, how much do you see it decelerate? yesterday it came in in line with the quarterly look. much could it decelerate and give the fed reason to follow what the bank of canada did and really give a little bit of a dovish tail? the university of michigan survey, what is good news? if it in flex upward is that good or is that perhaps the economy is in such dire straits as people are expecting to get the soft landing. i want to see how the market responds to a survey that has been inflecting negative for a while. tom: he was in london and was seen in the corridors with the chancellor of the exchequer.

the chancellor, jeremy holland, dismissed calls for tax cuts, warning that jon ferro must pay his fair share. joining us now from london, jon ferro. your accent has changed this week. it is worse than normal. jonathan: i am funded in dollars, and that is where i pay taxes. the second point i will make, for chancellor was only here to warm up the seat of peter oppenheimer of goldman sachs. peter knows that. you are a popular man this year. good afternoon to you, good morning, i guess. it is conference season. when you go around doing conferences, do they buy the hype in europe after hearing it for the 10th time? peter: people are warming up to it. it has been a long time coming, but performance attracts investors. we have seen a 30% rebound in the european markets since

october. at least in dollar terms. that is starting to energize a bit of interest in the region. rick -- it reflects the big shift we have seen toward value. something we haven't seen for more than a decade. jonathan: clearly we have priced out recession, we have priced in stagnation, and investors are focused on the difference between the two. now we need to focus on the difference between stagnation and recovery. and we start to focus on the fact that there is no growth in europe, it is just the absence of a recession? peter: i think we need to put it in context. we think the global economy is in relatively good shape. we expect to see a soft landing in the u.s., but we also expect to see a relatively soft landing in europe. gas prices have helped, the pickup in china as well, the absence of recession doesn't mean we are into a strong recovery cycle. i think the rebound we have seen in risk assets in the last

couple of months is overstating the potential from here at the index level. we got flat returns in the u.s. this year, slightly positive returns in europe. so, we prefer europe. think most of the action is going to be below the surface of the index. jonathan: let's talk about those opportunities. banks have ripped in europe. rio since october is up. these are huge monster moves. credit to you guys, because you got on this banks trade at a time when i was thinking, you have to be kidding me. we are going to get rate hikes and peripheral spreads are going to blowout all over again. why has that trade worked and why do you think it will continue to work? peter: first of all, the recession that people feared six months ago is not happening. there was a point where the market was pricing a downturn in the european economy. we actually have .6% gdp growth

across the euro zone this year. so the economy is growing. that helps a lot. second of all, the rise in interest rates is material, even where they came from. remember, just a year, 25% of all government debt in the world had a negative yield. now that doesn't exist. european rates were negative. now they are positive. the leverage that -- the leverage to that is a real game changer. keep in mind that corporate balance sheets are relatively healthy. so the losses and the risk of the big downturn hitting banks is just evaporating. the third factor is they were just really cheap, and they remain cheap. they are cheaper now when you look at the multiple relative to the market than they were doing the sovereign debt crisis. jonathan: we started by talking about how challenged the indexes. we talk about that in europe. the absence of tech was seen as

a weakness for a long time. is that a strength this year? i'm looking at your today tech names, those tech names in the u.s., they are flying today. is the absence of big tech in the indexes in europe a strength or weakness? peter: structurally a weakness, because there is going to be more growth in the tech sector. it's going to remain the most important driver of growth for the next decade. the constituents are likely to change over time. that has always been true of technology. you will get innovations which generate higher returns. i think it is a problem in a way that europe does not have many big tech names. but, of course, the recent rally we have seen in tech is in part because of this rally, again, in bond yields. coming down because of fears of inflation moderating. that has helped the longer duration parts of the market. i think really the whole concept

of being growth or value, which is driving the markets over the last decade, is not the story anymore. i think you need to have a much more eclectic mix, including areas of commodities and banks, but also companies that can sustain earnings. some of that will be in the tech sector as well. europe does have many of these. they be specifically technology, but our granola's. jonathan: which you have talked about before. jeremy: supersized companies in europe, mainly in the areas of consumer staples, luxury, health care, and some technology. these are about a quarter of the index and they are still growing because they are generating stable margins, and short cash flows. jonathan: i've got time for one more. it's interesting to me that the market always seems to dictate the stories we talk about. prices, shapes, sentiment. and the headlines often come

about from where the market is on any given week. clearly we have rallied in europe and over the past couple of months. and clearly off the back of that the conversation has changed. being here in london this week you can't escape the fact there is still a war in europe. for many reasons, based on what has happened over the last month or so there are reasons to say, that war has the potential of escalating again. i understand we have escaped what could have been a much more brutal winter on the continent. i'm just wondering, how long before we start worrying about winter in europe and what is actually happening in ukraine? peter: you make a good point. part of the optimism we have been seeing priced in is based on the collapse of gas prices. that reflects two things, a mild winter, which we cannot assume will be repeated next year, and a weak chinese economy that allowed and enabled european

governments to find other sources of gas supplies. as china recovers and europe needs to restock its gas supplies, at probably higher prices, that issue will come back. that is a game where we are slightly more tempered in our optimism, about the pace of the recovery this year. not just across europe, but equities overall. jonathan: that was great. how were going to make it up to manchester to watch arsenal? tk's trying to make it happen for us. it is amazing, tom, how easy it is to get tickets over at manchester city. they nicknamed that stadium the empty hat. it is that easy to get tickets. tom: why does no one show up to see that magnificent team? i'm serious. jonathan: i will let man city fans speak for themselves. last week when i try to watch arsenal versus man united, almost impossible to get a ticket. this week, man city versus arsenal, very simple.

tom: it is a great country. you have a train ride there, two hours three minutes. that does not happen in america. jonathan ferro with peter oppenheimer in london. we are going to pause the program right now and lisa abramowicz and i are going to go all engineering tech. lisa, in tear -- intel, failure, apple, success. that is what this is about. lisa: big tech is not monolithic. you are seeing divergence, and intel highlights that. especially with other chipmakers doing ok this money. tom: $32, down to $28. this is bloomberg. coming, anna edwards. -- coming up, anna edwards. lisa m: bloomberg has learned that vladimir putin is planning a new offensive in ukraine. the russian president is also

preparing his country for a conflict with the u.s. and its allies that he expects to last for years. the kremlin wants to show its forces and regain the initiative after months of losing ground. it is hoping to force ukraine and its backers to agree to some kind of truce. the international monetary fund is considering an aid package for ukraine worth as much as $16 billion. bloomberg has learned there are still a number of conditions , including endorsement from the group of seven nations. ukraine's government would also need to commit to a series of policies. japan and the netherlands will join the u.s. in limiting china's access to semi conductor machinery. u.s., dutch, and japanese officials are set to conclude talks as soon as today. a new survey of economists it says the european central bank will go for two interest rate hikes of 50 basis points on its way to a may peak.

then the deposit rate will be held for 3.25% for about a year. economists expect a struggling economy will eventually lead the ecb to cut rates. and more losses for asia's richest man. the selloff of adani's empire accelerated, erasing more than $50 billion of market value in less than two sessions. the fallout from a were port remained research as investors keeping an ion the sale by adani enterprises. the group disputes allegations of corporate malpractice. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> the first thing we have to do is the plan to have inflation. that is going to require discipline. when we are able to, no one wants to cut taxes more than i do, but we have to recognize that this is the priority for business, as well as consumers right now. tom: he is the chancellor of the exchequer of the united kingdom. his name is jeremy hunt. particularly for a waking america, how do you know him? he is the gentleman that made the best olympics in ages work. he is the guy who did the london olympics.

he is an expert at organization. also an expert at organization is anna edwards. let me just start with a basic view from 60,000 feet. with your coverage of downing street, the bank of england, you are truly expert at this. how is that exit thing going? is the chancellor happy with the experiment of brexit years down the road? anna: he was not one of the people who voted for it. morning. he was one of the voices who warned against it, but he has turned his view around, as many in the conservative party have done. he was talking about the virtues of it, the freedoms, and there is one, getting rules -- getting rid of rules around -- but on the others of the ledger there are plenty of voices saying, hang on, investment is below g7 levels. there are plenty of headwinds against the u.k. economy, and some of those can be attributed

to brexit. the economy is 5% smaller than it would have been had we not seen brexit. tom: when i come to london i go deep into the west, call eight heathrow, i go way north, up by houston and the rest of it. i do not get into the rest of the united kingdom. how is the chancellor and his party doing outside of london across all of the united kingdom? anna: we have a nifty phrase for that in the u.k. this is leveling up. this was introduced by this government, and it means trying to rebalance the economy from the heavy weight is the southeast, the place you visit, london and its surroundings, rebalance those growth opportunities around the country. the government is not living up to its own commitments around leveling up. they have set out a number of criteria that they wanted to measure themselves on. of course the pandemic and other things got in the way. that one is still a work in

progress, trying to bring other opportunity to other parts of the country. lisa: how cohesive is jeremy hunt's message -- message when they are not going to cut taxes, but fiscally there is a lot of constraint and they are facing off with europe and the u.s.? they pumping money into tech, pumping money into segments of their economy that will grow a lot? anna: seeing a real shift in the geopolitics surrounding the u.k. right now. the u.k. is not at the table when the europeans have those conversations about mobilizing 400 billion euros worth of money to take on the inflation reduction act in the u.s. the americans mobilizing $400 billion worth of funds. what does the u.k. do? the u.k. doesn't have the kind of firepower. his answer is that businesses do not just want subsidies. they are concerned about the ira, and he thinks other things will attract business to the

u.k.. lisa: do you get the sense that things are more stable? that we are not going to see a redux of last year? anna: they definitely have done a lot to try to turn the page on that one. i think there are still limits on the maneuverability of the budget. that is coming up in march. that will still have hangers -- have hangovers of what happened in september. that budget marking the u.k. out as something somebody had not -- something nobody had expected. there is still that legacy, and that still ties the hand of a government that is facing strike action and would perhaps like to spend more on people's salaries. tom: i'm fascinated by the relationship -- and this is after my distant view of the tumult of prime minister may, prime minister trust. yet we would look at the city as just moving forward everglades -- ever lives -- effortlessly.

what is the relationship with the chancellor of the exchequer with wall street? anna: i mentioned up the freeing up of the money post-brexit. this is called solvency two. if you remove the u.k. from the solvency to regulations there is a lot of money to invest. the u.k.'s wall street like that quite a lot. they like that stuff. there is always contention around passporting and the post-brexit reforms in the city not getting what it wanted after the aftermath of the brexit conversation. we have been through leader after leader and there has been plenty of turmoil. tom: one final question, if i could. what is the opposition doing? jon ferro has explained to me four times over a beverage of my choice british election cycle. i still don't get it, what does labor have a dramatically different chancellor of the exchequer view, or is there a solid middle ground, maybe like there were in the layer/brown

days? george: that is an interesting question. 2024 is when we get the next election. the important thing to note is the massive gap between the parties in the polling. post the chaos of the downfall of the boris johnson administration the labour party has opened up a massive polling lead, 20 percentage points at some junctures. that is huge. that is not very common in british politics. it is the fact we do not have an election this year that means we are not going to see any of the tax cuts. that was jeremy hunt's message today. but we would not rule them out before an election in 2024. tom: anna edwards in conversation with the chancellor of the election -- chancellor of the exchequer. thank you so much with that -- for that leadership. look for that on bloomberg digital as well. we spent so much time on the clear and present danger, jon traveling to manchester, that there is a stagger into the weekend.

lisa, how are you setting up for weekend reading and into a fed week? lisa: has the optimism gone too far? have we priced in the gains people expect for the rest of the year, and how would we know? how much could we see this feeling that the fed is going to pull back from some of the rate hikes that were previously expected, given the momentum we keep seeing in a lot of the underlying data? tom: i agree. what is fascinating to me, and it could be any chart, everything is sort of up as a general statement. the answer is, what is the breakout? what is the catalyst to leap up? the one thing i can come up with is, i have too many people sitting on my left modeling out 3% inflation. and i find that just -- we are not there yet, and they are saying we are going to get there. lisa: and some people being more aggressive, saying we are going to get down to 2%. next week the tech earnings are going to be key. not only with what they are

seeing on the ground, the bifurcation, until on one side and apple on the other. they are doing very different pictures. even taiwan semi conductor are doing better than good, with intel flat on its back. how much does tech give us a sense of what is coming up and they ongoing dependence on china? tom: a lot of people are riding on apple as the bellwether next week. it has got to be. it is the biggest stock in the solar system. i know jim over at citigroup paints a constructive picture. but others, this complete mystery of the flows of apple with apple's china. nobody really knows. lisa: and how much they cannot extricate themselves from this nation. we have a lot of public officials, whether in the u.s., germany making noise about creating a eager fissure between the west end china. it is not happening when you take a look at these companies. tom: i don't buy it. lisa: you are seeing that double

down, especially with the reopening of china. tom: i'm going to go back to a generational shift of toyota in japan, not betting on the pacific rim as a hazardous process. i can understand apple continuing with the china discussion, even if many others don't. tom: i'm going to call it a churn in the market. the headline, the vix under 19. it is some form of bull market. george bory coming up, he is chief investment strategist at allspring. this is "bloomberg surveillance." good morning. ♪ and move the energy that our world needs. ♪♪ welcome to a new era of energy. and it's easier than ever to■ get your projects done right. inside, outside, big or small,

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tom: "bloomberg surveillance." good morning, everyone. jon ferro with an accent change in london. do you agree with me? usually i can understand one out of five words, and we are down to one out of four words? lisa: you understand him. he is perfectly understandable to anyone. but i will say that it is really hard to go somewhere and not start to adapt. tom: adapt to the language? lisa: a little bit, yeah. it is easy to make fun, but it is hard. he reflect what other people are saying. tom: i don't have a life, so i don't go anywhere, so i don't know what that is like. but i know when you are in fargo

your accent changes. lisa: oh, yeah. tom: i'm going to get a data check. brent crude, $89 a barrel. the first thing i checked this morning was a 90 print. we are not there yet, but this is a backdrop. this week is a lift in oil. i'm sorry, a gallon of gas, however you want to frame it, all of a sudden it is a february topic. lisa: i'm so glad you brought this up. gasoline, three dollars 50 cents on average nationwide. still putting low, but the low at the end of last year was three dollars. it is creeping up at a time when people expected this to bleed into the consumer spending appetite. tom: read on the screen. it hasn't rebounded, but every day of the week we get right on the screen, and then boom. yields are given me some discussion. higher yields all in all. but don't want to make too much of it. does make too much of it is

george bory, chief investment strategist at allspring global investments. do you have to rewrite your strategy on january 20-whatever, versus what you wrote on december 28? george: good morning. it is great to be on the show once again. not at all. much of our strategy was written back in november in anticipation of a january print. as a strategist i'm happy where we are, at least cyclically, and we did expect a better start to the year, but the central message from us is that for bond investors it is still a pretty good environment. growth is coming down. it is slowly coming down. still pretty good, but coming down. inflation is coming down. as we will see next week, the fed is in tightening mode. this is the polar opposite of where we were 12 months ago. for bond investors, it is generally a pretty good thing. he pointed to the 10-year, the

10 year has been dropping and we are likely to be there for a while. tom: help me. john tucker and i used to do a wonderful thing in the rating -- the radio studio, the opening of his 401(k) envelope. jon informed me it has become a 201 k. what do you advise as a strategy for people like john tucker, who have been blown up last year in bonds, they need to recover, but they don't want to buy apple computer? how do you recover in the george bory space? george: bonds can do what they are supposed to do today. if you look at where bond yields are and where we got to last year, the downside of a meaningful repricing is your mark to market has gone down, your bond yields have gone up substantially. bonds can do what they're supposed to do. and one, generate income, number two, divide you with a buffer

against future volatility, and number three, we think bonds' ability to provide diversification is coming back. that higher coupon will provide some buffer against correlations as we move forward. you are not going to earn it back in one year, but you will earn it back. making sure you are positioned appropriately on the curve so you can compound your returns, and when we look at yields we can build portfolios, average yield between 4% and 8%. that is a relatively attractive opportunity for bonds. there is good cash flow generation there. importantly, there is capital appreciation. we don't have that penciled in all that much for this year. a little bit of duration. we think prices can go up a little, but as i mentioned, the 10 year is around 3.5 percent. we think it is going to be there for most of this year. lisa has talked quite a bit

about credit spreads. we have seen them rally you today. we are probably going to give a little bit of that back, but what we tell bond investors, 90% of your return comes from carrie, it comes from income. that is what it bond is supposed to do. generate a very predictable, precise, and manageable stream of cash flows. if you are using bonds to do that, even the ones you bought last year are still doing that. the price dropped, but they are still generating the income they were supposed to. lisa: basically this is a way of saying they were supposed to be boring, and they are getting back to it, and they can provide that benefit to a portfolio. how much of a liability is the fact they have been anything but boring? markets last year, led by your area, the safest aspects of the credit market, and then this year they are behaving like equities? does this bring in tourist flows and volatility? george: there is a big rotation

going on in the market and that is a good point. bond investors, we brought a lot of tourist investors into the asset class as bond yields came down structurally over several years. what you are seeing is a big rotation in terms of demand. retail demand, we have seen a pop early in the year, but will you have seen the biggest form of demand is from the institutional side. these are in pensions, insurance companies, large institutional investors who buy bonds with very specific liabilities they are trying to match against. this is where we see the greatest amount of demand. the other is globally, where is demand coming from? historically over the last several years, tremendous demand from overseas. that is pulling back as the dollar weakens, what we are seeing a nice uptick from domestic investors. if you look at the pension industry, these funded plans are as highs they have ever been. that is a rotation from equities into bonds as a structural move

that we are likely to see this year. lisa: let's put some numbers on this. last year investment grade corporate bonds lost 16%, total return. this year could they gain 16%? george: it's unlikely. i think the realistic returns for an investment grade bond over the course of the year, we would pencil in conservatively mid to high single digits. if you could call back half of that loss, there is a good probability that happens. six team percent would be a massive recession, major drop in yields and bond yields a corporate's coming down as well. that is not our central case. tom: i don't mean on a pension basis, but to our listeners and viewers, i believe we have had great moderation, we have had a massive medical issue in covid, and enormous swings in what inflation will do. have you adjusted a casual

actuarial assumption that all of us need to assume? do we need to save more because our total return over the next 10 or 20 allspring years is going to be lower? george: we think structurally returns are going to be lower. as inflation has gone up, as you pointed out, we think inflation will stay higher structurally and what we saw over the last decade. on top of that, fed policy has moved up. it really means that the cost of capital is going to stay structurally higher, and that will keep sort of overarching returns lower, perhaps, than they have been. this goes back to the story about bonds. what can they do for you? if you are compounding your portfolio at 4% to a percent a year that is a desirable return level with relatively limited volatility. that volatility should come down as we move forward. that will help your bond

portfolio, both be accretive to your wealth, but also come as i mentioned, that buffer against other things comes back in vogue as we go into this year and next. lisa: i'm glad you went there. the volatility aspect is where i wanted to go. tom was asking me what the reading was over the weekend i wanted to do. it was very much, have we gotten too complacent with this idea that we are not going to get all attila d in benchmark rates. how much are you watching the rolloff from the federal reserve and the potential they go beyond what the market is expecting, try to shock the market into a tighter financial condition? if this disrupts this thesis for lack volatility? george: it has been coming off the peak, so we had an extremely volatile year last year, as all markets repriced higher inflation. as that shock value of that experience comes down,

volatility comes down with it. if the fed is going to moderated pace of rate hikes that is a good thing from a volatility perspective. no there is qt happening, so that will add some volatility. volatility will remain elevated, but it will not be at extreme levels. it means risk premiums broadly speaking have rallied, but they are not going to rally back to those extremely tight levels we saw. again, it goes back to that increased risk premium built into the market. as an investor you can take advantage of that. our view is that the economy is slowing, but more importantly there is a massive rotation happening within the economy. inflation is not universally a bad thing. many companies had nominal growth last quarter. 9%. that is a pretty punchy economy. there are beneficiaries to that type of environment. as a bond investor i can take advantage of the volatility, rotate my portfolio to focus on the winners, have a nice

bottom-up analysis, and really capture that yield as we go forward. tom: thank you so much. george bory of allspring, always informative. i'm sorry, as you know i'm never going to retire. they have the "surveillance" casket out back. there is the chancellor of the exchequer speaking before, and he cuts to the social policy mr. bory was speaking about. he says to retirees, get back to work. "i say britain needs you." we are going to see that in america too. pandemic over, and anyone with it -- with gray hair and a bowtie can retire. lisa: it goes beyond just pandemic spending. if people are retiring, pulling out of the workforce, then you have a labor shortage, and you are seeing that across the board. how much does that keep inflation sustained? i saw this story on the terminal

this morning, that people work for central banks, the fed and ecb, are complaining they are not getting wage increases in line with inflation. even the central bank employees are saying, wait a minute. tom: there is a whole actuarial assumption, and nobody thinks about this until they are 42, at the bottom line is, we underplay this in the financial media. george bory is living at allspring. this is a big deal. as the chancellor says, get back to work. retire. lisa: central bank workers world -- will say, everybody else is getting wage increases, i want to get them too. tom: from london, jon says, really? ok, jon. stay with us. the vix, 18.86. lisa m.: up-to-date with the first word, i'm lisa mateo.

the chancellor of the exchequer dismissed calls for tax cuts in an interview with bloombergtv. hunt said sound money must come first. he was also asked about green subsidies. jeremy: we think if we are going to have the transition to net zero we should benefit from free and open trade between all of the countries that share that ambition. but i don't think subsidy is necessarily the best way. what people want is creativity, innovation, ideas, a climate, a regulatory structure that encourages. lisa m.: hunt also pitched the u.k. as a hub for high-tech and innovation. it is almost into a year -- almost a year into an invasion that vladimir putin thought would take weeks. bloomberg has learned that vladimir putin is planning a new offensive in ukraine. he is also bracing has come -- his country for a conflict he expects to last years. the kremlin wants to show its forces and regain the initiative after months of losing ground.

the idea is to force ukraine to agree to some kind of truce. the next sanctions on russian oil are likely to be more disruptive. among other things, they will impact diesel fuel. russian deselect sports account for 50% of global flows. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪ ♪ can help your business get a payroll tax refund, even if you got ppp and it only takes eight minutes to qualify. i went on their website, uploaded everything, and i was blown away by what they could do. getrefunds.com has helped businesses get over a billion dollars and we can help your business too.

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>> refinery capacity is down 8% relative to where it usually is this time of year. that is putting some of that squeeze on gas prices. perhaps more exporting from china and other exporters could

help, you have to look at the refinery situation to understand the near term in gas price. it is down about $1.40 from its peak last summer. tom: jared bernstein with the white house. very important and really sane voice on financial matters on hydrocarbons. right now a large hydrocarbon company reports. fortress worth. lisa: chevron after saying they are going to buy back $75 billion of shares today, adjusted earnings-per-share, four dollars and nine cents. you do see a move marginally lower, 42 basis points lower after yesterday's nearly five percent gain. perhaps this is a story of share buybacks exceeding any sort of slight disappointment at a time when fuel feels in the forefront. tom: we are going to get to

amrita sen and a moment, what upstream is the romance of going across the horizon and going out and finding a marginal arrow. 5.5 billion large, and you prepare that -- compare that with downstream, which is like getting into your tank. that gives you the big oil balance between upstream and downstream. lisa: but this also really complicates the message for the white house. the white house got angry with chevron. saying, how can you invest in share buybacks? you should be investing more in production. perhaps they could say, look, we are doing what we think is right with the market. buggger off. tom: the production i get. take the money and run it into production, why don't you do that? but there is the whole esg issue and, is it going to be a pure share buyback? jon ferro is always upstream and

downstream. the river thames. moving from football match to football match. fulham, i believe, is upstream. and westham is downstream. did i get that right? jonathan: if you meant east london versus west london. i'm trying to make a career out of translating what i think you mean. amrita sen, cofounder and head of research, energy aspects, alongside me in london. amrita: great to see you in person. jonathan: tom just went through these chevron numbers. i think across a handful of firms, $200 billion in profits last year's not bad. can you tell us whether those expectations have changed? amrita: the answer is no. scott sheffield said this. regardless of where oil prices are these companies and -- companies are not keen on

investing. dare i say we cannot and fault them, because investors do not want them to invest. investors want them to be focused on esg metrics, even with energy prices where they have been, and that is what they are doing. they are giving back to shareholders, and whatever investment they can do in green energy. jonathan: let's talk about where energy prices have an. if the u.s. goes into recession can we still have triple digit crude? amrita: i think so. i believe this is asia's year, with china reopening. the man down over 1.5 euros a day -- 1.5 million barrels a day just do to china. when china opens up, all of asia is going to go with it in terms of the effects we are going to say. i think that is going to be more than enough to offset a u.s. recession. jonathan: one question we explored this week was the commodity intensive nest of this china reopening. one person suggested to us that it was not going to be that

intensive. are you taking the other side of that? amrita: metals-wise we have already seen a pickup. from an energy point of view we are already starting to see them buy. given how much refining they need to do i'm very happy to take the other side that their imports are going to be up at least one million barrels a day. jonathan: you mentioned the supply backdrop. how vulnerable is the supply coming into 2023? amrita: we have released 220 million barrels last year. that was the supply they came to the market. opec is going to maintain its course right now. we are not far away from a big deficit. i think the deficit happens in the summer, but right now gasoline, things we pay for, it is incredibly tight and is going to be a very tight products market. that translates into crude in the second half of the year. jonathan: a week of optimism, constructive views about europe escaping the worst of it this

winter. you are smiling, so let's build on it. did europe get lucky with the weather or is it because they fired up cold? amrita: i think the weather helped. this week has not been warm. this week has been relatively cold, put it has been in spurts. if it was a cold winter at think europe would have been in trouble. coal helped. will have changed behaviors. that has definitely helped. the reason i'm smiling is, i also think europe and policymakers are probably smug right now. we still have next winter to get through. i do not think we should be like, ok, we have solved the problem. jonathan: let's talk about whether that smugness is misplaced. through the sump -- through the summer we were building up of storage. and we had the benefit of nord stream to build up those levels. can they repeat that this year without nord stream? how wander the -- how on earth are amrita: amrita: they going to do that? and with china reopening.

i think that is where i come back to, look, yes, it is justified why prices have come off, what to expect these prices to remain for the rest of the year, that is where we disagree. jonathan: you have to forgive me for asking a canada-based question. there people going to start caring? front page is, it is cold, but europe has escaped recession. when other people that you talk to going to start caring about the things you are talking about? amrita: i really wish they already started caring about it, honestly. because it becomes very shortsighted. i also think it is too soon to say we are going to avoid a recession, because industry does not come back that quickly. i do not think it is going to be a severe downturn, look at the layoffs already happening in the tech sector. it will have an impact on growth. jonathan: will you say tough winter ahead for europe this year, regardless of wherever the weather might go? based on the fact that it is going to be tremendously difficult to build up storage?

is that a base case, tough winter ahead? amrita: i would say for the next winter, and it will depend on what happens with china and how much china buys. our base case is that china is going to come back strongly. again, we are not expecting a repeat of last year, we would also very much cautioned that this is not going to be status quo forever. jonathan: this was great. it is nice to see you. amrita sen of energy aspects. pk, you heard it. a lot of people are better off with the winter we have had in europe, can you repeat the act next winter? tom: i think things have changed general hodges, formerly with the u.s. army, with some real military experience on europe, wrote a blistering article on the options ukraine will have with tanks. i think the military overlay changing with the new staffing of their material in ukraine folds right into the energy story. jonathan: i could not agree

more. there was a reluctance to provide these things six months ago. now we are doing that, and now there is a conversation taking place too -- and i would be looking forward to hearing what richard haass has to say about it -- a conversation about maybe providing jets as well. i don't know where we are on that, but we are taking steps in the wrong direction in the eyes of many that this could escalate. tom: it seems to be the jet story in the next conversation as well. jon ferro in london this morning. futures read on the screen, but we have seen that this week. lisa, to your conversation with george bory, i did a careful story of the bloomberg total return index. almost a four standard deviation move down over a decade you look at the price of bonds. a huge move, down 16%, and we have come up 5%, 6% as well. my word, there is a long way to

go. lisa: which is a reason why people are looking at this as income over the long term. the volatility has been tremendous. were not going to get that 16% return this year, and they would not even be for return to get all of the losses of last year back. how much do people come back? how much new value has been unleashed, but what is the pain people are sitting on an terms of losses? tom: that goes to what i talked to him about an terms of retirement. and the chancellor of the exchequer's comments about the retired who cannot retire. that is the next dynamic. lisa: people are kind of hoping that is the case because there have been a lot of people who retired who are still spending, and people are concerned that has created a labor shortage. tom: we will see, the inversion pretty substantial. -70-something basis points. yields higher, 3.56% on the 10 year yield. stay with us.

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>> when we look at what is happening with the consumer, which is the backbone of the u.s. economy, we are seeing a clear loss of momentum. >> for the deterioration in the labor market, we are starting to get flavor of that. >> the danger is going higher in rates and it lasts for longer than what the fed is even looking for. >> we do not think we will cut by the end of this year, we think 2024. >> it is a hard landing. >> this is "bloomberg surveillance"