>> there's a lot of things the markets getting wrong right now what best price for the pavitt fed policy and now i think we are getting back to realistic levels. >> now the market is starting to think the fed will go further than they are communicating now. >> some of this rally is juicing, the formal rally. >> every data point matters -- we are in an every data point matters type of environment. announcer: this is bloomberg surveillance which on the thinking, lisa abramowicz, and -- jonathan pharaoh, lisa abramowicz, and tom keene.

>> i'm jonathan ferro. futures down .1% on the s&p. yesterday, yields pushing higher, and what happened? the nasdaq outperformed. the nasdaq year-to-date is absolutely flying. tom: it's foam oh thursday. that is where we are now. what i will look at, one statistic to get the morning started with claims coming up and the rest come on the market, you are missing, we had an accommodation of .50 standard deviation, new high on the bird financial conditions index. even as we speak at a .44, this is an accommodative market going against chairman powell. jon: you will love this note to build on that and yesterday with this quote, there is an old adage, don't find the fed. [laughter] tom: oh really? jon: this behavior is not just fighting the fed but also taunting the fed with crypto meme stocks and unprofitable companies responding best to fed communications. you can now one call and get the

other call, so you can have a call the fed and say data will be good, rates are going to go higher, so what will outperform equities? tech? i don't think tech is the answer. lisa: first of all the point about a stronger economy does not edify the reason why meme stocks are outperforming. that is not necessarily a logical conclusion. this is something we heard yesterday as well, does what we are seeing in tech stocks, in meme stocks force the fed to go further? actually force the hands of all of the scenarios -- no landing scenarios and get to a real outcome? jon: and the story in europe record high fronts on the cac 40, record high on the ftse and the u.k.. we will get earnings tomorrow. air france klm, up close to 35% year today. you see monster gains in europe. tom: i'm looking at japanese economic statistic and inflation is higher. that is where we are and we got

gdp numbers coming out and it is not just america doing this. i think the year of numbers are frankly more stunning. jon: jobless claims and a couple hours. let's wait for the press -- wade through the price action, equity futures down .1%. new highs on the year for the two-year in yesterday session, intraday coming close to 470 and then backing away, backing away this morning as well, down five basis points on the two-year at 458, maybe 459. euro-dollar advancing, reclaiming a 107 handle. 10704 on euro-dollar, about .1% positive. lisa: the euro-dollar has been stable, bouncing around that range. i'm curious where we break out two. today we are watching 8:30 a.m. the big data, pvi, jobless claims, housing starts, and building permits. with respect to ppi, how much do we get an edification of the disinflation goods. if we get a repudiation of that

were surprise upside print with respect to inflation for goods, do we get more significant responsive markets? i guess the answer is which market. today we have european central bankers including the bank of england and the bundesbank. to me, this is the big question. we see yields in the u.s. reaching multiyear highs but also over in germany at a time when we heard yesterday ecb chair coming out, christine lagarde sang 50 basis points on the table for the next meeting and they will see after that so how much they really have -- double down in that manner. today includes three fed -- two fed presidents and one other official, how do they react to the meme stocks rallying? i'm curious whether they feel like they have to push back a little more aggressively on financial condition easing that

perhaps we heard from fed chair para -- fed chair jay powell. jon: a different market for sure, thank you. joining us to discuss is a portfolio manager over a blackrock. let's start there. the closing on the two-year was january 18 north of 4%, 4.08%. we are higher by 50 basis points since then. over the same period we have seen the nasdaq absolutely rip. what gives? >> good morning. thank you. it's interesting because when you think about last year, last year was very driven by rate data, the sensitivity of the stock market, particularly growth stocks and maybe more than that the early growth names to nominal and real rates. as you point out, we see this move higher in rates and the nasdaq is rampant. the simple answer, if you had a reversal from extreme positioning in the end of 2022 and it -- that has clearly not ended yet. he had massive tax loss selling,

massive shorts and a lot of these names. as people come into the new year, that pressure has been -- i do not think meme stocks and growth stocks are what lead us in 2023 but a lot of this has been a reversal of the tough year you had, particularly at the end of 2022. tom: beneath the radar really not even reported was japan didi -- gdp. the nominal gdp japan -- nominal gdp of japan was some 2%. do not understand the impact of an elevated and more persisted nominal gdp in the united states? and as jon ferro mentions as well in your chart actual war-torn europe? russ: i think this is important. why is the stock market up question mark let's leave the meme stocks out for a moment. the glass is half-full argument is what you are allergic to. so you had a view three to four

months ago about a hard landing and let's call that the economy contracting 1% to 2%. now you have a better and better likelihood of a softer or no landing. if you have 1% growth in 2023 which does not seem outlandish and 3% to 4% inflation on top, that is 4% to 5% nominal gdp, a much bigger tailwind for earnings growth in the u.s., probably to some extent in europe as well that investors are exciting six months ago. that's one of the reasons, probably the right reason, why the stock market has been resilient as it has been. tom: nominal gdp across the pandemic from a high of 17%, that is a boom economy. the fear of missing out. down to 10%, down to 9%, and nominal gdp in america, 7.3% versus under 2% in japan and we wonder why stocks are going up? there's a spirit in the u.s., it is irrefutable. lisa: this goes to the question,

russ, and i would love your take, how much of this rally that we have seen, the re-think of last year, is justified based on better-than-expected economic data? russ: i think it is justified. i think the stoxx can have a decent year. the mystery is less why are stocks of versus why are parts of the market-leading that should not be leading in environmental race that is still climbing. i think we have an environment where we are getting closer to the end of that cycle and maybe it goes a quarter more than the market things are now but we are still seeing the end of that process. we do have a better economic outlook, with better nominal gdp, none of this meaning we will go straight up and chase every momentum stock out there but i think the reality is in an environment where you avoid a recession, where nominal gdp is 4% to 5% and rate volatility is probably going to be lower by the end of the year, that is not a bad environment and probably

leads stocks higher by the end of the year. lisa: how would you play this? would you sell tech stocks, by the rest, and perhaps not have as much in cash as people expect because this is an opportunity in other assets people are discounting it too much? russ: it's probably right now, cash does not look so bad right now, at least compared to some of the other parts of the curve given the fact you are getting a lot to sit out. i think you would want to go back to something that is judiciously embracing risk area i do not think it is all about growth. in our portfolio, what we have been doing is emphasizing that we're are still going for quality and that is because we are in an environment where the economy we don't think will lead to recession but there will be deceleration and we are splitting the difference on the growth value debate, we are going for garp, it is a growth at style reasonable price that tends to go well.

i think it is more about picking your spots, having companies with strong cash flow, rather than making these big bets on tax or nontax jon: great to catch up -- or nontax. jon: great to catch up. that is russ koesterich. this is a leadership question, why is tech leading in a time where people are pricing in a high terminal rate for the fed? tom: i would skew to one word, quality. people are looking at profitability and persisting free cash flow. the mystery to me on a fear of missing out thursday is in a speculative area, seems almost like a whipsaw of edge funds and the tide. they are in, they are out, let me -- let me know they are today. jon: it was shortcoming in january, what is in february? at some point the theory has to give, doesn't it? you can't keep saying the same things and keep saying it doesn't make sense. tom: john, don't give away our

secret. [laughter] lisa: first of all we come up with narratives around something that is difficult to pin down. understanding that blanket statement at the outset. i think what russ said was fascinating about you want to go back to something that is judiciously embracing risk. this comes on the heels of better-than-expected data and i wonder, within the tech sector, how much people are riding on this idea of job cuts, allowing growth, allowing profitability, that incredible sort of cash fortress tom points out to continue to attract investors. that said, the underlying thesis of the fed having to go further looms out there and continues grazing the pressure, the boiling of the frog that raises the specter that perhaps it won't work. jon: it is encouraged by the january data. 3.4% unemployment, jobless claims up 200 k, another read on that later, and retail sales with a three handle yesterday. it is too early to draw

conclusions but if you came into 2023 with a theory in your theory was the growth would decelerate, the fed would back away, maybe we have to pause in march, you had to reassess the probability of the erie and clearly that probability shifted. tom: to the conversation with russ, we talked about topline not inflation-adjusted animal spirit and that is what you saw yesterday in retail sales erie those are nominal numbers, the top line number. forget about the economic babble. that matters at some point. jon: futures down not even .1%. lisa is going to the day ahead and we will talk about claims later. tons of fed speak. we need to talk to peter scheer about what is happening with zero days to expiry of j.p. morgan warning about. what is it again? peter will define a term and join us in the next hour. this is bloomberg.

>> keeping up-to-date with news from around the world with the first word, i am lisa mateo. a warning from the congressional budget office, it says a federal government would be at risk of a payment default as soon as july if congress fails to raise the debt limit. house republicans have threatened to hold off on lifting the debt ceiling until democrats agree to cut future spending. russia launched a major cruise missile barrage in ukraine today. the ukrainian air defense says missiles to critical infrastructure facilities launched from both the air and sea. lloyd austin says russian casualties are likely to mount in ukraine. he called russian soldiers ill trained and ill-equipped. china will impose fines on lockheed martin and raytown for selling weapons to taiwan. the fines are worth twice the value of the companies's weapon sales contracts with taiwan over the last 2.5 years. lockheed martin and raytheon are also barred from exports and

imports involving china. the fbi reportedly search files at the university of delaware which houses president biden's senate papers. according to the associated press, the material agents took does not appear to contain any classified documents. the president's legal team was said to operate with the yard. global news, 24 hours a day, on air and on "bloomberg quicktake," powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

>> we look forward to working with our allies to ensure we all do even more to invest in our shared security. we still have much more to do. even as we rush to support ukraine in the critical months ahead, we must all replenish our stockpiles to strengthen our deterrence and defense for the long-term. jon: that was the u.s. secretary of defense speaking in brussels yesterday ahead of an important security conference in germany, touching down today in germany

campbell harris leading a delegation. we will have player coverage -- kamala harris, leading a delegation. we will have that coverage for you. no drama as we often say, down .1% on the s&p. yields, in that 378.30 eight after pushing higher the last day or so, much higher on a two-year. very close to 417 yesterday's session after retail sales delivered in upside surprise. we come back on this one by five basis points, 458 on the u.s. to year. tom: what i'm gonna do right now is digress with a little history with tensions we have seen. for americans, there is only one event of 1963 but for europe it was coming out of the immense difficulties in the late 1950's and one guy in germany set up a conference, munich security

conference. he was a resistance fighter, it was germany trying to find a way and path and it was basically a meeting where the allies could measure how allied they were with a brief on secretary lincoln's trip today, tina fortin joins us now, he geopolitical strategist. we don't have to [indiscernible] that desperately needed the munich security conference one million years ago. how badly does germany need this conference this morning? >> germany needs the munich security conference and i would argue the u.s., u.k., and the world, need the munich security conference. it was great to hear you remind everybody how and why it was founded and to remind our younger market participants, only a few years ago these kinds of meetings were dismissed as

talking shops. i would argue we are back to an era where the words used and show strength is critical in laying the groundwork for what is going to happen in the coming months and year ahead. tom: how allied are the allies and where does president biden and secretary blinken fit in? >> it's really important because this conference has one objective only, to communicate a unified front to the kremlin when it comes to ukraine. americans in particular have been skeptical that, through winter with higher energy prices and inflation that had the european continent even harder than anywhere else, that this unity would prevail. what is important and i think different, diverging from expectations as public opinion in the u.k., in the european union, in member states is

robustly in favor of continuing to support ukraine. this is what i want to underscore, that despite doubling and tripling of energy bills and the cost of living crisis. there is really no turning back erie we do see mixed messaging, some stumbling including from germany on, freeing the leopards as the great campaign went, the labor tanks insisting the u.s. send abrams tanks before about the broad takeaway should be standing up to putin and supporting ukraine. lisa: i like how you put that, that there is one goal for this conference, to protect unity to the kremlin. how does the china debacle we have seen with the u.s. and china and some tit-for-tat, potential for some meeting between tony blinken and wingman of china, how does that play into or comic it that goal? >> it is a reminder that

everything that the west end g7 does to communicate about ukraine has another meaning, which is consistency of position for beijing. so as you readily point out, these balloon hostilities that have transpired have been met by pretty prickly rhetoric from beijing and you mentioned the sanctions response on u.s. tech companies, raytheon and others. they are not backing down. they seem to be using the hullabaloo over the balloon, sorry i just thought of that, and china to poke holes in u.s. capability. so i think there is still a question about whether lincoln will have this meeting on the sidelines of the unique secured conference as scheduled and that points to what diplomats say we need on the u.s./china

relationship, so-called guardrails. because hoax for the reset that followed the g20 meeting in december are looking pretty fragile now. lisa: i will give you some of that prickly rhetoric as you put it from the spokesman of the foreign ministry, whether there will be discussion between wang yi and antony blinken. they said the balloon tests capability to properly handle crises and stabilize relations with china. what does it mean to properly handle crises? >> to not inflame them. not that i'm a mindreader on the chinese foreign minister but first of all not to inflame them, the suggestion was that the u.s. overreacted. then i noticed weird communications coming from chinese embassies in europe about the train derailment in the state of ohio. so there seems to be some kind of line of attack on u.s.

capability. i'm not sure where that is headed but it does not suggest that anyone is de-escalating the rhetoric ahead of these meetings, which as you know and to be incredibly well choreographed in advance. jon: wonderful to hear from you, tina, on the munich security conference which begins tomorrow, the relationship between europe and the rest of the world and particularly u.s. and china. the latest news early this morning, lockheed martin and a subsidiary of raytheon technologies added to a list of unreliable entities due to their participation in arms sales to taiwan. tom: i think it adds up. what i would say is from tina, why do we do that? we are doing of comics -- economics, finance, investment. there were phrases she said that i have not heard in 45 to 50 years. this is a huge deal. he is going, right, to the munich secured conference?

jon: lisa mention than there's a possibility of a meeting between the chinese and u.s. delegation. i've no idea. tom: it seems as though the worn ukraine and she mentions the kremlin, these are things from another time and place. jon: something it goes back to is globalization over the last several decades but there was a belief for a long time that if the west included china, china would become more like the west. that was naive, some people might call it arrogant and they were dead wrong. now we see some consequences of them being wrong as you have to pull back and they are trying to unwind it all. can you put the toothpaste back in the tube? i don't know but they will try and it will be expensive. tom: i'm not asking for an opinion about just a zeitgeist, is the united kingdom leading the way on this bridge of allies? from boris on through to mr. sunak. is the united kingdom leading the harkening -- jon: it is part of the leadership, at the epicenter of

the group of allies without a doubt and has been the last couple years and obviously this dates back decades and decades without will not change for the new prime minister at all. lisa: can i weigh in on something you said, this idea of this really harkens to a new dynamic that will affect markets? you say we have seen deglobalization, perhaps we have seen the talk of it but we have not seen the action of it and with the action of it will mean has not been priced in. jon: i don't think we have seen we said it, i think we are starting to see the beginning of that taking place, the unwinding of it. that will be a story for a long time. futures on the s&p, -.1%, live from new york with yields coming up a couple basis points, this is bloomberg. ♪

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jon: equity futures on the s&p down .1% on the s&p 500, a big lift in the nasdaq yesterday, here today to the nasdaq up something like 15%. this morning down 0.0 spix -- 0.06%. the two-year keep on climbing in the last 24 hours of the bond market, close to 417. the bond market would look like this on twos, tens, and 30's. down for basis points, 45847 on a two-year, call at 459. 378.5 7 -- re-.757.

-- 3.757. this over the past year has become rough. it has become clear since october markets can rally even with less central-bank support. i think that's an important -- tom: they have been a terrific voice for "bloomberg surveillance." i think it is so important to have him in our studios today and particularly true because jon holds the longest lunch at any ecb meeting ever. [laughter] why don't you lead out the conversation. jon: that's if you can find a good restaurant. the chief economist joins us in our, fantastic to have you in the studio. >> good morning. jon: let's start with your conversation with clients. when you come to the united states and meet with u.s. clients, can you reveal the perception of europe and how out of sync it might be with reality at the moment? >> the perception has improved a lot over the last three months. it is a bit too negative and

still out of sync but not as much of the past. we had this with euro crisis where hardly anybody in the u.s. seem to understand europe, maybe it would get through that. jon: we are europeans to be fair. >> the further way you were from frank for the ecb, we of course would not let our currency go under, we need to refer the right conditions to do this. so the point is there is some misunderstanding as to how europe works and how europe reacts to the putin stock but it is more open-mindedness now. the key question i get at the moment is ok the winter was mild but is that just a mild winter? is europe really over the worst of the putin shock, gas price shock, gas shortage risks, or will he come back in the winter? that is a key push backend our answer is we are probably safe, even for the next winter, because we are using less gas, even in the weather adjusted

terms and we have built up facilities to import more. we are probably fine. putin's attempt to blackmail us with a gas weapon has failed. jon: that's the question we ask, it is better now, what about next winter? is it about gas from elsewhere and how much has coal been effective in europe's ability to get through this? holger: cold does not play a major role in this, no. we have a bit of call and we can probably get cold from friendly nations such as australia if we have to and most of it is that, once again, gas. we will likely end the heating season at 50% capacity. a year ago we ended at 25% of capacity. we need 30 percentage points less of gas imports to prepare for the winter thereafter. so we will be using a little more cold but our need to use more coal is not so elevated that it itself could turn into a

problem. tom: i'm shocked how people don't talk about nominal gdp. japan showing some nominal gdp. america has a buoyant nominal gdp and we know that. what about europe? what is lagarde's animal spirit, nominal gdp that is the backdrop for her ecb decisions? holger: normal gdp growth is roughly above normal. we at the moment have very little growth. we are kind of in winter stagnation. the nominal is probably expanding at a pace of 4% to 5%, which is not too bad if you are to have the split of 2% growth and the rest being prices. at the moment, we have nominal gdp is not the problem, it is this flip between prices and at the moment no growth or little growth with the prospect real growth is going to come back by the summer at the latest. tom: at least the inflation

numbers there are not the inflation numbers. lisa: you mean 10%, 9%, this incredible amount that has not come down? maybe peak inflation in the u.s., less confidence, at least in europe erie perhaps getting more confidence. i want to go to something you're talking about that it has become clear since october that markets can rally even with less central-bank support. how much is this support -- is this because the dominance of the real economy in european indexes? it has not been hinged to as many interest-rate sectors than the u.s.. holger: that's a major point. we did not have this huge run-up that was highly levered and of course we have in our economy less import of the really introspective sector such as the homebuilding sector and residential sector. the key point is it is a matter of confidence. it is not just liquidity that drives markets, it is you people want to use the money they have

to buy equities, to buy risk assets? so it is not just his their liquidity, it is what people want to do with the liquidity. we use the overall liquidity out there but people keep -- people become more confident. equity markets in europe can rally, even bank liquidity going down, and the same holds for this economy. lisa: part of this is because china came back online, a significant part of why that change the narrative. how much of that has been overpriced or overplayed given the increasingly domestic focus of the world's second-biggest economy? holger: i actually think this china factor plays a bit of a role in market sentiment but is not the key driver. for me, the key driver is we realize all of the major economies are more resilient than expected. this seems to hold for the u.s. where there is an economic slowdown but we have this discussion, will there be a

landing? we expect a soft landing many -- in many european data and data across much of the world, times are a bit tougher than say a year ago but the worst scenarios are not playing out and the china reopening story is more like the icing on the cake for them rather than being the underlying driver where we are getting back towards more risk on or less risk off sentiment in markets. tom: immense respect for your childhood and coming out of world war ii. there was a fear of inflation pounded into us in america. i see 7% to 9% inflation in germany, does the bundesbank panic at some point? holger: no. panic is not the right word. tom: what is the right word? holger: the bundesbank is on the hawkish side and would like to step on the monetary breaks than

any that come out a history great even the bundesbank acknowledged the european inflation is to a significant extent i would say almost exclusively the result of putin. this is unlike the u.s. where we have this domestically generated inflation coming out of the fiscal and early part of the pandemic. in europe, inflation was a bit on the high side but starting to peak when putin started his war. and now the gas price shock and grant -- gas price shortage risk, the shock drove the economy down and prices up and now we see the reversal of the shock that is the weird combination of getting better growth going forward and lower inflation which is not what normal economics will tell you if it is a domestic in place in problem you need a weaker economy to get inflation down or we -- all we need to europe is

for europe to digest putin shock and that is what we're doing and apparently even with more success than economists like us had expected a few months ago. jon: is that an expensive way of saying europe's problems are transitory? holger: europe's biggest problem is hopefully transitory, the putin problem, not in the sense of the war, it's a separate discussion on how that may last but in the sense of getting simple use to that there is no russian gas for us. it is tough, we are adjusting to it, we can live with it and we will be living without russian gas forever. jon: it's interesting to hear you say that phrase because when i speak to european economist and when we hear from president lagarde, she says the same thing, what we are experiencing in europe is different than what you have in the united states. you had too much fiscal stimulus yet in the united states the administration will often say it is a global problem. is it? holger: there are two very different aspects. the one is the u.s. in 2020 and

2021 had far too much fiscal stimulus and had a classic overheating economy and the reopening bouts in 2021 and 90 have to take that back. europe does have a significant fiscal stimulus as well but it is a mighty stimulus to this next-generation eu program means every year might add up to over 2% of eurozone gdp, year-by-year . that is exactly the right way to do it. if you want to spend more money and you have the need to spend more money, don't do it in one rush. if you stretch it out over five years, you will get something for your money rather than higher prices. tom: speaking of money, this is not why we had you here, could harry kane go to unit? is the great german soccer team going to steal the tots best player, best player in the world? holger: i'm not into the details of that but you nick has attracted global talent and are

among the few european teams who could pay the price if they have to. tom: that is what we will play in the highlight reel. [laughter] jon: holger schmieding there of blackrock. the chief economist. tom: this is what the show is about, back to back with holger schmieding. jon: he is meeting with the white house tomorrow. tom: i learned a lot. jon: did we get a date yesterday, a possible range for the so-called x day? lisa: do i believe or july? somewhere in the summer. they gave us a range that could be sooner and the huge deficit. the one issue i had and i wish we had more time with him is the inflationary push in europe is pretty broad-based. the core has been accelerating more so it is not all energy and there is the wage pressure you see also in europe so it is sort of how much is the stimulus and

fiscal spending paired with regime change when it comes to the economic paradigm? jon: it's a good european story to tell. lisa: it's a great european story. jon: europe seems to be the story. record high in paris, france on the equity index over there, record high on the benchmark in the u.k., the ftse 100, and all-time high as well. futures down about .1%. 7:30, look out for this, the global liquidity head over at federated. this is bloomberg. ♪ >> keeping you up-to-date with news from around the world, i'm lisa mateo. china is questioning whether the u.s. is genuinely looking to repair ties damaged by the dispute over a balloon. foreign minister called on washington to handle what it

calls an unexpected isolated incident. later this week the nation's top diplomats could meet at a security conference in germany. new insight for investors on when the federal government will be at risk of a payment default. the correctional budget office estimates it could happen the soon as july if lawmakers failed to raise the debt limit. house republicans want to hold off on lifting the ceiling until democrats agree to spending cuts. in the u.k., the national health service reportedly paid $2.4 billion to private hospitals to help in early stages of the pandemic. but the medical journal bmj suggests a little bird and sharing took place and findings raise concerns the nhs was not making the most of the resources available to it early in the pandemic. tesla fired dozens of workers at its factory in buffalo, new york this comes one day after employees announced a union campaign. that is according to a complaint filed with the national labor relations board accusing tesla

of retaliating for union activity. the electric car maker not responded. air india could almost double what already stands to be the biggest aircraft in commercial aviation history. they ordered a 470 planes from airbus and boeing. air india options to buy another 370 jets. global news powered by -- local news powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo and 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. that could really help us manage inventory.

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>> you are seeing even customers with $100,000 incomes, companies like walmart are seeing more consumers of that level of

household income. some of the dollar stores and even off prices where they are -- their average income was under $40,000 and now consumers with $60,000 household income are going there. the tray down israel. jon: the tray down israel, the message there from an advisory group -- down there, the message there from an advisory group. down .1% on the s&p. looking to continue the bounce from yesterday on the nasdaq, positive .9% on the nasdaq in the face of high yields off the back of blowout retail sales data with a three handle, we are trying to make sense of this. another head stretching -- another head scratching, another painful moment for people who did not expect this. tom: really to go back as a benchmark the beginning of the pandemic valentine's day 2020, have we been, to use a word from economics, have we been as

welded as we are now? i cannot remember when it was like this. i think it speaks to how rate rises have come in. it is not easy we are not here gross accommodation, we are somewhere up there. jon: here today gains have been phenomenal, france up a crazy amount here today. delta airlines of 19. this is phenomenal stuff that keeps on grinding higher. jon: i was in l.a., sunset tower -- jon: tell us a story. tom: you know how they have banners in the light post? jon: right. tom: the whole thing to the pacific ocean, the whole thing down is paramount banners. [laughter] it was like they were screaming at hollywood, pay attention to us. i don't know if anybody is still paying attention to paramount, i don't know what they do. jon: did you see what spielberg said to tom cruise?

tom: no. jon: the top gun maverick may be saved the theatrical side of movies. that was a quote from spielberg and that is paramount for. tom: pluto tv. jon: i got no idea what that is. tom: paramount plus have the soccer games i don't watch. jon: i mentioned this in a break, a weekend to start watching yellowstone, billions. i'm late to this i know. i wanted to find season one, it was on peacock. the latest season was on hulu and i cannot find it on paramount plus. and it is made by paramount. can you make -- i don't get it. tom: is peacock paramount? lisa: no. tom: they are separate. jon: they are separate. [laughter] tom: the look at me like that. they are watching yellowstone and i'm watching jelly stone. jon: it's a problem right now. tom: it's a big problem and we

will get a brief on it. our next guest joins us and is in charge of streaming it is see a bloomberg how big is paramount plus? are they like to netflix, teen sweets, are they in the game? >> paramount plus, no, they are nowhere near the scale of netflix or disney plus. we think by the end of 2022 they probably would have had 55 to 60 million subscribers. the thing with pearman plus is they have great breadth of programming and lots of success. they surpassed expectations. the question, is it enough to be a standalone business, enough to be viable? i don't think so. they have still done well, relatively well in the string wars given they had a late start. tom: what will be the catalyst for camp nations -- for combinations in a nonprofitable streaming industry? >> this is the big head scratcher with paramount, they

have a great selection of assets you mentioned, talk on, a great film studio, franchises, mission impossible coming out later, transformers, so they have a great pipeline, they just do not have enough to be viable on their own. the big question, it -- is this going to be an m&a target, a lot of people think it will. there has been interest from warren buffett, almost a 60% stake in the company. fundamentals on their own, not looking too great. lisa: we talked earlier with respect to disney plus and out platform is king and not necessarily content in the same way. is this most effective for paramount or would it be apple or some company that can merge with another platform that could give it more visibility? >> absolutely. at the end of the day it is deftly going to come down to m&a. the problem with paramount plus

is it still has substantial exposure to the linear tv model and that is not something much people want to get into. a lot of it come from whether it is to be are affiliate fees. eventually when there is an m&a deal, it will be have to be pieced out. maybe the streaming platform goes for something else but the studio is the most valuable part. apple has been a name that came up multiple times, also a media player like comcast, you mentioned peacock, comcast, or warner bros., i don't know but we will have to see. lisa: what's the model people were talking about where they're trying to find anything? is this going to be bundling? will this be mass rollouts? what are people talking about right now? >> i think it's a little everything. there will be consolidation eventually. there has to be a streaming shakeout and we probably see about two to three major must-have services and all these

other smaller niche services rolled out into those big dogs if you will. so really it is going to be consolidation but discoverability and the power of the platform is important. paramount unfortunately because of their size they have not necessarily been able to go all into streaming. jon just mentioned how certain seasons of yellowstone on certain platforms and they cannot pick a lane. in the streaming world we asked companies to pick a lane. paramount unfortunately does not have the luxury to do that so they have to license out some content, keep some for their own so you will see 1883, 19 23, the yellow spinoffs on pearman plus. any older seasons you've got a good other platforms. jon: we were also wondering, questioning the future of the movies made and how they would be rolled out. in the pandemic i think many of us felt like it was the end of going to the movie theater and watching the latest release and then you had what happened with

top gun maverick if tom cruise saying we will wait and wait even longer until this could be available at movie theaters. how much did that change the game? >> it absolutely did. your quote about steven spielberg, i think that is absolutely true in so many ways we see tucker maverick really resurrect moviegoing in such a big way and then we have seen some of the other movies were on well. avatar is the latest example that has done so well. top and maverick over $1.5 billion of the global box office and i think what this has done for studios in general is it has told them theatrical is really the way to go. and if you have a big rock cluster, that should be seen in theaters and absolutely should erie that said, box office has recovered but i think we are still not going to see the numbers we used to see before, which was $11 billion in ticket sales. a lot of the smaller movies are

definitely going to streaming platforms. if it is a big blockbuster, it definitely is going to go to theaters. jon: love that moment. thank you. paramount numbers coming later. i can sense in your face in the way you looked at me that you have not watched talk on maverick. tom: i have not watched top gun. jon: you are killing me. it was in one look and i knew straight away. how have you never watched that movie? [laughter] how is that not happened? tom: i've got 70 other things to do, i can't. tom: it is so good, i cried in talking to maverick -- top gun maverick. lisa: i don't remember watching any movie on a plane, why is that? jon: i'll tell you a story about the british marines. [laughter] tom: please.

[laughter] jon: the original top gun, it would play game with the original top gun and him and his friends could hit pause on any scene and they would all know the of the movie, how cool is that? people memorize this stuff, they love it. tom: i believe some people are saying they actually have a chance to have a real movie like top gun this year? lisa: how much of this also from the love you talk about from the franchises, those franchises leading out front with some sales. i think that is interesting. lisa: there's less risky, you can put the budget in, and people come. jon: when's the new season out? tom: march 1, ted lasso. men delorean as well, they are coming up with another spread. jon: i look forward to that. tom: i watch ted lasso. jon: i look forward to that.

our next guest talks about what zero dte means next. ♪ this is ge vernova, helping generate and move the energy that our world needs. ♪♪ welcome to a new era of energy.

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>> there is a lot of things that fed is getting wrong right now. >> we are getting back to more realistic levels. >> the fed is thinking further than they are communicating right now. >> it is the film o'reilly. -- fomo rally.

jon: a snapshot of the year so far. pricing in a higher peak rate, so to speak. tech stocks are outperforming. we will try to figure that out for you. good morning, good morning. this is bloomberg "surveillance" . alongside tom keene and lisa abramowicz i am jonathan ferro. the performance, t.k., in the last one he four hours continues. tom: this is a regime shift down to 1819. 18.51 now. yesterday almost a 17. jon: jobless claims around 200 k. highs for the year. tom: nominal gdp come the animal spirit that is out there, you bought the february 14 roses i about the february 15 roses. jon: what did you get, 20% off? tom: better than that.

about 28%. jon: i hope miss keene is not watching this morning. 28% off on her roses. tom: there's a guy down in florida who lives on the beach. his name is doug. he trolls on the beach waiting for famous people to walk by. a couple of days ago michael walked by and he has his floaty's on and is ready to go into the ocean. he corners nathanson and one of his calls is is paramount to be acquired by berkshire hathaway? jon: lisa will go through the day ahead because we have a guest in the studio we want to get too quickly. futures are unchanged on the s&p 500. yields are coming in a couple of basis points after pushing high yesterday.

lisa: to build on what you're talking about around the head scratching rally intact, how much is this inflation ahead fake? the data that we will get to speak to that, the ppi in addition to the jobless claims and on the housing side you're seeing optimism with lower mortgage rates briefly. ppi, how much this inflation are we seeing in goods especially as we see the likes of used car prices to go back up today? european central bank speak are getting in on it too. the bundesbank president come the ecb executive board member, everyone is really taking a look at the two-year yield. i go back to what he said at berenberg, that even with less accommodation with central banks, stocks can still keep rallying but perhaps bonds are having a tougher time on the front and giving you that kind of yield. the fed speak includes the cleveland fed president, and fed governor lisa cook, st. louis

fed president, perhaps they can speak. tom: i'm waiting for the japanese speakers to come up. the boj today. jon: has that been confirmed? lisa: confirmed that he is the nominee. he is going to be the person. the question is, does it change anything? jon: good morning to you. tom: the charts are something. >> i live on bloomberg, i have to admit that. tom: jp morgan had headlines, he had a difficult time calling this market over the last 12 to 18 months, the u.s. market anyway. we have this phrase and in it an acronym, zero days to expiry. a lot of our audience are hearing more about those

options. can you define for all of us what is zero dte and what is it doing to the market? >> there is huge volume and that and single stocks tend to be more weekly and etf's have the daily. volumes have been driving through that and i think it has a couple of repercussions. people are literally gambling. there is a bloomberg screen, the most active traded, and it is almost like watching a horse race. it is almost this laddering. i think people are creating this, volumes have exploded. 40% of equity volumes can be tied back to the hedging of single day options. it is a massive driver and i think why we are seeing moves that are amplified. maybe something that would ba.5 percent move based on the move becomes a 1.5% move. jon: can you explain how this

become self-fulfilling for the people -- let's say that i am an institution and i see some of these short-dated call options. what do i have to do on the others that leads to this becoming self-fulfilling? peter: let's say the day starts 400 and someone buys way out. all of a sudden it's going to 403 into ever sold has to start buying spy which will exaggerate the price move. oro five, they have to buy more. someone starts buying the 408 calls. you see this laddering-type trade that occurs over and over. it reminds me a lot of what we were seeing a year and a half to two years ago when you had gamma squeezes. those were individual stocks starting on monday with weekly options moving to the daily options. the vix is irrelevant to me. it calculates options with expiration. as more people gravitate to daily options and the volatility

does not get picked up in that. i think that is where the surprises will come. the hedging is occurring in daily and weekly options. tom: a rule of thumb, options drive delta four times leverage, futures 10 times leverage. the short-dated options, what is the leverage equivalent? it has to be way higher. way out past futures? when do the regulators step in if this is a train wreck waiting to happen? you and i know it. peter: it is hard to figure out what justifies this. you're seeing the meme stock-type things with twitter feeds promising to make $100 into $100,000. it is truly gambling. there is no binomial model that will predict this where you buy something out of the money and you hope that it triggers. if you look at the background on the days calls people really push hard on some of the more

shorted stocks and vice versa. tom: stay away from the jargon. gamma is a form of acceleration. what we will have is a level change. a cool breeze will go up or down. what will then -- equities will go up or down. what will happen with a one-day duration with a leverage way out 10-1? peter: that is when you'll see liquidity's going back. what happens now as you have this full level of liquidity. as the moves start they pull back. tom: you believe there is risk on major wall street front desks? peter: i don't think that it is there is much as individuals, though it has started gravitating more towards not just retail traders been institutional traders. you aren't getting these types of volumes because it is mom-and-pop. this has definitely hit the big institutional desks as a trading strategy. lisa: what are the consequences?

muddied signals from a market that does not cohere with the larger economic trends? or is this something with a more significant whipsaw waiting to happen with an unexpected downdraft that could happen suddenly? peter: it is harder to get a good read on the market. the moves are amplified so you can see that. you have to watch these things are you will miss signals. the thursday after the fomc when the nasdaq was up 500 points you could see this really trading through these zero-day expiration options. you have to be watching this. it dilutes information and you have to be prepared. if you think it is a one to 3% move you can get 5% to 10% easier. lisa: is it volatility or the directionality and persistency of the rally that is the self-fulfilling aspect? peter: i think that it can make things extend a little bit. if we live in a world with the

windshield wiper, looking who you can stop short or long, it makes the sense that you hit triggers higher and you keep pushing higher and higher and you get more exaggerated forces. the short bottoms out and then you switch back. the other thing it has really done is as a contrary and you are trying to figure out, what is the market positioning? you want to bet against that. market positioning changes on a dime. the ability to move huge amounts of risk through short dated options has changed that risk position. it took weeks. i think these happen in days now. lisa: what is your projection of how this plays out? we have seen cute narratives trying to pen off the heels of action. how does this play out with the boiling of the frog with higher rates to the front end? peter: i think we will see one down day were we go through the triggers that stops the exchanges. then regulators will pay attention. no one pays that much attention when the bias is higher. i think that it will take a big

down day when no one can explain why. we start hitting triggers on the nasdaq in the new york stock exchange is. jon: a repeat of early 2018? peter: i think it is a little bit off because the one thing that we had in 2018 was people trading the vic's directly. they had the ability to trade the vix futures, and there were interesting trigger points at 4:15 p.m. that let people push that. what i look at liquidity, whether the bond market or equities, as soon as they start losing money they start shutting off in the bid offer goes wider and that is when you will see these exaggerated moves. tom i here now cheerm aggeddon. lisa: have you watched "top gun" before? peter: of course i have.

one of the generals that i work with, general walsh, was a top instructor. so that was pretty cool. jon: what did he say? peter: he said that the movie was fairly realistic. there were some people who were phenomenal pilots, not necessarily great people. and others were great people. in the vietnam war they felt the need to train better. jon: thanks for being with us. tom: can you be back in three days when we talk about cheermaggeddon. jon: academy securities are perfectly placed for this conversation. live from new york, this is bloomberg. >> keeping up-to-date with news around the world. i'm lisa mateo. a warning from the congressional budget office.

the federal government would be at risk of a pavement default a soon as july of congress fails to raise the debt limit. house republicans have threatened to hold off on lifting the debt ceiling until democrats agree to cut future spending. china will impose fines on lockheed martin and raytheon for selling weapons to taiwan. they are worth twice the value of the company's weapons sales with contracts with taiwan over the last 2.5 years. lockheed martin and raytheon are barred from export/import involving china. there is a report that russia has lost at least half of its tanks since in the -- since the invasion of ukraine a year ago come the u.s.-based institute for strategic studies. it says that russia is using older equipment as replacements. the fbi reportedly searched files at the university of delaware which houses president biden's senate papers. according to the associated press the material that agents took does not appear to contain

classified documents. president biden's legal team was said to cooperate with the fbi. fidelity is bucking the trend of financial industry firings. they want to fill 4000 jobs by midyear. fidelity says that the new positions will focus on customer service and technology looming a year of record hiring that brought fidelity's head count 68,000. global news, powered by 2700 journalists and analysts and 100 20 countries, i am lisa mateo and this is bloomberg. ♪

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>> some of our republican friends in the house were talking about taking the economy hostage over the full faith and credit of the united states. they say that unless i accept their economic plans, which is totally irresponsible, they are not going to pay the national debt. i made it clear at the state of the union that i will not negotiate whether or not we pay our debt. i will not allow this nation to default. jon: president of the united states on the debate that will ramp up later this year. from new york city, good morning. equity futures down .2%.

yields come in a couple of basis points on the 10-year, and your two-year coming in four to five basis points, down four basis points to 459. the next out for the market is an hour 13 minutes away. looking for jobless claims and potentially another take higher but still around 200 k. tom: we just inverted from -90 basis points and the shock of regional sales to 81 basis points. public notice, thank you for watching and listening. peter uses more than me, the major options screen on the bloomberg, i don't think that it works on your cell phone, but on the terminal moso is a conduit into his world. jon: a lot of people compare it

to watching the casino roulette wheel in real time. i'm going to get a lot of hate mail. some people might say that. that is how he described it. that is not my characterization. tom: i was in mcdonald's yesterday and a guy came up to me, thank you for watching, and he was talking about housing. and rents. i went back and looked at rent in manhattan. from the beginning of the pandemic, valentine's day 2020, rent has gone up 19% in new york city. up to 4100. what is critical is to do some form of income approximation. in the same time the income average, not fancy people watching bloomberg surveillance, is up 6.5%. that delta is the only conversation. 4.5%. jon: it is very expensive to

live here. too expensive. tom: it is different dynamics in kansas city between rent movements and income movements. jon: not long ago the banks would come out and say we are sending part of the bank to wherever it might be. you're thinking you are getting sent from new york city, that sounds terrible. now everyone is like, does the salary stay the same if i move? lisa: that is the problem. austin, texas, for example, the prices are skyhigh as well. tom: for btig, i will rip up the script and talk about your ohio. there is a small chemical spill in ohio that is not on the elite east coast radar. there has been a lot of criticism of that should we be paying more attention to train derailments in your ohio? >> i think if you look at the

actual data around train derailments this happens a lot. this is a regular occurrence. it is the actual impact that we are seeing in ohio and visuals are uniquely stunning. this is something that if we talk about trying to move from the rhetoric and the visuals of this event to the actual policy discussion, what i am hearing from folks is pipelines are very often safer than trains when you talk about trains going through populated areas. that is where you will see the policy conversation. tom: to me the elephant in the room is the inflation data that we've covered the last few days. housing in america. i take issue that new york city can see is that it's terrible here but find out there. i don't believe it for a minute. what can washington do about rents and homeownership, mortgage payment policy? what is it to do? isaac: i spent a lot of time

working on mortgage policies with fannie mae and freddie mac and fha. i think there is one thing the policymakers struggle with. our mortgage finance system and housing dynamics are local. some of these pain points in certain cities that we've seen rapid growth in in particular since the pandemic, there is no simple solution. there is an undeniable supply crisis. there was an opportunity to address part of this with the most recent ira bill. there was a discussion about sending money back to the states in the form a block grants and saying that we will give you money if you do zoning reform and try to use that to spur growth, which we have seen in certain minutes of polities. from a federal -- certain municipalities. from a federal point, as you and

i know and we discussed before, this is not a demand problem in housing, it is a supply problem. i am fearful about what that will do to marketplace dynamics, especially when the fha, for example, is already seeing 6% early payment defaults and seeing cracks in the data around credit performance and that aspect. lisa: you mentioned the ira and you wonder about stimulus going forward given the report yesterday and the fight we are expecting. how do the report yesterday color your thinking about how the debt ceiling debate goes down? isaac: that one dropped like a lead balloon. the numbers were atrocious. we have a one point 4 trillion dollar deficit from this year that will average to trillion per year through the 10-year budget window. we are going to see federal debt held by the public go from $25 trillion this year to $46 trillion in a decade. not to mention, and this is the

one that is not getting nearly enough attention, the cbo says that the highway trust fund, social security, and the medical trust fund, the hospital insurance trust fund will be defunct in a decade. together, and i'm worried that d.c. is not focused on some of the real drivers of our fiscal issues, which are entitlement spending and some of these longer-term dynamics. instead, we are going to have a physical fight over the debt ceiling, and it looks like that fight will happen in the june-september timeline with september probably being the date that most investors need to circle on their calendar. lisa: is that basically that you will see t-bill rates shoot up, one month three-month t-bill rates? isaac: from a practical's perspective that is what we will see as we hone in on that date, when the government's extraordinary measures will be

exhausted.the cbo is saying it will be between june and september. i'm telling you that i think this congress no matter what will plunge that deadline to the end of september for two reasons. one, sequencing. it aligns it with the federal funding deadline also at the end of september. two, no one likes to be in d.c. in august, especially lawmakers. they will want to push the fight into september. that is what we will see as one of the downstream implications of this pressure in the marketplace, especially in that timeframe. jon: september, because that is when everyone will start caring. right now, i don't think anyone does. here's the latest from hsbc. from stage bears to bulls, this is max kidner. max came into this year very underweight equities. max underweight is what max would say. he came into this year and got

more constructive quickly and pushed against the consensus we would get this second half are up and look for performance in the first half. we find ourselves as lonely bulls in a crowded pack of bears. answered the most frequently asked questions, but goes on to do that. overweight equities, overweight eurozone, and so on and so forth. tom: he is catching up with johnstone for his. he was a little slow. we covered that last year. all of a sudden he looks like a genius. jon: max had a decent year this last year and is having a decent year this year. equity futures down .2% on the s&p. kumbaya, all that good stuff.

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jon: you would go to a restaurant and ordered the soup? you would actually do that? lisa: there are entire restaurants devoted to soup. jon: as a main course? tom: explain soup to the foreigner. -- soup guy to the foreigner. lisa: it is a seinfeld episode. it was a guy that was really mean and you had to be nice to him or he would say "no soup for you." jon: when my mom would make soup for dinner we would be furious

as children. we would protest as children. lisa: maybe that is how good of a cook she is because when i make soup my kids are happy. tom: they called him the soup nazi in the show. i was below 59th street seven years ago. the things you learn every day. jon: i just thought that i would continue the conversation from the commercial break into live programming so you have a decent idea what goes on behind the scenes. tom: we are working on this so you can see us in the break. jon: like live sports. tom: our wonderful advertisers are on board. jon: they shake hands and then there is betting that comes up on the side. we can do that. futures right now are down .25% on the s&p, a little softer backing away from the gains

yesterday in the equity and bond market. the nasdaq had a decent day of gains -- tom: for our viewers, what is roku. lisa: the device that you can operate streaming services on and they have basically that you can put in some sort of chip or device that allows you to stream on any screen or roku specific streams. it is tied to the streaming wars

ended amazingly during the pandemic, then the post-pandemic hangover, and now it is growing. we were talking about paramount earlier and came out with earnings. they missed their earnings in the fourth quarter this year, lower by .6%. they are not being rewarded for better than expected subscriber gains. now it's all about the money not subscriber numbers, which i think speaks to the moment we are in. it is also interesting that height hotels their expectations. those shares of .4%. this is what we have been talking about routinely, people want to travel and are spending on travel and travel companies are delivering massive results. you see it across the board with the. jon: do you want the quote of the day from j.p. morgan? bonds are back is all i hear everywhere. the last time this many influential people said something was going to be great was fyre festival.

isn't that brilliant? giving me the eyes like what was fyre festival. i'm not explaining it. if you don't get it come you don't get it. the line is there. tom: we are joined today, i've been in your world the last seven days than i have the last 15 years. you own it. the screen on the bloomberg. explain why the btmm money market screen is so interesting. why are we so interested in short term paper? >> if you look at 2022, it was the only positive asset class. expectations are that it is probably going to match if not beat most asset classes' return in 2023. the problem that we have in the

liquidity on that btmm screen if you follow it investing in commercial paper, from government agencies, repose, they are yielding anywhere from 4.5% to 5% at this point with the expectation that the fed will go higher by another 25 to 50 basis point of their yields will continue to rise. even if you look at bond yields getting up to 3.5% to 4% with a little appreciation for the year you are looking at much more of a return then 5%, almost guaranteed, from a money market perspective. tom: is your world running smoothly? is the liquidity back and forth from the short term paper market healthy? >> it is healthy. the short term paper market is at its peak in size since pre-pandemic.

it is almost 1.3 trillion at this point and is a healthy mix of financial firms, various industrial firms, different types of retailers, pharmaceuticals, oil and gas making up a large part of it. it is a diversified and growing sector of the market with a lot of buyers at this point. the ebb, two-way buyers and sellers in the market are pretty healthy right now. lisa: i want to go what oksana said, not just about fyre festival, but it highlights the discomfort with everyone saying that bonds are back, this is the place to be. what is the pushback, the potential risk developing when you get such a solid consensus? deborah: the concern is rates go too low. the combination with the bonds are back speech is a combination of what you can get from the

coupon or the deals on the product as well as may be a little potential growth from an nab standpoint. growth being in the 4.5% this 6% area. if the yield gets too low, the major component of the return, you are not going to get the overall return you expect. two-years are indicative of that . if you look at what they've done over the course of the last month, they were way low following the bond sentiment market until, number one, the jobs report, and number two, the fed speak, and number three, strength in retail perspective and economic perspectives over the last week and a half. the two-year yield looks like it is following the fed not with the bond market is saying. that's the risk. lisa: to build on that, one thing i've been surprised about is everyone saying they love

cash, that short-term debt looks incredibly attractive and yields keep rising. how do you explain that? usually when people want more of it the price goes lower and bond yield goes higher. why is the price going lower if everyone is on the same trade? deborah: it has to do with the fed. the fed has driven the front end of the curve and until a week and a half ago was driving mostly one-year end under yields with where the fed was going. now the two-year has joined because people are realizing that with the fed has said about going higher but staying there for longer is probably going to dictate market returns in 2023. you cannot bet that the fed is going to get to a terminal rate. 1.25 percent or whatever you think it's going to be. and then going back down to 4.5% by the end of the year. that is not what the market

should be thinking, yet it was at the beginning of the year. i think that is starting to erase. that is what is driving the fire. jon: thank you for joining us. we heard the same thing from the ecb, the ecb executive board, saying yes we are at that moment where we think we are getting sufficiently restrictive but ultimately i may have to stay around to figure out what is happening next. i keep going back to the note at the start of the year in his blog when he said there is a second phase. the second phase is that we get there quickly, we wait until we are convinced we are going back to 2%. lisa: there is a new wrinkle, which is that it might take them a while to get to that place. is not going to be 250-point rate hikes and then pause. they will go in increments, but it doesn't mean they will raise less than they would otherwise.

that is the point from the ecb and potentially the federal reserve. jon: if you find yourself taking longer to explain your view of the world it means that your position is getting weaker. more people who are bearish need more time to explain their position. it is retail sales, data, bouncing back from december because december was a fluke and this is a head fake. they don't believe in the jobs report. it doesn't capture the full picture. there something else going on. let's see what happens if we get another month of this data. how long would it take for that view to break down? when you spend so long trying to find your position that ultimately you can't do it anymore? lisa: how much does the price action define the narrative and how do you avoid that trap when there are such little clarity? jon: to your point, if you look at bonds and the economic data it makes sense to a lot of

people. you look at where the leadership has come from with equities, i can't find the narrative that explains leadership with equities with the data and the bond market. that's difficult to do. lisa: i don't know if you can. peter said that bonds are setting a clearer signal than stocks because of the machinations in the derivative space that we were talking about aren't very clear. at the same time there's undeniable strengthen the economy, and you have to factor that in. tom: the note that you read earlier, i was just reading it here and i love at the bottom of his short note he says there are green shoots in earnings and that is corporations adapt. i will go back to someone 01 to nominal gdp creates an interior animal spirit. an expert on solar eclipses, pioneer, used to say inflation and nominal gdp are bright lights that allowed people to do better.

you mention -- mentioned hermes, is it tomorrow? yeah, that is a niche area but corporations are adapting. jon: luxury and airlines. we will talk about those earnings tomorrow. a lot of people thought that maybe we would get a pause from the fed. we will catch up with steve next. futures down .25%. this is bloomberg. >> keeping you up-to-date with the first word. china's questioning whether the u.s. is generally looking to repair ties damaged by the dispute over a balloon.

the foreign ministry called on washington to handle what it calls an unexpected isolated incident. the top diplomats could meet at a security conference in germany. new insight for investors on when the federal government will be at risk of a payments default. the congressional budget office estimates that it could happen as soon as july if lawmakers failed to raise the debt limit. house republicans want to hold off on lifting the debt ceiling until democrats agree to spending cuts. air india could double what stands to be the biggest aircraft order in commercial aviation history. the carrier has ordered a record 470 airplanes from airbus and boeing. they have options to buy another 370 jets. u.k. consumers are suffering from a cost-of-living squeeze. it is caused partially by soaring energy bills. the founder of a renewable power supplier discussed how the government can ease the crisis. >> during this crisis, our

government has spent 100 billion pounds subsidizing energy bills to take away some of that pain. investing would be the cause of the problem. for the same sum of money we could build the infrastructure we need to be 100% green on the grid in electricity and gas and that would be a proper investment for our country. >> he plans to sell. earlier we said mistakenly what he lanced it with the proceeds should the sale occur, and we regret that error. i am lisa mateo, in this is bloomberg.

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from your first big move to retiring poolside and the other goals along the way wealth plan can help get you there. j.p. morgan wealth management. >> we have had three head fakes, employments in january stronger than most people surmised, inflation coming down less than

people surmised, and now a boost in retail spending that was great stuff you don't think the weakness in the dollars over partially because we see a deeper recession coming to the u.s., north america generally. jon: great to catch up with him yesterday, on the story of strong economic data pushing the fed to keep lifting rates. steven englander stood a call in march. saying the fed is likely to pause when there's a clear sign of labor market slowing. we expect 25 basis point hikes in march and may when they were looking for no hikes previously. looking for a peak rate of the federal reserve at 525. tom: saw the adjustments in the studio. this conversation so important after talking a few days ago, steven englander joins us. do you remember back when you had your one volume under your

arm at yale. did you read international economics cover to cover? steve: i did, but i think that the textbook that i used was even older. tom: now the analysis out of the pandemic with this unique inflation and unique international dynamics, did the models and theories of the textbooks work? steve: the basics are still very much used. i think it is the question of how far ahead are consumers. the business of thinking has been introduced since then. you can understand 95% of what is said with the textbook. tom: two days ago, talked about a 6% yield. that was moving of the five-ish up. bullard speaks to that, right? 7% yield, 6% yield. what are the ramifications for listeners and viewers if we enjoy a 5.89%?

steven: it depends on what is driving it. if it turns out that it is just that the u.s. economy is more resilient and disinflation continues, which is what we have been seeing, it is a strong u.s. exceptionalism story. we can exist with higher reeled interest rates and the economy trudges on making u.s. assets attractive. if it is inflation it is risk off. it is still dollar positive but you know that there's going to be a crash at the end and rates are going to come down. lisa: in this uncertain moment with everyone shrugging and not knowing, what is your compass? steven: you know, you just have to look at the data. i think that is why the january data was so tough. retail was strong but not seasonally adjusted. they dropped 20% every year. so, you're waiting to see if those numbers are actually confirmed apart from other issues that may exist with them. i like looking at continuing

claims. i think that that will be the indicator that ends up being the most reliable. lisa: continuing claims in less than an hour. we have seen them confirm the story from the jobs data we saw in january, so now, what are the chances of the fed going significantly further than the market is currently expecting? steven: it is an example of 20,000 firms and 30% response. it is a very thin needle that we are standing on. if you actually look at the numbers, two months to six months moving average, the services, housing is still continuing to go down. all of the big core indicators are headed down. the disinflation story was not the story, but the cpi was reaffirmed. it was the fed hawkish nest that is standing out in the market now. lisa: citigroup put out a note saying that the surprise has

been resilient activity, which means that a recession is less likely but raises the probability of a long. time of too long inflation. the base case is growing and they will have to go me that. do you agree? basically because of some of the inflationary aspects, goods and inflation re-accelerating in the car space, does that feed into a view that looks more probable to you as well? steven: that is a 2024 view. i think if the fed takes interest rates up to a five handled the first coverage doesn't bother because they know they will be tight. in the market says that we will have a three handle in 2024, if you're not sure that inflation is actually getting close to target, it might be 2024 where the fed goes from, saying they had 5.25% and they go to 5.7 5%, that is still contractionary.

3.75%, they better be convinced it will work. tom: the standard chartered with the great international reality of bank day today, we will be joined in next hour. thunderstruck deterioration in argentina. 99% inflation in buenos aris. peso black market, 400 pesos per dollar. help us with the median see of the international monetary fund. does it look like bailouts for the in march? steven: i think that the higher that the higher the rates go the more pressure there is. the more the imf is going to have to do a lot of running very quickly in order to make sure that the search and default scenario that people are speculating on doesn't happen. it is a function of rates. we came in falling and now they are rising.

i think there are some discussions between the imf, central banks, and the fed saying we love you guys, but look at what you're doing. tom: jerome powell, six-month t-bills 5%, does that make him the central banker of the world, to nigeria, argentina? steven: the u.s. is 20% of the world gdp and 150% of real financial conditions because it is exacerbated outside of the u.s.. he is more than the central banker to the world. he is the king central banker to the world. jon: the federal reserve starts hiking after the central bank starts hiking. how are those doing who went hard, early, first? steven: they did it because some could afford to do it. mexico and brazil have a rate cushion. if you started off weekend you couldn't keep up -- started off weak and you couldn't keep up, you're facing the possibility of being jon: in real jon: trouble.

facing a scenario where the fed sets policy for the rest of the world, what would they be doing now? steven: probably capping it. but they don't -- jon: of course not. i'm trying to work out, you are saying the fed is causing problems but the rest of the world has inflation problems, don't they? steven: it can be because of domestic fiscal policies, domestic policies they haven't addressed. it isn't all on the fed but the fed is the most dramatic thing in the last month. jon: to wrap it up, it feels like a confusing time for a lot of people. when i hear a fed speaker or fed official, we caught up with the earlier one this week, say data dependent, that seems like the short way of saying i have no idea. is that where we are? steven: i think they have raised enough they don't know where they are, but there is a possibility we are in 1981, a possibility we are in 1996. there's a whole range of possibilities out there with very different implications.

the probabilities that you would attach to them are not that different. you have to wait to see how things play out. jon: it is perhaps unfair, but i wonder if they are hoping to not get a repeat of the january payroll report? steven: i think that they light candles every day to not get -- not get a repeat. jon: it is no good, push that over there. the payroll, people are struggling to do that. you get a repeat of that in february -- steven: the response rate has dropped from 60% -- jon: you think we can do that with payrolls as well? go back to what i said earlier. it seems that people are spending more time explaining their position from the start of the year. if you spend more time explaining it, the position itself must be getting weaker. if your argument is strong should be an easy story to tell.

lisa: the fact that the san francisco fed took out a report about how the weather affects employment numbers and how it was askew based on the weather gives you a sense. people are saying that consumer spending as well because it's nice out, let's go shopping. sam rowe put that out yesterday and i thought that it was hilarious. jon: i'm not here to say that there are not real issues but the january hard data has everyone thinking, i have no idea what's going on. i guess we are going to find out if we get a repeat in february. it's too early to draw conclusions. i'm getting a hard time on twitter. about the soup nazi thing on seinfeld. i deserve a hard time. jon ferro doesn't know the seinfeld suit nazi but gets high-handed about fyre festival week. lisa: thank you for the apology. jon: futures negative .25%. this is bloomberg. ♪

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>> the market has gotten too far ahead of itself in pricing fed

re-because and not keeping up where the fed was. >> we have seen disinflationary pressures mount. >> it is possible that this recession is delayed. >> in the next three months you will see the u.s. economy weakened. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning everyone. on radio and television, good news on inflation and retail. good news here in 29 minutes. the four-week moving average claims, never what i imagine this statistic, a 190,000 jobs. jonathon: it's amazing, another tech higher. still near 200,000 with the unemployment data and retail sales.

the data has had many people reconsider how far the fed can go. lisa: up to 6% and bowler speaks today who nudge 7%. jonathon: a ton of fed speak coming up later. the lead story in the equity market. is where the leadership is coming from. text still outperforming, is pretty phenomenal, fascinating to watch. lisa: what do you think they will say? jonathon: i think they will say i was right. the news was not good from these tech firms. tom: i don't agree. i think there cash flows are stunning. their currency has adjusted. apple's single line in the middle of the press release said

ask for an exchange was not all that bad. lisa: but it was expected. this is the issue to john's point, they did not exceed expectations. the change has been a dissonance because typically the stocks do better when you expect a low rate environment to process. is the stock market purely noise right now to what we hear from peer share and derivative trading's and bond saying that this is a federal reserve that will raise more. tom: there are three markets. there is the speculation market. there are four tech companies doing better than good and everybody else, they are not in the nasdaq realm? jonathon: it's lonely over at max kettner.

i always struggle with the idea that the bond market no sub thing the equity market doesn't. you can say that yields are going higher and then totally fail on the equity market calls. lisa: we are seeing the economy do better and act more resiliency in the face of higher rates and policy. his relationship breaking down a bit in order to see higher rates and lower stock prices. jonathon: i got a quote that said you should show average joe's know just as much as the experts. that one is from barry. it's like those: shows on radio. we have to make that happen. thank you barry. let me know if you are free

tomorrow to talk about this market. tom: let's go to the data. i did not have a chance to say this in the last hour. we are coming out of the pandemic. i stood on fifth avenue, i watched fifth avenue and is not the same. it is all tourism. it's no employees, it's not what we grew up with. jonathon: it is kind of weird. equity futures are down .3%. we are 25 minutes away from jobless claims data and it has been phenomenally low. just last week we did get a take higher. nothing significant just yet but are trend is a trend. 200,000 is the job estimate. tom: this is perfectly timed. daniel morris, we saw him in

london last time we were there. dan, i don't want to talk about stock buybacks, i want to talk about what our viewers and listeners should do with their use of cash in their portfolio? what do you do with cash right now? dan: we have had this massive repricing now. are the fed funds rates going up another 25 basis points or even 50 basis points. we have already had the massive moves last year. on the equity side, but we are talking about with the risks but

the balance of risk reward this better than expected. jonathon: everyone last year was a bond trader. you had people coming on the program and saying this is what will happen with bonds, this will happen with stocks. now they are calling for high yields and at the same time, tech is outperforming. why is tech outperforming is yields climb? daniel: one we will have to see how long it persists. it has gone on for several weeks. there are some headwinds but nonetheless, if you go back to the recession talk you do traditionally see growth are performed value. on a relative basis, that's in line with what you see historically and what we would anticipate this year. we get back to what happened with inflation and how does the fed respond?

you do anticipate growth outperforming. lisa: if you look past the recent hysteria, we are in a disinflationary phase and people are getting over their skis with expected rate hikes? daniel: in retrospect, it's easier to say, but the big head fake we had with inflation expectations. the market was pricing the inflation rate at the end of the year at 2% which was a massive fall. that was based on the data we thought we had. subsequently, the data was revised and you saw this disinflationary trend went away. that's another factor in challenging the markets, you come up with the narrative that allies with the data but the data changes. lisa: how are you positioning? it's affectation to be nimble but you see rallies in the equities and risk spaces.

daniel: we are still cautious and neutral in our portfolios. you see these tech rallies but you also see big reversals. will it be sustained, that's really difficult right now? let's get some confirmation from the trend in data points pointing in one direction and then get on that trend. jonathon: what would make you change your mind? what are you looking for? daniel: we get down to inflation. do we see a plateau? that is the risk we are starting to price and again at the end of last year. we saw fed funds go to 5.5. we see a plateau in inflation around wages, we had one month of this surprisingly strong data

in payrolls. it will take more than that. jonathon: dan, it was great to catch up. daniel morris at bnp paribas asset management tom: i think you killed the earnings season here. i want to go back to scott galloway's book, just magnificent must-read book for every student. the galloway four is modeled for $310 billion of free cash flow a year from now. i went out and looked at for midwest work courses. boeing, dear, cat and they modeled out 27 billion, 310 versus 27 is why everyone is focused on those for stocks. jonathon: they are cash machines.

when you can work out what multiple to put on what and some of these companies are saying growth is decelerating. they said that the good times are coming to an end. they are talking exclusively about a guy. lisa: you already have high valuations. there are all these other companies that are doing incredible things but those eight names account for 60% of the total gains on the s&p 500. tom: apple has a 26 multiple off the bloomberg ds screen. that means apple innovation. jonathon: i am getting slaughtered this morning. slaughtered. especially after the soup nazi.

how can you trust this man? where has he been? tom: but i don't get doctor who. i just have no idea. jonathon: it just wasn't that big in the u.k.. tom: i remember, it's 2:00 in the morning. i look over the fancy business and he is watching the show called little britain. and i was addicted to it and i didn't know a third of the humor. jonathon: that's great, that's brilliant. i miss that. futures are down .09%. we will catch up with daniel ives of wedbush securities. this is bloomberg. >> keeping you up-to-date with news from around the world. but the first word on lisa mateo. a warning from the congressional budget office. the government will be at risk

of a payment default if congress fails to raise the debt limit. republicans have threatened on lifting the debt ceiling unless democrats agreed to cut spending. the fines are worth twice the value of the weapon sales contract with taiwan over the last 2.5 years. lockheed martin and raytheon are barred from imports and exports with china. russia has lost half of its tank since it invaded ukraine. that comes from the u.s. institute of strategic studies. russia is using older equipment as replacements. blackrock is raising $1 billion following his biggest loss. he will reopen the hedge fund for more cash at the end of march. the fund managed 3 billion and lost 12% in 2022. fidelity is bucking the trend of

financial industry firings. they want to fill 4000 jobs by midyear. the ability says the new positions will focus on customer service and technology. that follows a year of record hiring that brought his head count to 68,000. 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 in this is bloomberg. ♪

>> one of the main problems in the supply chain, systemic

issues and the lack of availability it's impacting a lot of suppliers. we had the energy crisis impacting our suppliers. a lot of difficulties to find the skilled workforce around the world. jonathon: just bringing it home there. the post-covid environment, we are still in it. it is year three of pandemic economics for so many of these multinational businesses. tom: he does a terrific job of managing. with the pandemic, is not as bad medically. but everything we are talking about every day is about the damage done and what were moving on from. jonathon: were still working out the economics. as the labor supply going to come back? lisa: where is the discussion

around long covid and people who retired early and the people who died. all the questions around the structural shift from the south crisis. we are not going back to 2019. what is the new post-pandemic normal? it will not look like the pre-pandemic environment. jonathon: not to put it down, you just know that kruger would have done amazing research on this. tom: these are people doing applied economics, not theory but what's going on out there. and kruger clearly would have been there. people lean forward on global wall street from the gentleman from penn state.

dan, i was talking about scott galloway earlier. let's call it the lives for, the big four companies. $310 billion of free cash flow. what is the quality and predictability, the persistency of the big four's free cash flow? daniel: right now we are looking at 80%, 90% visibility. that is the big difference when you go back a few years ago. it's what's happening in redmond. that has been a big headline during earnings. better than feared and investors , have been underinvested. tom: should tim cook fear china? daniel: ultimately, he embraces china. he is to navigate china as well

as any ceo in the world. he understands is the heart and lungs of the supply chain and 20% of the demand for iphones. iphone demand will trump in china globally. that is what continues to move up higher. lisa: last year we talked about the interest rate sensitivity in the tech space, is it less sensitive now? daniel: new york city cabdrivers factor that in. now, when you look, investors have gotten used to it. they factor it into what the fed is going to do any eighth or ninth inning. now it comes down to valuation relative to the last five years based on growth. that is why a lot of these tech names continue to move higher. demand is holding up and you have all of that baked into the stock which is why these stocks have moved up on b plus type

earnings. lisa: you say people have gotten used to it but there has been a shift in the market since the beginning of the year in terms of where the expectations for rates are and how far the fed will have to go. when does this change the discussion around tech shares that we've seen here today? daniel: from attacked investor perspective, the cpi, ppi data, mac rose, you could have another move around from the fed perspective but there's light at the end of the tunnel. were getting to an investor environment where a soft landing or no landing looks like what we are seeing. tom: i want to ask a question we have gone over several times before.

there's a vision of where the cloud is going, what is the cloud look like 5, 10 years out? these big tech juggernauts, do they have a degree of freedom to move larger and global footprints? daniel: when you think about moving to the cloud, only 45% of work is moved to the cloud. when you look at the vision is about artificial intelligence and data. this is why you see the game of thrones between microsoft, google, amazon, apple and others diving into the pool. that will be in $800 billion market in the next 5, 6 years. tom: i walked by the apple store and i pointed to miss his keen with larry haverty who told us

all how to do securities analysis. he and i did a stand up interview 12, 13 years ago over the death of apple. is that gloom still out there? daniel: i think it's like mahomes not winning another super bowl. you just have to -- you have iphone sales all over the world. this is a rock of gibraltar tech stock. haters will continue to hate but there will be a 3 trillion market cap. lisa: we talked about the winners and losers of the tech space. what do you make of that? apple is being left in with meta and facebook? daniel: i think what you start

to see is that headcount because in you saw that with zuckerberg. along with activism, it change the value out a lot of the stocks. over the next 6-9 months more of a deviation fundamentally towards the winners and losers. any of the frothy names that continue to get sold, you have m&a dry powder and activism swirling across the board. salesforce is a perfect example. if you go 45 days ago back, that's a stock that has a significant setback because of activism. jonathon: are we now comparing mahomes to apple? daniel: i think we are talking

montana. it's tom brady like. jonathon: you can't compare mahomes to apple. lisa: you're just provoking the people who are getting to you about seinfeld. jonathon: michael mckee will be here in five minutes to talk about jobless claims. we also have michelle meyer from mastercard. just to go back to tag, the gains are just phenomenal. tom: we are all working in real time. facebook is up 18% since the report in october. is that true? i would've never guessed that. lisa: you see the biggest

rallies, it's one of the questions i have here? jonathon: they even change the name for goodness sake. something they were wasting money on at the time. but the return of efficiency for that company. that is the effort for 2023. lisa: do they change their name back to facebook? jonathon: jobless claims are up next. from new york, this is bloomberg surveillance. ♪ emerson technology detects compressed air leaks to save manufacturers, like colgate, over 20% in energy costs. go brush your teeth. go boldly. emerson. this is ge aerospace,

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tom: bloomberg surveillance, we welcome you here. what a set of data points we have seen. we will do this with mike mckee. ppi is not cpi but it matters. there's also the small matter of housing and jobless claims. mike: let's get to the numbers, they're coming in now. ppi for final demand, real change from december. the number comes in .7%.

january revised to negative 4%. take out food and energy is still up .5%. year-over-year is up 6%. food and energy core up 5.4 percent. those are both lower than we had seen in prior months. but still, a very high number. housing starts come in at one million annual rate. that is down 4.5%. they were down 1.4% in december. they thought it might go up because the weather was better. building permits up .1%. jobless claims, what you say about jobless claims? 194000 and it was revised to 195,000.

the labor market is hanging in there. finally, the philadelphia fed index takes a dive. -24.3 after -8.9 in december. i can't tell you what that's about. tom: come on is about the eagles. mike: -- lisa: there is a turn on the market. the clear conclusion is ppi, disinflation the people were talking about in the good site where is not as great as people thought. it is not coming down nearly as fast as people expected. ppi final demand was supposed to come in at 5.4% and it came in

at 6%. the revision is upward dramatically. one data point after another is hotter than expected. tom: the s&p 500 is -31 basis points. we have been in the yield curve. the full faith and credit to -80 to -82. a greater inversion with dollar weakness. i am not getting much love from the twos intense. ppi is a set of data with revision as a higher inflation regime for business. lisa: this to me is the main takeaway, inflation is still high relative to where people expected it to be. the labor market is still strong. anyone looking for coincidental data is getting the same message.

is this enough to stay that people underestimated the strength, resilience and disinflation is not happening as much as people expected. michelle: is not happening as fast as people expected. mike: people thought given what we saw in november or december the prices would come down. they are coming down but not quickly. goods prices, 1.2% rise in goods prices in the ppi prices for final demand. services only of .4%. the ppi for trade services which is they calculated from the margins from real inhalers and wholesalers is only of .2%. we see a compression a margins

and in the past that has led to layoffs which is not happening. tom: we will get to michelle meyer with information on the consumer. professor rogoff sat in your chair and modeled out 6% yield structures. bullard speaks today as shocked us with 7%. are we shifting up now? are we going out from low five to a higher viewer estimate? mike: yesterday it was 5.5, that was before today's numbers. the issue is, we have a lot of data between now and march 22. a lot of opportunities for people to press hire or change their minds. tom: michelle meyer, with her expertise on the consumer and housing.

a number of years ago, she had a sterling career with global wall street and now gives us information and knowledge with economics that you can only get it mastercard. chief consumer expert michelle myers joins us. you get the data like no other market economist in the game. what is the state of the american consumer? michelle: we are absolutely looking at the consumer with a high level of detail. what we are seeing and what we have not seen in a while is that the consumer is out there willing to spend. this speaks to the inflation data and the labor market data that the consumer still has purchasing power. if you have a labor market that is still expanding. there is still some savings buffer and access to expand the balance sheet. if you underestimate the

consumer, it has been a problem. tom: without getting into vatican secrets, are you seeing massive credit card usage and how do the increasing rates fold into your view on the consumer? michelle: the consumer is using all of their sources of purchasing power. they still have a lot of purchasing power from the labor market. you still have a lot of income flowing in, disposable income which is supporting spending in real time. consumers don't have to rely on other sources. the consumer is not strain right now, they are navigating the rate hike prices. that is what fueled the inflationary numbers we have seen through last year. the consumer has utilized savings. they have increased credit card

usage as well. you saw from the g 19 data credit has been on the rise after the post-pandemic. where people pay down their debt. lisa: the markets are slow to respond but they are starting to respond more. the nasdaq is down 1% ahead of the open. do you get the sense that people have bought into this disinflation story too much? we could see another bout every inflation that since cpi even higher? michelle: to me, a useful way of looking at inflation is to understand the different drivers some of inflation. the good news is that the supply side has come back where you have seen this repair of supply chains, restocking of retailers. retailers have been able to

return to just-in-time inventories which makes pricing easier and more transparent. we saw consumers enjoy discounts. there is a disinflationary story. for services, which will be tied to the super core that takes out housing, it will be tied to the labor market. we know there is still wage pressure and a lot more stickiness. i think it's really important when looking at inflation to be able to separate the different parts of the inflation narrative based on the drivers some inflation. i don't think the disinflationary story is over but we have to be aware that it's going to take time. lisa: what is your sense of where the market is wrong? in two years from now we will get a 3% inflation rate? is that in line with your

expectations with the consumer spending power that you see in the granular data? michelle: over that timeframe it does seem reasonable. if you think about the core codes components, prior to the pandemic those were deflationary components. price reductions and the dramatic increase in the level of prices which does not seem sustainable. a reversion to normal level seems right. the fed is committed to cooling down the labor market. if you believe in the fed's resolve which i think we should, then inflation should ultimately come down but it will take time. this whole cycle is taking time and that's what we have to remember. tom: michelle meyer, mastercard economics.

mike: i went to the philadelphia fed, thus the outlier of the day. everything else suggest substring. the headline from the philadelphia fed is -24.3 and we have seen new orders dropped to -13.6. delivery time scott longer, negative 13.6. inventories rise, number of employees has been cut in half. at this point, whatever is happening in the philadelphia, new jersey region doesn't seem to match what's happening at other parts of the country's. it seems companies are raising prices in order to meet the demand out there. lisa: the new york fed came back less than people expected. it is region by region. our people starting to question the data?

mike: they are questioning the models that underpin the data. this is not what you are expecting to see in defense of the federal reserve officials. they have been saying we will see a stickier inflation problem and we are going to see below trend growth. they have been 50% right. tom: we will continue with michael mckee. vicks at 19.32. standard & poor's, 500. two year yield is optionally higher. stay with us, from new york. this is bloomberg surveillance. good morning. >> keeping you up-to-date with news from around the world. china is questioning whether the u.s. is genuinely looking to repair ties damaged by the dispute over a balloon.

the foreign ministry called on washington to handle an unexpected isolated incident. the top diplomats could meet at a security conference in germany. some new insight on the investors on when the federal government for a payment default. the cbo estimates that it could happen as soon as july if lawmakers failed to lift the debt ceiling. the fbi reported these search files at the university of delaware which houses president biden incidents papers. the material that agents took does not appear to contain classified documents. the president's legal team said to cooperate with the fbi. mayor eric adams is reconsidering its requirement that city employees work in the office five days a week. the problem is that city jobs are going unfilled as flexible jobs could be more appealing.

the carrier has ordered 470 planes from airbus and boeing. air india says it has options to buy another 370 jets. 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 and this is bloomberg. ♪ at morgan stanley, old school hard work meets bold, new thinking, ♪ to help you see untapped possibilities and relentlessly work with you to make them real. ♪

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no matter your purpose, at pnc private bank we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why? >> the higher rates go the more pressure on weaker credits and the more the imf will have to do

a lot of running very quickly in order to make sure the servants and default scenarios don't happen. there are some discussions between the imf and other central banks in the fed saying we love you guys. tom: this is what bloomberg surveillance is all about. nasdaq deteriorates, down 1% at 3%. here's the agenda for the next 20 minutes from global wall street. lisa abramowicz and tom keep with michael mckee. damian sassower here on serious issues on the land of imf. we will talk about that in a moment. mr. mckee, go. mike: the president of the cleveland fed bringing the 50

word saying she saw a compelling case on february 1 to raise the fed fund rates by 50 basis points instead of 25. one would assume that she would carry that belief over into the march 22 numbers considering the ppi we got today. she does not think we will get back to 2% inflation until 2025 and wages are a primary reason. they are above a sustainable level. she is also suggesting, she sees weakness in the economy ahead in many of her contacts are preparing for recession. now only if that showed up in the numbers. if she were pat harker that might explain the philadelphia fed numbers. but the rest of the country seems to be moving along fairly well. tom: s&p -46. we will drag mckee into this

because of his experience with 1998 and imf moments. i have been wanting to speak to damian sassower. he is expert it buenos aires inflation, black-market pesos 300 73 according to bloomberg news. how close are we to bailing out argentina, nigeria? damien: we have to look where we were 6, 7 months ago. the imf has done a good job it and playing the playing ground. the move we have seen in credit default swaps, along the perimeter for the most distressed economies. el salvador, ghana, they've all

come crashing down, i'm talking 50, 60. the probability for the credit default swap it tells you it's down considerably. there are only six emerging markets that have a one year implied default probability which is better than where we were. it's still pretty bad. lisa: what we're seeing right now, the deterioration is notable. a 1.5 decline in the nasdaq. two year yield surging to new 2023 highs. nearly 4.67%. how much has the em trade and the willingness to extend money to developing nations has been predicated on the risk rally we've seen this year? damien: em sovereign credit, we

have seen tons of demand. investors have been adding to loans there for the better part of three months. we are only starting to scratch the surface of foreigners going into mexico, indonesia. buying a stalling on the news of the snow landing scenario. if you look at em currencies, that was a huge recovering rally in that's done now. tom: this short covering is done. we read stanley fisher, the book that came out in 1998. we have been here before. what is different this time about the imf versus other moments of rising rates folding into the school realities for nations? mike: they have gotten better at surveillance. tom: nailed that. mike: keeping track of what's going on and markets and they

have urged countries to build up those balances which they have done which makes things a little better. there's more transparency, more information out there. people can react more quickly. one of the big changes, damien will know this. you jack interest rates up when your currency starts to fall. and now, there is an individualized view on how to keep these countries has above waters. tom: s&p futures deteriorate. lisa: you seen a similar move in the to your guild. dollars turning to euro weakness. 10677. the persistency of inflation, how quick with this disinflation environment process?

we talked about china's reopening, how much is that underpinning this? there has been greater demand and less deterioration where we would otherwise get. damien: credit default swaps and china is the highest i've seen in years. there are six, maybe seven or eight countries whose correlations to china's cs. china is driving the entire complex. what is the more durable story here looking over multiple quarters? will it be the inflation story? i don't think so. i think it is a gross story. i think it's a china reopening story. from my perspective, i think you want to play those themes. multi-dollar. tom: this is an em opportunity

given the rate regime of mr. paul in the rest? damien: it's all in the eye of the beholder. do you want to fund and the dollar? the yen? tom: how do you buy 4000 square feet and buenos aires? damien: i will tell you where it's not, bermuda. talking to those who allocate money out, they have a lot of exposure to u.s. housing in u.s. banks. lisa: before we close out, as we headed to the market opening. as you parse through the data, is a take away different from the initial read? it seems this market is responding more aggressively now? mike: people are looking at

these numbers and folding them into the cpi and the economic strength and thinking the fed will have to go higher for longer. you have investors backing it up , maybe we will do it again? the fed has said all along we will need to go over 5% and do more. this is the market catching up to what fed officials thought. tom: can we do this again guys? are we on speaking terms? damian sassower and michael mckee. we have so much firepower here. futures at -45, deteriorating from -32. the nasdaq is down 1.4%. the fixes getting out near 20 level. we have a re-inversions.

-90 beats. lesson version, plus angst the -80 and we come halfway back to the -84 basis points. i guess webb saw -- whip saw. lisa: today was less of a whip saw as people parse through the data. this is what the fed has been saying. this is their own projections of the market catching up as the data reveals a reality that is different that what people are expecting. tom: please stay with us on bloomberg television radio. barry borrow will be with us at 3:00 p.m. in new york. mary barra at 3:00. i would suggest business

inflation, a little more inflating. thank you so much for watching. this is bloomberg surveillance. ♪ use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside and the other goals along the way wealth plan can help get you there. j.p. morgan wealth management. go. go lights. go big city lights. go spotlights. go stadium lights. emerson software helps clean energy become reliable electricity. go “good night." go boldly. emerson. i screwed up. mhm. become reliable electricity. i got us t-mobile home internet.

now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze-- ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. that and the paycheck.

jonathan: and the upside surprise love you, and downside supplies on top names. throw in hawkish fits becomes you get a recipe for this. angry futures are down hard. camped out to the open starts now. -- countdown to the open starts now. >> everything you need to know to get started for trading, this is bloomberg "the open" with jonathan ferro. jonathan: