>> the market was prized for a soft landing. we call this year a roadmap to recovery. >> the likelihood of a soft landon -- landing. that is all there. >> have to make a judgment on how it's going to be. >> we have a chance for a couple more rate hikes but not giving up on the disinflation story. >> if the fed wants to percent inflation they have massive work in front of them. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa

abramowicz. jonathan: live from new york city this morning, good morning. this is bloomberg surveillance. i'm jonathan ferro back after a long weekend. 8/10 of 1% of the s&p 500. i have to say a lot better once again. tom: you don't see it in the tape. i really suggest, john, we need to reset on this tuesday after the back and forth. you are good mike wilson has some real caution. jonathan: we will get to that in just a moment. going to hear from home depot, walmart, some big retailers reporting this week. lisa: i guess that is really the issue the decline in the euro sales. to me the most interesting aspect is they are boosting their dividend by 10%.

other companies think we have extra cash we are going to return it to our investors. so they did see a decline. all around, it's better than expected in many areas but still facing a lot of potential headwind. jonathan: extra staff investments start in the first fiscal quarter. tom: that's going to be the investment part. some of the headlines is pretty negative as well from 317, 318 close a long time ago, friday. you come down to a tendency of 3.09, 3.11. particularly on revenue is what i have to focus on. jonathan: the stock is negative we will pick up on that story in just a moment. the equity features negative. the yield much higher at 38767.

a lot better including from the u.k. the u.k. data improves on services. higher by 12 basis points. tom: are we up to four percent? this is part of the shift on this great tuesday reset we are having here with the youth get equities, bonds or commodities. it is a yield recess. jonathan: i couldn't agree more, tom. up seven basis points. lisa: this is a global move also. i want to reiterate basically a kind of money picture here the u.s. doing better than good the rest of the world probably less so. declines are west.

to me i think it will be interesting. we have walmart at 7 a.m. eastern. how long will we see the prices decrease to pass to the consumer? really speaking to this. at what point do we see the margin compression? today president biden is meeting with polish president and other nato allies the key here is as we celebrate, not celebrate memorialized a year of this war in ukraine how much more aid is the alliance going to provide to ukraine? the u.s. announcing $500 million in additional aid in a surprise visit to kyiv. in the u.s. we get the latest read the manufacturing and services pmi in europe we saw

the biggest jump in business activity the composite pmi in nine months and it speaks to this good news, bad news. jonathan: the manufacturing is still a little soft in europe. pmi really starting to improve. who remembers this conversation back in december take a listen. >> what we saw his two, three weeks in october. the system flattening out. jonathan: the outflows have stopped. the financial regulator is reviewing those comments made back in december on outflows what did he know? and was that an accurate representation of the flows in and out of the business?

tom: it has been a huge mystery of what swiss regulators do. all sorts of zurich and cultural baggage. it seems to be one of the ways that is very different from the united states. it would be very different. i would focus on a price-to-book 0.16. i can see to you i have never seen that statistic. jonathan: this was reading in and around 650. lisa: it raises the question, need to say that. one point are we getting misinformed to this day when they say they are retaining some of the clients? jonathan: a promise you that from morgan stanley the bear market rally that began in october is more often to a speculative frenzy.

global market strategist ben, if we could kick off by asking for your comments on that because i might see things differently. the bear market value that began in october is more often to a speculative frenzy that isn't coming. but do you think of that, ben? >> respectfully i partly disagree i think the rally is easing inflation. i think it's very fundamental. i would agree it's going to be a pause. you cannot annualize the degree of performance we had this year. in be some of the tech names we are -- which are up in average. bond yields rising and in --

just as big a measurement and i know we went out to 25 levels in december we are back about 22 points visit a outrageously >> -- we can argue it's an indicator here but we will definitely be pulling back on the risk elements of the market. if you'd be lucky enough to ride that 50% disruptive i mean, now is the moment to rotate into more cash flows. october was the low. i think it is full to mentally driven but the yields are beginning to put the ceiling on valuations.

it's now less depressed than it has been. is this a question then of leadership where you see it coming from in dish if there are is it a question of you becoming less optimistic than you have been in the past because of the challenge to leadership we have seen here today? >> becoming less of a concern now. the rally this year has been driven evaluations. bond yields rising its tone 15, 16 times. much less of an issue in the rest of the world. we are coming off 11, 12 times earnings.

there are -- they are less exposed. tom: i'm going to be rude here and take every advantage of your time as an award-winning strategist. they are in the news here and i'm fascinated if you feel you can envision a separated hsbc which generates 72 or 78 percent of profits and everything else in london. can there be separate hsbc's? >> when you have these big companies especially regulated businesses, it certainly difficult. that's been leading banks have been performing very well this

combination of interest rates and it's a pretty attractive proposition. jonathan: you addressed it. then, thank you, sir. tom: let's review this. ben laser was at hsbc he alone sort of like michael some posture then nailed the christmas bull market a couple years ago and he went to london on a separate thing we get max on he's not going to give us a straight answer. jonathan: classic i.

tom: can you imagine separated hsbc? jonathan: on the bonus pull over lowest since 2020 we have seen that from bank to bank. lisa: retained some of the talent. tom: when they raise it 10% and show record profits. say something, tom. jonathan: futures don't 8/10 of 1% to kick off of new week across the board here the data improves on the services side once again 387 from new york, this is bloomberg. >> keeping you up-to-date with news from around the world with first word, i'm lisa mateo.

vladimir putin has delivered a message on at the war on ukraine the first state of the nation address putin vowed to continue the invasion until russia has achieved its goal. he also threatened backlash if the u.s. and allies supplied ukraine with more long-range missiles. president biden is seeking dividends from his surprise trip to ukraine. the president hoping to rally support as he meets with eastern leaders in poland. shortly after a visit to ukraine, the u.s. announced $460 million in new military aid. china is urging the world to stop -- certain countries should stop fueling desire by blaming china and is saying ukraine today, taiwan tomorrow. beijing has been trying to distance itself from russia. in turkey a pair of earthquakes

rocked a southeastern province two weeks after major craig -- quakes any the same area killed more than 40,000 people. turkey government has announced it will start building about 200,000 homes in the hardest hit areas. hsbc's will consider a special payout after the sale of its canadian unit amid eight battle to break up the business. for quarter earnings rose 92%. on the credit side the banks have all suffered as expected, almost triple to 1.4 billion. global news -- global news 24 hours a day on air and on bloomgerg quicktake. powered by more than 2700 journalists and analysts in over 120 countries.. i'm lisa mateo this is bloomberg.

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>> russia thought ukraine was weak and the west was divided. he's counting on us not sticking together. he's plain wrong. when year later, the evidence is here in this room. we stand here together. jonathan: you approaching the one-year anniversary of the invasion of ukraine.

phenomenal to see the american president on president's day in the war zone without the military presence. tom: i thought it was a huge deal. we make jokes about february 20 and tomorrow is george washington's earth a but the symbolism is really tangible i thought the american media picked up on it. mostly i believe it was a signal to the allies of europe. jonathan: i think the visit itself wasn't a surprise but the timing was. perhaps he would make that visit. tom: the history of america is really sensitive. this is a country that always thinks wars are going to be short. three days worth -- short of the

anniversary. jonathan: this is probably an appropriate way to think about it it feels the war has fallen off of the radar. this is not where people thought the energy market would be. lisa: since we haven't seen a massive disruption is that really justification to say the war has decelerated or somehow gotten more result? it really hasn't is on the ground of what we are feeling. the u.s. is accusing china of potentially getting aid to russia. they were considering this. what is the fear that that could be and other escalation? jonathan: the fear is we could end up in some kind of proxy war between the united states and china. that would be something else. tom: that would be a step further as well. just a separate side.

let's jump into this. the image here with chief washington correspondent in poland today. the most important image, did you know annemarie the justification of this, in pickens world if he wants to go back before stolen, but before linden to sometime of the soviet view of the west the joseph stalin power that the leadership of poland and the polish people they want to bring the tower down. annemarie: this is very controversial. the hold the soviet union had on poland and the concern of russia and the invasion of ukraine and the border poland shares with ukraine. this is a message that will be

brought to president biden they want to make sure the security continues. they will ask for more u.s. soldiers on the ground in poland and it's not just the security of these east during -- neighboring eastern countries. it's all about financial concerns. talking about the fact that if there is not security in poland, they are concerned about how the economy can stand it. they want to make sure the economy remains open. it's a pivotal moment for president biden. also the fact that it is a signal to the polish people and neighboring eastern planks about the fact that the u.s. is in this for the long haul. tom: do you perceive that the distribution of any u.s. troops on the ground wouldn't be just troops in germany or even troops

in poland, but troops troops distributed? annemarie: what the president is going to be doing is going to be meeting with the eastern flank members eastern europe former soviet union members who joined nato following the fall of the soviet union. these are countries that have been sounding the alarm for years about the concern of russia and putin potential wanting to amend the mass. his sphere of influence but then again we are still waiting on the go-ahead from turkey to bring in nordic countries to nato. the president is likely going to mention not just resilience of nato but also the expansion of

nato under his leadership. lisa: tom was mentioning the speech about the potential provider g -- fighter jets. we did see president biden mention additional aid to ukraine in terms of what the weapons were, with the radar detection is what is the next phase of support in terms of material? >> this is fresh supplies, but not fresh new materials. there has been calls from republican senators saying at least stop training ukrainian pilots on these fighter jets. it's the right thing to do. he wants them to take the next step. ukrainians are always asking for more weapons. they want these f-16s.

that was apparent here when zelinski visited washington. ukrainians have changed in town. the ukrainian foreign minister, he said last year was about weapons. that was the message to the west. this year it's about sustainability. this is how they think they will be able to make sure they can withstand a fresher offense in the spring. jonathan: can we talk about the pressure at home? some of the criticism coming from the other side. >> this is coming from some members of the republican party because you obviously saw early february there was a train derailment in ohio, incredibly devastating and concerning. what some members of congress are saying is the president is in a foreign country giving aid to ukraine and not visiting

americans in ohio. this is definitely at the rate we are tracking. it is being picked up in u.s. media. for these members of congress, definitely something they are concerned. there are other republicans who, like mitch mcconnell, lindsey graham, they were at the unix security conference sink they want to see more eight going to ukraine. mitch mcconnell, the senate majority little things republicans do not support the aid and the fight the u.s. is taking on and the unwavering support is slightly over shattered -- overshadowed. jonathan: fantastic coverage, as always. annemarie with the latest in poland. we will hear from the president later on this morning.

the pressure to deliver more to ukraine and the pressure to do more here. tom: is speaking in russia, i believe we lost the feet. but the bottom line is he reverts back to what we talked to annemarie about he is fighting for his, quote historic lands. that takes us back to 364 days ago. jonathan: that conversation with the president coming up a little bit later, 11:30 eastern time. the president of the united states addressing the people of poland, the people of europe. futures negative, this is bloomberg. ♪ use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach.

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jonathan: coming back from a two-week loss taking more weight of this where -- rally we began three quarters of 1% on the s&p futures. bond market is not helping out. looks a little something like this yields up again by four basis points for 66 on a two-year. blame europe maybe this time around. the euro side and the u.k., better than anticipated. euro-dollar negative a third of 1%.

the ecb, maybe the boe. that was pretty impressive today and even the u.k., the conversation started. perhaps they can avoid recession too. tom: the bottom line here is a ticket back to, ok, real growth is actually pretty good with the stench of -- the substantial inflation. jonathan: that is the issue for people in markets. tom: were going to have to see. edgar morris public service to the nation a few years back and of course dr. morris on hydrocarbons, oil, the global view i have never seen from you a more indirect note that expect

the unexpected. define the unexpected out there along a burgeoning pacific rim. >> there are so many wildcards abounded that it's hard to know where to start. we can start with china preopening, long anticipated, over anticipated. now we are getting back down to reality. china make it to where the oil demand growth was two years ago. china is on its way down. it's moving out of the world's oil consumption after this recovery the demand in china and close to the last hurrah. that's for starters one of the things impacting the market. tom: i look at the dynamics here, is it a study of supply or a study of demand? which is most important to

you? >> we are in a period of time where the world is moving off of oil. we are coming out of a slowdown eventually where there is a flash of oil demand but it is stunning to look at countries. we look at the three major economies of the world. europe's demand was down before the pandemic and it's going to continue to go down. china's demand, diesel peaked in 2015. they are coming back to a level that they are going to start retreating from. we expect diesel demand to be lower this year than last year. this is a surprise from moving from natural gas when prices were extraordinarily high and for china that demand was between 300 and 500,000 barrels a day.

now that prices have come back down to earth and then you look at the united states at least in terms of weekly data the u.s. demand is down below where it was a year ago. u.s. exploits are up, significantly from where they were a year ago. partly the release of strategic oil but only because of it partly. has become by far the largest exporting country in the world. that is after the spr release was over. that is more than russia, that is more than saudi arabia, it's more than both countries combined. our supply is wake up. if you look at real liquids, oil, biofuels, natural gas liquids and running our refineries, we are at $21 million a day producing.

that is lisa: when this started. i'm curious how it diverse from the jp morgan view of the next 10 years. are you seeing demand is going down because they lack of activity? perhaps the data points to poor because of renewable energy? because of alternate uses, we have seen the transition accelerated since the pandemic. >> we have beth going on -- both going on. in china 39% of all sales is electric vehicle sales. phenomenal both in europe and the u.s. is not far behind but it is also something happening in the trade environment. we have seen treatment in place followed by what we call bill, chip, and iron.

it really moves to block trade and bring things home not only to the u.s. but it also includes some free trade agreement countries. europe was moving in the same direction and that started mimicking the u.s.. we have china for other security reasons going back. we have a retreat from trade that really started in 2018, 2017, 18. it has been reinforced with various mechanisms. we are not going to see the greater pull on demand coming back. yes, it's a little bit of both. lisa: how come you are recommending to investors this

is an attractive place to go? >> it is an attractive place to go. if you look at investments on the renewable side, they are blossoming. the issue is where to go, where is the greatest opportunity and where is the greatest thing? look at the numbers, energy transition side gotten around to $850 billion worth of investment in 2021. by the time we got through 2022 the investment turned out to be a trillion, 100 billion. compare that with oil, capital spending, it peaked in 2014 at around $800 billion. the opportunities are there in carbon capture, in harjo jen, in the areas where the new technology is working. that includes industry, it includes transportation, it includes building.

it is really high, emphasize that by the tax credits given and the direct subsidies offered by governments in the world. jonathan: and this is wonderful perspective. our apologies for the patchy connection as well. let's take a look at home depot, hd. it looks like this. down by more than 3%. these are the numbers. a decline in earnings. a tight labor market we get walmart, at the top of the hour in about 22 minutes. the longer some of these things come up in that report from the big retailer in just a moment. tom: i don't have it in front of me but the pricing power was not all that optimistic and i wonder if that is the scene we are going to see. they can't raise prices, pepsico, same thing.

can they raise prices? yes. it has been effortless. i have a function out of the pandemic of home depot from 200 to 400. right now, 305, 306. 268 the home depot level of the october angst we had. jonathan: pricing power. when it comes down what is it going to look like? lisa: walmart may be a cleaner read. home depot is closer directed to the housing market. that said, if you take a step back this is an example of how mike wilson could be right even if we don't get a recession. if you start to see real margin pressure, if easter to see a lot of these companies have to pay to keep up employees not able to raise prices on the consumer. all of a sudden you see margin pressure that really creates

some weakness for stock. jonathan: doesn't think these companies will be able to cut cost and. tom: that's the show came here and also point out the tech valuation home depot give you 18 times earnings. it's not like a 25 stock but nevertheless it's been a heckuva run but now runs into that margin angst as well. 16% it's pretty good. precast flick, pre-pandemic, now it is 16 billion. jonathan: historically equity do not typically before cutting. we never saw although before the fed stopped -- this is basically what is pointed out equities do not typically bottom before the fed advances and we never saw although before the fed is even stopped hiking. that is from jp morgan.

morgan stanley's mike wilson saying it is not coming. taking it one step further a little bit earlier this week when he said the following, we could indeed see a fit pivot but even if we do perhaps only in response to a much more problematic micro set up than what the market is looking forward to. that is the pushback. even if we do get a pause or pivot think about what we would be getting. lisa: suddenly a detail for the economy. a phenomenal story. that said, if you start to look at what is priced in people on not looking for rate cuts this year. you see a peak terminal 5.3 percent going down to 5.1% by december. a much lesser kind of different gents is with the fed keeps saying an hour stocks are seeing the message.

jonathan: it's coming out. tom: i'm studying. jonathan: how far did you go in your study? tom: i'm fascinated by, i'm an american. i don't get it but at the same time i get it. i watched season one of the netflix thing. i watched a special on michael schumacher. and, i mean, misses keene was like what in god's name are you doing? all she could hear from the library is [indiscernible] jonathan:. even better they start testing this week. tom: i'm ready. the three of us, i can see it. jonathan: is that why you have taken interest? tom: i'm looking at it. my basic take is, it easy to go from -- we need to find formula

one. jonathan: probably mclaren. tom: ford is coming back but may be mclaren. jonathan: you're going to be a mclaren fan. tom: i'm like four years behind. jonathan: futures -7/10. you decide during commercial break. this is bloomberg. >> keeping you up-to-date with news from around the world with first word, i'm lisa mateo. vladimir putin had a warning for the u.s. and its allies in today's state of the nation address. he threatened black clash if they supply ukraine with long-range missiles. he vowed to press on with his invasion. he also said russia will suspend participation in the new start weapons nuclear if the u.s.. china convince the world it is a neutral actor that can help anyone. that is coming a year after it

declared a no limits partnership with moscow. states counselor is set to visit russia after a peace proposal to end the conflict. during the first week a record in today's loans. reviewing comments made by the banks german on how outflow stabilized. apple is worth tens of billions of dollars global news powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo, this is bloomberg. ♪

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>> what we saw his two or three weeks in october.

they stop this coming back in support. jonathan: those comments of attracting a ton of attention. at the end of last year and this is what it is attracting attention this was regulator reviewing those comments that the chairman made on outflows stabilizing. that quote that basically stopped, we have gone through the earnings published this month. further outflows with tens of billions of dollars continued until at least the end of the quarter so attracting scrutiny according to reuters. down by 6%. tom: it's the way we are done we properly come dear heart came don't to .522. then we roll over here moments ago. jonathan: what is this company want to be when it grows up?

and how long have we been asking the question? 10 years? every time there is new leadership it seems they make blunder after blunder. tom: completely unfair but i think you and i in the same brown. it's been a blur. jonathan: i remember sitting there with brady 10 years ago asking the same question. we are asking the same ones now. lisa: they really have been supported by the management side. if people lose faith, that is the issue. we are dealing with a situation, the bank has lost clout in all the sectors. tom: we are advantaged at bloomberg's. that helps to have journalists writing this at. even better when he has tangible, real-world wealth management experience. before that, at a number of european banks.

you have actually sat across the table and watched assets go out the door. how does it stanch the flow of wealth management assets of the door? >> that is the big question. thinking is a business it looks like the credits we've had. the remarkable thing right now there is nothing from either. it is obviously bare. outflow actually stopped but resumed shortly after. it shows management doesn't know what's going on or they aren't able to steer the bank in the right direction. whatever the outcome from the story will be, it's bad for the bank. tom: this is completely unfair

but with your experience i think it is a fair question to take advantage of your years of doing this. forget about the marketing, the branding, the key phrases. is it simple that wealth management assets will be just sustained by the influence of middle east big money saying we own this bank, you have to put your money in the credit squeeze? >> that could certainly help. if they have a foot in the door there with the owners, that's going to help create some momentum in the area but you need asia, europe, united states. again, banking is a business of trust and if you don't have the trust, you can do all you want with your own but when investors and the people who bank with you are not willing to do this, i have very little hope for them putting up their own story. jonathan: let's talk a little

longer about the scrutiny the bank is attracting this morning and why. it wasn't just the comments, it was the timing. the outflows have basically stopped in december, we understand the remarks were made right before the closing of a capital right -- great. we know if he told them exactly the same thing and what came directly from the bank? >> we don't know that but the timing as you pointed out this horrible because it comes with the little bit bad taste in your mouth. it went ok, but then of course people not have the feeling they probably have been lied to. or even again even if they were not lying or misleading, if they were just telling people what they were saying it shows you have a management in place that is unable to make a solid prediction to help people and tell them this is where we are

and this were it's going to be and if you have that, how can you trust that bank either with your money and stock? i don't see it. that's going on for quite a while now. the cheaper the stock is going to be, the more trouble they will have to rebuild this trust. we have seen this with european banks in the past. maybe in of the change in management before you actually reach a bottom there. lisa: if they are of this interest, if they are losing client money if they are losing market share in other businesses. >> they can go on for quite a while. at some point, the ratio is 0.2 something. at some point, it may give the idea of a takeover. but, fly, why would you buy the bankrate now? you don't need to buy them. i don't see that happening. it could be in my view that the

bank is just not ceasing to exist but becoming smaller and smaller over the years. maybe not at the same pace we see right now but i think there is a relative chance that this was will never get out of this in the next 5-10 years. lisa: on one hand, you have regulatory scrutiny over misleading investors. on the other hand do they want to back a bank that is part of the national need this? >> i don't think they don't want to do this. they want to make sure it is a stable baking market. they don't want disruptions but i don't think it's going to happen. i think there is no issue of liquidity. it's like a constant decline of the bank going down. it's breaking away further and further and prices going down further. no prices in thinking here and

hence there is no reason for the regulators to support the bank. they can sympathize and watch the kind of management and just there is very little they can do. they can come up with storm strong message but from the current management and the one from before we have not seen that. jonathan: there is a 10 of bleeding this morning that's for sure. thank you, sir. breaking down the latest stock is down by 6%. another low. tk, it's up to them. we will talk about the outcome for this record scrutiny. i'm sure they have data and we will see if it backs up the comment. tom: i have the balance sheet in front of me, not the powerpoint. i give them great credit for showing the balance sheet, the traditional banking balance

sheet away from what young patrick was talking about. with equity down, i have a weight of 4.5%. 95 point five, we rounded up to 96%. i could be careful here in america we would say is this a growing concern? i do know if the swiss are saying that. what do you do at 1.98? jonathan: i will be slightly more diplomatic about it. i think it was described the way deutsche bank was many years ago. lisa: it is a systemic risk. it is probably less incentive for authorities to come in. that is what you are seeing in the shares. they are low capitalized. they are not going to be a systemic problem and that's what perhaps they are not going to be -- tom: does it further dilute

people down to 2.20? jonathan: this is in the capital resort no, tom. if it turns out that the chairman's comments were incorrect, the capital rate is going to go -- tom: my next question i want to ask, the behavior and the relationship to regulators would be the same in london. would it be the same in the united states with the fed? my answer is it wouldn't be. jonathan: patrick put it directly, the perception this morning they will come out with their own comments on the matter. a cutie futures -- equity futures and the s&p 500. a little economic data and take -- at the 9:00 hour mike mckee is going to break down some pmi. across the border including the treasury market up six basis points.

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>> the market was priced for a soft landing and was enthusiastic about a soft landing. we call this a roadmap to recovery. >> the likelihood of a soft landing, a garden-variety recession or even a hard landing, that's all they are. >> they've taken judgment on how persistent those upsides are. >> a couple more rate hikes from the fed but not giving up on the disinflation story. >> if the fed wants 2% inflation

they have massive amounts of work in front of them. >> this is bloomberg surveillance with tom keene jonathan ferro and lisa abramowicz. >> jonathan: jonathan: welcome back everyone after a long weekend, the markets reopen. futures negative. just starting out, good morning. >> smooth listening. >> how long will this last. tom: q the kenny g. just got with tom. >> listening to kenny g. >> did you? >> he plays the saxophone. >> but it's in the little trouble or tanner. >> we should get some music on the program. >> i don't think it's good to be kenny g.

jonathan: markets are open. let's get to that. futures -7/10 of 1%. keeping the sound going. yields are higher off the back of better data in america. lisa will go through the data later. we had home depot out a little bit earlier. getting on the warmer side of things. lisa: looking at the adjusted eps it's expected to be about $1.25 versus -- it's better than expected, you're also looking at an adjusted year earnings-per-share, the expectation for the fourth quarter was $1.52. it came in 1.7 one cents. beating across the board. i'm curious to dig through if using the margin pressures we sought home depot. are they raising wages and not able to pass that along. >> 3% year-to-date coming in. to 1% higher off the back of this. >> joe feldman is great saying

every big box is different, what i see here is a nominal gdp set of headlines. you've got an estimate of the u.s. comparable store sales x gasoline, nice beat up 5% to rounded up. with that she wanted with the forward vision is with this. getting some nominal gdp provision or not. >> stock down about 2.5%. lisa: looking through this and there is a potential opioid legal charge of $3.3 billion, there are also talking just in general about the situation. they're closing some inventories, lowering their inventory buys. basically fourth quarter inventory total went down 2.6%. i don't know that i'm finding some dramatic weakness here. it's clearly there facing the same pressures globally you're facing but i'll dig through the numbers. >> stocks up by 1.7%.

no drama off of that. margin pressure off the back of it they spend on labor cost. we pick up on that later. for the broader market we look at something like this. down three quarters of 1% on the s&p 500. yields up again by six basis points. the yield 10 year just short of 319. >> 3.92 as well. the inversion, it's dynamic right now but i would go to level of the core yields of a 4.66 and then out to a 10 year 3.88%. that is different than 4.00 but we are moving that way. jonathan: lisa bottom line the data is better than europe. lisa: i'm going to drive you crazy. good news is bad news in this situation. you can imagine the ecb going further.

people think it's all the more so in the u.s.. the heart of retail earnings kicks off. home depot shares lower. walmart came out and those shares are also lower parsing through the numbers to understand why the year-over-year comparative sales without gas rose much more than expected. will this also be margin pressure. cpi year-over-year you saw that hotter than expected. how much more of the consumers willing to absorb in terms of the costs that these companies are incurring. today we have president biden who will be meeting with the polish president, he will be speaking at 11:30 a.m.. what does he say in terms of the scope to ukraine and also curious whether he talks about china and china's role. we heard that. that's what stood out to me this weekend, this idea the u.s. suspects china of thinking seriously about providing aid to russia.

following up with europe we saw better-than-expected services pmi, out of europe. what do we get from the u.s.. the global manufacturing services pmi for february coming out after we saw the biggest rising euro area activity in nine months. >> the focus on europe in a big way the last 24 hours. an unscheduled visit by the president of the united states to kyiv at the under center of the war breaking out in europe. just looking at live pictures coming through from the presidential palace. awaiting the arrival of the u.s. president joseph biden. that set to take place in a moment now. >> this is hugely symbolic and i might also point out this goes back 3040 years. we go back to that era. it's not a small matter here. the polish population in america to use a scientific word is truly enormous. there is a domestic residence

here for any democratic and republican party members with the international ramifications. jonathan: for this morning, this is already about 15, 16 minutes later. we did have a scheduled bilateral meeting at 7:30 eastern time. about 24 minutes from now. we look out for headlines from that and headlines later on. we get remarks from the president. on the one year anniversary of vladimir putin's invasion of ukraine. tom: this is so important. the esteemed oxford historian expert just put out a blistering tweet where he said the prudent conversation sounded like stalin in the 1930's. you think that's a big deal for us, imagine what it's like for the polish people. jonathan: we can have that conversation, the contrast between -- the conversation lisa

just had about the data in europe, of economy doing better. what we're hearing from officials in europe taking place in ukraine which is just dreadful news. the economy is better, of the data is improving. i think on both sides of the atlantic were trying to work out how far the central banks need to go. based on where you are, where are you now? >> -- where you were, where are you now? nicola: the huge falling gas prices is a huge factor. there's a lot of pent-up orders built up during the pandemic that are being filled now. excess savings. we skirted recession this winter. and that was one of the key drivers that we were going to see ahead. i think by now with the economic

resilience we have to expect disinflation to be slower than before and as a result the ecb going to 3.75 as a peak is reasonable but i would say there's a little bit of upside risk to that. the hot seller at the ecb have taken a differing view. lisa: when i read the analyst notes before talking about the potential vulnerability of u.s. credit a central banks around the world raise rates. but talk about europe performing better even though it's contracted so much do you pushback on this, of the optimism about europe in light of how far the -- they will have to go? nicola: for sure we should expect middle potential growth may be a stagnant economy but monetary tightening will have an effect. it's possible we are going into a recession but i would say the recession will most likely be my

old. household and corporate balance sheet are healthy and there is this cushion from excess savings and pent-up orders. so i think you want -- credit is ok but you definitely want to stay in the investment-grade space, stay in the safer areas of the market. i think you want to be careful with high yield and equities. partly because in the safer parts of the market you get juice that you did not have until not long ago. so stay in the safe space because the monetary tightening has more impact. jonathan: i think you make important comments. i want to understand the credit risk safety of sovereign debt in europe. do you see an inflection point at some point. pricing of high terminal rates, stickier inflation as well. is there an inflection point where things get to a certain level where we start to think

about credit weakness again. jonathan: at these levels -- nicola: at these levels of yields certain countries including italy start to be challenged. i would say compared to a few years ago if you things have changed in europe. significant fiscal deliberation by the recovery fund. the ecb has shown is a letter of last resort when push comes to shove. and also euro skepticism more broadly has gone down as a political theme across the region. as much as the sustainability becomes an issue, of these factors are going to anchor the sovereign debt markets in better ways. we could have a bit of a widening of several spreads but i wouldn't expect those prices and the environment going forward. jonathan: thank you very much on this fixed income market. the major risk.

if you are pushed into a situation of fiscal dominance for the central bank has to come in and contain bond yields even if inflation will be stickier that's good to be the big call for real currency, currency implosion in certain places. i think we saw a test case of that in september. and the central bank had to step in because of what's happening with pension funds. that's good to be the bigger risk for the year ahead. tom: the big risk is to overlay all the central banks as one dramatically different. i think the euro we overestimate the ecb is like the fed. jonathan: totally agree. chairman powell doesn't have to -- do with ptb's in the italian bond market. futures down 8/10 of 1%. this is bloomberg. ♪ >> keeping you up today with news from around the world. vladimir putin had a warning for

the u.s. and its allies in the state of the nation address. he threatened a backlash if they supply ukraine with long-range missiles. putin vowed to press on with the invasion and said russia will suspend its dissipation in the new nuclear weapons treaty with the u.s.. president biden is seeking dividends from his surprise trip to ukraine. hoping to rally new support for the iranian efforts against russia as he meets with eastern leaders in poland. shortly after the visit to ukraine the u.s. announced 400 $60 million in new military aid. china is urging the world to stop saying taiwan is next after ukraine. the foreign minister says certain country should stop feeding the fire by saying ukraine today, taiwan tomorrow. beijing has been trying to distance itself from russia, portraying itself as a neutral force for peace.

in turkey earthquakes rocked the southeastern province two weeks after major quakes in the same area killed more than 40,000 people. mondays quakes killed at least three people and injured more than 200 others. the government has announced it will start building about 200,000 homes in the hardest hit areas. home depot forecasting a decline in full-year earnings. the outlook signals a slowing and do-it-yourself earnings at the retailer. home depot spending billions to increase hourly wages. global news powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo and this is bloomberg. ♪ if your business kept on employees through the pandemic, getrefunds.com can see if it may qualify for a payroll tax refund of up to $26,000 per employee. all it takes is eight minutes to get started. then work with professionals to assist your business with its forms and submit the application. go to getrefunds.com to learn more.

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up. tom: the history is extraordinary in this move from ukraine over to poland across that border with mr. putin speaking in moscow. all i can think of is not that it's back to my youth but the answer is we didn't imagine this . two years ago, certainly before crimea in 2013i -- for those of you on bloomberg radio, a very traditional meeting. john, it's 700 miles north from warsaw to helsinki and that's what this is about. jonathan: you said it's a situation week couldn't imagine a couple years ago. for a lot of people even 12 months ago when this war started there was a real hope we could move on quickly and here we are 12 months later still talking about this in the kind of things that were red lines aren't

redlines anymore. battle tanks to perceived -- to ukraine were perceived as not only unthinkable and escalatory step and here we are. now there are people having discussions about sending jets. >> for the international audience, there is a codified reality and this is around the presidential birthdays of lincoln and washington that a war that's appropriate in america is four years. we were weaned on that. world war ii was a bit outside of that for america. edging onto five years but the more recent wars have dragged on. there's a huge sensitivity now in america that a one year war becomes a normal four year war that comes outside of that as we seen in recent efforts in the last decade. >> it comes down to the decisions of vladimir putin. tom: which was reaffirmed today and real worry in the administration that's come to

light in the last couple of days that they are concerned the chinese communist party may well begin to contribute to that russian war effort. >> tom: people watching on tv and listening on radio we have a wall of tv's in our studio and i pretty much see mr. putin selling to the domestic media and russia every single morning. putin is out there every day reaffirming his message which to poland has a different tone and to washington. jonathan: that bilateral meeting about to begin. we may well here a couple of headlines later this morning. 11:30 eastern time is when he's scheduled to make remarks. >> this guy is different. we are going to go to anne-marie right now. this president of poland standing with the president of the united states, he has a true affinity to america.

>> he certainly does ahead of president biden's trip he was talking about the fact that he wanted the u.s. president here and welcomed him here because he says it's a show of force and a sign not just of the sport of ukraine, they obviously share critical border with but to the polish people. it's a country that's welcomed so many of these refugees that have fled ukraine in the wake of putin's invasion. you look at prewar levels of the population of ukraine over 40 million people about 30 of them just a third of them have fled. it's a security concern. poland wants to make sure the u.s. is ironclad with that security support. as i mentioned in the last hour not just because of the obvious security issues. poland wants to make sure it's a safe place for the economy and the business to thrive as they are dealing with his neighboring

border. jonathan: looking -- tom: looking at the leadership of poland how are they distinctive from other eastern european countries, what is the polish distinction of the budapest nine? anne-marie: there's one clear distinction. that is that poland has been very steadfast in the fact they've been pushing the european union to do more when it comes to sanctions. if you just look at the energy landscape that's changed dramatically over the past 12 months. this is something biden in march when i was at his speech last year talked about. he said one thing was clear he wanted to make clear to europe in that speech, you have to end your dependence on russian fossil fuels. poland has ended a lot of it but 10% of crude comes from russia and this is because of the pipeline. russian crude is still flowing into europe. regardless of other eastern

european countries who say that might be needed, a poland is willing to have the sanctions and ended for good. the issue is the contract. they are out front speaking heavily about the fact they want to end all ties with russia while you see others potentially want to keep some business ties intact. lisa: i keep wondering what would germany say or do. it's really saying increase sanctions, the potential restraint on the russian economy. what would germany do if china took a more direct stance in helping russia as the u.s. administration is concerned about. how much pressure is there building on germany to take a harder and more public stance to support its allies in the u.s. and poland. annmarie: i think the united states, and they've been talking to their allies whether the munich security conference or behind-the-scenes. today and tomorrow in poland about what china is doing and we

just heard about an hour ago from the secretary-general of nato really repeating what the secretary of state set over the weekend which as we see this nonlethal material support coming from beijing to russia. he taught -- what he told cbs news as they are seeing concerns potentially information beijing is preparing to send lethal weapons to russia. this will be a difficult moment not just for germany but for the world. while of course russia and china are close. this has been setting the stage for years but obviously last year they decided to announce this no limits friendship even years ago 2018 xi jinping said president putin is one of my intimate most best friends. it's not lost on beijing the trade beijing has with moscow dwarfs what they have with the united states or germany. this will be a very difficult line for beijing to walk especially now that they're proposing this piece plan out in the front and they're still

making sure they're keeping communication with putin. xi jinping has spoken with him four times since the war has broken out. he's yet once called president zelenskyy. lisa: germany depends on flows and trade with china. how much cohesion is there among western allies to take a hard line with this. annmarie: i think what you're seeing is the hard lines are coming behind-the-scenes. this was also off of the acrimony between beijing and washington, the alleged spy balloon. there's big tension between washington and beijing. we also had in the past few months olaf scholz head to china. this is a difficult moment for these western countries trying to potentially diversify out of china. all of their economic prospects, much of it is reliant on china. i think what you'll be seeing is these meetings where they take a tough line on china and try to

make sure beijing does not step over that line. sending that lethal support to russia. that would be a line that would be very difficult for the allies to ignore. jonathan: any idea what congressional support for this would look like if there was a real risk of a proxy war with china. annmarie: it's a great question. as we've talked about for months , you would be hard in washington dc to find anyone who does not want to take a hard stance on china. so i think what you can see there is this would tip congress into wanting to fund that support. we've seen time and again from republicans and democrats as they want more to be done in combating china and send more support and aid to taiwan as well. jonathan: thank you for the coverage there.

it's a different question not talking about the economy and we are talking about reaction. tom: i'm looking at the feed here from putin's speech which has had less coverage because the pomp and circumstance in warsaw and it's interesting to see other historians saying the word that was used was alternate reality is what we are dealing with here. i think there should be more attention to what mr. putin said in this lengthy speech. jonathan: equity futures down. bond yields a little bit higher, economic data in europe better. u.s. data still to come later this morning. ♪ at morgan stanley, old school hard work meets bold, new thinking,

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jonathan: two day losing streak on the s&p 500. a slight loss last week. adding to those losses this morning. we are down by 8/10 of 1% on the s&p and the nasdaq. walmart, home depot lisa will get to that in a moment. the bond market looking like this. yields up five basis points having a look at the two-year. have a look at 390 on the 10 year. 809i guess you can call that. the focus on europe so far.

there is a real conversation about the u.k. avoiding recession. europe avoiding recession. the bank of have to do more. euro-dollar negative one third of 1%. lisa: you pointed this out it was better than expected services pmi data, weakening versus the dollar. people are expecting it to be better in the u.s. are the tightening cycle is going to be that much faster than people expected. the delta between the euro tightening. let's talk about the earnings we've gotten. they point to margin pressure, not being able to necessarily game out how to maneuver and what's a macroeconomic environment. lowered by more than 4% after forecasting a decline of four-year earnings-per-share. they're also spending on increasing hourly wages. wages up not being in the past along to the consumer. walmart we've been parsing

through they had a disappointing view forward in terms of what the profit expectations are for 2024 and parts of this year. to put this into perspective walmart saw the largest sales volume in its history in december. it's people not necessarily having demand. not just with the cfo is saying. what will be the effect of fed tightening on the consumer balance sheet. we feel good about how the core businesses operating. we are being cautious with the macroeconomic outlook. >> it's been very difficult as a retailer to understand these realities. they got all the inventory at the wrong time. talking about goods disinflation, that's happening at the same time the labor market is still tight. the margin story for a company like home depot. >> how much do you get this feeding in which you can get an economy that doesn't rollover while also getting margin

pressure that cause e-cig a significant issue -- that causes an issue for stocks. meta going to charge for verification of certain users. it just speaks to the more efficient leaner, meaner machine. i don't know all the details of it. jonathan: willing to hand over those details to meta-. lisa: how much are people willing to give because in essence there's a whole theory that we are already giving a data and that's our payment to them for the service they provide to us. now to pay on top of it what more do you have to give. jonathan: i get the verification importance but how you go about it and whether you trust the platforms with that kind of information. tom: what i'm hearing

consistently from everything including lisa's good conversation is we don't know. that's just simply where we are waiting for the jonathan ferro march through the rest of the night. here to talk up mr. wilson. jonathan: a tough couple of months for anyone who wasn't long exit -- long equities. mike wilson pushing back big time. the s&p 500 could slide 26% the first half of this year and he said this. the bear market rally in october for reasonable prices and low expectations morphed into a speculative frenzy based on a fed pause pivot that isn't coming. if you haven't read the note that came out sunday, please do. it's about climbing everest and going to thin air. and making poor decisions. it was a fantastic read. lisa: i love the death rally or

death place he called -- the death zone in terms of the other rally. tom: i thought you were talking red sox baseball. jonathan: don't they have -- lisa: don't they have oxygen? jonathan: if you stop moving it's kind of over. i've heard some horrible stories. i don't think i'm brave enough to do anything like that. people are in these long lines, it's very strange. lisa: the commercialization -- jonathan: of climbing everest. lisa: tom, road trip? tom: friends have done that. it's harder than you think. jonathan: so i hear. tom: it's not a rich kids -- jonathan: i think that's what certain rich kids think it is. tom: we will get the wheels back on the track.

i've really been looking forward to this, a -- when they sit around the table at federated they have a little bit of experience. i want to look at the experience of over the decades the simple idea that if rates go up we are all going to die. how do i stay in the stock market if nominal and real rates go up? >> if rates go up, depending upon where you are in the bond markets you could lose money on bonds. we think rates really have peaked out here so we don't think you need to worry about that so much. what you need to worry about is the debt that's going up. we have a lot of experience at federated hermes. we go back and have been around since the 70's and i liken this to the 1970's where there is

stubborn inflation, you have maybe not a wage price spiral but a problem that will last longer than many expect. they should be defensive. tom: your work at carnegie mellon, it's simple. you look at the x-axis whether it's arithmetic or log. if it's going to be longer, how do corporations adjust as we sit with walmart and home depot today. how do they adjust to the world? linda: profit margins are getting hit but sales continue to go up and earnings are surprising to the upside. that's kind of what you see normally in an economic cycle and is a get stronger people have more money to spend and demand of a pay margins get hurt. but it goes up. you're not at the front end of the economy for the cycle. you're on the back end and that's when the fed continues to

raise rates. we will agree that the fed is going to raise rates. that's not the issue. the issue is how long will they stay up. how long will bond yields be up and last week's cbo information came out, we are going to have at least $22 trillion more in data in the next 10 years than they thought just last may. if you have a three to five year perspective then you have to be sober amongst all this formal activity we are seeing. lisa: what's the distinction between the caution versus death zone? linda: i think the death zone is a tough one to call. for this year in particular. the consumer is extremely strong , a company's balance sheets are extremely strong and all we are doing here and around the world is balancing around the gdp. the longer-term is a malaise

type question. our days can be saved by the mass of millennial and gen z's coming behind these baby boomers and they will be extremely productive. our country are the best in the world for the long term. we need to get our act under control or there will be a forced austerity by the way of a weakening u.s. dollar. lisa: how do you express caution but not armageddon? linda: -- tom: linda froze over the gloom. jonathan: saying nothing. how do i express caution without coming across -- tom: going all armageddon there. that's it. jonathan used to do that to me. he did the buttons so my mike

would click off. jonathan: yeah. lisa: it's sort of like kids when they are doing remote schooling and they pretend to freeze. jonathan: linda brings up -- tom: linda brings up a good point, it's malaise. and the fear that we -- that we malaise through q2 and q3. >> you think a bit to make a call based on the first half of q1 that we've just had. tom: lisa don't you think malaise carries a little bit of ground between the surveillance death zone and the optimists that are out there. lisa: i'm not saying i'm calling for armageddon or i think that's the case. a mike wilson view of the world which is a 26% decline to 3000 on the s&p versus what you see over a jp morgan or even bank of america. michael sees declines of 7%.

that's a bigger decision. is it a leadership question, is it the depth of some of the earnings compression, the margin compression people are expecting to see. linda was talking about the potential for people to keep spending. they are spending but they want deals. they are not necessarily looking. we saw that last week. she was saying people are looking for deals, they are buying on sale. that's not good to be great for these margins. tom: there's never been an ed hyman death zone. he's a wonderful optimist in the american economic experiment. i want to make clear and we heard it, john stoltzfus has done two notes calling this a baby bull market moments ago. there's a whole group looking at this as an american innovation zone. jonathan: the short answer, all

of the above. coming into this year we've been hoping the process had started. it was about a question of whether that spread to services and how quickly that took place. now were having a conversation whether that picks up. that's a change from where we were. no you're faced on february asking a question, it is february confirmed january. if we get another big payroll report that's, communicate to a lot of people that there was more signal than noise in the data and then we have a completely different conversation. lisa: it's good to be a huge concern for the fed. jonathan: i remember bear grills didn't -- did a speech more than a decade ago when aberdeen -- i was in tears as he started to describe the death zone.

it was heartbreaking to just sit there with tears coming down the face. seriously emotional, it was just amazing. futures -8/10 of 1% on the s&p. this is bloomberg. >> keeping you up today with news from around the world. vladimir putin suspending russia's observation of the new start treaty with the u.s.. putin also warned the u.s. and its allies not to provide ukraine with long-range missiles. china is seeking to convince the world it's a neutral actor to help end the war in ukraine. this comes a year after they described and no limits partnership with moscow. they are set to visit russia after floating a fresh piece proposal to end the conflict.

in the euro area business activity rose at the fastest rate in nine months in february. that's raising the likelihood that the block could avoid a downturn this quarter. france and germany -- shares of credit suisse hit a record intraday low when it was reported switzerland's financial regulator is reviewing comments made by the banks chairman on outflows that have stabilized. results showed outflows for tens of billions of dollars continued. global news powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo and this is bloomberg. ♪ get help reaching your goals with j.p. morgan

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works disinflation. the fed still has work to do. we are doing another 75 basis points from here with no cuts until 2024. >> the chief economist at goldman sachs looking for a higher terminal rate last week. coming off the data in america. cpi last week feels like a month ago. welcome back after a long weekend. equity futures look something like this. minus three quarters of 1%. the earnings not helping. home depot a little bit earlier go first, they forecast a decline. and an extra spend on the labor story increasing wages for staff at a tight labor market. that stock is negative. home depot down. walmart about 50 minutes or so ago. initially the first read seemed ok.

then the reality strikes. talk to me about the reality. lisa: fourth quarter fantastic. the biggest sales volume month in december and walmart's history. a disappointment to 2023 and 2024 with the cfo saying if feel good about how the core business is operating. there being cautious about the economic outlook. and what is that american -- what is that outlook. is it price increases because of the savings coming down. >> there's a lot of unpredictability. that's for sure. >> it's down 4% but within a zone here. the question is the support we've seen in october. this is something we love to do it bloomberg surveillance and that's talk to security analysts with esteemed experience. joining us now with credit suisse to say she's an analyst

barely describes the trophies on the mantelpiece including the very challenging star line awards. thank you so much for joining us today. i want to stop -- start at the top. when you look at unit price dynamics and big retail what are they look like? >> thanks very much for having me. i think as you said this is one of walmart's better quarters on top line. the issue is on bottom line. and that translates into the implied guide for the p&l for calendar 23. we have two big box retailers today, slightly different tales on retail. walmart clearly seen trading in but walmart also seeing a higher cost serve as is home depot. that's the biggest question

these essential retailers that have all benefited for the last three years. what is the sustainability on actual operating costs and margins relative to topline growth that they've sustained and just appears there's a higher cost surge. >> do they use traditional retail management practices to adapt and adjust and it back-to-school holiday season or can karen short say this time it's different for big retail. >> i personally think this time it's different for big-box retail from the perspective we were very neutral on almost our entire coverage when we initiated and i think the issue is some investors believe the top line naturally flow through to a higher margin structure and i don't think that's the case.

retailers are going to face is it's a higher cost to serve. and margin structure may be very similar to pre-pandemic levels. because costs keep going through . walmart called out earlier prior to reporting on labor and home depot did today in terms of their billion-dollar investment in labor. margin structures may not be any better structurally than they were pre-pandemic by 20, 30, 40%. lisa: is this a story that goes across the retail sector using the same margin pressures and walmart, home depot or is it more on home depot and less on walmart do not necessarily be consistent? karen: i don't think it's consistent. i think what you have to look at is some retailers really leaned

into this during their sales game so tractor's for example really leaned in and did not flow through margins. in their margins hasn't really changed. it did not change much even with a much higher sales base. other retailers definitely harvested and i think what's catching up for many retailers is they should never harvest your sales gain, you should reinvest in the better ones have reinvested. they announced that several weeks ago, home depot announced another wage investment. i think retail investors are going to be shocked by the fact those massive margin increases through much of retail will be completely imploded and probably

be down relative to pre-pandemic levels because the costs to do business have gone up. sales are higher. jonathan: margin structures will be better than pre-pandemic. let's lean on something else. you said they're coming off a bigger or smaller revenue base, what are the retailers around there that can offset some of the margin pressure? >> obviously my coverage is essential retail so i can't comment across much more discretionary but within my coverage, i would say the club stores if you take a costco, they are deleveraged -- their leverage point is so much lower because their costs are lower.

they probably have more ability to retain margin improvements. but the rest of the retailers i think you have another investment cycle coming. if you have that for the dollar stores obviously walmart and home depot they will have that. i think you'll probably get that from target. i just think across the board there is another investment cycle coming and i don't think you -- i could point to many retail names i cover that will have above even for eps even if sales are flat to slightly up. >> amazing to catch up with you. just a snapshot, that line that popped up, the cost of service going up. lisa: we are seeing that with wages, with all the potential and whatever else.

it is also another investment cycle payment. this is the clash of the economy in the market. on the economic level everyone was asking companies to invest more, to pay more and that's it a few more spending power and momentum on the consumer side. on the flip side it will be at the expense of margins. at that point can you see a negativity for market story while it's a positive. jonathan: i was thinking the same thing at the same time. if your president biden you probably like what you just heard. if your long the equity market you weren't too thrilled about it. at this point the president cares about that more than what people in equity markets are thinking about. >> can we see beyond to some kind of new normality of 3%. if we get the rate structure down. maybe we don't get back to what we knew and 2019 but something

new kind of like 2019. they've adapted every single cycle. >> the cost of service going up because i think the labor market is tight. 3.4%. lisa: if you look at real wages they've been pretty deeply negative for a number of years since the pandemic not just in the u.s. but around the world. if there's a tight labor market people demand more just to keep up the quality of life. tom: there's different parts of the labor market. if it's a rich session, we saw that this week. but every single one is different. jonathan: just got this email, karen short at credit suisse can you find karen long please?

i'm sure that's not the first time she's heard that joke. this is bloomberg. ♪ ♪ welcome to a new era of flight.

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>> the conversation is shifting. are we getting a reseller -- acceleration. >> frustrating both the bulls

and the bears. >> focus on quality, the companies that manage margins. the story of the year's wages. >> missing out on what will ultimately be -- >> this is bloomberg surveillance. >> good morning everyone. welcome to a four workweek around the globe, of the death zone we are in and maybe the optimism for it. it will bring us some optimism no doubt but what we've got now it's a toxic stew as i've heard for the last few hours. >> mike wilson and morgan stanley things are and that so-called death zone. the equity market going lower. j.p. morgan said even if the addicted, it's probably because

the data is bad. this morning, data is good, yields are up data is better in europe. >> life goes on and i heard that. it got picked up on twitter. there is a huge uncertainty from the death zone to the optimism of the hoover bulls to the malaise of the moment. jonathan: there's a difference between a better economy than expected and a decent equity market and picking up on that story the perfect case study is what's happening with walmart and home depot. >> sales did phenomenally in some ways reporting better than expected sales numbers. but the margins not there expected for that going forward. how does that shape the narrative? they can pass along the costs to keep workers and investing in their infrastructure. tom: we saw this with president

biden in poland as well, i think underplayed here. the better tone out of europe, of the move forward with great uncertainty came from mr. putin in moscow in his lengthy speech that's been underreported and how that reflects the earnings and financial tone. jonathan: you have to talk about the economic data. it comes on -- if you want a source of volatility may be it's the fed minutes. i wouldn't typically say that. they come out at 2:00 p.m. eastern time. will this be a platform for the doves or hawks? if you asked me when chairman powell said look to the minutes i would've said that's a platform for doves. there was response to a fed pause. now you've heard from them talking about the prospect of 50. does that come up.

does a conversation about financial conditions,. he's meant to represent the consensus on the committee unless you have the risk for him to communicate. but does that come up in the minutes for the news conference. basically they pushed back -- they didn't push back at all. lisa: basically saying this is where we outline what we will think. how much do they massage the minutes than they would have had. they can really give some guidance through the way they characterize the discussion. jonathan: massaging of the meeting. lisa: give a message that perhaps it's more hawkish than how it came off. they can give a different tone if they see the facts are somewhat different now. jonathan: do you think the chairman said redacted that. lisa: i'm not suggesting that. they can emphasize certain points. based on how they see the market, how they see the conditions.

tom: i think you are way over analysts. my question is i promised you all read the minutes but do i read the minutes or watch man city. jonathan: liverpool, real madrid. tom: what is it like to have one of the great european teams visit the great stadium, what's it like. jonathan: it's a very special stadium that a lot of people, you notice the beginning, teams don't like going there. i think that becomes psychological for the team to convince themselves it's not a great place to go and they underperform and they don't like going there. it's good be fascinating to watch that. tom: we will have to see. our guest has a lot of experience.

just to see what they do but what i love about it, he's looking at this year as an anomaly. jonathan: let's talk about that. multi-asset strategy had at state street. what are you looking at this year as an anomaly. >> it's going to be an unusual year. i think markets starting after the payrolls number in the retail sales and cpi, of economy is going to stay strong probably into q3. the consumer in the u.s. is in a good place. recession talks, soft landing, but the point is u.s. consumers are not really affected by higher rates. in other countries as rates go up that hurts consumers straightaway. what were seeing on the data is

not happening here particularly when you have such strong labor market. tom: what's so important is how do we participate in the stock market, whether you're doing it through funds or active management or individual stocks. how do you participate given the death zone that's either here or out there somewhere. >> honestly right now i wouldn't participate. my view is i would agree. i think stocks got ahead of themselves and price that goldilocks soft landing. it's nonsense. the fed is going to keep going. i think i'll go through june or maybe july. so i wouldn't be participating with the stocks right now. we've had what i think was a real significant bear market. i would not rule out a return back.

lisa: this is an idea people can get behind. one thing you do say that is counter consensus is you think the dollar could strengthen considerably. how much of a pain trait could that be considering everyone said europe is the place to be this year. lee: it's not true in europe, it's not true in the u.k. or anywhere else. so while others fall by the wayside as consumers take the hit for the mortgage payments hike, we see week data elsewhere i think you'll see separation and that will drive that higher. back in october we saw a massive overweight on the dollar looking at indicators now it's about a third of what it was in october for institutional investors. that means there's potential to rebuild those and as you say it's a huge consensus against the dollar now.

i think it's good to be really painful over the next six months. i think we see that rally back, maybe not to the highest we are at but the euro in the low 101, 102. i think it's perfectly reasonable. lisa: does that make u.s. assets more attractive than europe. is this going to be a reversal of the entirety of the first month of this year? lee: i think it is. e.m. is an area where everyone's been desperate to buy it. i like selling the dollar at some point it would be a great trade. buying it at some point will be a great trade but everyone's going in prematurely on the basis of that goldilocks scenario which is starting to unravel but maybe january was one off, maybe the big data is coming. if it doesn't all of it that's been piling into em will get hurt. at some point it's good to be a

great trade. jonathan: that number, the duration of them leaves so much longer than what we see in the u.k. in europe. talking two to five years. something like that. talking about fixed going for decades. what are the consequences of that. a generation of people longer-term mortgage. lee: it does mean people don't move but what it means is the fed's job is that much harder even if you look back in the 80's, the last time we had inflation issues we've got now only around 50% of mortgages were 30 year fixed back then. now you've got 91% and not only that most people, a lot of people refinance during the pandemic to much lower rates. if you look at debt services costs they are lower now than they were before the pandemic. even with rates where they are.

mortgage debt payments are lower than pre-pandemic. jonathan: do they mean decade-long lags? lee: this is the thing, the impact is going to be much more drawn out because you're not hurting the majority of people. you hurt your activity, a home sales or car sales but if you have your house and your car all at fixed rates, nothing changes. that takes a long time. tom: is he this gloomy because liverpool is in eighth? jonathan: they are not doing well this year. do you want a prediction? lee: i think they're going to win 2-0. jonathan: what about the return leg? lee: that's good to be 1-1. jonathan: good to know.

[laughter] headline across the bloomberg in a moment. of course on this market. those sound pretty long. >> i've always had trouble. i've never heard that cautious. jonathan: getting gloomier. lisa set earlier can you help me understand and communicate the difference between skepticism -- [laughter] lisa: caution. that's for the tenure of the notes. the death zone. jonathan: this is bloomberg. >> keeping you up today with news from around the world with the first word. vladimir putin is suspending russia's observation of an attribute with the u.s..

the last accord limiting their nuclear arsenals. putin also warned the u.s. and its allies not to provide ukraine with long-range missiles. president biden seeking dividends from his surprise trip to ukraine. hoping to rally new support for the ukrainian efforts against russia as he meets with eastern leaders in poland. shortly after president biden's visit to ukraine the u.s. announced 400 $60 million in new military aid. in turkey a pair of earthquakes rocked the southeastern province two weeks after major quakes in the same area killed more than 40,000 people. monday's quakes killed at least three people and injured more than 200 others. turkey's government as announced they will start building about 200,000 homes in the city. walmart came out with a profit this year that fell short of estimates. that signals a cautious outlook for the world's largest retailer after last year's performance

was heard by a surge in inventory. earnings will fall by as much as 6.2% in the current fiscal year. home depot forecasting a decline in for your earnings. the outlook signals a slowdown in do-it-yourself spending at the home improvement retailer. home depot is spending $1 billion to increase hourly wages in the tight labor market. global news powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo, this is bloomberg. ♪ we all have a purpose in life - a “why.” 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?

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>> i do not think they can get cpi to 2% without crushing the economy. 2% is not the right target. when you have so much stuff going on in the supply side you need a higher stable inflation rate. jonathan: fascinated to hear those comments on friday. the chief economic advisor and bloomberg opinion column -- columnist. the story here is he believes the least worst option now that the federal reserve can take his except the higher inflation rate not because he thinks it's good,

he just thinks the alternative idea is even worse. ultimately you have to crush the economy to get down to two. lisa: i listened carefully. he doesn't think it's a good idea to raise the inflation but there isn't necessarily a better option and this goes to the atom line of thought. to the telegraph or does it become more accepted. as they see inflation, down but not as much as they'd like. jonathan: he also set at the last meeting they should go 50 but they go 25. it speaks to the idea perhaps they should. >> even people who thought of a soft dish landing and there was a significant disinflationary force start calling for potentially 75 basis points more rate hikes or the basis point hike. tom: he echoed greenspan in a measured way and measured is different than the emotion of

the junk conditions out there. >> january change the conversation. we said this a few times. it's too early to draw conclusions. in this market we don't have that luxury. we have to wait to see if they can fulfill what we saw in january. >> right now quickly a note from oliver, he reaffirms an outperform walmart. this is a joy, it's incredibly well-timed. he's with the bank of england or was with the bank of england and we won't ask with the bank of england is declaring victory but spencer dale has a unique portfolio to bring to us today. not only his work in economics. also here with his work with british petroleum group. he's been someone who supported our economics for years and we

are thrilled we can dovetail what bp sees out there with the heritage of british petroleum. i thought oswald bernstein was great on the day bp said we will have to walk away from all that we did in russia. how big is the turmoil right now and global oil like a year ago when bp said we have to walk away from russia. >> i think the oil market remains very uncertain but the biggest surprise over the last year is russian exports of crude haven't changed. you look now compared to a year ago they are pretty much unaffected. where they're being exported to has changed. a lot of it's going to europe. we see in a most massive shift away from europe particularly with the ban into india and china. overall flows of russian oil pretty much unaffected. >> everyone has to lean forward in the annual survey.

what is the distinction we have to know about mr. putin and the cash coming in. >> we spent a long time thinking about how the war may affect energy markets. i think the simplest way to think about this if you sat in the boardroom of bp or government officials around the world a year or two ago all the conversation was about the importance of decarbonizing the energy system. that urgency stays but the war has been a collective reminder about the other things energy systems need to generate. and you also need to give energy affordability. you put those together. energy economist will have to talk about security, affordability and sustainability . we can solve a try lever but the importance is you need to balance all three of those different elements if you'll have a successful and enduring transition. there was a danger that prior to

the war the world will be focusing on one enemy and had lost touch with those other two. lisa: he was talking about a pretty radical view the chinese level oil demand may be close to its peak and is on its way down because of the trilemma and the difficulties other economies are trying to solve it. spencer: in the near term everyone's been surprised by the pace at which china's relaxation and covid policies happened and so they've used up their views of oil demand growth this year. so the story if you look at most people now consensus out there would have all demand growth. of that half of that is china. the story which i guess relates to ed's peace. we think about energy security countries worry more and more about it. the natural instinct, reduce

level of inputs and instead boost my domestic. for many parts of the world including in china is non-fossil fuels. so it's nuclear, it's hydro. most of the energy you import particularly in china is oil and gas. it's one of the stories in the outlook we think the war is there to accelerate the energy transition because of the security effect, a booster domestic renewables and that has a positive. lisa: it's an important point when people look at commodities. if it does well supposedly oil prices should go up. are you getting on board with the idea oil prices can stay low even within a decent global economy because of these alternative forms of energy. >> one is alternative forms of energy. we've also seen a key factor

which i think helps to balance markets in america in terms of u.s. title and the nature of those businesses. at one point they were able to act as a moderating force on oil prices. the nature of those business models has changed now. far more focus on giving returns back to shareholders. reinvesting less. i think that's because the price at which rates start to come on a higher than they were a year or two ago. jonathan: where does core consumption fit in here? lisa: in the very -- spencer: in the very near term it's gone up. further out i think we are seeing the story in europe of a mass movement away from that coal and have seen significant reductions in coal-fired productions in the u.k. and europe. that trend won't go away. jonathan: the streets a bit

behind on europe's better performance. the fact whether it's been milder. do you see that the winter after that? spencer: the underlying story is still europe and the global market in some sense we got a lucky break this year because the weather was mild. next winter and there is no guarantee that will happen. so the market remains fraught. there are some signs in terms of the residential heating and in terms of the way businesses are using natural gas in europe that that's declined. some of that may persist but the underlying vulnerability that europe needs to import its gas via global markets rather than by russia means that that's their. prices today, they've come down a lot. they still double what they're used to be.

about five times higher than in america. there's a risk that it can go higher if we see the cold winds. jonathan: you can do -- spencer: i think chelsea is just a waiting game and i'm fully behind the team and i think this time next year i will have a big smile on my face. tom: can you get us into the bp box? spencer: i wish. jonathan: let's do this more often. equity futures right now down 9/10 of 1% on the s&p. we catch up with stephanie roth of jp morgan and keith lerner of truest. ♪ than the business you're in. (robot whirring) want smarter factories? that's the internet of things business. accelerating r and d? data science business. hey. have a look. managing global supply chains? shrink our carbon footprint business.

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tom: "bloomberg surveillance," much going on right now in poland. an historic meeting that harkens back to another time and place, the president of the united states with the allies of eastern europe. in the battle of ukraine -- the warm ukraine i should say. this is an extreme remote for those -- the war on ukraine i should say. this is extremely important. this is ally reaffirmation. lisa: vladimir putin saying he is halting impact he has with the u.s., with nato allies to

allow investigators and investigators in to observe their nuclear arsenal. this highlights the growing fissure between russia and the rest of the western world. tom: the week is so important that before we get to he at barclays, we should have michael mckeon here, not so much on philadelphia fed, i don't see the data, correct me if i'm wrong, but far more importantly on the week ahead, and lisa mentioned she will read the minutes, i will not. lisa: you just promised you would. tom: mabel -- maybe i will get to it but there are pc and fighters as well. are you focused on the minotaur deflator's? >> more on pc at the end of the week because it is about spending and about incomes and whether or not incomes have started to catch up with or are way ahead of what the fed wants to see.

spending, is it holding? it seems to be for retail sales number and then we get the inflation components which will be important, pc is of course the inflation decks that the fed targets so we will watch the headline number but more importantly the core services x housing number which is a one jay powell cited as telling them the most about the status of inflation in the economy. tom: this is important. i don't think mickey has ever broken down the services into something new. this is sort of we are making it up as we go. lisa: this is the new measure the federal reserve is going to take. michael: they are looking at it, yes. services are where inflation's dangers are the greatest because the service industries are still having trouble finding people and therefore pay up for and have wage inflation issues. we saw that today with the home

depot people talking about raising prices to people. tom: future security on television and radio, dow futures, down .9% on the dow, nasdaq down 1%. the vix expands over 22 as it has a morning, 22.36. lisa: i want to note the philadelphia fed nonmanufacturing facility did come in way above where it was expected. i will love your quick reaction before we go to our steamed guest. michael: it's up from negative six point five. while this is a tertiary indicator, people don't pay a lot of attention to it, what we have seen in europe and what we will be looking for later in the united states is a rise in service industry measures for pmi's around europe and u.s.. what it appears to be is with the weather is mild as it has

been in many countries, there is more disposable income because people are not paying as much for utilities and that is giving service industry spending up. that will be something interesting to follow. the filthy at -- philadelphia manufacturing index took a dive. the fact service industries are hanging in in that area is good news for the economy. tom: in a four-day workweek, there is -- and a four-day workweek, it is important to readjust economic data to michael mckee speaking of. march iannotti is usually economy, chief economist at barclays with far more tours than the u.s. and dallas fed. thank you for joining us. when you are at princeton studying with people there, there were theories you talked about. is there any operative theory for mr. paul and the fed? >> good morning and thank you

for having me here today. i think the fed has increasingly used its tool, the forward guidance over the past couple decades, and has become more adept on using that and i think this is a theory that has been largely debunked in those days at princeton. tom: describe the barclays guide path of suppose a disinflation. describe the glide path and timeline of that glide path. >> very good. so we have course come down from very high inflation rate when we were at 9% cpi inflation last year. inflation has come down quite a bit over the past year. we are now expecting inflation to overall continued to decrease throughout this year despite the fact that the last reading has been stronger-than-expected and

we expect pc deflator to show robust gains later this week but we expect inflation to come down to around 3% by the end of this year. with core little higher and headline inflation 3% of the pc measure. lisa: you said the fence seems to be gaining traction along strong labor demand. what you suggest they do to gain more traction over labor markets? >> they really have one tool here, the short-term fed funds rate. they can increase that a little more. we expect they will increase the fed funds rate another 25 basis points at their march meeting, that they will continue to raise it and the other 25 basis points in may and likely again 25 basis points in june.

in total, bringing another 75 basis points of tightening with their short-term fed funds rate. in the background we have the balance sheet continuing to decrease but much of the control of the economy is happening more through the fed funds rate. lisa: you talk about the blunt tool and a can have blood and painful consequences, particularly for an employment market that takes a while to return to its full force once it is beaten up but i'm wondering whether you agree with mohamed el-erian where he said basically it will not be worth it for the fed to do it it takes to get inflation down to do percent and they will probably have to settle at a higher rate of say 3%. do you agree? >> i feel pretty strongly that the fed will want to bring inflation back to 2%. they are determined to do that, it will take longer, but they are determined to do that. i do not think they will settle for 3% inflation.

the reason is they have really benefited tremendously in the recent episode from the fact inflation expectation has been anchored at 2%. if they were to deviate from that and were to give up on achieving 2% over time, most likely inflation expectations would be drifting up both across financial markets, households, firms, professional -- professional focus, we would revise the inflation x occasion up and that would be costly for the fed over time. tom: a couple years ago, good number of years, with the event at blackrock, i saw the two of you at princeton at the time and you wrote a paper on the disaggregate. to me this is a key point coming out of a natural disaster, a pandemic. do we aggregate in our analysis or are things so messed up that we have to disaggregate labor disaggregate monetary policy? disaggregate the -- do we

disaggregate here or are we going to sum up like we are ultimately used to doing? >> when you think about the fed in particular, they are interested in bringing the overall inflation, meaning headline pce inflation, back to the 2% target. in order to understand dynamics, we have to the aggregate. this is particularly relevant in the recent of assad where we have services and goods evolving due to the shock to the economy with the services prices initially declining but increasing more rapidly and good prices -- goods prices falling sharply initially and rebounding strongly to the supply chain issue. we have to look under the hood and look at the details of the components to understand it as a whole. lisa: when you disaggregate, perhaps we will find rolling

recessions in different sectors that add up to perhaps less robust growth than you might expect but not a wholesale overall recession. is that your outlook? you fall into that despite the blunt tool the fed has and desire to get inflation to 2%? >> we've seen the tightening of financial conditions, increasing of rates, having a rapid impact on the housing sector, reducing housing demand last year, having significant impact on permit issuance and so on and affecting activity in the residential sector so we have seen that quickly but i think underlying your question is the fact that more broadly we have not seen a recession. wiki -- we see consumption growing strongly, very robustly and that consumption is fueled by this tight labor market that generates a lot of income and fuels consumption. do i expect them to eventually

slow down as the rates go up? as the fed continues to tighten its policy? we have seen indication from the survey of senior officers -- opinions suggesting the tightening of credit, tightening in the lending standards. we expect that to overall slow down the economy more broadly and to result in contraction later this year. tom: doctor, thank you so much, his with barclays. i think that is so important and just another research paper along the way but when they were students at princeton out at well over, the idea of should we look at these statistics all in or disaggregate, it is a huge question right now. lisa: especially because we see rolling recessions. the goods economy is completely distinct from the services economy at many levels. you look at different patterns, different cycle, and this is

because of the pandemic, because of a lot of the purchasing power brought forward. how do you parse that out for the overall figure? tom: you've got to the heart of the matter which is if you parse out goods, dynamics, and services dynamics, every viewer or listener knows that's where living service inflation. it returns with a vengeance and service we have to see the evidence of a service inflation term. lisa: and now we siri inflation with some areas with the good side. how do you gain this out -- game this out? tom: we continue. futures deteriorate, -34. the 10-year-old -- 10 year yield 3.80%. this is "bloomberg surveillance." >> keeping you up-to-date with news from around the world i am lisa mateo. vladimir putin had a warning for the u.s. and allies in today's state of the nation address. the russian president threatened

a backlash if they supply ukraine with long-range missiles. putin vowed to press on with his invasion and also said russia will suspend its participation in the new start nuclear weapons treaty with the u.s.. china is urging the world to stop saying taiwan is next after ukraine. the foreign minister says certain countries should stop fueling the fire by blaming china and saying ukraine today in taiwan tomorrow. beijing has been trying to distance themselves from russia and petraeus a neutral force for peace. goldman sachs has the federal reserve raising interest rates 5.25% at its march, may, and june meeting. the bank chief economist told bloomberg he also thinks there will be no rate cuts until 2024. after citing higher inflation numbers for january. in the euro area, business activity rose at the fastest rate in nine months in february raising the likelihood they can

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very closely. this is a real problem for china in this relationship with many other countries, not just the united states. we hope and expect they will forbear from going down that road. tom: the president of the united states in poland. the secretary of state of the united states antony blinken speaking on china this morning and in its difficult meanings we have seen at ford. annmarie hordern, our chief washington correspondent with the president, in poland. we have seen the pageantry there and of course the meeting of the nine members of eastern europe, but the focus must be, and maybe you agree off the radar of it, is this china/russian u.s. access is not being discussed enough. lisa: that was one thing that, my attention, the most concerning, that suddenly this is an even greater rupture between the u.s. and china that

raises a new tension. as john put it, the potential for a proxy war played out in ukraine. tom: some other perspective with this, with agf investments, their chief policy strategist. good morning. gregg reidy joins us. it is simple. as you know, the first year of a war there is a tone and then the second year of a war it is different. what do we do on spending, on defense spending in the second year of any given war? >> it certainly is a much more relevant question because everyone assumed maybe the fed would not get as they would in this new fiscal year and they are up to $850 billion, they got a 10% increase. and we hold -- heard comments from antony blinken over the weekend and the hens china has made to aid russia. if that does occur, i think it would be a serious rupture and i think it would lead to still

another big chunk of defense spending. we might go up another 8% of fund -- a percent to 10% focusing on shipbuilding in the south china sea. tom: that is where i wanted to go. i hope i have the correct -- the spelling right there. correct the spelling if you would. what it comes down to it, it's tied together with ukraine, the philippines, and china. and we decided we will build for bases in the philippines and the new york times had an article on this this weekend. the u.s. is projecting towards china, aren't they? >> yes. and i think any chance we would lifted some of the trump-era sanctions is gone. i think there is a chance we could have even more sanctions against china. lisa: what did you make of what tony blinken said? that they are seriously concerned that china could be actively considering sending more support over to russia, and

that includes perhaps surveillance to port? this is on the heels of the balloon episode. what do you read into that? >> i think it is ominous. i would worry if we went down that road. japan is even on the front page. that is on the back page. there is so much attention i see so many people in the u.s., some of the republican saying cannot spend that much more on defense but i think biden has the votes in the senate, has enough republicans there to get him a big increase in spending. lisa: this could potentially go to expanding a presence in the philippine and potentially go to expanding a presence with a number of allies in the southeast asian region. but this also speaks to what is going to be the relationship between business and china and also with the u.s. and germany because germany defends a lot more on china.

do you have visibility, on the business side, whether they will be aggressive, the administration from the u.s. come on pushing back on expansion in china. >> my sense is that they will. it is maybe a vote a bull but i think u.s. businesses are going to have to anticipate a much more hostile climate this foreseeable future. tom: it is all foreign exposure with the president in poland right now meeting but i think we need to bring it back. how good a week did governor haley have in the south carolina's? she made a splash x number of days ago. what is the now what for the candidate and other candidates ready to jump in? >> that's a good question, tom. she had a great opening day. as the week went on, there were more people ticking at her record or inconsistency on racial issues but i think she is a fresh face, i think she will

have some traction here over the next few weeks but there are more people coming in whether pompeo or mike pence. she does not get to have the stage all to herself and it now looks like desantis is gearing up in speeches over the weekend, against crime, and now his comments on not spending as much money on ukraine. it is a crowded field. tom: do you see any evidence that the former president mr. trump, lost his audience? i don't see evidence of that? >> he's lost a little and what surprises me as he has been relatively quiet, no nasty nicknames, no outrageous bombastic statements. by trump standards, this has been a slow period. you wonder about why. i think it is temporary. i think he is still in it to win. tom: and here's a president with

the symbolism we saw this weekend and what we see in poland now. what does he return to, an announcement well-timed? >> i think he will wait until april. that seems to be the consensus. he had a great weekend. for him to take a 10 hour train ride both ways to go into a war zone, you gotta give him credit or chutzpah. i think he is clearly the nominee. there might be a french canada or two but barring some kind of health issue, the nomination is his. lisa: there has been a number of critics who said perhaps president biden's focus is enough on the demise six. -- sphere, particularly in east palestine, ohio and he is to internationally focused at a time where there are these major conflict. do you think that could hurt him as he becomes potentially the next president again? >> it could. obviously he wants to get the

inflation lower and the economy stronger and doesn't want to see the fed's raising rate to much more but i will say this will be a year where geopolitics dominic -- dominates. it will eclipse most economic issues. lisa: you think it will be more on the spending on defense and sanctions front and not necessarily on the actual war aspect of it, is that correct? >> yeah. and i think the defense budget is probably going to get another a percent or 10% in this fiscal year budget. tom: thank you for the brief, hugely valuable. gregory, this morning. the whole dichotomy from what we have seen in china, ukraine, and poland over to who will run for the republicans shows you the preface of the moment. lisa: the fact greg says geopolitics will dominate is telling.

what we see now is the kind of tension we have not seen since the cold war and that's the language they are using now, china saying people are acting like a connie warren tony blinken coming out saying we have no intentions of going back to a cold war type mentality. this is -- sort of these are mistakes people see right now. tom: what's interesting to me and to your great observation is the cardinal rule is geopolitics does not matter for the american electorate as they move through october, through labor day, towards november, but there is one huge exception as we celebrate the life of president carter, grievously ill, resting at home in georgia. that is great except we have to remember that mr. carter was overwhelmed by international relations in that huge landslide defeat to ronald reagan having to deal with the terrible irani and hostage crisis. lisa: you think about where we

are at the current moment to the increase of fissure between u.s. businesses and china, what does that do to inflation and what does that do for some business models and preeminent u.s. companies that are intimately connected with china? tom: are we going to hear a different story from admin hyman -- edward hyman. there was a lot of caution today led by goldman sachs as well. lisa: there are plenty of bowls that say this is the beginning of a bull market, that we are looking at sustainable growth. i think there is a distinction between the economy versus markets. for a long time it was markets over the economy and is that shifting little bit? tom: so much for a slow four-day workweek. it is not slow. dow is down -333 points. the vix 22.40. stay with us.

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jon: welcome back. from new york city this morning, good morning. the countdown to the open starts now. >> everything you need to get set for the start of u.s. trading, this is bloomberg the open with jonathan ferro. jonathan: live from new york, counting down equities, forecasting a rocky year. credit suisse