>> this rally has been very fundamentally driven. >> the economy is going to stay strong in the first half. the sumer in the u.s. is still in a good place. >> more broadly, we haven't seen consumption growing robustly. >> 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? announcer: this is bloomberg a "surveillance" with tom keene, jonathan ferro, and lisa

abramowicz. jonathon: from new york city, very emotional. good morning. this is bloomberg "surveillance" with tom keene, jonathan ferro, and lisa abramowicz. yesterday closing at a new high for this two-year. we haven't seen at this level since 2007. at the close yesterday, 4.72. the fed minutes a little bit later. these are the most stale, dated fed minutes we have seen in a long time. lisa: moving -- tom: moving so quickly. as ambiguous as i heard him yesterday, the giant from citigroup. that 30 year mortgage in america to the data check we are going to do here, just in a short moment here, a mortgage at 6.51% to 6.96 percent.

dare i say we rounded up? jonathon: who is going to take that mortgage when they are locked in at 2.5% or 3%? the pandemic has completely destroyed the mortgage market. for one is locked in on these very low fixed rates. tom: i can't remember the year-over-year, but it was 30% down from a year ago. yesterday, that is how that folds right into how people are living right now. jonathon: a big question, does the february data confirm what we saw in january? we got a hint yesterday in the pmi. i think that really shook things up. lisa: the data has come in hot. the data in january was not a one off. the reopening of china has changed the narrative. what do you get if you have

higher, faster growth, a better economy? but inflation is also higher than expected. this is a conundrum wrapped in an enigma. that's basically the conclusion from all the notes i have been reading. jonathon: the price for better growth is higher rates. that's ultimately the discussion. tom: i have never been in a morning squawk box meeting, a research eating, or out with a big guy three levels up from you , and they are going, "this is a conundrum, wrapped in an enigma ." [laughter] lisa: you are welcome. jonathon: unchanged in the s&p 500. 3.948 seven on the 10-year. this is a six-day losing streak.

we are down 1% on wti. tom: as think -- i think as lisa said it, we are modeling up 3% inflation. but there is a panic right now. you talk about the minutes being so stale. there is a real panic out there about good growth. we are getting and elizabeth warren economy. good growth, jobs, this is terrible, we are all going to die. jonathon: why is that elizabeth warren? tom: well, bernie sanders once a four-day workweek. jonathon: i'll take that. lisa: all i can say is that the four-day workweek has been put into an experimental phase in the u.k. and most companies are not going back. just saying. it is sticking around longer

than expected. here's what i am watching. more than the idea of stronger growth, which is a good thing, what i'm really watching is the geopolitics. 8:45 a.m., biden will be meeting with the regressed nine -- bucharest nine. at the same time, china's top diplomat is meeting with russian foreign ministers. the tension is tangible. are we seeing an ongoing hardening in the lines here? are we ratcheting up the tensions? this, to me, is the biggest risk i keep monitoring. at 2 p.m., we get the fed minutes. you should read them because, yes, they are stale, but they can massage them. people are talking about how they will massage them to give us a sense of the fund rates. it is now a post-2007 hi. people start to expect only two,

but three basis point hikes. this is going to be really telling. here's the big issue that we spoke about a couple days ago. how much is this federal reserve willing to allow inflation to run harder for longer? if you look at how it is baked into the market, it is well above 2%. it is over 2.5%. is the fed going to allow that? is that ok? are they going to encourage a softer landing? jonathon: thank you. let's talk about how stale these numbers are. when chairman powell said the process has started, we had payrolls at 500 17,000, unemployment at 3.4%, cpi not dropping as quickly as people

hoped for, ppi delivering an upside, and we got a first look at february with a pmi improving as well. geoff yu joins us now. just how stale are these minutes? geoff: they are quite stale not in the domestic sense, but in the international sense as well. in the u.k. and eurozone, are we going to look at fiscal similarities in europe? now, not just the domestic side from the u.s. economy, you are looking at an external list as well. owing back to the point made earlier, why isn't it something to celebrate? tom: you are a student of history on this. rates higher, inflation if not higher, at least disinflation sustained.

the basic simplistic thought is the world will come to an end as we know it. there will not be revenues, no earnings. yet, history says the complete opposite. how can we calm people down who would like to go on? geoff: i think they will need to look at the margins, and earnings. i think with job losses in the tech sector, the margin recession, let's just look at where underlying demand is. people are spending. on the continent, normally were people are safest, energy bills are starting to come down. oil is above 100, but it has not come to that. they can loosen their purse strings again. lisa: if you take the jon ferro view of the world, how would you reshape it right now, based on people going into the year

softer in the first half and strengthened on the back caffe? where do you land? geoff: i with land on it no recession. we were skeptical of a recession in the first place. and higher for longer, probably not in the camp of thinking about 6% or something wild along those lines. gravity will come to play a role at some point. but we have to land at a place where it is higher yield rates for longer, and allocation will have to follow. also, cash on the sidelines. money has to be put to work. i still don't think it is going to be in the dollar, because most people are doing that already. jonathon: let's put it together. i said that barclays had said are yields -- higher yields pay for better growth. how do you celebrate it? geoff: if you look a place like

switzerland, which has struggled with low rates for a long time, and we discussed this a couple months ago, we will be able to offer yields and keep money as onshore as possible. this will change the flow dynamic. you can now look for the best gems out there, stay onshore, invest in domestic productivity, because high yields means higher returns domestically. i would see this as a good thing. they just need to go within any playbook. jonathon: i'm a simple man. does that mean to buy banks? geoff: if we look at financials both in emerging markets and developed markets, financials is the most sold sector globally. we have higher funding costs, but no loan demand out there. that's the missing link. let's go back to tom, talking

about the velocity of money. that has not picked up because people are still scared. but if we see consumer demand, then further down the line industrial demand, banks can start to lend. that is where opportunity is going to be. jonathon: this was fun as always. geoff yu, a strategist over at bny mellon. earlier this morning, we heard from china's top diplomat speaking to his russian counterpart, describing relations with russia solid as a rock and withstanding the changing international situation. we heard from vladimir putin modems ago, saying that russia and china, and the relations between the two, are reaching new milestones. tom: china's top diplomat, this is a guy fluent in chinese, english, and japanese. how may people can say that? this is the new face of china

diplomacy. wang yi, and i think we will see more of him. jonathon: china is willing to deepen ties with russia. this coming at a time when the u.s. is worried about china providing direct support to the war in ukraine. lisa: this is also ahead of xi jinping aching a trip over to visit vladimir putin and that them orchestrating peace talks. is that really what's going on, or is it more of what the u.s. is considering providing more assistance to ukraine? jonathon: good morning to you all. futures doing nothing. this is bloomberg. >> keeping up-to-date with news from around the world. with the first word, i am lisa mateo. white house aides say president bidens trip to poland underscore the massive miscalculations by vladimir putin in ukraine. it also highlighted the costly

development and democracy that the u.s. and its allies have made. the president told the crowd of about 30,000 that ukraine will never be a victory for russia. china's top diplomat calls relations with russia solid as a rock. they're trying to betray themselves as a neutral actor that can call for peace in ukraine. meanwhile, the "wall street journal" says resident xi jinping is preparing to visit moscow. we have a sense of how many fed policymakers saw the case for a larger's -- a larger interest rate hike. they will publish minutes of that gathering at 2 p.m. eastern time. we will also see if they will take rates higher than expected. in the u.k., nurses have suspended further strikes. they have entered intensive talks with ministers in an effort to find result overpay

hikes. there is limited ability to raise wages in the next fiscal year. microsoft has made it clear that there will be no $69 billion deal to buy activision blizzard without "call of duty." earlier this month, british investors said it microsoft may need to divest "call of duty" to get the deal approved. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪ ♪ this is ge vernova, helping generate and move the energy that our world needs.

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pres. biden: president putin's craven lust for land and power will fail, and ukrainians people -- their ukrainian people's love for democracy will stand. we offer democracy today, tomorrow, and forever. [applause] that is what is at stake here, freedom. jonathon: the president of the united states on his tour of europe, addressing the people of poland. between russia and china, take a listen to this. this is from china's top diplomat, describing ties between the two countries solid as a rock and it will withstand the trials of the changing international situation. that's just from the last couple of moments, saying china is willing to deepen ties with russia. i think this is exactly what the

united states is concerned about. tom: someone who knows more than we do is and hodges. he is a general of the united states army, retired. i don't know what wisdom to give you between ben hodges tweet last night on the eastern front or what we are hearing from the secretary of defense austin of the philippines and the new axis relationship between russia and china. i don't know if i'm back in the 50's -- the 1950's, the early 1960's, the later 1960's, the early 1970's. jonathon: how close are we to a proxy war between the united states and china? tom: i am not qualified to answer that, other than to say it is overwrought at this time. we have to see what will happen post-world war ii with diplomacy common sense stepping in. jonathon: you hope so. tom: we need to see.

our correspondent joins us in warsaw today. let me start with a video from moscow of mr. putin and mr. wang. how does the president of the united states adapted and adjusted images from moscow? reporter: i think you have seen the administration on the offensive already before images were coming out. we had secretary -- secretary of state antony blinken of putting china on guard for the potential of what they see of beijing supporting russia in a deeper way. their concerns were with sending legal materials to russia. but what is really going on is this historic split screen, what we are seeing between what's happening and warsaw. jonathon brought you those comments from wayne need -- wang , saying things were solid as a

rock. the commitment to nato by the united states is rock solid. he is going to bring that message today to the bucharest 9. we are seeing a deepening of ties. last year, a no limits relationship from xi jinping and putin. now, a deepening of that relationship versus a deepening of the relationship the president wants to symbolize between the united states and western europe and eastern europe. tom: you are a real student of this, i give you immense credit, but the overreach i believe that the 2008 belgrade meetings, condoleezza rice and robert gates, the huge decision on how far we reach. does mr. putin look at the regressed 9 as a threat and he doesn't have a common turn to push against it? annmarie: of course he does. the bucharest 9 is made up of former sufi it -- soviet union

states and those of the dissolved warsaw pact. this is estonia, hungary, poland. this is the same group of countries that met the day after putin decided to invade ukraine on february 24. they met on february 25. their concern was who will be next. this group was also started after putin's aggression and annexation of crimea. this group started in romania. it was between the romanian leadership and poland because of putin's aggressiveness toward ukraine and, most notably, the annexation of crimea in 2014. lisa: as we see this split screen of the meeting happening where you are in warsaw, there is a question about the business ramifications. there was news overnight of china's authorities encouraging estate owned enterprises to avoid the big four auditing firms, to avoid possibly leaking information. at what point do you see a

willingness on the part of western nations to sort of hard in the business lines, aside from rhetoric internationally, with respect to a trade ties will look like between the western world and china? annmarie: i think you are already seeing that happen with what the united states is doing. there's export controls on highly sensitive technology. not only was the u.s. enacting them from the commerce department, they are also getting on board japan and the netherlands. what comes next remains to be seen. i think it is quite obvious that there is a push in washington to not just enact these rules against china, but also make sure they are doing it in this multilateral approach, which really is the difference between the trump administration and the biden administration. they are taking the same exact approach, because they have similar concerns about china, that this administration really wants to make sure. they are getting the likes of

amsterdam and tokyo on board when they do this. lisa: it is so hard to parse through the signal from the noise, especially when you talk about diplomatic rhetoric. how much of the lines really hardened between west and china over the past couple of weeks? annmarie: i think what you see is the war of words and acrimony because of the alleged chinese spy balloon. that put a huge banner in the works. obviously, at the munich security conference, they were able to have a discussion. there's going to be talks of blinken going over to china. but obviously, this isn't just happening as symbolism and the world. behind the scenes, these are serious concerns of the biden administration and the u.s. congress. they just created a new committee to look at the concerns and warnings on china. this committee is going to be giving their opinions on what they think is the best approach

to combat china. you are likely going to see more bills come to the floor. jonathon: just a finish, chancellor schulz in the last week? annmarie: chancellor schultz in last week was at the munich secure to conference but he was not here in warsaw, but he was at the munich security conference. besides that, i don't know where he is today. i imagine he is back in berlin. there are a lot of questions regarding him, especially here in poland and talking to polish officials. one, there are obviously concerns that they want the leopards delivered asap. and they also need the parts. other countries that have the leopard parts -- leopard tanks, they need spare parts from germany. they are putting pressure on germany to speed that up. i think there is also a little bit of debate about germany, talking about the fact they are no longer getting russian creed. it is coming from kazakhstan.

there are concerns that is it really cassock oil, or is it just labeled that? jonathon: this was great, as always. amh in poland today. we will catch up a little later. this is tremendously complex. lisa: it was a great question you asked. as you pointed out, they are at many times the weak link. this is a nation highly dependent on china, that will really see it's good economy go into a deep recession if it causes some sort of more substantial fissure between the two nations. a lot of optimism around european growth has been due to the china reopening earlier this year. i think this is a really interesting question not only geopolitical he, but also for markets. tom: and also historically. this is something only jon ferro can do. the historical baggage here is huge, the unspoken this.

schulz was busy last week. he is not there. the president of the united states is there. but there are allusions here to the past that i will not dwell on, but they are delicate. jonathon: we also have to friend the last couple of days as well. the president has flown to europe, gone into ukraine, in a war zone without an active american military presence. gone to poland, addressing the whole world about defeating russia's war effort. what we saw was the diplomatic gut punch for the chinese communist party, officials turning around and saying ties with russia are rocksolid. that's where we are. futures right now unchanged. this is bloomberg. ♪ unexpectedly closed today due to... cdw experts can keep you up and running with an apc smart-ups lithium-ion ups from schneider electric. it offers cloud-enabled remote monitoring and three times the battery life, so you can get the performance and certainty you need to stay open for business.

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jonathon: yesterday, worst day of the year for u.s. equity markets. down 2% on the s&p 500. tom: you sent me that email. jonathon: that was top of my mind. lisa: the dow? yeah, right. [laughter] jonathon: three-day losing streak on the s&p 500. longest of the month of february so far. what happened to the breakdown of the correlation between equities and bonds? yesterday, equities down, bonds down. 10 points plus across the whole curve.

four basis points, closing above 4.70. getting closer. i know you're on the lookout for this, close to 4 on a 10-year. tom: i'm going to suggest we went from stanley fisher ultra accommodative to some form of accommodation. now is when the heavy lifting starts. that is what we are all living. jonathon: milking some dollar strength now. euro-dollar right now one of 6.33. on the year, 110.33. this came the last day after the fed meeting. when we going to fed minutes later, what are they actually worth at 2 p.m. eastern time? [laughter] lisa: you have promised about

five times that you would raid them. now you're going to say you're not? tom: i will give it the tom keene skim. [laughter] jonathon: they asked for the impression of chairman powell. then, they said to look to the fed minutes. he said to look to the fed minutes for the discussion. now, a lot of people are going through the fed minutes as part of a scenario analysis. what will they do it this data picks up aggressively, and is there any insight to come out later? lisa: to tom's point, that is kind of ridiculous because reaction changes every week. we can game out what they're going to do, but they are going to do what they want. that said, they can get more of an impression from the minutes. jonathon: you are suggesting they can massage things a bit. lisa: i'm not the only one. they can emphasize certain points. they could potentially limit reference to those voting.

[crosstalking] tom: i'm sorry, 4.00 10-year yield is a big deal. jonathon: we are getting closer. tom: it is the whole curve lifting. this is not spread dynamics. on radio, this looks good. my first exercise i do was done 35 pounds each. [crosstalking] tom: where are we right now? my theme for this year was the great zombie rollout. if you are not profitable, you will get rolled up. we will see how that goes through the year. but my second idea, maybe i plight -- maybe i played it too little, was price down, yield up. was anyone prepared to go through the october lows? this is the biggest, broadest of our series.

18% was the carnage. the bounce was up 8% in price. then, we went down 4%. if we go down another percentage, we break through to new price lows, new yield highs. a topic for amrita sen --brian weinstein. what is the outcome if we preach through with low price, high yield? brian: no one was talking about a couple weeks ago. it is certainly possible. let's call it about 3.9 percent. from that rate, you know you're going to be between 3.3 and 4.5. i think a lot of people chased bonds a little bit too late in retrospect. it doesn't make them a bad buy, but there could be more pain to come. tom: the bonds are there, but what is the to do list here? i mean literally on a wednesday, are you opportunistic to acquire

bonds, and in what way are you just waiting to find that spot? brian: i think you are waiting to find a spot. i guess that makes you opportunistic. but you were just speaking about it. the fed doesn't even know. a lot of the indicators we were waiting for are either lagging or a bit stale. i think uncertainty might start to steep the yield curve. we had amazing flattening. we touched -92, around -75 right now. you start to buy, but there is no reason to catch the falling knife. you need to wait for a reason for us to stop selling off. jonathon: this curve is a mess. a 30-year at 3.96. try to make sense of all of that. there is a question for you. are we facing a once in a generation opportunity to lock in high yields or are we facing a new generation of high yield?

there's a big difference. if it is the former and not the latter, i will take on a 10-year and lock it in as long as i can, may be than that. if it is the latter, there is no real investment risk down the road because this is a new world. which one is it? brian: i think it is closer to a generational chance to buy. let's say this is the new low. we will be between 4% and 6% on 10-year notes. i don't think that's the case. i think there are natural reasons growth is slower and inflation will take a while, which the curve is telling you, but they will be it. let's say 10-year notes are between 4.5 and five. you can park money, take some income for now, take money from other markets, and that will continue to slow down the economy. i don't think we are seeing a brand-new regime, but i don't

think we are going back to trading 50 basis points are 75 for a long time. jonathon: as you look across the curve right now, what is the optimal spot for you? brian: i think we pretty much got there at 92. you want to put money in the yield curve as time goes on. two is closer to 4.7 or 4.75. i think it can start to diss invert. we are getting a little bit of strength before the real weakness starts and the fed will actually have to pause, even ease at some point in a year or so. i would move my buys in the yield curve. lisa: how do you parlayed that duration call into credit? spreads being too tight, then they widened by more than 100 basis points.

at least according to some rating sectors, do you see this as a buying opportunity now or something as possibly pointing to more risk? brian: if it is going to re-steepen, it is not the optimal time for credit. at this point in the cycle, you buy quality and connector riskier things later on. lisa: how much are you looking at the potential for perhaps a 6% buggy, seven percent bogey, on your and oral returns based on this once in a generational lifetime, or you see higher yields, and lock them in and ride them the whole way down? brian: first, we have to stabilize. if we go down another 4%, that will put us down 4% for the year. if we earn our coupon back, we will end up flat. [crosstalking] tom: that is famous morgan stanley bond math right there. brian: if you can find values and be patient, get good levels,

if you buy close to 5%, you will make 5% for the year. duration should help at some point. that is not now. it takes a long time. the markets are inpatient, but the fed will tighten too much. that is just not the story yet. jonathon: let's finish on credit and sit there for a couple more questions, if we can. yields tightened to about 3.85. that is the tightest we have seen on the year so far. that is the same day we got the payrolls report for the month of january. i was speaking to alliancebernstein and said this made no sense. we have some 50 pmi's and spreads are tighter, not wider. he said you can go two ways, not just one. either they need to widen or the pmi's need to improve. the pmi's have improved. they have gotten better. we are no longer sub 50. good news seems to be bad is for the equity market. what does it mean for credit? brian: i think if you take a

longer-term view, credit markets are just ahead of the data. that's one of the problems the fed has. they keep pointing to data with lagging indicators. i think it was a great indicator things were going to bounce and we got to pessimistic. the fed has one mission. they want to raise cash rates high enough so that if you buy a six month bill and not the high-yield market. that is a tough headwind. it may not cause unemployment to go up, they don't madea economy to crash, but they need things to slow. is that good news-bad news? yes, it is harder for the fed to stop raising rates. if the higher market keeps widening, i think it tells you they will raise rates until it hurts. jonathon: is it still the game, does it come down to that, what you just said? avoid everything else? brian: i think so. they had every opportunity to do something different. you could re-steepen the yield curve, increase in tightening,

and the fed could do it. but they haven't. maybe they have been overly nuanced at times, but the idea is that it takes a long time to stop inflation. it is psychological. the only way to do it is make cash rates very attractive, invert the yield curve, and weight. for all the nerve -- for all the noise since october, i don't know if things have changed. jonathon: we enjoy it is always to catch up with you. brian weinstein, morgan stanley investment management. tom: this is really, really important. weinstein is hard-core. this is a morgan stanley tradition of looking at individual bond versus spread. spreads is the way wall street talks. but our less -- our listeners and viewers who own a bond, maybe they look at that when things are comfortable, but when things are sweaty, they look at

price. the joke is, christ down, yield up. there is no one worried about the 30-year yield spread. we go down 4%? that is a coupon for the year. jonathon: last year was brutal. tom: and it was great. the all-cash gpd fund, we provided that. jonathon: how is that working out? tom: it's working out great. we added two basis points out that. lisa: jp morgan doesn't like your fund that munch. i think they are banning the use of that. [crosstalking] jonathon: futures turning a bit negative, down 0.2% on the s&p. three-day losing streak on the s&p 500. will we add to that? this is bloomberg. lisa m: keeping up-to-date with news from around the world. with the first word, i am lisa

mateo. today's release of the federal reserve minutes are likely to show how much support there is for larger interest rate hikes. the question is whether more officials considered a 50 basis point hike at the last meeting. the tone could hint at how policymakers are interpreting recent data on inflation. the european union has slacked its natural gas demand by almost 1/5. finland saw the biggest drop. usage there was cut by more than half. bloomberg has learned that j.p. morgan chase has curbed its staff use of chat gpt. it cannot write poems and create stock portfolios. there have been reports about inappropriate interactions and errors in its results. in china, authorities have urged state owned companies to phase out using the four business -- biggest accounting firms. they are still concerned about data security.

high vehicle prices and pent-up demand prove profitable first lantus. they unveiled a share buyback of as much as 1.6 billion dollars, after forecasting another year of double-digit returns. they're offering some relief to car buyers, too. they expect vehicle prices to slow this year. as chip shortages ease, production picks up. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ this is ge aerospace, advancing flight for future generations.

♪ welcome to a new era of flight. lomita feed is 101 years old this year and counting. i'm bill lockwood, current caretaker and owner. when covid hit, we had some challenges like a lot of businesses did. i heard about the payroll tax refund, it allowed us to keep the amount of people that we needed and the people that have been here taking care of us. see if your business may qualify. go to getrefunds.com. 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? >> what about what happened in europe? that is the big one for oil. a really warm weather shot drove gas prices down sharply, particularly in europe.

where dropping all the way down to 49 euros a megawatt hour right now. gas prices in the u.s. collapsed from 9 all the way ted 2. that put a lot of downward pressure on oil. jonathon: remember when we said we needed a meteorologist last year, just a forecast crude and gas, maybe even the equity market in europe? that was jeff curry of goldman sachs. crude right now, let's take a look at oil together. it is down for six straight sessions. that is the longest losing streak on wti crude since december 2022. crude right now $75.50, down at about 1%. over the last six sessions, it is not a brutal amount of losses. down 6%, but certainly losses are there for all to see. tom: they are there to see and we will get to them, but i think all you can do, and everyone

knows it is the single toughest thing to predict, a lot of good academics on that as well, is to listen to smart people. go from ed morris yesterday to our conversation with dr. curry of goldman sachs, then amrita sen, all you can do is talk to people who know what they're talking about. jonathon: ultimately, still pretty bullish when you go through recent comments, suggesting the china reopening was on course. tom: that's the core issue. christian may look at j.p. morgan, they say -- that our you have, you had jay polaski on. lisa: the morris distinction. that is the question. how much do you start to see renewables come in and reduce

demand even in an economic recovery? that is the distinction between bulls and bears right now. tom: amrita sen, all of these strategists take a different view. what i love about amrita sen, off jeff curry and his macroeconomics, she looks at supply and demand. as simple as i can, and i don't need a central theorem lesson, but what is the conversation of your world right now to the stock and bond upset we are living? how does crude correlate? amrita: great question, tom. and as always, thank you for having me, always a pressure -- always a pleasure. fundamentals are not particularly strong. we built it on bad inventories, we've had bad weather. we have right now a lot of refinery maintenance. that is my right now, creed is pretty much at the mercy of, exactly like you are saying,

bonds and equity markets. this is why this has been trending lower. crude is probably going to be at the mercy of macro headlines. even good news is bad news. you would think a strong labor market is really bullish for gasoline demand. but no, the fed is going to raise interest rates. what does that mean for the future of the u.s. economy? it is very, very problematic for crude until fundamentals pickup. tom: when they do pick up, we have china reopening. what is your x axis on the china reopening? are you waiting for may or may 2024? amrita: no, it is this year. we have one million barrels baked into our numbers of chinese growth. i think the problem is china coming out of the lunar new year holidays, it has maintenance. we are hearing right now of potentially low chinese product exports coming out in march.

we need to confirm that. it is still very early stages. it will take a little bit of time for this to percolate through. i would say right now, oil prices are actually focusing and factoring in a western recession. it really has not factored in the china reopening. lisa: how much does this factor in the fact that chinese increase in usage will be fundamental to renewables, domestic production, whether it was wind or solar? that kind of substitution, for whatever reason, is diminishing the demand, even in stronger economic profile. amrita: absolutely the case of longer term. right now, we have got more than one billion people who have been locked up for three years and we are seeing it in jet fuel numbers. just china's reopening alone can lead to $400,000 -- 400,000 barrels per day of jet fuel. there is an enormous amount of pent-up demand peered we have

seen this in the west. i don't want to complicate the story. the renewable story is there for the long term. ev sales in china are skyrocketing. we have that in the numbers, but that doesn't take away from the fact that gasoline and jet, which is used for mobility, we are seeing very, very strong demand. people are going to fly and you are going to see strong demand numbers out of the region. lisa: good news, bad news, it doesn't matter what it is, but oil prices are lower. that seems to be the trend regardless. what is going to shift that and get prices above $100 per barrel like you expect? amrita: i think we have to wait until the end of the second quarter and second half of the year. for me, fundamentals have to drop. we are expecting this from the second quarter of this year, but not before that. we have a big gathering in london next week, all the traders, producers, consumers coming in. i think you will get a lot of

talk around this as well. i would say after that. tom: the three of us really look forward to seeing you there on the all hydrocarbon week for bloomberg. jonathon: is that on the list? tom: it is. you know, you can't get a drink at oil week in london unless it has an umbrella in it? jonathon: it's like copper week or whatever it is called. can i get to this quote for morgan stanley this morning? they cut their forecast for crude for four q and 2024, about $95 per barrel from $110. the new estimates reflect stronger demand, but also higher russian supply. there might be some people in this commodity market who would turn around and say, russian supply, wise that affecting the market? what is that all about? amrita: we have also raised our

russia supply number because they are able to place more barrels than expected. part of doing a forecast in an extremely uncertain world, that's absolutely fine. however, i go back to chinese demand growing by one million barrels per day. we do not have one million barrels of spr hitting the market. even if we assume russian production is flat year on year, i.e. we don't lose any, but let's assume that, it is still a much tighter market just from china. jonathon: i just got a message from a bloomberg subscriber. it says forget wti. can we talk about natural gas? what's behind that movie? -- move? amrita: the weather. europe and the u.s. got very lucky with how warm it has been. march forecasts have raise the amount of natural gas backing out, so prices will have to fall to about $1.75.

still a little bit more to go. but it has been brutally warm. jonathon: what a change. natural gas falling below 2 since 2020, and looking for lower. amrita sen there. you want the weather? across the 48 states, january was the sixth warmest on record. new york, pennsylvania, indiana had the second warmest january in data going back to 1895. tom: somebody was saying you could go out to wyoming without snow, which i can't imagine. there was a genius years ago who is going to play for the cardinals. his name was al goldman. he came out every day and gave strategic wisdom and was very gracious. once, he said to me, tom, the correlation of hydrocarbons is set for percent -- 74% of what

the weather is at the subway. [laughter] some graduate student had done research on this. lisa: not to go back to this, but this is the conundrum wrapped in an enigma part. you have lower gas prices, lower utility bills, that gives people more discretionary spending to go out and shop. yet this distortion of whether, so it what point can you count on it as being real versus whether induced distortions? jonathon: is it not real? [laughter] lisa: i guess that's not the way to phrase it. i guess sustainable is the thing to call it. jonathon: i would always trade a cold winter for a great summer. what we get for that now? lisa: heat and humidity. jonathon: i'm fine with humidity. i grew up with rain every day. lisa: you are like tom with cold weather. jonathon: i will take the heat.

it is nice in the summer. that is what summer is about.

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>> it has been deceiving inflation and interest rate shock. >> the economy is going to stay strong in the first half of the year, probably into q3. the consumer in the u.s. is in a good place. >> we see consumption still growing very strongly. very robustly. >> the fed is going to continue to raise rates. the issue is how long will they stay up? >> this is bloomberg

surveillance with john mccain, jonathan ferro -- tom keene, jonathan ferro and lisa abramowicz. jon: good morning for our audience worldwide on tv and radio. this is bloomberg surveillance. equity futures unchanged on the s&p. we close. -- week lows. tom: i am going to suggest a lot going on. a yield curve lift. a signal of a change i would suggest very few people modeled in. this is unexpected. jon: the whole yield curve shifted higher by 10 basis points across the hold of the curve. the question we have been asking over the last couple of weeks is whether february confirms that. a sneak peek a little bit

earlier yesterday. s&p global. it can confirm what we saw in january trade lisa: -- saw in january. lisa: climbed above the contractionary level of 50 for the first time going back nine months. we are in expansionary territory for services and a report that came out this morning was interesting. people taking money out of some of their basic goods items and putting it into flying around and staying in hotels trade -- staying in hotels. tom: work from home has changed all these service sector things we talked about. people are traveling because we are not modeling out, we have got to get out of here at friday

at 5:00 p.m.. they are taking off friday and monday. jon: lisa was talking about a four-day workweek. is it three? lisa: u.k. is going to keep a four-day workweek in place. they did an experiment and the company said we are going to keep it this way. jon: that brings productivity up. we cannot do it because the stocks are open five days a week. lisa: we will be on zoom in our pajamas. jon: let's work through the price action on the s&p 500 totally unchanged coming off the back of the worst day of the year on the s&p. losses more than 2%. across-the-board, three-day losing streak on s&p 500. year-to-date on the s&p, moves we have seen in the bond market have been phenomenal. higher than more than 10 basis

points in yesterday's session. coming in now at 3.94. tom: we got to 3.96. in the last hour, the mortgage rate is bankrate 30 year mortgage bumped us up 7% again. a 7% housing market doesn't change the equation? jon: who is going to buy a house with that kind of mortgage? tom: who can afford to? forget about 3% grade how much value is taken out in an urban area from 4% to 7%? jon: i saw some of the latest housing data and it said housing sales stifled by housing interest rates. the right way of framing it is saying the housing market is stifled by a pandemic interest rates. nobody wants to move. lisa: if you have a locked-in mortgage of 3%, why transfer

that into a 7% mortgage, even if you could get a lower price? not necessarily declines in actual prices a lot of people were expecting. 8:45 a.m. president biden meeting. a meeting already happened with the top diplomat in china. how much do we get this since there is this ongoing cold war deepening or can we get softening? we are going to get a business case for this. businesses are going to think twice about extending their relationship across borders in this connection. 2:00 p.m. we get fed meeting minutes. a lot of people are going to dig into how they emphasize reaction function. how they emphasize potential for ongoing rate hikes rate even at

25 basis point increments. new york fed president speaking, touting inflation. i am curious what they say about the importance getting back down to 2% in terms of a longer inflation goal. this matters in terms of understanding how far they will raise rates and how long they will hold it. if people believe this momentum will land -- will last, you get the no landing scenario. jon: no landing. this is january 9, 2023. there will be no landing for the economy this year. that was edward yardeni, at the start of the year. president at yardeni research. all talking about the same thing. why did you see that coming earlier this year? are you seeing more confirmation of that view? ed: my instincts came out at the

beginning of the year. everybody was talking about a recession. some people said it was 100% inevitable. they have data supporting them. the index of leading economic indicators, which has an awfully good track record of forecasting recessions, has been screaming a recession since it peaked in february last year. it gives you a one year lead time. we should be in a recession right now and it is not happening. i also looked at the consumer. consumer data continued to show you don't want to bet against american consumers. when they are happy, they spend money. when they are depressed, they spend even more money. jon: a term quite loosely defined. for a lot of people it means the economy doesn't come down. we keep churning out great gdp, great payroll stories. but also inflation remains sticky. is that the element you also

forecast for this year? ed: prior to the release of the january's batch of no landing indicators in early february, we were mostly debating whether there was going to be a soft landing or a hard landing. nobody spent much time talking about no landing. no landing in my mind it means the economy is going to 2.5%, maybe more this year. soft landing is more like 0.5% to 1%. hard landing is traditional recession with negative numbers of 1%, 2%, 3%, 4%. that promotes the no landing scenario. it's something we need to debate. there are two versions of that. inflation is what the market started to worry about and disinflationary one. it seems like a stretch but it

is possible. tom: edward yardeni is what we are all about at bloomberg. i want to know what no landing means with gdp and the animal spirit of corporate america. where you get your two scenarios, you get an ok to a robust, nominal gdp. what does that do to corporate america? ed: corporate america continues to have good revenues grows. -- revenues growth. part of that is inflation. part of that is real economic activities doing better than widely anticipated. this gives some credibility to the more bullish, upbeat outlook for earnings i have been talking about which is $225 a share for earnings this year for the s&p 500 and $250 a share next year.

those numbers are on the spectrum of earnings outlook, more optimistic ones. plenty of people talking about even now $200 or less for earnings. lisa: people are looking at margins. revenue growth can be really robust. we saw yesterday from walmart and home depot margin erosion as they are facing higher costs for their workers. they are not able to pass those along. is that sector could spit -- is that sector specific, consumer specific or broad-based, price then? -- priced in? ed: today for research we are working on a story on profit margins. we look at all the data using forward profit margins aced on analyst consensus, expectations for revenue and earnings.

what we are seeing is widespread. everybody has some amount of labor they need to operate. there has been a squeeze. some of it is pandemic related. we are getting back to a more normal labor market. labor is going to find there is a limit, and extent to which wages are going to be raised by companies. companies are starting to running to -- run into resistance from consumers. inflation can come down even if the economy doesn't land. jon: edward yardeni of yardeni research. tough call on the equity market. great call to the start of the year for this economy 2023. it is too early to draw conclusions of the data. we look for incoming data for the month of february.

the bmis slightly confirming what we saw in january. tom: are we in news vacuum in economics? we are all addicted to cpi tuesday? jon: payroll friday? lisa: they dropped to a 20 year low. this just came out. we were just talking about this. tom: we are at 6.96. i don't know how you do it. jon: someone message me about this moments ago. in the u.k. you can port your motor gauge to a new company. lisa: that is what people are talking about. jon: let people move their mortgage totally. tom: can i get in and alfa romeo? jon: do you want to talk about that next?

an electric alpha? futures up .1%. this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world, with the first word i am lisa mateo. white house aide says president biden strip to russia underscored -- they say it highlighted the costly investment in democracy the u.s. and its allies have made. the president told a crowd of about 30,000 that ukraine will never be a victory for russia. chinese diplomats call its relationship with russia solid as a rock. trying to portray itself as a neutral actor. weighing that with vladimir putin in moscow. the wall street journal says china's president is planning to visit the russian capital. we may get a sense of how many fed policymakers saw the case for a policy increase at the

last meeting. they may also show whether fed officials anticipate the need to take rates higher than present -- than previously thought to tame inflation. the biden administration will cut mortgage insurance costs for some force time homebuyers. -- first time homebuyers. they will see their fees cut by $800 a year or 3/10 of a percentage point. -- or .3%. ? global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪ ♪a lovely day (lovely day)♪

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>> u.s. consumers are not being heard -- not being hurt by higher rates. in other countries that hurts the consumer right away. it is not happening here. particularly when you have such a strong labor market. jon: he was brilliant. ultimately the point from him is clear. he believes the lags are superlong. because of the nature of the mortgage market, we saw a big move in rates yesterday. the curve more than one point -- more than .1%. backing away from year to date highs. equity futures shaping up on the s&p 500, positive .1%. yields coming in a couple of basis points.

3.9292. tom: how about an automaker with a double digit return. stellantis is the car i always wanted as a kid. the rest of it up 21% per year. volkswagen -- rno up 3%. volkswagen up 3%. jon: my mom had a renault five and destroyed it. tom: for americans this israel -- this is important. aneesha sherman stellantis -- --stellantis, the leadership is carlos tavares.

carlos tavares joins us now. chief executive officer at stellantis. thank you for formula one. we appreciate it. i have the conversation -- i have to drive the conversation forward off of earnings. you are looking for a warm spot in 2026. you had a joint agreement with the swiss. they are moving on to audi fine. the great mystery is what carlos tavares is going to do to get into the new age of formula one. can you advance that story this morning? what have you learned in the last couple of weeks what your alfa romeo team will do? carlos: the 14 brands, very warm to our heart. our motorsports programs are focused on 24 -- with a hybrid

brand. also on electric racers and maserati. maserati is now a contender of the world's ev. that is where we are continuing to focus. from here we will have motorsports program at one point in time. we still have time to discuss this. then we will unveil the program. it is too soon to unveil that. i apologize for that. tom: we can do it later in the interview. help us here with how you bring the romance in your success since 2014. how do you bring that over to ev, how do you bring alfa romeo and all you have done there over to electric vehicles? carlos: that is very simple.

you just have to drive the cars. if you drive the cars, if you experience the takeoff acceleration of an ev, if you experience the smooth ride and the improvement on the noise and vibration, if you experience the very low height of the center of gravity, an ev car is a better car. you can easily bring it to alfa romeo with extended technology to ensure the customer drive is even more exciting and pleasant. this is exactly what we are doing, extended sporting is for the alfa romeo brand with better acceleration, better drive, a smoother ride. this is exactly what we do with american cars, with dutch. we bring more muscle, it is just a better car. tom: you can drive down central

park west in second year in and ev alpha and the noise you can make, it will be just killer. lisa: i am not an expert in the fake noises you can create in your silent ev. i want to talk about the ram and dodge brands. we are talking about the u.s.. talking a lot about margin pressure. you recorded some of your biggest margins ever with the sale of these types of vehicles in the u.s.. i am wondering how long that can last even there are starting to be some pricing pressure on the margins. carlos: we should recognize the employees of stellantis in 2022 facing all the external headwinds they had to face. in the near future it is going to be an exciting period where everybody is going to try to

hold on to the pricing power despite challenges between supply and demand that are already there. rebalancing on supply and demand will put pressure on pricing. because of interest rates we see some cooling in the economy that you will bring more cost reduction of some of the raw material. eventually starting with steel. one side pricing power is the pressure. you have technology, appeal of the products, new models coming in. from the other side you need to run fast in reducing the cost at a faster pace than the eroding of pricing power. that is the name of the game for next year. we are in that race. we will see within one year who is going to be the winner of that race. that is exactly how things aren't unfolding in front of us for the next few quarters. jon: does that mean job cuts?

carlos: the picture is about how do you absorb the cost of electrification. many places of the world, the customer has not totally recognized ev's are a better car. when there are subsidies to raise the cost of electrification, then the country -- then the customers by ev's. when you remove the subsidies, you have this exert -- you have this example in germany, and italy, customers stop buying ev's because they are not affordable enough. the challenge for the industry in the next four years is to absorb the additional cost of electrification to protect the middle classes. can by ev's at an affordable price. the transformation of the industry is just starting. we are transforming our company

because new technologies are in, softer platforms, many components, a time as, all of this costs a lot of money. at the same time you need to bring affordability to the middle class. if we do not do our homework, in terms of productivity, then you will not be able to compete because some of the new entrance will show you your cost will not be enough. we needed to make sure we protect our companies by doing more. a breakeven point, a benchmark of the industry is at 40% of revenues. jon: does that mean job cuts? carlos: we are not excluding anything from the task of

absorbing the cost of electrification. jon: thanks for your time today. carlos tavares of stellantis. that is the hot button issue for european manufacturers. tom: u.s. manufacturers are dealing with it as well. carried over tensions in china, that could have been a long conversation. jon: it is going to lead to job cuts in the manufacturing business and autos. lisa: there are fewer employees required for ev manufacturing. this is a logical consequence. jon: futures positive point 2%. -- .2%. this is bloomberg. ♪ 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? go. go lights. go big city lights. go spotlights. go stadium lights.

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jon: three-day losing streak on the s&p 500. equity futures shaping up as follows. .1% on the s&p. nasdaq .4%. coming off the back of the worst day of the year on equity markets. nasdaq close to 10%. two year yield, .2%. the highest going back to 2007. yields come back this morning by six basis points. 4.6643. off the clothes of yesterday's session. inching closer to 4% on the 10 year. now 3.9234.

shifted higher by .10 -- by 10 basis points. tom: we had a -90 two basis points, a difference in yield on twos and the tens. now it has gone from -94 which is an indication of that shift up and flatter yield curve. jon: take a look at euro-dollar. tom: why did we leave carlos tavares behind us? jon: he would still be answering that question about job cuts. still going. he doesn't realize the interview is finished. can we go back to euro-dollar? 10641. the day before the jobs report.

this is what makes the fed really dated. if you go through all the points , whether it is the payroll on that friday where we have jobs 3.5%. cpi not dropping as quickly as indicated, ppi, upside surprise, retail sales month on month, first look at pmi for february, is the boom time of january confirmed by february data? this is how stale those minutes are. lisa: it is a conundrum. an enigma. with the earnings coming out, just confirm that view of confusion. we just got tjx, discounted retailer, net sales coming in at $14.5 billion versus $14 billion expectation. $.89 versus $.79 -- 78 cents

year-over-year. really positive. it shares up .5%. comes on the heels of negative outlook with respect to walmart and home depot. it is a different buyer base. tom: alfred from new jersey, thank you for emailing in. he was at a marshall's in new jersey yesterday. this is not home depot, this is not some big platform. this is a grind it out" but he, discount and comp sales beat is really impressive. lisa: should we look at some of the other earnings? jon: you have never been to a t.j. maxx in your life. lisa: i have been to a lot of t.j. maxx. let's look at some of the others. overstock, those shares down as they report net revenue for the third quarter -- for the fourth quarter that missed estimates by 8.2 percent. very tied to the housing market. how much is that a part of what is going on?

remember when they had this crypto aspect? they mentioned they were going to ask -- they were going to accept cryptocurrency and their sales boomed during the pandemic. optimistic they can continue to generate gains with the observance of bitcoin although it was down before. costar group talking about that lack of sales. a commercial real estate company down 14.4%. dealing with the potential declines in revenue and seeing negative forecasts going forward. this is fascinating considering fourth-quarter revenue tumbled 75% for that company compared to the year earlier period. ask where it is in terms of housing market pay. tom: we are doing this in real time. intel was stunning trade and historic headlines this morning. they reaffirmed q1 guidance. i am reading this for the first time. they cut the dividend

substantially from 36.5 to 12.5 since their usual mckinsey babel. mckinsey is is in the news as well. something about five nodes that are going to do some sort of strategy. this is an iconic company that is really challenged. lisa: videos reporting after the bell. the stock reaction isn't much. they cut the quarterly dividend dramatically. the shares are lower by .3%. put that money towards other things. perhaps this is the kitchen sink. tom: intel, 6% for the last 10 years. it has been a train wreck. i don't have the stock rates in front of me. i am going to say from 65% down to 30% as a general statement. jon: not earnings great this year. tom: the way we do earnings, we do them in real time.

right now we are going to shift back to bond market. where all of global wall street is focus. marilyn watson joins us, the head of global fundamental strategy at blackrock. at some point you have to make a t-decision. what is a t decision? the shift up in the yield curve we see, what is your t decision at blackrock in bonds? marilyn: yields considerably higher than they have been. in the last few days, the market is continuing to refocus on where the terminal rate might be. also how long rates will remain elevated for a long period of time. also the level cash and where you can get that as well.

the decision for investors is looking at new portfolio, income natural abilities, interest rate duration risk, and how you can get returns from the income you want and this is versus cash, not versus risk asset anymore. looking at the bond market, it is focusing on getting very high quality, decent carry and comparing that to where you can get the cash and showing you are getting what you want. lisa: what point do you extend that to duration? we were talking with brian weinstein earlier and he was saying now is the time shifting four year yields. do you agree? marilyn: we are increasing duration. now is the time we lock in a little more of that carrie as we do. continuing to see very strong inflation data, overall economic

activity remains -- remains robust. we see terminal rates on the horizon. we think the economy will slow from here. now is starting to become the time where it is maybe time to lock in a little bit more. being very cautious and cognizant that the fed is being very data-dependent and has made it crystal clear they will keep rates above the neutral rate for a long period of time. lisa: mohammed was on last week with john talking about how this fed will have to choose between torpedoing the economy or allowing inflation to rest at a 3% level and not a 2% level. you agree with that, do you think ultimately we will end with a higher inflation rate over the next 10 years than the fed would like? marilyn: the fed has been trying to trade that very fine line and has shifted down its increments

to basis point hikes. we think we could see a few more. the bar is high to separate that. it doesn't want to torpedo the economy. ideally it will bring inflation down in a steady fashion but it doesn't want to torpedo the economy. labor market is very strong. the fed is making sure inflation does come down. inflation will start to take down the second half of this year. it is a very fine line. the fed is in a tricky position. the fed will do its best if it can to bring inflation down to a steady point. it is possible inflation could remain for a long period of time above the 2% rate. its target was more in the average position. tom: katie martin at nft had a

great summary of the real life of the 60/40 portfolio. miss martin had a scattered out chart showing just how ugly 2022 was. do you have a belief that bonds can be a constructive part of a diversified, allocated portfolio for the next three years? marilyn: yes, bonds can have an important part in a diversified portfolio. now more than any period, 2022 was a very poor year for bonds and equities. looking forward in this environment where we see decent yields, where we can lock in decent carrie for high-quality bonds with very little interest rate, when you are looking at overall diversified portfolio, you can get so much more now in

the bond market. it is far more attractive than it has been for a very long time. if you go back to years, 10 years, when you look at the central banks and suppression they had on interest rates and on carrie, yes, you have got the price appreciation, but the actual carrie you got in the bond market was pretty low. that funneled market -- that funneled money into risk assets. bonds now play a very important role in diversified portfolio. jon: that word diversified, is that uncorrelated diversification? what we witness yesterday, we were told at the start of the year we would get a break in bonds. is that a correlated diversification with treasuries? marilyn: it is important to focus on less correlations. we will see correlations.

we are seeing a strained dynamic at the moment. we saw it this week with bonds and rates as well. we will see less correlations. that is incredibly important to focus on aspects to focus on correlations and to understand the drivers of a specific bond. that is an important part of a portfolio. jon: marilyn watson of blackrock on this bond market. treasuries up, stocks up. lisa: it is going to take a terminal rate established before we get that. jon: getting closer, i am told. tom: that correlation question, that was university finance.

you nailed that. jon: appreciate that, tom. futures up .3%. this is bloomberg. ♪ lisa: keep you up-to-date with news from around the world with the first word i am lisa mateo. today's release of federal reserve minutes likely to show how much support there is for largest -- larger interest rate hikes. the question is whether officials consider a 50 basis point hike at the last meeting. and how they are interpreting recent data on inflation. the european union slashed its natural gas this winter by almost a fifth. that leaves a goal think survive the winter would lower gas flows from russia. finland saw the biggest drop. use just -- usage there was cut by more than 50%. s, will get $13.9 billion from

the government in the next three years trade -- the next three years. it must improve its performance. since 2008 it proposed blackouts to its economy. tesla focusing on battery sales in the u.s.. president biden's inflation reduction act which includes manufacturing tax breaks. it has concerns europe will fall behind in the race to attract production of electric vehicle components. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

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>> when we have seen in the most recent quarter, we have had share gain from the lower and middle income buckets. as consumers are being more

discerning, looking for value, in a world where convenience really matters, our value proposition is resonating with them. jon: that was john david rainey, walmart cfo. home depot had a tough time yesterday. home depot down 7%. forecasting a tougher earnings story. ultimately higher labor costs as well. tom: what was the distinction between walmart and home depot? jon: labor story. the outlook for both were tremendous. we had a guest yesterday from ubs talked about the cost to serve was getting more expensive, bottom line. lisa: we heard that from stellantis, the equation, how do you offset with cost-cutting you are seeing and the lack of ability to pass it along? home depot is problematic because they are katie -- they are catering to the housing market.

we are seeing the problem there. jon: a good conversation yesterday. are you causing more trouble? tom: equities lift yesterday. it is am -- it is a mckee kind of end of the week. saving us right now is aneesha sherman. retail analyst at bernstein. it is always easy to focus on

luxury. aneesha sherman has what real retail is doing from sea to shining sea. she has real work in retail and hurt experts insecurity and -- and her expertise in security analysis as well. 90 days ago, did t.j. maxx -- off the gloom of 90 days ago, did t.j. maxx move? aneesha: t.j. maxx outperformed. t.j. maxx and marshall's, the core two banners. expectations of a plus 3% to 4%, the performance on the comp, traffic, inventory moving was strong. margins were a little disappointing but the sales came in. tom: what is the path forward? if we are in a new rate regime where money costs something and they have a carry on all their

retail, what does your worry look like forward? is it block and tackle quarter to quarter move or can there be some real vision? aneesha: for the lower end retail, value retail that got killed last year, they are looking at a strong 2023 recovery because their comps last year were sir we -- were so weak. lower end consumer was more pressure. they should be in -- they should be expecting stronger performance in the coming year than they did a year ago. that is different from more premium brands that did fantastic last year and are facing the tough comparisons. lisa: it's a comparison type of story or the fact that people are trading down, looking to cut costs in their own lives and might be looking at a discount rather than a nordstrom? aneesha: yes, we heard that narrative from companies from the last seven months now. people are more cautious, more likely to buy on deal, less

likely to buy full price. considering the weight of the purchase a little bit more than they were a year ago when they were happy to spend and happy to pay full price and getting out of covid mindset. a lot more caution in the market will benefit tjx and its peers, ross and burlington that will report next year. it is not just about comps, it is about potential in crude -- potential improvement in demand lisa: in the share price as well as earnings, t.j. maxx down a touch on the year. not including today's pop. you look at nordstrom and it is up more than 20% on the year. will we see the reverse correlation? aneesha: i don't know if we will see off prices d rate. they didn't do as well last year. tjx was an exception. tjx was up 6% last year. beat the market, beat the sector.

we will continue seeing upward momentum on ross and burlington that ended last year it down and are recovering from that. lisa: we have been joking about how we could have had a meteorologist on for every segment at the end of last year and probably given us that her landscape for what we could expect this year. how much this weathered feature into this? not with people going into stores but with respect to gasoline price and utilities going down, giving people more discretionary spending. aneesha: it is a big part of it. especially for lower income focused retailers, value retailers. any relief to the lower income consumer, easier fuel prices, fewer trips, lower inflation, lower sequential inflation, any relief goes straight to the bottom line in terms of spin. we have come under pressure with consumers. any relief helps to spend a bit more. anything weather related that will drive gas prices will certainly help. tom: the distance from dior to

tjx, there has got to be a middle ground. i haven't understood for 20 years with the middle ground of retail does. after the pandemic, maybe we are over stored. there are some mall issues as well. what do all the players in the middle do? aneesha: the middle is in a tough situation right now. the middle end or slightly end department stores. some of the mainline retailers that are mainstream retailers are in a tough spot. they are going to see some trait line going to value, but they are not immune to consumer pressure the way the higher luxury brands are. which are continuing to perform. they are going to get squeezed. we are going to see more store closures and perhaps more bankruptcies through the next 12 months. jon: we had this explosion of by now, pay later. one of those brands were affirmed. affirmed came out with big job cuts in the last weeks.

that helped people fund big purchases. to make a monthly payment. are you seeing any of that start to fade? what does that mean for the bottom line of some of these big players? aneesha: macy's for example, for their own credit cards, payments are down, carrying balances are higher month-to-month. a demand for something like right now, pay later is still there, but supply is probably coming down. we will see that. that is a part of what we are seeing in terms of consumer caution. there is less easy action -- there is less easy access to financing. jon: great to catch up with you. aneesha sherman of bernstein. that last point is an important one. all the lines you see at luxury stores, a lot of people going in there, by now, pay later. just make a monthly payment. you see something totally unaffordable, thousands of dollars, hundred dollars a month. lisa: you see rates slowly tick up. how much do we see that by now,

pay later disappear? tom: i look at cole's, -- at kohl's or upscaled to norstrom. their track record is a -6.9% per year. why are you in business? i don't get it. i get it, it is a family. that is the answer. but the whole middle ground retail, is a mystery. jon: it has been tough for how long now? tom: 20 years. jon: you know when you go up lexington avenue in new york, madison avenue, all the empty storefronts still. i ask this all the time when i walked down, at some point don't you have to cut the price of the rent to try to get someone in there? i am told a lot of people investing in this real estate are looking for write offs.

lisa: you can do a tax deduction based on lost revenue if you don't rent it out. if you rent it out you have got to lock in rate some are and you have to next year lock that in. jon: they are going to do this indefinitely? lisa: at what point does this become a political issue to say you have to change the scenario to revive an area that has been kind of decimated? entire areas in mid time -- in midtown have no activity. tom: cranes and specialty talking about real estate in manhattan and other cities as well. what you're talking about is the cranes unspoken. nobody wants to talk about empty storefronts. talk about the 50th floor, but they don't want to talk about the first floor. jon: you came back off a long weekend and you said midtown retail has changed. tom: the spirit is different. jon: equity futures up .25%. jon: equity futures up .25%.

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bloomberg. >> there is going to be more inertia and resistance to inflation. i'm hearing people out there still pushing price. trying to test it. as the meetings go on this year, maybe we don't get quite as far but if inflation persists? >> nobody covers the fed like bloomberg. your global business authority. from the world of politics to the world of business. "balance of power" as you news, analysis, and insight. balance of power, weekdays on bloomberg. >> we are now expecting inflation to overall continue to decrease throughout the year despite the last meeting. >> the consumer is extremely

strong. company balance sheets are extremely saw -- strong. >> there's going to be a fall out. you cannot annualize the degree of performance that we had this year. >> it's possible we are going into recession and that it will most likely you mild. tom: good morning, everyone. thank you for being with us this wednesday on radio, on television, in the markets. it's a bond move with the diplomacy of europe. i want to link this into the financial move now. -- world now. let amir put talking in moscow, biden talking in budapest. the middle grade insurance company that announces with profitability a one billion euro buyback read that website about

europe and continental europe during the time of nazis. it's a history organization on the german companies and it speaks to the tension that we face in 2023. jonathan: edit speaks to this week in terms of geopolitics. going into ukraine to kick off the week, talking about solidarity with ukrainian people. worried about whether china gets involved in providing direct assistance to russia. and this headline from earlier this morning, the top chinese diplomat saying that relations with china and russia are solid as a rock. it speaks to the tension between the united states and china more than anything else this morning. tom: in that speech that i heard from true russian experts, the most chilling speech they have heard going back to stalin. linked again into the finance

and recovery of germany, they came out after the war and were relatively the first to make reparations to the jewish people that lost property in germany. the tension here, as you mentioned with your question, shoals, there are delicacies in this delicate time. jonathan: it's a low probability event that we wind up in a war between the u.s. and china, but there is still a probability assigned to it that isn't zero. if that takes place, where does it leave the chancellor in germany? tom: lisa, the tensions in the bond market, are we all in agreement that the last 90 days have been absolutely nuts? i think specifically linked to the anniversary of the war and a europe in recovery and bringing back munich and the rest with people just trying to survive through it. lisa: the mystery of pandemic

economics mixed with the exogenous risk of ongoing war. people believed in immaculate disinflation until they didn't. a terminal rate was priced in until it went to 5.4%. it's been whipping around and now it's back down. people are gaming out a scenario where suddenly there is strength from this warmer than expected winter entering the sphere of a model that we have with pandemic economics and geopolitics that raises the existential issue going forward. tom: john, you do better on this than i do. anyone modeling price down to yield up through what we saw of october last year? jonathan: well, we are getting there now. intraday we have not gotten down yet. close to 480 on the two year yield. on a closing basis, on the two-year it rides the way across

the curve. shifting higher in yesterday's session, the bond market looks like this, covering two basis points on the 10 year. still close up at 4%, 392, 73. jonathan: and we moved away -- tom: and we moved away from that accommodation. it's a long way from the positive .50 effort we tried to get to. jonathan: futures positive, .2%. we are going to hear from the new york fed president of it later. at 5:30 this afternoon. i have said all morning i think the minutes from the federal reserve are pretty stale given what we have had. now there's this message from twitter from a few moments ago, they are not stale if you are hawkish. i think that's the advice at the moment. if it's dovish it's like yeah, they didn't have all this data.

lisa: people are looking for a sense as to whether the fed will massage the minute. there is this idea that they can push it in a certain direction and that will perhaps to the hawkish that people are looking for. tom? tom: i can't say it enough, it's a venerable company saying forget about it, we are buying back shares. jonathan: but the labor pressure, don't forget the labor pressure. retail, it's something we need to keep an eye on. it wasn't a massive story a year or so ago. they can pass it on. tom: the vix, 23.14. michael or pat jones trading, michael, -- michael o'rourke at jones trading, michael, all that

tangible out there, is the glass half-full or half-empty? michael: i'm in the half-empty camp. it's been an incredible corrective rally in the bear market for the last four months and i think we are ready to resume that. lisa: how do you push back against people who say we have seen a real strengthening in the economy, a growth increase in terms of expectation with fed rate hikes. why not lean into that given that a lot of companies are doing better than good? michael: i wouldn't even say better than good. when you think about the situation of economic strength january and the preliminary pmi from yesterday carrying over into february, we still see basically hot economic data with high inflation levels. on the flipside it's home depot and walmart saying earnings will

be down this year. we are looking at an environment where the fed needs to be tied up. we just moved to a positive real fed funds rate earlier this month with ed inflation problem. it's a policy outlook that will be unfriendly going forward. again, the fundamentals for companies are slowly deteriorating, that's the best way to describe it, not improving. lisa: what will it take for big tech to outperform again given the incredible on performance -- underperformance this year? michael: people realizing that inflation is not under control. i think you touched on it in your conversation that you just had about what's going on in europe. and between china and the u.s.. there may not be a proxy war but we are seeing deglobalization themes and i'm still a big

believer that china entering the wto in 2001 created that stable low-inflation environment of the past two decades and we won't have that going forward. it's going to be a much more challenging environment. for the past 15 years we've had a real fed funds rate on average of one point 25%. that's not going to be the case going forward. jonathan: does it get you -- tom: does it get you to a pension forward returned with an actuarial assumption? michael: i would say i think you do. it's been a beneficent environment of the fed having latitude where they can pump liquidity into the market anytime, at any sign of weakness. we don't have, they don't have

that flexibility anymore to react like that. they have to be concerned that if they are at all accommodative or can show less vigilance on inflation, you will see inflation expectations uptick. there is still a high inflation environment, it's something they have to get under control and we are just not there yet. jonathan: let's take a guess on the two-year, is it more likely that we get to 531st or is it more likely we get to something like or hundred 20? michael: will we were just at 420, right? it's interesting, if you look at the annualized rate of inflation and the core cpi of the past three months, going back over the past 40 years every time we have had inflation of those levels, not talking the 70's,

talking 3%, 4%, 5%, you have seen interest rates higher than where they are today and that is one of the reasons inflation is going to be sticky until we get rates of it higher here. it's an environment with a real fed funds rate of 300 basis points as opposed to 23, 22 basis points. that type of environment going forward i think you will see the rates go higher. jonathan: is that a call to say higher and not lower? michael: i would say so. jonathan: lower and not higher. michael: absolutely. jonathan: thank you, sir. trying to work out where people think the next ones coming from. tom: hence are spinning. we have been busting grandmas chops all morning but she's absolutely dead on. jonathan: wrapped up in an enigma.

that's going to be a prim are now. lisa: conundrum within an enigma? terrible. terms of the next big move a lot of it's going to be tied to big tech in that for me is where this interesting outperformance is. how much of people really got him out of that position? jonathan: can you imagine 520? tom: can you imagine? jonathan: amazing. futures right now, positive, 2/10 of 1% higher on the s&p 500. don't miss it. i mike, but that's because i have to be somewhere else. don't miss it. [laughter] in two minutes. i felt bad teasing it, don't visit. don't miss this. at hyman, coming up. looking forward to hearing that conversation. lisa: up to date with news from

around the world, i'm lisa mateo. you might get a sense of how many fed policymakers saw the case for the larger interest rate increase at the last meeting of the central bank to publish those minutes at 2 p.m. new york time and it may show whether officials anticipate a need to take rates higher than previously thought to tame inflation. in poland of the president, biden, is meeting with eastern european leaders who have supported ukraine, sending weapons and taking in refugees fleeing the russian more. president biden returns to washington today. the top chinese diplomat calls relations with russia solid as a rock. the remarks come as beijing is trying to portray itself as a neutral actor that can broker peace in ukraine. meanwhile, "the wall street journal" says the chinese president is preparing to visit the russian capital.

the biggest maker of computer processors, intel, slashing their dividend payment. they want to preserve cash for investment. last month they forecast one of their worst quarters in their history. chip companies have been hampered by a steep drop in demand for personal computer processors. the biden administration will cut mortgage insurance costs for first-time homebuyers. the program will be unveiled today with mortgages insurance by the federal housing administration fees cuff i $800 a year or 3/10 of 1%. local news -- global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo and this is bloomberg. ♪

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>> i regret today's decision by russia to suspend its participation in the new start treaty. president putin is in no way preparing for peace. he's preparing for war. for new offensives. he's mobilizing more troops and sending in more weapons. that's why we need to step in our support -- step up our support for ukraine. jonathan: the nato secretary-general they are addressing the world. russia back in more ways than one in the last couple of days with firing language from vladimir putin. getting an endorsement from china. calling it rocksolid. a striking headline given what we have seen. tom: and these video images are really something. it's a kremlin like white room, white table, but putin is not

sitting in one time zone and the other in another. images matter. they are right across the table from each other being fraternal. jonathan: i do wonder if we had gotten that headline if we hadn't had the issues we have had in the past couple of weeks between china, the united states, and the alleged spy balloon. would we have heard that language? lisa: basically is this tit-for-tat, rationing up tensions saying we want to get involved and show our strength and your potential weakness in this situation. if you are not going to play ball with us, we are ratcheting up tensions. how much is this a negotiating tool? jonathan: the relationship is solid as a rock, withstanding the trials and not influenced or pressured by third parties. we all know who the third-party is when they say that. jonathan: traveling back -- tom: traveling back to washington,

president biden. england, anne-marie horner. we are going to take advantage of that commitment to really learning and understanding the history of the continent all the way up to siberia. i want to talk about the elephant not in the room. when we talk about the budapest nine -- bucharest, bucharest. but let's talk about the budapest nine. the guy from budapest is not there. it's really important when you look at that. anne-marie: it is important. victor or bottom has better rebel. someone who has dragged their feet when it came to sanctions. saying he wants economic ties and strong relationships with moscow. but he's also talking about the european union saying that when

russia invaded ukraine, the west elevated it into a bigger conflict. his words, he views it as two slavic nations fighting against each other. something you don't hear from other european leaders. the elephant not in the room as you correctly noted, he will be sending another delegation but the ft talked about it as well, this organization of the hungarian military industrial complex and it's difficult at a time when you have the biden administration alongside president duda and other western i -- allies meeting with the bucharest nine wanting to talk about a closer relationship within nato and viktor orban poking holes in these alliances. jonathan: how unit -- tom: how unified are they? think about that bridge in prague, so historic to

everything, medieval times and all that. forget about the history lesson, how unified are these nine? anne-marie: it's pretty clear that they are unified in the sense that the day after invaded ukraine these nine wanted to coalesce and have a meeting. obviously they had concerns around being either part of the, former part of the soviet union or a part of the now dissolved warsaw pact, they wanted to make sure that this didn't go outside ukrainian borders and that they were not next in terms of anything putin was thinking around adventurism or an absolute invasion of these former soviet countries. the group was also created after putin and i crimea. created in 2015. we obviously saw the fighting in eastern ukraine since then. there has been a concern, a growing collective concern amongst the group.

i would say that they are pretty united in those concerns but obviously you have a spectrum of those like president duda and those like victor or bond -- victor orban. lisa: i believe that president biden hits back today or early tomorrow and it comes at a time where he expressed solidarity not only with the bucharest nine but all of europe in saying they will counter russia. any tangible takeaways from this other than the ratcheting up of tensions between china and russia on one side in the u.s. in europe on the other? anne-marie: one of the main things to watch out for when he heads back is something that he has flagged it we have reported on, another tranche of sanctions against russia. penalties against key industries, potentially more export controls as well as going

after more individuals. that is one tangible thing we can take away from the trip. but overall the trip was really about symbolism. we have this wariness and fatigue rising amongst countries around the world about the fact that everyone is starting to settle in and realizing that this is not a quick conflict, it is going to go on for a long time. biden wanted to make it clear that the u.s. will remain united with western allies in providing funding to ukraine but also making sure that they further try to isolate russia, which is why this split screen is fascinating, russia is trying so hard to show that they are not isolated, look who is in town, the top chinese diplomat. lisa: is it russia or is it china and what is the message that china is trying to send? that they want to facilitate some peace talks? yet they are talking about the unwavering support russia.

anne-marie: china is playing a two-part game at the moment. publicly they are doing these quote unquote peace plans that are being very much questioned with skepticism by european and u.s. officials, but this is something the global south, countries in latin america would welcome, countries with food and energy insecurity. so this is something the u.s. needs to make sure that they build up support to counter. at the same time, xi jinping is trying to be seen as a global statesman. someone who can try to play this hand of bringing peace. but behind the scenes he has no problem calling putin on the phone a number of times but has yet to call president zelenskyy at obviously the u.s. has made it clear they are concerned about beijing going over the line of not just sending help to russia, but lethal help to

russia as they continue to advance this war. jonathan: catch you again in the next hour on this, anne-marie, thank you. coming up in the next hour, here's the lineup for you going into the opening bell. jay polonsky coming out of tbw. lori from rbc capital markets at 9:30. jay, very constructive on the global equity story. darrell cronk, u.s. equities. that will be the conversation for the next hour. tom: i think that mr. polonsky said that he was way out front of the medical salvation of china, china opening the pacific rim. last time darrell was sitting next to us here, he was extremely constructive. like we will hear from ed hyman here in five minutes, on the american experiment that can

survive high yields. all of these guys are older, they have lived this, they've seen it. ed hyman loved bob seeger, he told me he was complete they all over bob seeger. jonathan: on a serious note, ed hyman on china and ever caught -- evercore, that's what i want to hear. tom: yeah, they pull back a little bit but yeah, optimism. jonathan: looking forward to the conversation coming up at about five minutes time. who said that? a wise woman once said. [laughter] two hours ago. lisa: no one remembers her. [laughter] jonathan: futures positive. this is bloomberg. ♪

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tom: "bloomberg surveillance," lisa abramowicz, tom keene, we welcome all of you from around the world. it has been an extraordinarily day for us. busting grandmas chops, but that's what we are hearing from guest to guest. lisa: everyone says that this is the most uncertain time in our career, gaming out pandemic with the russian invasion of ukraine and what we see globally. put it together in there you go. tom: what we know is that it can only be smart conversation. perspective has been dead on

with no landing. leading the charge, hugely anticipated for the last half hour, ed hyman joins us and we are thrilled that he is going to have a extended conversation with us. yes, we will get to the china call in a bit. ed hyman, thank you for your generous time this morning. you say inflation is slowing significantly. david rosenberg said inflation is slowing significantly. it's on the good side. do you see service sector -- inflation slowing? ed: yes, i do. tom, it's great to be on your program. it's a terrific program. just wonderful. there is a pmi for services and it has dropped 20 points, from 75 to 55. there are plenty of services that i think are slowing,

particularly in the financial service area, insurance, etc.. that's the key, to get the measure of the watches to slow down. one of the big services is rent. i'm convinced they are going to slow dramatically and even go negative with shelter cpi. there are a half a dozen measures of surveys of rents that have slowed significantly if not declined over the past nine months. they leave the shelter cpi by about eight months. i'm a couple of months late now on this showing up. but i think the shelter is going to slow and before you ask it, wages are going to slow. if the keynesians lay off people, what can you say? tom: can we make news here

today? is evercore laying off people? ed: they may lay off me if inflation doesn't slow. [laughter] tom: got to be careful with tough guy, ed hyman. leading to the chase, going back to wayne angel and cj lawrence, monitoring him to. as you know they are in disrepute over the last decade. why are you following m2 in its collapse so carefully in your research note? ed: i read milton friedman when i was 23 years old. in the 70's, he became a rockstar. every time you had about of inflation, money growth accelerated 10%, 15%. so, it was an easy connection in that regard. bank deposits, 85% of my supply,

a practical way to track it every week. they have declined significantly, down about 2% now , declining 100 million in the past two weeks. this is going back to the 1930's to have a situation like this. now we have found over a decade that the supply might not have much of an impact it is in a normal range. 5% to 10%. they found that out when they tried to gear up the monetary policy with freeman on the money supply. last year the money supply increased almost 30%. the year before that, government outlay increased 50%. the fed to monetize that. now into last week was -3%, and ominous and significant decline.

at least by one or two years. you can't see it on the programming you had this morning, but it is coming and it shows up in some of the slowdowns around the inflation ratings that we are seeing now. lisa: this really speaks too long and variable lags, the discussions around tightening and removal of accommodation and how long it will take before we start seeing data. as you say you and others are not surprised in that we are even seeing re-acceleration in specific segments of the economy. what do long variable lags look like in 2023 in this era of crosscurrents of different trends? ed: 22 years. we do a lot of standards i milton friedman. we have done a lot of metric

work on global short rates leading by one to two years and if you hang on for a second, in 1923, 1923 john maynard keynes wrote a paper saying the money supply leads by 16 months. so i have not been, i have been surprised but i haven't been fighting. the economy is strong now because when you're ago that number was zero. zero. qe was in place. the money supply was around 10%. those are all now totally different. so, that will show up more towards the end of this year and on into 2000 204i think. lisa: people are talking about a no landing scenario that we could avoid. ending up re-accelerating into a new bull market. do you push back against that

and say look in a year, two years, we will see a downturn and the longer you have faith in the no landing scenario, the more potentially fraught it could be? ed: on the no landing part, i mentioned long variable lags. they are pretty painful. there was a piece from early 2009 criticizing people that had moved to the view that we would have a recession. housing weakness contained. it's different this time. became very popular. that's what's going to happen. that's what's happening now. i think that judging by this, it will end up creating a recession by the end of this year. the no landing story is looking at banks right now.

tom: ed hyman, folks, we are welcoming his generosity for being with us for this half-hour. this research note, 68% on the short rates, but to get out front folks we protect the copyright of all of our guest. go to evercore isi to join the religion if you will. i want you to speak to those younger. they didn't read you, they barely know your research. they have never faced this rate structure. this return to a real rate. there's a whole feeling that life can't go on. explain how life goes on if we come back to a legitimate interest rate shema. ed: seems to me, tom, we are already getting into an environment for life goes on because the economy is doing so

well right now. the stock market is pretty contemporaneous and they know that rates are high. i think that we are getting there but it is a learning process. the fed, i think, is doing a pretty good job of communicating what their plans are. if i was them, i would pause and see what they have gotten done so far. keep going, or if they can it turns out they should continue to pause or cut rates, they can do that. depends on the water that's under the bridge. jonathan: the president -- tom: the president of the united states meeting with the bucharest 9. i say this with immense respect, you remember the politics we have all faced.

how do you overlay the politics of the nation into what has been a multiple decade of hyman optimism. how do you take the challenges of the time of jimmy carter and fold them over to the time of joe biden and overlay them on a belief in the american economy? ed: that's too much for this morning, but i have a deep respect for democracy. i'm a conservative but i, i see a benefit to the back and forth that we have going on right now. i think it is too extreme, but it plays a role in the system. so at the moment, i don't see it being a terrible impediment. powell is doing what he's doing. i don't know if you have seen it, but federal outlays are scheduled to decline about 5%

this year. in 2023. it went up 50% in 2020. let's not celebrate too much, but it is a crazy world. the parts i find most troubling and i'm sure that you do, too, the war situation and the situation in china. which i am constructive on, but they definitely, they have a more problematic situation politically than we do. tom: i'm sure that you were briefed on the script that we will be taught -- coming back to talking about china and the optimism that evercore isi has and that stunning expectation on that recovery. ed hyman will continue with us. lisa, i get almost goosebumps here about the moment we are in we are we all have this, you know, been busting your chops this conundrum and enigma in the

sum of all our fears. in the real world you read the people that you choose to read. that is what ed hyman has done over the many years. lisa: the conundrum wrapped in an enigma is a butchered version of winston churchill. tom: are these elements of 39? lisa: that's the question, right? a moment of potential pivotal changes and hopefully not the same kinds as 1939. tom: we will continue with ed hyman, our annmarie hordern mint -- annmarie hordern didn't is in warsaw throughout the day. lisa: keeping you up to date with news from around the world, i'm lisa mateo. the release of the federal reserve minutes are likely to show how much support there is for larger interest rate hikes. wilmore officials consider a 50

point hike? the tone could hint at how policymakers are interpreting recent data on inflation. the european union cutting the natural gas demand this winter by 1/5, meaning a voluntary 15% goal to help survive the winter was met. finland saw the biggest drop. usage was cut by more than half. tesla is prioritizing battery sales reduction in the u.s. over germany because of the inflation reduction act including manufacturing tax breaks. fueling concerns that europe will fall behind in the race to attack production of electric vehicle components. china, authorities have urged state owned companies from using the four biggest international accounting firms, concerned about data security, including pricewaterhousecoopers, ernst & young, kpmg, and lloyd. how would you like a touch of

olive oil in your cup of coffee? it's happening at starbucks across italy has they struggle to gain traction in the company -- country. they plan to launch the new coffee line in the u.s., japan, and the middle east and u.k. later this year. global news powered by 2700 journalists and analysts in 120 countries. i'm lisa mateo and this is bloomberg. ♪ get help reaching your goals with j.p. morgan wealth plan, a new tool in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside

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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? >> if you take all the regions globally, we have the highest return forecast in asia, part evaluation story impart recovery from china.

i think you need to look within equity index to really find better relative opportunities. tom: can we suggest that pharaoh steals oppenheimer more than we suggest? or does london have them first? lisa: we get plenty. tom: peter oppenheimer, very competent there. tom: saying good morning to abby joseph cohen when, we should point that out as well. ed hyman, you stopped traffic here the last time you were on. with optimism on the china reopening. i believe you had adjusted real gdp. where is your number on the china reopening? still at 6%? ed: that's at the end of the year. it's a complicated situation.

more complicated than i expected. but we still think it's going to be very strong and opening up. i learned the hard way or the easy way that it makes a big difference. when we had the pandemic collapse, i learned from china. i was estimating -50 for the u.s., which wasn't too far off. we had a big rebound. gdp was something like 30. they had that dynamic coming on as they reopened. it seemed to be pretty successful. they got through the pandemic that a big percentage of people had the virus with a herd immunity going on. plus stimulus. working through the system.

lisa: how much will that trickle to the rest of the global economy given the increasing isolation of china with a deliberate focus on nationalism and this isolation with respect to the fishers that we hear about right now between china and russia? ed: lisa, i think they will export. once they get the factories going, there will be an increase in a source of exports. recently they became the biggest exporter of of vehicles. i think it's going to push up commodity prices. like copper. but then come in and push down finished goods prices. i will say i'm watching most closely the price of oil. that is my northstar as to how

china is progressing right now. oil prices, which i look at on the bloomberg, they are pretty quiet right now. $75 for west texas. that tells me that china hasn't gotten whipping ahead yet. lisa: this is incredibly important. a lot of people have come here to say that oil is incredibly muddied to given the price signal and people changing to renewables and china increasing domestic production of wind, solar, coal, exporting or importing some of those materials from australia. are you saying that's not true, oil is the cleanest read on what's happening with china? ed: i think it's an excellent point. on the price of oil, if things

like what you are mentioning are true for a number of commodity prices, it could feed into my strong view that inflation is going to be less then what people expect. not to mention the money supplies. i think that some of these technological advances you mentioned could put down pressure on some commodities. something like copper is right in the middle of technology advancements to make these work. some other commodities like natural gas, you can see them making new lows in the u.s.. when it happens it really helps economic activity on a current basis. particularly in europe. but it is also working a little bit here.

tom: i understand that once a week or once a quarter you read the work of julian emanuel. but let's dovetail the stock market and equity market and ownership of equities into your economics. with all of this said, is it at the point of 75 or the great market of 82 where corporations will adapt, adjust, and prosper like there? ed: first, we have open office architecture. having learned this from michael bloomberg. this is when you were on park avenue. so, i am cursed with the fact that julian sits right next to me. i went up with that guy all the time. he's terrific and thinks the

world of all three of you. on the current picture, my view is that inflation is the key. the fed is going to keep typing until either the economy slows or inflation slows significantly. i think inflation is slowing more than the fed thinks. a year ago, if i may say, i was pretty agitated that transitory was the wrong idea. inflation was going up everywhere. every place i looked it was going up in the fed cap saying transitory, rates at zero. and now i see inflation coming down most laces. unfortunately it's not coming down in the most visible places that the fed looks at like the consumer price index from the

pce. as a student of this, i see it coming down so many places underneath the surface. in the real world, if you will. i think that inflation is going to keep coming down. i think it could undershooting the fed target by 2%. tom: ed hyman, thank you so much for this half-hour. generous of you to be with us. that's the heart of it, really, lisa. he's done this before, with great respect he has been lagged a before and when his thoughts happen a little later than people thought they would, the division here, the distance that ed hyman and other disinflationary optimists have on the street, i don't believe i've ever seen it. lisa: again, it goes to the confusion of the moment. the fascinating technological advancements that could bring down certain basic utility

costs. a disinflationary force. with deglobalization or re-globalization and what it does if china isn't the factory to the world that it once was or doesn't provide a disinflationary force, how is that put together into previous models with the right numbers? understanding whether that model is even correct. tom: could you use it in a medical event? the heart of it, folks, i have laughed at my grandmother for 35 years with a scotch in her hand telling us about the pandemic of 1919. we thought she was not. lisa: but it's not just pandemic. there was acceleration of work from home, remote work, more nationalistic views. all of these different crosscurrents put together. my father is a mathematician. he once said to me that it's great to have a nice model but the model is always wrong.

when you take a look, the parameter is always wrong, understanding the moment you are in. he's right, we are in the dark of the bed. tom: usually -- dark a little bit. tom: hugely in the dark. thursday, tomorrow we get claims. lisa: but the key one will be the pce core deflator that the fed is looking at, do you see that same upside surprise from pmi and other inflationary types of metrics? tom: i want to look at housing and michael mckee will have all of that for us. it's an extraordinary morning. futures are up. stay with us across radio and television. this is bloomberg surveillance. good morning. ♪

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jonathan: coming off the back of the worst day of these. up just 0.2 s&p. the morning. the countdown to the open starts just now. announcer: everything you need to get set for the start of u.s. training. this is "bloomberg: the open" with jonathan ferro. list from new york. bonds and equities climb and fall together, waiting for potentially still five minutes. china says its