x monetary tightening is not taking a bite out of the economy. this is a bad news for inflation. >> at some point, we will see inflation come back down to target. >> what do you think inflation will fall back to? possibly 3.5%. >> there is no set for the economy. >> this is market volatility. we have to change her views quickly. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. >> where did february go? live near city, good morning. for our audience worldwide, this is bloomberg surveillance on tv and radio. alongside tom keene and lisa

abramowicz, i am jonathan ferro. let's get straight to the market. one third of 1% on the s&p 500 as we get started. i think we have to begin in china. upside surprise with data. our latest reporting suggest the chinese leaders are surprised by how well things are going. >> i read the notes. this happened 14 times before. i am going to say back in 1968, but let's go back to 1978. this is all about property. they can't let property collapse, and what i saw in the reporting on bloomberg, it's not that this will be a property bailout, but they will move forward, and that is where you come to the 6% gdp. we keep hearing about this on bloomberg surveillance. >> it is a pandemic in his 70's. is that what happened? >> i think their solution is the only investment they have is property. the bottom line is everything said and done, property can fail. >> you saw it at the opening of black rock. we are looking for 6% gdp growth is here, and ultimately, we're

looking for dislike towards the threes. that is the story. that is a tug-of-war. >> that is what i want to highlight. authorities in china are celebrating incredible data. but how much is this a messaging exercise at the same time we have companies moving out of china. really, you're hearing about this more and more, especially with what we saw in washington yesterday. >> data is good in china. under the radar, hardly being discussed today in china. lukashenko -- a russian allied. >> this is an afterthought. >> in this market you have decisions to make. do you want to be invested in china directly, or do you want to go through china proxies and avoid this tension between the united states and china at the moment because of what is happening with russia and ukraine? >> the traditional way to invest is multinational. the optimists are looking at a glass half-full and saying we are going to get through this.

we are going to get new data and we are going to get disinflation. we are going to have some form of life goes on, and that will be multinational. apple is doing business with china. >> you get some u.s. data. this will go ahead and just a moment. the market looks like this. one third of 1% on the s&p 500. a lift after the loss of last month read on both the nasdaq and the s&p 500. keels are little bit higher. 393 on the tenure, and we been sitting here in and around 390, staring down the barrel of 4% over the last couple of weeks. >> at deutsche bank, yes. on foreign exchange, writing a more leisurely no. for the next two weeks, we are obsolete critical. we see that in the spread. yields between them and i walk in this morning. you get it later, you get a at 5:52 a.m., but the bottom line is, i come in, and you have essentially a record vanilla

spread. >> should we share the true story? i am approaching the entrance of bloomberg, and tom shots out don't do it. don't go in. don't do it. i think i badged in before and by 10 seconds. >> futures are positive. a ton of data coming up. >> that is the goal just before the other person if not early enough to get there when i get there. retail earnings continue today. we get and dollar trade after the bell. american eagle. macy's and costco are on deck. we are sorry to see a resurrection of names that have done really badly. here today, there have been a lot of positive gains. 11% up for kohl's. you seen it down about 15%. the volatility has been incredible. at 8 a.m., this is the most important date of point of the day.

the boon to spank expects this to average 67% over the year, and possibly not back down to 2% or even the year after that. a time when they want to accelerate how much the balance sheet gets wound down. these are the debates that could potentially be turbocharged by the data we get today with the two-year yield in germany. the highest levels going back to 2008. at 10 a.m., the most important data point of the day, which is the u.s. ism manufacturing data, as well as prices paid for these manufacturers. do we see any increase in some of the momentum in the manufacturing sector after a lot of people thought there was a recession? this is a conundrum for the market. what if you get some kind of recovery in manufacturing, just as you start to make progress in diminishing mission? >> this is a push and pull of an asynchronous recovery. >> well set as always. i day ahead with abramowitz.

let's get to our strategist at eic be. we are filtering through the data that comes out later. we want to talk about the manufacturing in the united states. there was an of -- there was a robust read. the biggest question we have is whether february confirms that. do think it will? x -- >> you will see a modest improvement in manufacturing. but i don't think you are going to get back to expansionary environments just yet. i think we have some headwinds, and will be not only watching that component in terms of prices paid, as underlined, but also employment is not coming out, so we have to wait for another week we had more than another week. i think we can and should see some stabilization in the manufacturing backdrop, but i'm not sure we will have enough momentum the blowout with an uptick of sentiment just yet. >> i am very interested from

your purview of or in exchange, what do you think of the bond market, and what is the spread market in inversions signaling? do they signal crisis where we go just joint or we trump conditions, or is it normality? >> when you look at the history of those yield curves, you can signal that this will -- to that this inversion is ticking in the curve, and whether that is dislocation in terms of economic activity, or you think it is becoming a little bit ahead of itself in that particular context, the degree of conversion does overstate the downside risk in terms of the outlook. we are cautiously of the view that the market is pricing in a little too much for the fed because of the resilience we

have seen in the turn of the year, we may not see that being maintained. we have seen inflation pressures start to diminish, but in the context of the main data release going back to early so as underlined the key events of the day, i think that german yield curve is going to be very instructive because we are going to see further inflationary pressures, and it will be supportive. it will keep well under as well. >> that is where we want to go. i think the market is pricing in significantly. 4% ecb terminal rate at a time where you have inflation running at the fastest pace in decades. in modern history in europe. how much we price and on the upside surprise could eventually come from today cpi data or tomorrow's broader zone european rate. >> with the french and spanish hcp, that is on the top side, and with the spanish numbers,

they are particularly disappointed in the prices we seen, so it does look as though we are pointing towards a higher german prince. >> i think we should look beyond the headline read and focus on the core number. that will be something which will be a much more relevant policy narrative going forward. we saw some comments from philip lane over the importance of core prices when you strip out food and energy. those were already at highs. if we look at an uptick in terms of core prices, that will only amplify the degree of pressure on the ecb to tighten the policy further. that starts to raise issues, uncountable issues in the context of the ecb of those fragmentation confirms. >> -- concerns. >> we've had about six of the points of hikes. they were at -50 on the deposit rate and out to 50.

goldman sachs came out and they now think the terminal rate, the pink rate of this hiking cycle will be 375 the ecb. is that where you are at? 375 pushing forward? >> put it this way. when i adjusted our criminal rates back in december to 350 for the year, my presumption of 350 was proving to be increasingly -- challenged by the inflationary dynamics. i think the core prices remain relatively sticky. i think the prospect of 375 or higher continues to build. so accordingly, that underpins our structural bias towards a higher valuation of the euro-dollar to the worst of the neck six to 12 months, and that is we want this for the next year. >> you are stronger at 106, point -- pushing towards .8% print thank you. cibc.

the latest from goldman, looking for a positive rate. 375. lisa's friends, the bank of france's governor was out. >> i guess i did. >> has waiting you to bring it up. we were looking at the great. quick seleka sate your friend. >> the bank of france's governor. >> trying to say that. >> that was beautiful. >> i would say slightly differently, but there is a question about what the terminal rate is. if you want to get there by september, march is not the last. that is instruct about a time when the rate is already higher. you wonder, especially with a peripheral spread control, have you seen the worst of it in terms of being priced into the market? >> talk about the journey. that's what most people are looking for. that is what the ecb is guiding us towards on 50 basis points in may, and in june, you have a lifter 325. maybe 375. >> i'm going to go bullard on you. we are now talking about the speed.

i would suggest september. i don't care what the central bank is. in central-bank talk, this is basically tomorrow. this is part of it. a lot of people talking about jump conditions in yields, and some of its own crew, but the answer is, all of a sudden, we are talking about getting there fast. >> meanwhile, we won't speculate on the rate and when it may be reached. there you go. >> when the peak rate will be reached. >> that is the same issue. you don't want to double down on that. >> he doesn't want to get there fast. >> all of the above. >> our. weeping waiting on this. were killing this talk, aren't we. >> looking at that conversation later. futures are up one third of 1%. this is bloomberg. >> keep you up to date with news from around the world the first word. i am lisa mateo.

in china, the economy is showing signs of a stronger rebound after bigresearch's were abandoned it manufacturing posted its biggest improvement in more than one decade. meanwhile, service activity climbed, and the housing market stabilized. in northeastern greece, at least 36 people have been killed in a train crash. 85 others have been injured. authorities say the passenger chain collided with a freight train just before midnight. it started a fire. the passenger train was traveling between two popular tourist destinations. lori lightfoot has become the first mayor of chicago in 40 years to lose a bid for reelection. she finished third in tuesday's election. on april 4, a runoff will pit the former chicago schools chief against cook county commissioner randall johnson. lightfoot was unable to overcome voter dissatisfaction with chicago's rising crime and slow economic recovery. christopher wray says the fbi

has previously determined of the covid virus originate from a potential lab incident in china. this contradicts scientific claims that emerge naturally. he's at the chinese government has been trying to counter the work the u.s. is doing. global news powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo. this is bloomberg. this is ge vernova, helping generate and move the energy that our world needs.

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invest in america, lower health costs and strengthen social security and medicare. we will cut the deficit more than $2 trillion over the next 10 years. by the way, i want to make it clear, i'm going to raise the taxes. if any of you are billionaires, you have to stop paying 3%. >> the president of the united states there on taxes in america. we will pick up on that and a second. equity futures are positive one third of 1%. field is not doing much as we kick off the month of march. we are looking at german inflation in one hour and 43 minutes. we will break that down right here on bloomberg. then later, after that, two hours later, we will get a read on the ism manufacturing survey for the month of ua. that is really important we had the month of january had to remand as -- tremendous data. we will see if that confirms. >> i wish.

i wish for the british process. when does the campaign start or prime ministers with six mins before #>> you mentioned in slot. you don't like the 18 month anthem. >> we are knee-deep in this. for international audience, maybe is not at the front of the newspaper, but is on political rags. emory horton joins us from bloomberg. this campaign forever correspondent. we saw president biden say i will raise your taxes come or wherever he said, but there is a different candidate that was say, i'm not going to raise taxes. that would be the gentleman from mar-a-lago. president trump taking a splashy are on the last couple of days, in particular with strong pulling against the gop worthy. is it for real? >> the strong pulling is numbers that are kind of eye-catching, especially since he is still in the lead, even when you have the likes of governor ron desantis

picking up steam. that pulling down trump receiving worry 3% support, and met the santos received 20%. what's more interesting is that individuals who did not pick donald trump to be there candidate, the second choice was ron desantis. and vice versa. so at this right, and your point you made versus u.k. and u.s., i am very well aware of it. this campaign season is obviously so long. you have no that you are starting or ending. it is a rolling basis. it is early on. but the former president still has a hold on his party, and a cpac, we will hear him nikki haley, but ron desantis will not be attending. >> this crew, and let's -- the 45% or whatever that are for the former president, is there any belief that he could marginally expand on that? i believe he has to get into the vicinity of 51% to be reelected.

is that within the zeitgeist? can he make that marginal pickup? >> i think the playing field is very wide. it is only growing. the governor of florida is being talked about a lot, and he is a new book and these on this national tour, and he hasn't said he's running but he's holding events with a lot of important donors, and in trump's backyard at the mar-a-lago, but he has yet to say he is running. it is too early. it is way too soon. >> let's talk beyond just to his running, with the main issue will be. we saw in washington dc that china is front and center with the republican senator -- the republican representative mike gallagher from wisconsin. he said this about china. it is not a play tennis match. this is an existential struggle over what life will look like an the 21st century, the most

fundamental dumps are at stake what types of proposals are behind the pretty fiery rhetoric? >> the optics of this -- they are in the same room as the january 6 committee. they want to put on display a show, and they are talking about a threat of china and the decisions they are going to make that will be important for america in the next 100 years. it is everything. we talk about tiktok, you have individuals talking about their leaders. it is a slew of issues that this committee is going to bring to the forefront when it comes to china. what really caught my eye, and i put it down to ring it to you is that at the same time this was happening, there was a from the chamber of commerce in china saying that for the first time in his 25 year history, fewer than half of respondents ranked china as a top three investment priority. that is huge. what the trade data shows is that they are at near records between the united states and

china. >> that is why there is a bifurcation between the near term expectations for growth in china and the other from potential challenge as we were talking about earlier, because there is a dissonance with what companies are doing now and what they say they are going to do. does the u.s. want to encourage the or do they want companies to take care of what they want to take care of? >> what you see from yes politicians and the administration is that they want to make sure that companies are either going year shoring or front shoring, and they are diversifying outside of china. that really came to the forefront at the height of the pandemic everyone realized that china had a hold of all of these goods that other countries need to get access to, and they just claim. you see that with the president in the commerce department talking about the rules of the chips act. they want companies to invest in manufacturing, here. that is the town. this administration and also, republicans and democrats in congress are taking that when

they talk about business leaders. >> happening right now, the president xi jinping is welcoming the belarusian and, lucius franco, of putin ally. he wants to expand cooperation according to cctv. how complicated is its foreign policy effort of the united states with all of the united states with all this in mind? ask it is complicated. xi jinping had his top diplomat in moscow meeting with putin, and he is welcoming a state visit with lukashenko who is putin's closest ally at the moment. one year ago today, russian troops were in belarus. they helped to fight this offensive in kyiv from the directive of president putin. what she is doing is almost a proxy friendship to russia through lukashenko. belarus is a small economy, when

it comes to change, they have china. this is more about an olive branch to prudent by welcoming lukashenko. >> in washington, on top of the story. this is how complicated things are. the last couple of weeks, the administration and the united states is been very trans earned about their concern. china would provide legal aid to russia. what is happening subsequently? china has described the relationship as rocksolid. that is the chinese description of the relationship. this morning, the press is welcoming prudence ally. i will center lukashenko. >> eight proxy friendship. a concern of that leading to a proxy war being in the ukraine. how much our lines hardening as a result of where the gravity is pulling the donations? if you look at what happened in washington, it was the aggressive. this is our adversary in a massive way.

china versus united states will define the next decade, and you have china coming out and looking for allies to solidify that. this is pretty concerning and a landmark moment. >> i'm looking at this, and first of all, i have a proxy friendship with anne-marie, but it is boxy. we are very proxy. but at i want to know is that russian sanctions are easy. what does china sanctions actually look like? >> a been super clear in the ministration to say that there will be consequences. they have been totally unclear but what those consequences might be. >> the reason i ask is what is the lead behind his fiery rhetoric? is there something substantial? companies perhaps don't do as much investment read is that the goal of some of this rhetoric? >> maybe 18 months ago, china was almost on investable. then we started the year, and china was unavoidable. then the tension came back to

the surface. what is it now? how do you allocate that story, knowing it will be a big teacher in global growth with these worries and teaming to simmer >> we have always heard this rhetoric percolating on the outskirts. how much is become central enough to be concerned enough to trade on it in a way they have not before? >> will pick up on this in the next hour. once again, coming up, the next segment, jennifer from capital economics. a direct friend of the program. equities are up .3% rate good morning.

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>> equity futures lift on the s&p 500. up one third of 1%. the nasdaq is up .5%. lisa watched this movie six month ago. one stop talking about it. >> every time we talk about geforce, i think of that one james bond scene from moon raker. let's move on. >> tell us more. >> it is terrible. >> the markets. >> the bond market. the two-year looks like this. on february 2, the day before the role work from 03%. on the u.s. three year. almost four 81. yields are unchanged on the

session. not unchanged over the last on. a move on the tenure. yields are unchanged on the session over the last month read materially higher. in the fx market, we shape up with gpi. the regional stuff, a breakdown in germany. looking for the cpi to come in unchanged in about 90 minutes from now. we get the latest read, unchanged on the previous month year-over-year, and that is a problem for the ecb, which is why the likes of the ecb and goldman sachs are at 375 on the depot rate over the ecb. it be great if this is the hiking cycle. >> where are we on the bundesbank? we had headlines from nagel, and it's like sooner. >> it will be strategic in the next week. we have a kinds of 50 basis points at the incoming meeting this month read i imagine the hawks will be driving to get the same guidance for the following meeting to say we've got 50 again. >> this is a joy. what we are going to do, and you hear me talk about vectors, this is where i got it.

jennifer make you and was lucky enough to learn economics at ucl. a giant at ucl of the algebra vectors and economics is wendy carlin. if you study with wendy carlin at ucl, that is a good thing. jennifer joins us this morning. capital economics. i'm going to go right there, and i think there is a real change here in the vectors we perceive of inflation, led by europe, france, spain, and the rest read is there disinflation in europe? >> not really. the reason the headline fears, everyone knows inflation is coming down, but the gas prices coming down. that should continue. the core inflation figures are seeing in france, spain, and in the german states, there is a service inflation picking up that has to be a real worry for the ecb time where the labor

market is relatively tight. >> in this world, is there a study of goods and inflation, or disinflation and services inflation like there is in america. can you make that partition country to country in europe? >> yes. you can. even from the granular level, from the german states, we've had some data is in services and inflation. we know the inflation is coming down. product shortages are ready dramatic across the surveys, and that is pulling goods and inflation down. shipping costs are coming down, but services seem to be going in the other direction. i think we will see that by now, there will be clear evidence of service inflation off of that trade that is not happening. >> year ago, people said that nature of inflation was very different. it is not delivered through the injection of mass fiscal stimulus. rather, it is driven by energy and the crisis in ukraine. now, we see it is stickier, even

the energy prices are not that elevated. they are higher than they were, but not relative to where there were six months ago. how do you explain this? >> there is some knock on effect from energy prices. they were high for a long time, people are feeling the squeeze on the bills on their fishing for higher wages. it is quite a slow process to get wage growth up. it was well contained for so long, and they were relatively sticky. there is evidence that they seem to be picking up. the workers are having some success in pushing for higher wages it also, firms are trying to push through higher costs into the retail prices. and like services. >> how does this defy the logic that europe, the european inflation stories are so different from what we see in the u.s.? it is perhaps, idiosyncratic, and easier to beat. that is basically the argument from 12 months ago. now, has that changed? is this a similar inflation?

asked it is similar. it is just behind. inflation was slower to pick up, and in the year event, with headlining inflation picking up. it was later than they did in the u.s., and it will be slower to fall back as well. the wage bargaining process is a bit slower, and it may even be that because of that, because of the stickiness and wages, which we get in the euro zone in particular, the core price pressures underlying inflation pressures are more persistent. >> is this part of the reason that the market is now adapting to the idea that perhaps the ecb terminal rate needs to be closer to the fed terminal rate? the inflation picture is similar in the united states. >> i think that is right. we were expecting this rate to be about 3.5%. the market is higher, but i think we saw the upside, and depending on what happens in the real activity data, as well, what we have seen in the survey recently is evidence of

resilience as we have it elsewhere, so it depends on whether the policy tightening we've already seen and the drag from the squeeze on real income feeds through strongly into the hard data and whether or not we see a recession that we've been expecting in the euro zone? >> it is a hugely important -- acutely important bit are you suggesting that all 17 nations of europe, 20 x nations of europe, they all have the same equivalent technology overlay as the united states of america? >> no. >> we can do a rate of equivalency? >> trend growth product video and see -- equivalency is lower. quick settlement interrupt, but this is critical. how can we affect an equivalent terminal rate, if that is the case? >> it depends on when doing a cycle, and what we are seeing is

overheating in terms of inflation pressures, to be beyond where the ecb would have wanted the neutral rate. it is still relatively low, and i think ultimately, we are going to be getting back to a nominal rate at 1.5 or 2%. it depends on what happens in the labor market. >> is anyone ecb with your experience talking about our start? i've never witnessed anyone in europe wax philosophical about your because i just don't think there is an equivalency. exit is a fuzzy concept. it is difficult to find. can you imagine finding that? asked i've never heard extinguished people say the phrase we heard a lot in last six months. it is sufficient restricted. was sufficiently restrict? it will be very different. it will be sufficiently

instructive in germany. >> i don't want to get in trouble. what is sufficiently restrictive in mississippi is from from montana. in the aggregate, can we do a compare and contrast? >> you're making a comparison, and that is interesting. the debt crisis is thinking out loud about reconstructing the ecb. set of having national precedents, you want to strip the bias out of things because maybe, the regional breakup and makeup is a little bit more effective when it comes to these issues. >> it is a serious concern. what is the knock on effect economically to a rate that might make sense for terminally but not her -- fort germany been out for italy. can you way in on a much weaker europe going forward because of the damage they have to do to the economy with rates that may be closer to equivalent to the united states, but they are not

fit for the production and productivity that tom was talking about, or the technological overlay of that economy. >> the ecb has always had a complicated job with various nations and different structures of the economy. of course, kiefer the euro zone's you do not have a single fiscal all see which can contribute to the government financed across the entire region. you have economies like italy with high debt were they just can't offer the kind of fiscal stimulus that would offset the effects of a policy tightening, so that is a major issue. and i think another major problem across the euro zone is the difference and structure of mortgages, with some much shorter term, variable rates in spain, and you get to pass through policy tightening relatively quickly, whereas in germany fixed terms come much more slowly. it is a truly difficult to find one-size-fits-all policies, and clearly going to be the case in some economies that they suffer more than others from the

tightening. >> this conversation is another example of why we should never have done this. capital economics. i'm not saying you said that. that was a joke. be careful. >> she is a proxy friend of ours. >> can training -- complaining about the military union. >> listed so that out there. >> this is pretty straightforward. inflation is too high. it's not like things have been dreadful in italy and fantastic in germany. we have to work this out. it is straightforward. >> you're actually right. that is the issue. they have to take a blunt tool to a serious problem. it does not seem to be abating. the issue now is what is the economic consequence and how bifurcated is it between different economies in different inputs? i would say this is not as disparate as it has been in the past. based on the german challenges. what is unique and >> when you come to debt, it is a very different experience right now for italy. rates where they are. compared to germany where rates are. >> that goes back to the fiscal separateness of europe versus

maybe a uniform united states. let's make clear that there are euro optimist that think long term that europe could do an aggregate economy better than the united states. are we there now? i'm not sure. >> that remains to be seen. maybe a couple of examples of governing in that direction during the pandemic, but once this crisis phase --. >> there is a war going on. i don't think now is the time to do a study of it. >> we can talk to james about that. he is going to join us at 7:30 a.m.. you want to name the firm? i know you love doing this. you've got this. where is james working. >> i think there going back to aberdeen. aberdeen. it sort of like how we say -- how lisa pronounces the french banker. >> oh stop. >> he imagined this conversation

sat around the table and they have this marketing table. they paid for someone to get this. >> this is how you appeal to millennials. just remove that. >> i love this bank story. i want to know the meeting on the board who said yes. wax -- >> i will center my first idiocy of this. the american can company wasn't good enough, so they named it primerica. i'm not sure i know it primerica means. >> what i love about these situations is that we make a big decision for the rest of the company, they all feel really happy with themselves, and the employees get a memo, and then desperate >> was a phillip morris? >> for goodness sake didn't speak to some people in aberdeen, and they are like no. don't talk to me about this. james will join us. >> we hope. >> is not going to cancel. >> he's a proxy friend. >> in your, this is bloomberg.

>> keep you up-to-date with news from around the world with the first word read i am lisa mateo. u.s. businesses are set to invest billions of dollars in northern ireland and that is only if the deal on trading regulations leads to political stability in the region. the prime minister could use a prospect of international investment to convince northern ireland unionists to back the deal. the cost crisis shows little sign of easing from last month and the price in british stores rose in february to their highest rate since at least 2009 -- 2005. shop price inflation hit 8.4%. food prices rose astor. 14.5%. in ukraine, volodymyr zelenskyy said the battle is the most difficult situation facing the country's forces. he says the intensity of fighting is increasing. ukraine has decided to send additional troops to stop the russian offensive. china's president has moved to

consolidate the communist party's hold over the economy. in a speech for, he touted plans for a sweeping change to the country's bureaucracy. the party will also have more influence with private companies. shares electric vehicles make it lower today. the company's forecast produces as many as 50,000 ev's. it fell short of wall street expectations. reggie knew -- revenue came up short. supply chain issues are the main issue limiting production. global news powered by 2700 journalists and analysts and 120 countries. i'm lisa teo. this is meant -- this is bloomberg. this is ge aerospace, advancing flight for future generations. ♪

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to help advance and connect all that it takes to excel in business ... to the business i'm in. deloitte. every day, millions of things need to get to where they're going. and at chevron, we're working to help reduce the carbon intensity of the fuels that keep things moving. today, we're producing renewable diesel that can be used in existing diesel tanks. and we're committed to increasing our renewable fuels production. because as we work toward a lower carbon future, it's only human to keep moving forward. >> the big event last year was not russia. it was china. you've global oil demand contracting 2% in the fourth quarter of last year. that is a recession in my book it china comes back, and we will

lose that spare capacity. our base case is we get to the earth quarter and we get above 100. my confidence that we will see another spike in the next 12 to 18 months is quite high. >> we are looking for a triple digit crude on your end. that was goldman sachs. live from your, good morning prayer at here is the price action. a quick sneak peek at crude is softer. negative by .9%. call eight percentage point lower. 76.30. the yield is unchanged the equities with the lift. what should the data be? it is pretty decent to expectations with an upside surprise across the board. ask the week this of the em joins us. we have 6.86. there is stability there. we have weakened out to 71. >> that is a strength in the currency. off the bank -- back of the

data. we mentioned earlier. with our reporting from chinese officials, how well the reopening is, and how well the data is. >> will do that right now with our asian economics correspondent, but more than that, a tradition for -- a terrific correspondent. we have a lot of serious questions, but let's go to the bridge of china from hong kong. it is tilt into thousand seven, and it changed everything. is there enough of a reopening where the core doors of western corridors from hong kong to the rest of china are normal? >> the reopening is going better than i expected, data, the numbers i have are the first decent read we've had in the economy since the reopening. it is better than it has been expected. 52.6%. not just from consumers and services, but manufacturing. certainly, big part of that is china going on to hong kong, and

it is picking up on some of that. but the broader back story is the economy is now setting itself up for a better year than anticipated. only at the back end of last year, we remember the growth all caps heading towards we percent. now hardly a day goes by without my inbox getting up trade, and people are expecting a target of 5% or more. >> my amateur take is to watch the property market. is that true, and as it once again beijing bailing out the national property market? >> i think that is quite true to keep an eye on property. it is not a bailout. home sales improved on the year for the first time since the middle of 2021. that is significant because the slump of the housing market arguably cause more pain to the economy than covid, so there are signs of bottoming out. there is official support for

the authorities putting that together. i wouldn't call it a bailout. not in a traditional sense. they are imposing pain, but there is a turnaround. a lot of that is being pointed out as one of the reasons for optimism. >> is there any connection between the better-than-expected data out of china, and the emboldened approach in terms of chinese potential willingness to engage with russia, and with allies in the war in ukraine. >> well, you have to say that china's economy is on its knees into the end of last year. this going to be important, going into the data behind them, and the music has been better. there's not just a consumer side of things, and a hint of manufacturing. plumbing indicators are looking better. all of that speaks to china getting back on track and on his feet. we will bolster the position on

the world stage, and it is not feeding into the position of ukraine, per se, but it will do leadership no harm in terms of the global stage, and the point of the covid being handled better than anyone else. >> socially, is this recovering enough to garner support for president xi jinping for the leadership of china among the population that they'd wish amid some public dissent we have seen that is very unusual in china? >>. usual. we have seen some porting -- report, especially in the wake of the draconian covid zero -- zero policies. no it is difficult to be scientific about consumer public opinion across china, but know that there is a feeling of disaffection. it is part of the reason why authorities made the terms they did. it is as rapid as they did and authorities are aware of what is going on on the ground, giving a punishing lockdown and ongoing

restrictions, and the american chamber came out and they are making a point that foreign companies are just exhausted about what is going on in recent years. there is this affection on the ground that is hard to be precise about the extent of it. >> can you speak directly to this? how does life changed for you in the last few months in a place like hong kong? >> it is night and day compared to what it was when we did covid zero. airports have been reopened. it was one of the world's busiest. the crossing is reopened that is crucial for trade. of course, on the ground, things are better. we had face masks. but, hong kong, as one example, it is still what it was. in the pandemic, the level of activity and visitors and tours are not what it was, and they've a long way to go. it is not just covid zero. it is a feeling that hong kong is caught in the middle of the geopolitical tussle between

china and the u.s.. it is on a geopolitical fault line. that is really weighing on the recovery. >> do you think there's things that been lost for forever? that will be hard to recover from? >> or has to be, compared to a few years ago in terms of visitor arrivals, conventions, conferences. events, people coming back and forth it some of the business has leaked to singapore in terms of personnel and business. no doubt. but china and hong kong remain that as long as shanghai is behind a strong capital account, the business model remains a money box for china. it is a place to do china, and that part of the equation has not changed. >> thank you for your reporting. just testing as always. out of hong kong. we had those conversations a couple of days ago in the united states. what would change and what would remain the same privilege go back to a pre-pandemic rent. we have them in the niceties,

but there happening in hong kong. >> i go to the resiliency of tiger nations, and the unique experiment of china. they have a lot of other equally as big challenges read from the last 20 or 30 years. i just -- i don't want to pontificate about a specific ring for servants -- pacific rim resurgence. but we had jeff curry on earlier, coming into this block. we were looking at a hundred dollar oil, and i would suggest that the one or two factor in that is a pacific rim redo. >> supply chains. supply chains around the world. for a major stress test we all know that. we are talking about undoing globalization, deglobalization, that process, if it starts to begin, it will come with a price. we have to work out how expensive it will be. >> this is one of the most salient arguments for our

protracted inflation pretty even if you do a part globalization, or you don't have the headwind, to keep prices low, then you will see some higher prices. you'll see more price pressure. you will see labor issues as you try to get some of the workers. if you don't have the factor at the same kind of way, did you see the anecdotal about airport manufacturing moving, saying it will move some of their manufacturing out of china. the sum of apple's own manufacturing units are doing this. you see this on the margins. i don't know if it is enough to be more than anecdotes. >> under my living room couch, it is a life of 50 airpods. last, first-out. first-in, last out, last out, whatever. there's got to be 20 years of airpods under my living room couch. what a racket. what do they cost? they don't let me know what they cost. >> i keep buying them.

>> where they made? there made in china. >> it depends if you get those for something like that. quickly made in china? >> they are being suggested. >> they want to move manufacturing. >> under your couch. i suggest, you with the couch you might save yourself. >> can you imagine? that business alone. airpods. uncomfortable. that would be huge. >> scary. >> most of the sell side crew won't do a legitimate some of the parts. the number is so high. they don't want to be associated with it. literally. i'm not kidding. from a compliance standpoint, you don't up with a number out there. ask what's the number? >> i don't have a year. it is die normans. with airpods, you don't know. >> looking at the credit card statement, do not know what you're doing? >> we don't go through this.

>> i do that.

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>> terry tightening is not taking a bite out of the economy. >> we will see inflation coming back down to target. >> headline inflation will fall back to around 3.5% by midyear. >> there's no sector of the economy that is hurting. >> we have to change our views quickly. >> this is bloomberg surveillance. >> let's get the month of march started. good morning from new york.

this is bloomberg surveillance. i am alongside tom keene and lisa abramowicz. i am jonathan ferro. data out of china, europe and the u.s. to come. >> i will let you talk about it because you care more than i do. this marks one year under delayed jobs report. it is a big deal. >> at 8 a.m., you get a breakdown of german inflation. so far, so bad for the european breakdown of cpi. >> but we have seen from france and spain going in the wrong direction. we have heard from the buddhist -- from the german central bank about possibly winding on the balance sheet faster. >> and how complicating and might be to have china reopening at the same time. that proves we have only just

started to see a bounce. that bite for growth is not in commodities. jeff curry of goldman this morning talking up triple digit at year end. >> it is important what you said about the time continuum. someone said this morning we are two months and on a 12 month year. we will refrain in may and august. we will talk about this in a moment. the idea of making views to the end of summer is not going to happen. who is brave enough? >> let's talk about the first two months of the year. january, disinflationary process may be starting. february, coldwater at the start of the month. >> to show you how much this is the case, we saw the best

january performance for bonds for the aggregate index in data going back to 1990, and then we saw the worst february performance for the aggregate index going back to 1990. that is the whipsaw we have seen. >> sell the product. >> appreciate it. >> we did not make 50% back. we went down on price, terrible bond market last year, came up on the pounds -- on the bounce. >> futures trying to bounce by one third of 1%. the s&p 500, a little bit of a lift. we will talk about the data we will get later. the bond market changed on the 10 year. >> with talk about what we are seeing and expecting. we talked about some of the retail earnings. we got lowe's. it met expectations.

they came in disappointing across the board in terms of gross margins, revenue and their forward forecast. those shares are lowered by more than 11%. it highlights how hard it is to get ahead of some of these stories. the whipsaw action we have seen in terms of before and after some of these earnings has been tremendous. >> i have never been to one. what happened to colts? >> someone wrote in and saying they are using it as an amazon return center. there is this concern. if you cannot identify what your role is. >> the hope is you would return stuff and buy things. >> i went into retailer -- into a retailer i will not mention. it was all people doing online returns in the store. our storefronts becoming return centers? >> i have always hated the word

omnisphere. kohl's, family business, many would suggest it should have been rolled out years ago. it is a venerable midwest retailer. it has gone nowhere for 10 years. return -1.2% per year. why are they publicly traded? >> we will follow that throughout the moment. we get german cpi for february at 8 a.m. what will be the response at a time when to your guild -- when to year yields in germany are -- ism manufacturing and prices index for the month of february. do we see a re-acceleration? >> that is the number one question. payrolls next friday. >> eight days away.

>> will you be around for that? >> i am not here for the fed meeting. >> you are skipping the fed. why? >> children rule. >> they demanded you skip it. >> with each kid, you get a window or two a year. >> i am aware because i was a child once. >> we took vacations. >> i was not aware that children take tyco -- takes time off. let's start with this equity market. you like quality growth. what is quality growth? >> thanks. we started this year looking at a market that was driven by better-than-expected economic data. we saw strong january jobs, better-than-expected retail sales and inflation at least

starting to move lower, but i think the trade into what we call more cyclical parts of the market probably happened too fast this year. so to your question, as we get through this year, we need to see a couple things before we can revisit that recovery playbook or cyclical playbook. we would need to see -- need to see inflation move lower, the fed stepped to the sidelines, and we are starting to see earnings being revised meaningfully lower. until those conditions are in place, we would say the market is going to take a more defensive tilt, but when those conditions are met, maybe towards the back half of this year, we think investors should think about diversifying into the recovery parts of the market. that means quality growth, growth that is not negative earnings yielding, not as

speculative, and areas like cyclicals, even parts of small caps, international. it is all part of a recover y playbook. >> you have a sentence in your notes that i agree with, which is that extrapolation is dangerous to your net worth. if it is an extrapolate free 2023, if you have faith to be in the market, how far are you reaching over to the next horizon? are you looking out a year or is the new extrapolation out to three years? >> i think january data -- it is dangerous to extrapolate the danger we saw in the labor market certainly in the consumer to the rest of the year. the labor market does tend to be

one of the lagging indicators. we have leading, coincident and lagging indicators. the labor market tends not to be the first shoe to drop but one of the last. to your question on time horizon, we think a 12 month time horizon, although we have been talking about 12 to 24, because that is when we could see through -- see this cycle go through a bottoming process. investors have a unique opportunity in the 12 months ahead in that we know bear markets do not happen that often. one every four to five years. but every bear market has ended and has been followed by a potential bull market. when you look out 12 to 24 months, we think investors are positioned for better opportunities ahead. >> what is the leadership going to be in the next bull market? >> when we look at the last 10

years or so after the financial crisis, that was an environment that was characterized by a fed funds rate toward the zero bound , growth outperforming value for much of that because investors were pushed out the risk spectrum. we think about the next 10 years, we don't necessarily see yields back at zero bound. the fed funds rate could go from this 5% back to neutral territory. in that environment, we think investors have to consider a balance between value and growth and think about a more diversified picture and leadership. so that is interesting for the next longer-term period. over the next 12 to 24 months or so, we will go from a more defensive oriented tilt tet offensive lee oriented tilt. that recovery playbook comes into play. >> we discussed this yesterday. defense is usually what works

when things are bad. last year, defense was energy because that is what worked. what is defense in 2023? >> it is a great point because energy is not always the defensive part of the market, but we think more traditional defensive sectors, if we go into any sort of economic downturn, those sectors that have underperformed this year, we may see some interest and leadership come out of that more traditional recession proof and inflation proof part of the market. what's interesting this time around, defense is also your shorter duration cd one to two year treasury bond space as well. what is notably different this cycle is cash and cash like instruments are yielding anywhere from 4% to 5% plus, and that's an environment where, if investors do want to hang out,

think about a recovery playbook, but in the meanwhile, put their money in attractive yielding assets, that is where we are seeing defense now. >> great. defense and cash and the 5% yield you can pick up on it. we will talk about china and these comments from the fbi director, christopher wray, speaking to fox news last night, and said this. the fbi has assessed that the origins of the pandemic are likely a potential lab incident in wuhan. that conversation coming up shortly. from new york, this is bloomberg. ♪ >> i am lisa mateo. thank you mainland governor andrew bailey is a signaling further interest rate increases may be needed to contain inflation. bailey said that doing too

little now may mean sharper rate hikes later. he said the experience of the 1970's, listen. in china, the economy is showing signs of a rebound. services activity climbed and the housing market stabilized. fbi director christopher wray says the agency previously determined the covid virus most likely originated from a potential lab incident in wuhan, china. his comments to fox news contradict scientific claims that the virus emerged naturally. lori lightfoot has become the first mayor of chicago in 40 years to lose a bid for reelection. she finished third in tuesday's election. an april 4 runoff will. -- lightfoot was unable to overcome

voter dissatisfaction with chicago's rising crime and slow economic recovery. lowe's forecast an annual profit that met wall street estimates. the retailer took a cautious approach in the midst of shaking conditions in the housing market . 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. ♪

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claim over $2 billion but it's only available for a limited time. go to getrefunds.com, powered by innovation refunds. >> the fbi has assessed that the origins of the pandemic are likely a potential lab incident in wuhan. i will make the observation that

the chinese government has been doing its best to thwart and obfuscate the work here and that is unfortunate. >> the director of the fbi speaking on fox news. that is something after the report we had over the weekend from the wall street journal. >> we talked to johns hopkins yesterday, paul sweeney and i, and it was something to talk to somebody from another time about this. what is the efficacy of going back to look at these horrific skeletons in the closet from three years ago? it's a huge debate. at the same time, if this is correct, it is still appalling, if it leaked out. >> what is amazing about this is the amount of different agencies across the u.s. government that have different views. the journal spoke to that.

the energy department and fbi said the virus likely spread via a mishap. the wall street journal says four other agencies and a national intelligence panel judge it was the result of natural transmission, two undecided. what do you say about this? >> you need more information. perhaps this is a way to lobby for more access to some of the facilities in china, but i don't know the answer. the question is, how is it leaking out in this capacity? and what is the consequence of that from a policy perspective? >> you are dead on. what is the goal? i remember being in washington as treasury secretary henry paulson had the first conversation, business meeting, with the chinese. it was a complete failure. >> the frustration people have is that this was a question people ask during the pandemic and it was shut down and it was

a conspiracy theory and now there are agencies publicly discussing what was once considered to be a conspiracy theory. the frustration other people also have is that most of government was not open-minded about where this was coming from. >> it is political, which means we need to speak to annmarie hordern, our washington correspondent. an open question, with your reporting and reading the zeitgeist down there, where is this heading? where are we in one week or month or year on the mystery of the beginning of this pandemic? >> i think you outlined the fact that there is no consensus across a variety of u.s. agencies about what happened. this goes down to the issue that, when there was the pandemic outbreak, there was not these independent researchers

allowed into that wuhan lab, sewin -- so when scientists come out, there are individuals who are critical of that because the access at the beginning. there are still a lot of questions. jake sullivan, when he was asked about this, said it was the biden administration that got the department of energy involved into looking at this, because they are the ones that control these labs, so they will say they are the ones that want diverse views to get to the bottom of this, but when avril haines released that report, it was inconclusive, because these agencies cannot agree. >> the u.s. agencies cannot agree but i don't see one iota of interest of the chinese to act within the scientific community on virology. and my right on that? >> they did not want to have these independent researchers come into their backyard, into

the wuhan lab. they say this should be scientific and they think when the u.s. points fingers at a potential mistake that they are politicizing it. >> does this highlight the political nature of the lack of a scientific process of certain claims that were rejected outright and casted off as a political smokescreen? >> i think if we continue to get either more comments from the fbi or reporting about the department of energy was able to find as they were brought into the conversation, there will be questions about the united states in terms of their support and funding for the world health organization, and i think that's probably where this story goes next. >> please elaborate. how will this be used to justify some change in the support the u.s. gives to the world help

organization? >> the world health organization has ignored some of these concerns about this starting in a wuhan lab. the chinese government is is also part of the world health organization and there will be criticism they did not act appropriately and get to the bottom of what happened. >> what is the alternative in terms of the potential consequence the u.s. could create to say if you do not comply or allow for this transparency, we will do x? what is that? >> you will hear a lot of politicians use this information, whether it is the energy department or the latest comments from the fbi, to enact tougher stances, whether or not it is business or based on humanitarian issues, human rights issues, with china. they will use this to feed some

potential bills or export controls, whatever is, against china. but i'm not sure that the u.s. -- they do not have a conclusive final understanding of what happened. you have all these -- these are a number of agencies that do not agree. it will be difficult for an administration to take a definitive approach to this. >> i think you have read more on this than i have. on a probabilistic determination basis, good people are going, almost like the fed minutes, setting up the probabilities, and the answer is, to use a statistical word, i am hearing we have a real dearth of confidence in our estimates on this. >> even the energy department says that that judgment was made with low confidence. they are still working all this out. countless lives lost.

it has cost the global economy trillions of dollars. if you had an accident anywhere that cost you thousands of dollars, you would want to know how that accident happened. shouldn't we be more keen about finding out what happened here? >> i would like to see more clarity on the process different groups are coming to the conclusion from. what is the process they are using to find different conclusions and what evidence are they using? is it consistent evidence? we don't have any visibility. >> it is top-secret. >> but it is not because it is coming out in terms of the conclusion so it what point do you release the information so the public can judge for themselves? >> we have gone through this process. initially, we were told masks do not work but we needed them for health care workers, so then we needed to wear masks, and then you had to wear them all the time. some of the things we were told, people were lied to, and that is

the trouble people have with this kind of information. >> but there is also the question of some sort of precondition you have around these conclusions if you don't have all the evidence to come out, what some of the ramifications could be before you have the evidence. it is a fraud situation because of the political tensions that go more broad -- eight fraught situation because of the political tensions that go more broad. >> the story is not going away anytime soon. thank you. if you are tuning in, we need to pick up on what's happening in markets and look ahead to some economic data in 35 minutes. german cpi. two hours later, a fresh, brand-new manufacturing read on february. we want to work out whether the robust nature of the u.s. rebound in january will be reflected in the economic data for february. that's a february isem.

next friday, payrolls. >> i will take your point. it is a huge deal. but when germany comes out, i'm sorry, it is inflation centered right now. jobs, it will be important, particularly after the oddity of the boom 30 days ago, but inflation matters and i believe it is march 18. it is a big deal. >> james is coming. looking forward to that. this is bloomberg. ♪ 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?

>> equities look like this. a bounce. we are looking for one after a month of losses in february. equity futures up .25%. on the nasdaq, .4%. last month, we were told repeatedly coming into the year that the correlation between stocks and bonds would break and it did not. yields are up on the two-year, a basis point. on the 10-year, a basis point. >> we are still close to 4%. you think about the economic data that can get us to some

drama, which people are starving for up or down, and how far away are we from real drama? >> wait for the ism in about two hours. get a flavor of things for the month of february. >> things became fun in 2007. it was boring before them. i have never seen a time like this where everyone is hanging on croat cannot -- hanging on macroeconomic blah blah blah. >> are you going to read her into this? >> we will go through the rundown quickly. i was going to have a look at fire exchange -- at foreign-exchange. >> i am fired up. thank you. >> someone will tell you in a moment. foreign-exchange.

thanks. in 30 minutes, cpi out of europe, germany. euro-dollar, having a decent session as ecb officials talk up big moves. >> people are looking for the euro to go higher. what i am looking at, rivian came out after the bell. that was supposed to be a competitor with tesla. it is not, evidently. forecast deliveries are falling short of expectations and they are losing money on each of their vehicles they are producing. remember when they used to take people's money and said they would deliver? lower by 8.7%. tonk? >> one drove by me the other day. it is a beautiful car. just 40 to 20 after visiting 10, visit the new tesla? i don't get it? >> part of the problem has been

they are trying to lose money on each car. they basically generate enough critical mass in the market and they are not being successful. this has been a warning elon musk has put out. there's been some feeling that there is indication based on their latest results. lowe's came out meeting expectations. those chairs not moving around that much. kohl's is where i am looking because if you dig through those earnings, not only do they talk about gross margins well below expectations in the fourth quarter, but there full-year forecast was very low. they talked about the potential for withdrawing guidance again. this is what happened last quarter, citing macro pressure. they see earnings of $2.7 a share for the full year versus the estimate of $3.2. those are down 49% over the last year to give you a sense of the concern around this company, both macroeconomic and

idiosyncratic. >> what did our friend call it earlier this morning? glorified amazon return center. no one wants to be called that. >> i wonder how many of these brick-and-mortar stores that have not created a reason to exist are returning. >> they have to create a reason to exist. when you sit in the board room trying to work out a reason to exist. >> there are activist investors involved with kohl's as well trying to -- >>, with a reason to exist -- trying to come up with a reason to exist. >> that is brittle. >> i will not mince words. it is every sector. >> let's go to james. >> let's go to james to save the hour, investment director at abrdn. you have some wonderful

perspective we are hearing about the inability to predict forward. how do you go about it day to day to not so much a just a portfolio but even maintain confidence in your existing portfolio? how do you process that? >> there's conversations in the kohl's boardroom room about reasons to exist. it sounds like a segue into my attempt to forecast the future and manage the risk associated. it is difficult. you have talked about it, the complete about-face between january and february. i called it narrative tennis and that's very much been the case over the past three or four months, just doing the opposite of the prior four weeks has been a profitable strategy given the nature of markets, how low liquidity tends to be, how many

systematic amped technical traders -- systematic and technical traders there are on a daily basis. you have to be disciplined, respect market price action. that means managing risk without necessarily giving up on your core view. so i am still of the opinion that this tightening will see the economy suffer in the future, hang onto some sort of duration view, but i need to manage that accordingly. >> david page has the same idea as you. the word he uses is asynchronous, that some people will win within our narrative tennis, and i look at chevron with a massive buyback, lvmh with a more measured buyback, but critically they put a date on it, which is somewhat unusual, especially for americans looking at share buybacks. can there be winners out of this? >> the energy sector

has been a massive winner over the prior 12 months. there is no surprise that they would return some of that if not a lot of that to shareholders because may the investment opportunities are not as abundant. everyone will be at a different place on that spectrum. you will see winners and losers in the equity market. the bond market is much less diversified in terms of day to day performance. equities, even when there's a broad trend, there are individual names bucking that for specific reasons. if you are selling nondiscretionary items, you expect to do better than if you are selling high discretionary items. if you are selling them to the rich that tend to be less sensitive to the cycle, you find it is a much more defensive player relative to those highly cyclical retailers. it is all horses for courses. >> there has been a bearish tilt

to some of your commentary and i have been sympathizing with it. i wonder how painful it's been to be a bear through the ups and downs of this tennis match, as you put it? >> it's not been easy. it has not been easy because it's not just about getting fundamentals wrong. i have been surprised at the strength of the u.s. labor market and wrong in terms of timing if not yet the endgame. but there have been periods in this market over the last two years where i feel i called it correctly and the market has responded in a way that is not normal. the u.k. is a prime example paired you had that dovish -- prime example. you had that dovish mpc just before liz truss's budget. those kind of moves have been painful. that is the job.

that is what you sign up to. it is about trying to be humble, being disciplined, taking market signals but not allowing yourself to be led by the market. it is a tricky balancing act, that fine line between humility and confidence, overconfidence. you have to find a balance but it's been a difficult couple years. >> the difficulty in calling the macro and the market response, at a certain point, how much has the process changed? has it become a dartboard? >> the process has changed. i think it is true upon markets as well. realistically, you can summarize that as they're being less fundamental investors, so increasingly the marginal buyer or seller is not somebody looking at the same data as you. they have very different investment styles and strategies and they -- and there are

different triggers for their portfolio changes. this data is hard to come by. in the bond market, you are talking about over-the-counter cash trading. over-the-counter derivatives is part of that. it is more difficult to get data. it has meant that we overshoot relative to fundamentals more frequently and by a greater amount. in markets as volatile as this, that can be large gaps between market pricing and what i would consider to be the fundamental playbook. >> i am loving it but this is not why we are having you on. i got an email at 4:00 p.m. that said more soccer, less formula one. they want the football talk. we are going to do that now with athey because he's qualified. i am lost on how many leagues these teams -- this is not america. in america, you play major league baseball.

you have the premier league, this league, that. would you explain why the tots are visiting sheffield united? >> that's the fa cup. you play people in different leagues. >> lower leagues. >> for a trophy. winner takes all. is james athey riveted? no. he would love to see tottenham win a trophy. >> is there a clock in piccadilly circus or whatever? >> basically. i wanted to come back to something you said. i cannot think of anything more frustrating than getting the macro call right and the micro call wrong. i am sure you know any duke, the poker player.

she often would say do not focus on the outcome. focus on the process. when you have a year like you have had where you nailed the macro by got the market call wrong, particularly in equities with tech leading at all that stuff, how do you reflect on the year so far? >> that is exactly right. i think it is important -- is an important lesson. don't just judge the quality of decisions on the outcome but the process that led to them. it is frustrating from a performance perspective at times, but it should not lead you to try to do different things next time. concentrate on where you have got the macro wrong. the ecb, that's one way. i was dovish with respect to the ecb outlook. i underestimated how hawkish they would be prepared to be and how stable the bond market would be, so that's led to

introspection on how i have handled incoming information and how stuck i may have been, but in the case of the u.k., it's frustrating, but should not lead to too much change to the process going forward. you continue to use your analysis and play the odds. >> appreciate it. james athey of aberdeen. good morning. ♪ >> keeping you up-to-date with news from around the world, i am lisa mateo. u.s. businesses are set to invest billions of dollars in northern ireland but only if the deal on post brexit trading regulations leads to political stability in the region. british prime minister rishi sunak could use the prospect of international investment to convince northern ireland unionists to back the deal. in northeastern greece, at least 36 people have been killed in a train crash. 85 others have been injured. authorities say a passenger

train collided with a freight train just before midnight, starting a fire. the passenger train was traveling between two popular tourist destinations. the biden administration is preparing a policy shift that would encourage service stations to sell higher ethanol gasoline and offer it all year. the changes demanded by governors of corn producing midwestern states. it is unclear how it would affect the prices drivers pay at the pump. global news powered by more than 2700 analysts in over 120 countries. this is bloomberg. ♪

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[together] the chookie! manage all your sales from one place with a partner that always puts you first. godaddy. tools and support for every small business first. >> the moves you would get if you followed a bullard approach is more consistent with history. you would see rates move higher to peak, but once you reach

that, you would break the economy, have to see rate cuts follow quickly. >> on that theme, you can go back six months, take that quote, take out six, putting four, and say the same thing. we will get to four, five, and now we are saying we could get to six and things will break. >> dead on in the history of this to the 1970's it granted, this is highly unusual. everyone adapts. the housing market witnessed what you mentioned earlier. the publication from the dallas fed says, what if housing gets in the way? that is different but you are dead on that we've had this kind of recession before. >> if you are on a 30 year fixed 3%, lucky you. you are not feeling this. sit it out.

>> there's some fungibility with divorces, kids move schools, whatever, the usual soap opera, but people will sit this out, so prices will not come down as much. >> apollo put out something that i thought was interesting. the interest rate sensitive components of gdp are only about 20% of the gdp. so that is significant, but it will take time to bring down growth, especially when those interest rate sensitive areas have less sensitivity because of the 30 year time horizon. >> do not tell joe biden. he will be -- the politicians will be more attuned to the interest rate sensitivity. >> given where the economy is, 3.4% unemployment? >> as we get to the election, yes. after labor day, the election kicks in. it is an odd time.

is it a good time to talk to damien? >> it is a perfect time. >> damian sassower joins us. i will suggest, in your world, not for all but for some, there's a great unraveling coming on. patrick gillespie helped me on the unraveling. we know argentina is terrible. who are the other argentinas? >> tunisia, el salvador, the list goes on. you make a great point about what we have seen in the last month since that payroll data. we have seen em follow the fed. it is the two year that matters in fixed income these days. they have blown up. 50, 60, in the case of mexico, a 100 basis point move. >> you slide in your at 7:30, 7:45 a.m., you check your bloomberg about 8:30.

is there efficacy and looking at the credit default swaps or do you look at other damian sassower our secrets? >> i with the synthetic markets because they always overshoot. spreads in emerging markets have been following china and we have to talk about china before our conversation is done. sovereign credit default swap spreads have compressed considerably and that's what's taken the probability of default for those frontier economies like argentina down so considerably this year. but you cannot believe it because it is synthetic and it always overshoot's. we really do have to talk about china. is that an ok pivot? >> usually people just answer their own questions. >> that is how it works. >> carry-on. >> is anyone surprised by the data we have seen? >> no one should be. >> 5.5%? forget about it.

but underneath the surface, and that is what we like to do, let's look at inventory builds, energy, lng and cold, the feedstock for the chinese economy. they are rising, the highest since 2021. >> are you saying that you think this data is not accurate? >> there's a time element to everything we are looking at. people are excited about the china reopening. we expected a bang outnumbered, but how will they be able to sustain that type of sentiment? what i'm saying is look at the underlying data, travel. travel has bounced back. that is why the nonmanufacturing peon -- mittens -- pmi number was better. it's come all the way down. the end demand for the first use of copper or oems demanding aluminum for their -- for whatever it is, finished good

inventories are rising. this is not good. i don't see sustainable domestic demand. >> jon ferro comes to the u.s. and calls it aluminum and damian calls italian -- calls it aluminium. how does this translate into an emerging markets call bolstered by this news that china would be reopening and providing a boost to developing nations. are you saying this does not give you enough conviction to pile onto that trade, that if anything, on the periphery, there is evidence against it? >> look at thermal coal prices. they are reflecting this. it is underperforming expectations. people thought china's reopening would be gangbusters for everyone across the board. that is what the pmi data is telling you but to sustain that over the course of the year will be impossible. we are playing for another retreat. it will be a slow grind.

and when the property sector may finally catch a breath, we are a long way from normalcy there. so i think we need to see the property sector come back online. you have some time, but that takes me into my thesis, which is effectively there's a more durable play in china growth and the reopening then perhaps in the euro zone and disinflation. >> if you took a 12 month rolling view of the economy in china, right now, we think it is six. when you get to june and july, are we thinking about 3, 4? >> if you look at the imf data, they are talking about 4% gdp growth. structurally, if she cannot -- if xi cannot get these reforms put through, spending, confidence that they will have savings, if they cannot correct the problems with soe's, where all their public savings and

social services come from, if you cannot reform that, we will not see the snap back to 5.5%. >> that raises the question whether we have already seen the reopening trade and it is over? >> that is basically the suggestion and that is what damian is saying because the anecdotal data already points to a slowdown, a lack of activity down the pike. >> you got in at 5 a.m. this morning. >> i ran three miles this morning. >> i did. >> i was so excited to listen to you guys. >> you sound like mark wahlberg. what time did you wake up? >> i cannot sleep. i am jetlagged. i came back from miami last week. >> that is the same time zone. >> you are questioning whether miami was real. miami is real. >> nice. >> this is too much. >> what is happening here? >> where does your son go?

>> he's a senior in high school but he will be going. >> this was nice. >> that was emotional. >> aluminum. >> whenever i say -- if i say "aluminum," i get so much from back home. >> just say aluminium. >> then people say, you have been living here a years. >> most important thing going forward, march 15, ted lasso. >> it is a little bit like him. >> are you watching formula one? >> i am in the final season. four or five episodes in. it has changed my life. and the golf one, i forget the name of it, i watched the first

episode. >> it changed your life? >> mood push. the way i see it, it is about performance of the engine. you need a bigger engine. you need a better machine. it is all about performance. >> you are right. >> trying to perform. >> you are on with your team with bloomberg intelligence. those four young kids are there. in your mind, push it. >> love that one. >> love fernando. >> i blame for ari -- blame for erari. >> the idea that you're watching championships that took place years ago.

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>> i think the economy is surprisingly strong. >> it will depend where valuations are. it is pricing in still a very modest growth outlook for the

economy. >> markets are adjusting to the fact that the fed has more work to do. >> we may see a gentle dip back down and rates but people locked in with cash or not going to stay long-term. >> we see a mild recession, i stress mild. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning, jonathan ferro, lisa abramowicz, i'm tom keene. an important march day. lisa showed the chart earlier but the vector is weak on the statistic. jonathan: that is on manufacturing, let's see if it continues to progress for the month of january. really robust economic data economic data -- for america. we will see a february conference. another upside surprise for

eurozone inflation. first spanish inflation, then french, now german cpi. nine point 3%, the estimate was nine. the euro-dollar is out one full percentage point and approaching 1.07. perhaps a consideration of needing to do more. tom: to the united states as well, the two tens spread up to -90. it was negative 89 before the german statistic. it is important is to be clear, this is not a disinflation study. many of these are up. there inflation realities. jonathan: without a doubt. you got germany, spain and france. we will get a read on italy, the euro zone composite, later this week. and we will talk about interest

rates from the ecb, a major change from six month ago. the conversation is -- lisa: and from an economics perspective it is what don't we understand about the nature of this inflation because the narrative has changed around this is an oil shock, this is different inflation we saw in the u.s., a broad-based inflationary push that has stemmed from wages, services, tourism. it will be tough to beat. as the consequence of raising rates to 4%? tom: this is foreign for me and they said, but not for john. this is the cultural fabric of europe. these statistics, 7% france, 8%, a stunning 9.3% statistic on harmonized inflation, that is unacceptable. visceral. jonathan: and i would imagine based on this data going into the next ecb meeting there will be a push from the hawks to confirm the next move is 50 as well.

the current guidance is 50 for the march meeting. they will not a commitment to go 50 again, to retain some credibility around the inflation target. tom: do the hawks get hawkier? two finland, to the come along or fight tooth and nail? jonathan: i think they are going to come along because what choice do they have? what is the argument? it is not just germany. it is italy too. it is not just france, it is spain as well. and that is the problem we have. it is across the euro zone. up until, and i think you will hear more from the likes of the leader of italy, until in break in the bond market. lisa: or until you have to use the bond market in the wake of fiscal support and weakness. if you talk about coupon

payments and it is a different proposition. tom: such a good conversation. good to john schumacher. the u.s. yields 3.93%. anymore data like this, they move. jonathan: big moves. higher about a 10 year stateside. a 10 year yield in the fx market, that is the euro-dollar. tom: wow. jonathan: 1.0684. particular weakness. tom: if it is 110, it is a round number, can we imagine the euro reeking of higher interest inflation to something above a 1.10 question mark --? jonathan: we had it on the euro-dollar, it came all the way and after the blowout pay will report.

best play world report. -- payroll report. tom: mike schumacher joins us. are we moving away from disinflation to price stability or outright inflation? mike: very sticky inflation and that is really the challenge. the point about germany and europe reacting viscerally to inflation is excellent. talking to clients over many years, that is always been the big fear in germany for historical reasons. it is simply too high. jonathan: when you look at what is taking place in the bond market off the back of this, it is been orderly in places like italy. lisa, tom and myself talked about this moment to go. if you told us the ecb was going to go to four, we would've all said the italian bond market is not going to survive that. we're going to have real trouble. have you been surprised by the

stability on the periphery and are we getting to a point where things become more troublesome? ethan: it has been -- mike: it has been surprising. we have not heard much in the last month or two and now it is because the ecb has the main challenge in front of it, has to get inflation down. it will have to tolerate some volatility and peripheral spreads. it's surprising it has not, previously but i think that is why. lisa: there is a larger issue. we talked for years but how we could not execute the regime without more ripples and consequent is in financial markets. now a five or 6% regime been on which nation you look at. and we are not seeing the ripples in terms of the difficulty in borrowing, questions around the validity of stock valuations at any existential level. what's going to cost us to change at a time when people seem to be resetting their understanding of the interest rate sensitivity of the global economy?

mike: it's a couple of things. one, it is going to have difficult he over time but not yet. and when you thing about corporate borrowers, there is a lag function. it takes a couple of quarters for is a default easily. you look at the high yields this year. it is material but it takes a while to get through the system. lisa: we've been talking about how difficult it is to game out the macro data and understand with the market reaction would be to that data. when you look at inflation coming in hotter than expected on consecutive days, france, spain and now germany, what do you deal with that information? how much is that shift your view or the trades you are recommended? mike: one thing we have been looking at as you can imagine is relative pricing for various central banks. ecb versus the fed. usually we fade the ecb at right now you can do it. i have been more in the camp

that the ecb would not deliver. but after seeing this nasty inflation, you have to lead -- lien toward the ecb, going 50 this month is a lock and month looks more likely. very tough to say with ecb and the euro right now. jonathan: do think there is more chance the ecb gets to four than the fed gets to six? mike: tough call. if you look at market pricing, it is a 20% probability. looking at options pricing. a little higher in terms of terminal rate. eileen lightly tore the fed but it is a tough call. jonathan: the fact that that is a tough call, that conversation, we are announcing four is ridiculous, six is nuts. we're taking it seriously. thank you as always, unreal. tom: and mike schumacher with his holistic view is fabulous. i'm still not over the untimely

and far too early death of martin feldstein of harvard. he was a massive euro skeptic. if not the american euro skeptic. there he was, well over 10 years ago, writing that i am sorry, history is here and it cannot be reversed. but martin feldstein and barry eichengreen and the rest in america looking at this did --this experiment, which you lived pre-brexit and you let our coverage, none of this dealt with 7% inflation. the arch german conservative, over to martin feldstein, dead set against the experience, none of them framed 7% inflation. jonathan: back to the hikes of 20 --2000 eight, 2011, and go to the statements. there talking but the risk around the inflation outlook and price stability, close to but

below 2% and you look at where inflation actually was, what was the concern of inflation levels, in and around 2%. that just frames this conversation in europe at the moment, nine is a massive problem. when i look at the comparison between now and 2011, 2012, germany was stronger than the periphery. it had a stronger argument to say we don't want all of this easing. i get that stuff. when you look at euro now, germany is a problem in the last 12 months and they all have the same issue, inflation is too high. it makes this decision a lot easier. the got to keep going. lisa: the most unnerving part about this is we don't understand the inflation picture. perhaps not even why it was so low in the decades when it was an omission to get all the way up to 2%. now there is a sense we keep underestimating the stickiness and we don't understand why. people come up with theories but they change every day. jonathan: that phrase, we don't

understand, that's what they need to say. so many people don't have a clue what is going on. lisa: are the balance of risks that inflation is going to get higher in hotter? that is it, they have not shifted to the destruction of the economy. the balance of risk is on bidding inflation. jonathan: the story has changed like four times. in two quick months. those meetings back to back, federal reserve, disciplinary process has started. the risks around inflation becoming more balanced. not balanced but more balanced. here we are a month later. going into these meetings this month. a complete different conversation. and it could change in two fridays again. lisa: exactly. jonathan: i told you so, it was a head fake. futures up point 1% on the s&p, this is bloomberg. ♪ lisa: keeping you up-to-date

with news from around the world with the first word, i'm lisa mateo. they commingle in governor andrew bailey is signaling the further interest rate increases may be needed to contain inflation. he said that doing too little now may mean sharper rate hikes later. he said the experience of the 70's taught that lesson. in china, the economy is showing signs of a stronger rebound after covid restrictions were abandoned. manufacturing posing the biggest improvement in more than a decade last month. services activity climbed and housing market stabilized. fbi director christopher to ray -- christopher wray say the covid virus most likely --this contradicts scientific claims that it emerged naturally. the chinese government has been trying to counter the u.s. is doing. lori lightfoot has become the first mayor in chicago and 40 years to lose a bid for

reelection. she finished third in tuesday's election and an april 4 runoff will hit the former chicago schools chief against the cook county commissioner, johnson. she was unable to overcome voters dissatisfaction with rising crime and slow economic recovery in chicago. the latest outage for trademark --twitter since elon musk took over the company. there were problems loading the servers, following problems last month that prevented users in the u.s. an issue -- asia from following the accounts. 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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>> there were clear successes but also some clear stumbles. on the direct consumer businesses, we found more challenging. it became clear we lacked certain competitive advantage

and that we did too much too quickly which affected our execution. jonathan: jimmy sullivan of goldman sachs, chairman and ceo. tom: it is like rolling out a new iphone. it is so far from what it used to be. jonathan: is that where goldman is going? tom: i don't know. he has the screen, he does not have a tie, we got a new champ. jonathan: they are going to love your coverage, the new iphone with goldman sachs. equity futures up on the s&p. yields higher by a basis point. german inflation coming in hot and widely anticipated after the regional breakdown from state to state across germany. cpi comes in at 9.3%. that is up from 9.2 month over month. just to get the month over month number, one percent is not good year-over-year with a handle, month over month.

that will mean one thing for the ecb. tom: we've got to cover this right now, too important. have to stagger march 16. do they jawbone like lisa has to talk about fed officials? is there jawboning pre-march 16? jonathan: that is kind of dumb. they will go march 16, 50 basis points. tom: but does everybody speak? jonathan: at the government counsel? of course. in the big conversation will be whether they communicate another 50. tom: does neel kashkari way in? -- weigh in? jonathan: let me give him a shadow. i get it, he said 5.40, i want to stay there and forget the rate cut stuff. what did we start pricing in the last week? 540 and pushing out rate cuts.

and his tone has been correct. -- not lisa: and his tone has been correct. he has been right in that narrative as well. tom: the narrative at goldman sachs, thanks to sonali basak. now we speak to devin ryan with years following the travails of wall street. i know you memorized all one hundred 18 pages, i went to the money chart on page 68. enterprise partnerships disciplined growth and see hope and a prayer two years on the consumer area, the net revenue goes up and change in net reserves comes down. the hope and a prayer is a two year path to a better consumer bank. were you sold on that? were you convinced yesterday? devin: good morning, tom. so yeah. it is a road that is going to be

complicated on the consumer. but you have to give them some credit. had the first investor day three years ago. hit all of their targets they laid out there at least in terms of borrowing and efficiency ratios. the key drivers, we are talking about consumer here with the key drivers are what they are doing in investment banking and asset management and the consumer is one piece. it looks like they're going to look at strategic alternatives and look to sell some assets. but we think they are going to hit that as they did over the last three years. i feel good about that. tom: is there one out there to buy? how do they jumpstart this out of fortress gorman? devin: they have done some small talk asset management. the big talk -- they have pushed a two hundred billion dollars last few years here. it will raise another 50 billion or so over the next two.

they are seeing 13% revenue growth, a kegger on their asset management fees. i think that is going to continue here. they made a credible pitch there and i don't think they need to do inorganic things. but they're going to look opportunistically. jonathan: at times they were described as getting flustered. you were there. how would you describe his performance? devon: i think, first, the stock is up 110% since 20 19. he took over in 2018. i think i have to give him a pass. that hit their targets over the last three years. i think he is frustrated with the narrative in the market. the company is sharing more than have ever given before and they are not hitting everything. i think they are clear that there has been some missteps here and i think it is frustrating, the pushback they are getting. but he did mention that the partner headcount, the turnover there, it was low since 2014 and

the employee turnover is at a five year low. so they are not seeing a mass exodus. the book value has grown almost 40% since the last investor day and the stock has outperformed the s&p by more than two since that day. i think they deserve a pass and they are just not big on all cylinders. jonathan: do you think the problem is he is not james gorman? devin: there's only one smith barney. morgan stanley to that deal and that has been transformational. morgan stanley has outperformed in some areas. goldman sachs saying listen, we have outperformed in a lot of areas. i think it is a slightly different business and and in the last few years, it has been toward morgan stanley's favor. but goldman sachs had a phenomenal outperformance in 2021, better than anyone else in the industry. 2020 two, the most recent year,

it was a tough and i would argue abnormally difficult backdrop. we get mean reversion and goldman sachs will be back in the running and people will stop giving him a hard time. lisa: there have been discussions about repairing some of the mistakes goldman sachs is perceived to have made. this is focusing on the consumer banking unit. there was a discussion yesterday about fighting strategic alternatives for a number of different units including the specialty lender as well as the credit card partnerships with apple and others. do you think this is a good move on their part? do you think trying to offload big parts of the consumer credit business is the way to go? devin: i think based on new directive and consumer, which is to be more targeted, it makes sense. have to have the right buyer and the right transaction if that is what they're going to do. but i think goldman and their ethos came up yesterday. they have a bad trade, they don't sit on it.

this is a situation where they get a little mud by making a mistake in this one area. but they need to move on and get themselves in the best position. this is a small part of the story in our thesis but i do think that potentially looking to exit some of the essences could it make sense at the right price and it will take away some of this overhead -- overhang gutting more attention than it probably deserves but that they would like. jonathan: that is the theme, maybe they're getting too much chris is then perhaps they deserve. as you look at the coverage of this name, the stock that you cover both in the media and from the community in your pit as well, is it just about the individual? devin: i don't know that it is personal. goldman sachs for its history has delivered outstanding performance. i think it is human nature that when firms are really performing well, people want to find areas to knock them down. before david solomon came in,

goldman was a black box and they have given a lot of transparency and a detailed roadmap on their expectations and how they are going to get to their targets. when you do that, you are always going to find things to critique in this consumer area, it is one thing they have not delivered on. but the market has not really shifted. people don't want to subsidize use -- losing money. whether it is gold --goldman or fintech. i think it is that goldman has done well and people want to nitpick. jonathan: thank you, devin ryan on the latest with goldman and their investor day. you asked me at the government council of ecb, do they all talk? rick taddeo, they sit there quiet and the food is based on gdp. lisa: that is amazing. jonathan: some insights. pretty sure it is a joke. here's your lineup, mike wilson and morgan stanley, do not miss

at 9:30 eastern about the opening bell. we will catch up with stuart keizer of city, and also lineup. tom: good equity. can i defend mr. sullivan? 30 one billion revenues, wealth management 17 billion revenues. platform solutions, 2 billion revenues. it is tiny. jonathan: we have discussed that. futures rolling over, just about unchanged on the s&p 500. 60 minutes from the opening bell. ♪ ♪ portunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets

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tom: bloomberg surveillance, lisa abramowicz and tom, and most interesting day. mr. farrow -- mr. jonathan ferro getting ready. getting ready to explain the challenges of the equity market. red and green again in shock over german inflation. you have heard michael schumacher and others talk, it has been absolutely extraordinary. lisa taddeo speaking to the bonus broke president after the release of the animal -- annual report. >> it seems to be the case that inflation is raised.

-- very stubborn. it is not fair to speculate what is the secret beyond march but it looks like 50 basis points for the march meeting is very necessary. tom: and perhaps so important to our listeners and viewers worldwide, and percent inflation in germany. it sounds like just possibly we need a surveillance road trip to germany to really understand this high inflation. with that conversation, what did you learn about what i'm going to call the sweat factor, the angst of seven, eight and 9% inflation? lisa: to be honest, -- maria: he said it is going to be bumpy for january and the euro. they expect inflation in germany between six and 7%. he told me as the head of the bank, it is not acceptable.

we need to bring down inflation. the other concern he wanted to is the changing dynamics potentially where you see headline inflation go down but quarter inflation stays sticky and that is even more problematic. in terms of what to expect for the european central bank, everyone speaks at the governing council but this is the biggest economy so he carries a lot of weight. he told me march, 50 basis points, that is very necessary. but that is going to continue that point. he did not want to get into speculation for a significant number. but the market has seen a big repricing yesterday. for percent rates, would you feel comfortable? and he told me to some extent yes. lisa: we heard from them early this morning that he would like to see a more rapid acceleration of quantitative tightening, the reduction of the balance sheet of the ecb. how much company does he have on that front? maria: i think we are about to find out.

to the point, the very fair point that tom makes, who speaks when they gather and how does it work? and to 20 economies, with different dynamics. brescia joined europe this year and you have to bring everyone together around the table. this is a debate he wants to put forward. he told me it does merit conversation but we have to wait until the governing council meets. tom: our american viewers and listeners need a primer right now which you are inside competing on. i'm going to say germany and the netherlands are the arch hawks. spain has seven or 8% inflation. his spain joining them as hawks? maria: such a good point. the governor of spain was the chief economist before. that is the governor of the central bank of spain. at that point you see the cliches do not fit be.

--do not fit. he will tell you they cannot be a dove and they cannot be perceived as that. he also says we should be restrained this year so it does show that perhaps in this new era of central banking, the old way book does not work. tom: thank you and congratulations on a timely interview with the head of the german bank. a wide-ranging conversation with a little red on the screen, futures at negative four. carl weinberg joins, you had such a stunning note and it is off our radar. we have not mentioned japan today. but for our american viewers and listeners may be not schooled in this, guys like you say japan is really important. and the tension point is not yield curve control and the experiment out to 10 years. it is a dead out past 10 years and that is deteriorating price down and dramatic yield up. what does that pretend for

japan? >> good morning. the bank of japan has work to do. the end of the fiscal year is a few weeks away, march 30 first and there are substantial capital losses on what i will call the ultimate -- the ultra long segment of the jgb orkut. where they have not been trying to control the yield curve. the yields are up about 70 basis points compared to last fiscal year and that implies between 30 and ¥60 trillion worth of capital losses, big enough to wipe out the balance sheets a lot of the institutions. the bank of japan and the finance ministry are going to be out there in size over the next few weeks, buying up this asset and encouraging by the asset or they move the market lower. they will do it but it will be quite a challenge. tom: how close are they, and i don't mean to an absolute owning the bond market, on a trend line or a glide path to owning the bond market, where is the bank

of japan? maybe a baseball analogy. are they in the third inning or the eighth of buying every bond issued in japan? carl: at the short end of the yield curve, out to 10 years, i think the number is about 60 five to 70% of the market. at the ultra long and they own a lot less because the target has been to control yields from overnight out to 10 years. they still have scope to buy at the ultra long and of the market. but you are right, the bank of japan governor doesn't it said the boj can't buy bonds forever and at some point this has to come to an end. when it does there will be capital losses in the bond market and yes, i think that will imply, that will generate some institutional risk. lisa: the odd monetary experiment of japan beside the rest of the world, grappling with deeply entrenched inflation by all accounts and with respect

to germans, 9.3% february cpi read. subscribe to this idea that we will see inflation rollover, prices stabilize at a higher rate. how do you hold that conviction if we are not seeing it in the data? carl: let me frame the answer in terms of the interview just broadcast. i was so glad to see him talk about quantitative tightening. the inflation adjusted money supply in europe is still four point five percent higher than it ought to be given the current level of output and recent trends. sure, there is too much money chasing too few goods and that is pushing up prices. i view this as a price adjustment that will run its course when real money supply is deflated back to where it should be. by a combination of quantitative tightening and rising prices. we still have more price increases to go. but there is an end in sight to this process. this is not the spiraling inflation result in the 70's. i don't think interest rates

matter nearly as much to the ecb and the course of inflation in europe as quantitative tightening does. lisa: aside from just understanding the quantitative tightening, which are want to get into because that is being raised by the german central banker, how much are we looking at what you view is an overreaction by central banks to something that is perhaps stickier not inevitably protracted and spiraling? carl: i think they are chasing the wrong thing with higher interest rates. it is not to say i don't think the rise in interest rates is not a good thing in the longer run. we have had negative real interest rates in europe since the financial crisis and it is time to straighten that out so that investment does not get misallocated and the economy can grow in a healthy way. that is a good outcome here. but as they move much beyond two hundred basis points or three hundred basis points above inflation expectations, it will become restrictive and we will start to make sessions that are already going on worse. tom: you are not could go for two hours this morning on your wonderful heritage of latin

america which is falling apart. the argentine peso. but i would have to stay on europe. a lot of people publishing including the commerzbank overhead pantheon. the basic idea is there is eu inflation and our viewers are saying do we import that? do we bring their inflation at the margin over to give us a lesser disinflation? carl: surely at the margin, what happens in europe does transmit to us through trade prices and other forms of arbitrage. but it is quite at the margin. the price increases we are seeing in the united states are coming about in my opinion because we've got excess of cash balances in the united states also. they are over two hundred trillion dollars higher than where they ought to be given trends in the growth of the economy. and until that gets sorted out by a one-time rise in prices and by quantitative tightening, we are still going to see prices

going up here. that is the main event in the show. tom: carl weinberg, thank you so much. high-frequency economics. you have to leave some time here to some this up. my head is spinning over the geographic reach we have done this morning. it's like we are around the world with economics, finance and investment. i think george at deutsche bank, i will give him credit, we are at this critical two weeks. lisa: around the world with one story, more rapid growth and more rapid inflation than many expected. then over to the central banks, how do you map -- navigate a world that as weinberg was saying is perhaps less sensitive and a world we don't recognize after decades of low interest rates and imported disinflation? tom: the fact is, in terms of history, alan meltzer and the rest, they were data-dependent

and fine, we are there. we have 9% inflation in germany. so it is the acting now and as john mentioned, ecb is going to pop 50 basis points march 16. we are here. the data dependency is not out there. it is here. lisa: and you are going to see a response with higher rates if you take a look at what the market is pricing in, a 4% ecb rate. with the markets pricing in the federal reserve, it has gotten up to 5.4% july. have a peak rate of five quite 43% by september. it's not going to go below a 5.3% before the end of the year. that is what the fed funds market is now projecting as we get out what it higher for longer scenario is. tom: what is your bond space telling me? i look at two's compared to the 30 year bond.

we have never had this diversion. how does that go to high-yield and investment and the rest? lisa: we are seeing the lows, the greatest inversions, the greatest differential there. when it means is we are going to see yields stay high at the long and until growth declines enough. you're not seeing a feeling of deep recession being baked into credit markets. tom: in all the years of doing this, it is simple, as you talk to me in europe, 7, 8 or 9% inflation, that is an original conversation in the modern day. s&p futures at negative six, the vix 20 .62. this is --20 point 62. this is bloomberg surveillance. lisa: keeping you up-to-date with news around the world with the first word, i'm lisa mateo. u.s. businesses set to invest

billions in northern ireland but only if the regulations have stability in the region. rishi sunak could use this prospect to convince northern ireland unionists to back the deal. the cost-of-living crisis in the u.k. showed little sign of easing. prices in british stores rose in february at the highest rate since 2005. british retail consortium says shock price inflation hit eight .4%. food prices rose even faster, 14.5%. in northeastern greece, at least 30 six people have been killed in a train crash. 80 five others injured. authorities say a passenger claim --train collided with a freight train before midnight, starting a fire. he was traveling between two popular tourist destinations, athens and thessaloniki. home purchase levels fell to the lowest in nearly three decades as mortgage rates soared. according to the mortgage

bankers association, a 30 year fixed home loan rose to six point seven 1%, the highest level since mid-november. baseball legend alex rodriguez and his partner mark want to take on ticketmaster. they have raised a $30 million funding round for a new ticketing and fan experience business that they hope will outperform the incumbents, company called jump. among backers are drive by draftkings. 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. ♪

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welcome to a new era of flight. tom: bloomberg surveillance, three, two, one, take a breath. we several months --lisa abramowicz and tom keene on an interesting day.

it sets us up for thursday tomorrow, and the claims, of course they are going to be under 200,000. but ism at 10 :00 is really the lead data point. lisa: we get 10:00 today, 10:00 a.m., the manufacturing ism. on friday we get the services ism. how much do we get, this ongoing strength on both sides, note jobless claims and the idea that you are not seeing a weakening, how much does that get confirmed and how much more do we have to pricing or have we priced in the response from central banks? tom: a cacophony it is, thank you for joining us on radio and television. carl weinberg in japan, how obscure is that? yield curve control up to 10 years, oops. there's other debt somewhere. lisa: and the question, saying we can't buy bonds forever, they can't own everything always and going forward this is perhaps a departure from previous ideas. tom: we will try to calm down,

we will do that with the ira jersey. we try to look forward in a measure way -- measured way, how he publishes among his colleagues at bloomberg intelligence. i get a sense of calm in that when everything is said and done in the hysteria of european inflation, you are actually modeling out some form of a lower interest rate trajectory. describe that. ira: it is basically reasonably flat come the range bound market in the long end for now. and that is predicated on some of the things you and lisa were talking about, higher inflation in europe, the possibility of yield curve control and japan ending. that is going to roil the u.s. and european sovereign debt markets at least for a short period of time. so you have the risk you will see a four percent or 4.2 5% 10

year yield. when you see the underlying data, eventually the economy is going to slow and even though the glide path is a shower lower -- a shallower than we thought, inflation will be lower than at the end of the year like today. we do think long-term interest rates in particular will probably be lower later on. you guys talked about ism coming out at 10. -- 10:00. that new order tens to be one of the best leading indicators for the economy. we are nearing if not quite at recessionary levels. tom: are you suggesting we need to have our radar up for 4% 10 year yield deco --? ira: i am, we have been testing the waters as to whether we can breach that and we have broken a technical level. there's not a lot of technical support up to around four point

25%. you get some decent data. today for example, if the new orders balance -- bounce and it is about 45, could be an impetus that test for --test 4% would break above. the interesting dynamics start to reemerge were risk assets fall, equities down, rates up a little. but then rates are going to have a harder time probably moving higher when risk assets are doing poorly. lisa: when you say rates, perhaps that are -- is on the long end. and what is required for central banks to bring down inflation at the rates you are expecting, right now we are at a five .4 percent terminal rate for the federal reserve and seeing it staying there for much of this year. do you think that is enough or would you go further? ira: one of the things we have noted for a long time is at the federal reserve, at least in the last three or four cycles has

always hiked until the real feds funds rate has been positive. the fed funds rate are above the year, a pc deflator level. so we are going to get there probably when we get above 5% or five .25%. it does not seem unrealistic to me. will we have to go higher? that depends whether or not inflation accelerates. and there is a big risk to our view. that risk is that things like goods prices which we saw in january according to both pc deflator and the cpi data actually started to stabilize. and we thought it would continue to fall modestly. because it has been running hotter, there is a big risk that if inflationary reseller rates, the fed will have to go more. clearly that is something we have to watch the data closely for and one reason we will be watching some of the data like the ism prices as well as what happens to wage growth,

particularly in the services sector when we get payrolls next week. services has really been the impetus for a lot of the inflation we have been seeing over the last six months or so. lisa: we are moving forward to the u.s. data we are expecting in about an hour and what we are seeing next week. this comes after the inflation in germany, a shocking 9.3% february cpi read which is unthinkable for a nation that had hoped to have defeated inflation and tried to avoid taking out debt to avoid the spirals that it saw in the 1940's. how much are we looking at a global bond market that is very much influenced by inflation from nation to nation, pushing rates up globally? ira: it is all about inflation, frankly. have interesting dynamics where the global interest rate environment has complete shifted from where it was two years ago. in europe in particular, i think they started a little later than the fed did and it is possible

that the fed is going to have to -- the ecb is going to have to hike at least a few more times if not many more times. they have been reluctant to do that i think in part because some of the inflation has been influenced by exogenous factors like the war in ukraine. at the same time, the mandate is to get inflation low. in order to do that, they might have to hike even more. tom: a question from another time and place. i don't think i have asked this in an excess of 15 years. with the inversion that we have, is some of it for and buying of our longer maturity debt keeping the price up and the yield lower? that is a question from a great era. is that happening? ira: very modest. you look at traditionally who have been the bigger buyers of

our debt it has been central banks. one reason why foreigners have owned so much u.s. debt has been the fact that we have had massive current account deficits. but i think you are right. if you look at foreign flows into u.s. treasuries and private foreign flows in particular, these areflw from pension funds and other types of real money investors, those continued to come in at a reasonably high pace even though central banks are cutting their holdings of treasuries. and private investors are buying 10 year, 30 year debt. you can see that in some of the auction data we have been receiving. some of those options have been strong in a couple of the recent months. we can't say this month, but in recent months. because of that, part of that certainly is because of long and buying by foreign private investors for sure. tom: ira jersey, thank you so much. look for his public research at bloomberg intelligence, a great

team. particularly the short maturity era, it is not like to go past two years. i was shocked, you are doing a question and i was going back and forth between bbc football and formula one and that. then i wandered over to the u.s. 30 year mortgage rate. topping through 7%. i did not realize we did that in the last two days. seven -- 7.03% on what i follow, the 30 year bankrate mortgage. lisa: it went up to the levels we saw last november because it is basically this feeling that we are going back to an area before disinflation, which was five minutes ago. there is a question of how does this trickle into the real economy. it was a story in the wall street journal i read about how a growing number of purchase homes in the u.s. are all-cash. it is not surprising, because if you have to buy a home and you have the cash, you are going to

avoid what you thought is punitive in a three percent era mortgage rate. if you have cash you are in a better position than if you don't. to buy a new home. tom: back to biblical times, even in times of hardship, the haves can take it vantage of price down and if they have cash, which they do, they can do it. the moving of a seven year mortgage is seven point 14%. we are 11 basis points away from the series touching the moving study. lisa: how many people are actually paying a 7% target rate even the decline we have seen in mortgage applications? mortgage applications came in this morning. they were lowered by 5.7% month over month. o it has been an extra ordinary -- tom: it has been an extra ordinary morning. we will continue the discussion are radio and television. this is bloomberg surveillance.

michael: jonathan: the countdown to the open starts now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: looking for a bounce following a month of losses. china showing signs of a stronger rebound and inflation in germany coming in hot.