simone: welcome to first word news. kevin mccarthy says our nation's debt is a ticking time bomb. speaking at the new york stock exchange today, he said the house will vote on a plan to lift the nation's borrowing limit not without new curbs on spending. a california republican accused president biden of ignoring the problem. >> we will grow the economy until we stop being dependent on china. i do not want to see this president bumble into default.

i want to sit down and solve the problem together. simo the u.s. is approachingne: it's 31 .4 trillion dollar debt limit which must be raised by sometime this summer to avoid default. a warning from china, the country says it plans to conduct what it calls major military activities in the yellow sea. the chinese maritime agency did not elaborate on the nation -- on the nature of the plans that exercise will take place tuesday morning. china has ramped up military and aerospace activity off the coast in recent days with simmering tensions with taiwan and the united states. spacex postponed the launch of its massive starship rocket that was said to lift off earlier today. the company and elon musk confirmed there was a pressurization issue minutes before the launch. you on must tweeted another test launch could happen in a few days. global news, 24 hours a day, on air and on bloomberg originals. powered by more than 2400 journalists in more than 127 countries.

this is bloomberg. ♪ jon: welcome to bloomberg markets. kriti: let's dive into the price action because you are seeing less volume. the s&p 500 is down 0.2%. the two year yield is 419 -- 4.19 on the front end of the curve and that's not where we were this morning. we spent almost two months not being able to cross that key 4% level and now encrusted and stayed sustainably above it so how long will that stay with a federal reserve nearing the end of their tightening cycle? as you start to see yields higher, the interest rate

differentials in favor of the dollar are taking an plus hedge funds are no bullish on the dollar. what does that mean for the euro? $1.09 on euro-dollar and weaker by 0.6% and that's the primary contributor to the bloomberg dollar index so that's a crucial pair to watch. we were getting closer and closer to the all-time high and that would going in the opposite direction below 2000 on spot gold. jon: speaking of gold, we've been watching the materials sector in the gold names are under pressure but tech resource shares are up again today. we have plenty of reporting on what could happen to its metals business after this potential spinoff of their co-op operations. tech shares are higher. state street is lower. we are rolling through earnings season for banks with respect to its bank, outflows have been a

concern for investors with shares off about 10%. let's shift into technology where we have seen worries about the possibility of samsung going with a different search provider as a default on its devices in bing versus google and that's weighing on google prices. speaking of reports, we're looking at ship equipment names, down about 5%. that ties back to a report that we could see taiwan semi which is a huge player possibly cut back its big spending. let's get more perspective on that developing story. we are talking about a huge player when it comes to influence within the chip sector. what did you make about the reports that it coup cool off on capex? >> i think it points to demand

uncertainty even though we've been hearing about how demand has been very good on the data centers side especially with chet gpt driving a lot of the news flow. what you are seeing from the tsmc perspective is there is demand visibility and all these companies are interested. they have some prepayments but on the smartphone side, things are still kind of quiet. the refresh cycle is so far away and pc shipments have come down. you are seeing demand cooling off. net net, there is demand outside of data centers and that's why probably they are taking on their competitors. kriti: that's the asia and the netherlands story but bring it to the united states at a time when the u.s. is trying to bring

the manufacturing onshore yet the global supply is being cut. how do you square the two? >> a lot of what's going on is suppliers looking for u.s. based of chips. i think we will hear that with more and more companies looking to source their chips from the region they operate in and they don't want to go to thailand. that's another reason for tsmc to look where the demand is and where they should open the next factory. they may open somewhere in europe or the u.s. i think you will see more capacity expansion and companies announcing capex outside of east asia and that's part of the reason where debt is why they are in a latency mode right now. jon: the attention on these issues in part is because we look to the semiconductor industry to try to figure out where the economy might be headed. >> it's always a leading

indicator. there is a big the cyclical aspect. you seen it on different parts of the semi market. memory has been beaten up quite a bit. the capex has gone down by almost 50%. the numbers have been taken down by about 20% so you won't see the big companies having an immediate cyclical rebound but it's further out in the near term. kriti: we thank you as always. walking is through the important parts of the global story of the chip sector but outside the chip sector, attention on the banks. cameron dawson spoke about the current concerns around that sector. >> we even see deposits stabilize for the smaller banks in the last week. we saw deposits take up slightly. we have also seen loan growth tick up slightly so at this point, it looks like the issues

are contained. however, we still have to watch credit growth really closely. that is the thing that could tip us into a recession. kriti: for more insight on the charts and the risks, let's bring in the head of technical analysis. when you look at the stock market, there is not a ton of participation with low volatility and low volume. yet, no direction. what will it take for the stock market to see some action? >> what you are seeing on the service could be action but under the surface is very different. i can give you step we like and hate but let's remember a couple of things, almost 60% of the indexes under 200. some step is working and some stuff is not but what is notable is you go back to the highs set in early february in the s&p 500 is in the 41-50 zone and the

number of stocks was broader than that it is today. we've seen this rush for participation over the last eight weeks. people are more cautious than we otherwise would be. when you look at some of the leadership, it looks more risk off today than it did in late january. it's more defensive and it's healthier in staples and it's not discretionary and not financials or even industrials. the leadership and participation is narrower and more defensive than the headlines might suggest. jon: obviously, earnings season is a chance for some fundamental analysis on the technical side, given what you just outlined, what kind of things are you watching unfold when it comes to ups and downs technically speaking? >> when we think about the start to earnings season like what we saw for the -- from the banks, jp morgan's response was the stock was up seven or eight friday and how underwhelming

were the regional banks. i thought that was very telling. the high in the kr he was 9:31 a.m. friday morning. it drifted lower by four or 5% the rest of the day in the regionals had price loads. if the crisis and the regional banks have passed, then why can't they rally? kriti: you tell me because if you look at price to flow ratios that are depressed, are you looking at things like buybacks? you are trying to reenlist confidence in your bank, then this is the time to do that. >> and i think the market will be in arbeiter of this. when i see the price action and small size banks, their inability to bounce makes you wonder sure is over. for someone who evaluates markets, i have a tough time

being all in on the bullish call when i don't have the banks. jon: let me go what's be that's what's happening with the s&p 500 and talk about gold. there is a lot of connective tissue including what's happening with the u.s. dollar. what have you made of the recent momentum? >> we have liked it and we wrote a note laced september called the contrarian casework gold but it's not as contrarian now as it was but when you look at the flows and position income is not as aggressive as you might expect for how good been. gold is making 5000 year highs. is one of the oldest securities that's traded. that sounds pretty bullish to us. when you look at gold and other currencies as well, it's broken out into almost everything you can think of. we like it long. i don't know what the right target is been our target is

simply higher and you want to use consolidations or pullbacks to your advantage. gold has been very benign is rates have come up a we still like it long. i think the equities are starting to turn year and copper has quietly hung in there despite the macro headwinds out there. kriti: sticking with commodities, does it trade in a basket? there was a time when we're talking about supply chain issues and it was easy to hop into a basket of commodities and call it a day. are you watching the diversion of copper versus gold versus oil? >> i think this is true across the market. last year was a year of correlation. this is a year of dispersion. look at all the foodstuff over the last number of weeks with food commodities starting to surge and gold strong and copper has hung in but lead, nickel and

aluminum not so good so there is a split message. i think it's about dispersion and is not some monolithic call. look for gold versus copper at the end of the day and it's a good barometer for rates and the economy. gold continues to outperform copper which is the good message. kriti: watch gold versus copper, we thank you as always. coming up, the biggest story today, prometheus shares have surged on us as much as 30% after their $10 billion bid. this is bloomberg. ♪

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time for our stock of the hour. today it's a big day with merck striking a deal to purchase prometheus for $10.8 billion. this will be an opportunity for them to cushion the blow of losing a key cancer product in their portfolio. you might wonder if we see more m&a to help deal with that lack of protection which affects a lot of the big players in the industry in the years ahead. kriti: that something you see with modernity and pfizer post-covid. they are sitting on a ton of cash so what do they do with it but acquire and defend against changes to their portfolio. abigail doolittle gives us the details. abigail: it is a very large deal and if you were a shareholder of

prometheus friday, you're holding a stock is one -- that was $114 and now it's closer to $200. this is an early stage bioscience company and they don't actually have any drugs which makes it interesting. last december when the stock was more than it was today, they showed good results on an autoimmune disease drug geared toward ibd. diversification is the issue because merck is based around oncology. 43% of revenue is from keytruda but when the patents comes off, how did they replace it? this might be one way to do it and prometheus bioscience pipeline could be worth $5 billion by 2030. this is not the first acquisition recently by mark. they acquired schering-plough

for 47.1 billion dollars a year ago and it could be a reason that the shares have -- of merck have outperformed the last year. jon: maybe you had to do a number of deals to offset the loss of such a big drug. i wonder if people will be watching patent expirations among the big players as a gauge of whether we will see more m&a in the industry. abigail: i think that's the key because analysts are talking about how this acquisition makes sense for mark and you have the acquirer down just slightly suggests that folks are encouraged and are taking steps to shore up that whole. we were talking earlier on radio but what does this tells about the macro? it's some sign of confidence around the macro situation with a difficult environment last year. management teams were nervous but now they are comfortable

putting money to work and they are certainly doing that in the pharma space. not only did merck acquire schering-plough but we had pfizer recently make an offer for sea gen but that deal has not closed yet but there is probably more purchases in this space coming up. kriti: you just took my two questions away. in terms of the timeline of the keytruda patent expiration, what are we looking at? abigail: it's actually later in the decade. it's not until later this decade but analysts are already thinking about it because if that falls off completely and goes generic, you have a huge 43-45% percentage of the revenue. they want to make sure that is

short of so is not near term event for the shows you how the companies are thinking far into the future. jon: helpful context as always, thank you very much and we will continue to watch what's happening in pharma. as we count down to earth day at the end of the week, we will look at sustainable financing is some countries are getting hampered by debts. this is bloomberg. ♪ when you automate sales tax with avalara, you don't have to worry about things like changing tax rates or filing returns. avalarahhh

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jon: this is bloomberg markets. time for today's for what it's worth. our number is 360 million today which is the size of the belize bond, the largest debt for nature swap that has been completed. it's sustainable financing for developing economies to get out of debt by preserving national resources. >> as the world braces for

worsening effects of climate change, developing nations are being battered twice. 34 of the 50 developing economies that are most vulnerable to climate change are also at high risk of fiscal crises. >> countries are either in default or they are facing #'s where they don't have access to capital markets. >> enter the debt for nature swap -- >> they involve debt restructuring and in return for this, countries agree to invest in different nature and conservation initiatives. >> we are trying to make the conditional part as effective as possible. >> the belize blue bond is the largest at 360 million u.s. dollars. prior to the deal, their debt level approach 130% of gdp. >> we had the opportunity to reef finance -- to refinance so the government realized $180

million of savings. as a result of these transactions, these will go toward protecting 30% of their ocean. >> not everyone is happy with these deals. greenpeace has caught -- because for a rejection of debt for nature swaps. >> bit successful in that it essentially opens up a line of credit for nature and represents nature in these discussions. however, we are talking about high transaction costs. everybody is winning but not as much as you might think because it's so expensive. >> these concerns have not deterred market players. investors are snapping up the bonds as a way to show their esg commitments. blue and green bonds will continue to be a tool to combat climate change. >> until the world decides to undertake massive debt for if this on a planetary scale, we deal with here and now and we

don't want the great to be the emmett -- the enemy of the good. kriti: that was that bloomberg green report. we are not seeing any green in these markets today. the s&p 500 down about 0.3%. the nasdaq is down further. there isn't actually that much participation so not a lot of volume. i don't know what it will take to get there. jon: we are getting pretty deep into earnings over the course of this week so i'm guessing we will likely start to see technology stocks a wide gap when you look at the s&p 500 performance. the top 20, we will see how they fared during earnings season. kriti: the rally year to date has been very tech heavy so that will be something we keep and i on. netflix reporting tomorrow and tesla wednesday as well as ibm and most of the regional banks

wednesday and thursday. right now, the bond market catches my eye. more markets coverage ahead so stick with us. that does it for me and john, this is bloomberg. ♪ i screwed up. -mhm. i got us t-mobile

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>> keep you up-to-date with news from around the world, here is the first four. i am simone foxman. nuclear powers pledged to in -- cutting off a critical force of geopolitical will -- to jointly remove pressure from global supply chain. u.s. lawmakers seek answers to how the covid-19 pandemic started. former republican staffers releasing details from their own independent investigations.