♪ >> it has been a very thin rally. certain parts of the market to well. others continue to struggle. >> it is remarkable the way the economy has performed in the face of such rapid increases. >> still, this liquidity within the banking system. >> you are in a transition. we had 14 years of low interest rates in the real impact on valuations that take a while to filter through. announcer: this is bloomberg surveillance with john keene, tom offend pharaoh and lisa abramowicz. -- tom keene, jonathan ferro and lisa abramowicz. jonathan: good morning. i'm jonathan ferro.

equity futures -6/10 of 1% on the s&p, wrapping up bank earnings for the major players on wall street letter this morning with morgan stanley and the next couple of hours. after the close yesterday, a focus on the regionals. let's focus on the regionals right now. west alliance in the premarket up by 16%. a little bit later after the close, then onto first republic this coming monday. we've got to talk about this. so far, so good for the regionals. never mind the big players. weston alliance yesterday reporting profit better-than-expected and posits recovering slowly. tom: moments ago, it was the same thing. leading with the positive information. you see it in the market this morning. we don't need to do the data check right now, but this is under the radar in the new zeitgeist.i agree with you , this is good news, calling news by the regional banks. jonathan: lisa, calling this one

a significant win for the bank. lisa: the stabilization, the growth over the past week or so highlighting how perhaps the worst is over. now is the question of ok, is the crisis over? and if we move not, this goes back to the question you've been asking for the past couple of weeks, when we go back to pre-march 8 conditions? we are almost there, but not in the bond market. tom: to me it is about a fed that gets permission to come up 25 peeps. jonathan: then what? you get the high complied by the dot plot then what? they were asking whether the banking stress of the last month was a substitute for rate hikes. they concluded to some extent it was going to be, we just didn't know to what extent. tom, i think there are two ways of looking at this. one, the stress is stabilizing, maybe even the coast is clear. that is the super optimistic way.

the other way, this is the beginning of a process. it will ultimately lead to tightening financial conditions and remove some of the pressure from the federal reserve to do even more. and ultimately, this bond market has repriced as we have shifted away from the worst case scenarios and we are taking the two-year back toward 4.30. tom: the break out this morning on a solid seven basis point move indicate that direction. that one view is on the edge. and the answer is you mentioned this yesterday, there is a set of narratives out there now. it is not this or that. there's a whole, wide set of stories out there. you can pick your story this morning. lisa: i would pick the story of inflation. i know that britain has its own story, but the fact that it came in above expectations when you see credit tensions using, the idea that something broke, maybe it didn't break. we have to go back to worrying

about inflation again? that starts to really dominate the narrative in a way that people had perhaps forgotten about. jonathan: sticky inflation over in europe as well. the euro zone has its own problems. a bit of breaking news on the bank of japan from the team here at bloomberg. doj officials are wary of tweaking or strapping the yield curve control at a policy meeting next week. so soon after the banking crisis oversees cloud of the outlook according to people familiar with the matter. still positive on the session by half of 1%. tom: the weaker yen, the first thing i did this morning was triangulate, and it is really right up against resistance. a print would be a huge deal. that is not so much urodynamic as the yen dynamic, and that comes just before that headline. >> let's get you to the price

action briefly. futures negative on the s&p. yields higher by four basis points. in the fx market, just a touch of dollar strength. do we care about morgan stanley coming out, or is it really going to be the focus on citizens financial in the next couple of minutes here? we pointed to what we got yesterday, given that western alliance performed much better than expected. if we get a consistent stream of that from the regionals, all of a sudden, is banking crisis over? i know that tom is going to be reading for the whole thing. i think this is going to be really telling at a time when you did see the bloomberg u.s.

financial conditions index revert back to almost where it was march 8. do we get a sense of bifurcated nature of places like san francisco versus somewhere in the midwest, or a manufacturing hub in the south? today, the hawks and the doves. new york fed president john williams, whether they perhaps signal something in terms of a policy response. tom: does the beige book get in the way of manchester city? i lisa: think it does. lisa:definitely. jonathan: fantastic speech last week, really interesting. not because of what he said, just because of how he said it. he's talking about patients. i just wonder if that is reflected by him today. off the back of some of the data we had. they've got time to get a little

bit more information and gauge where we are. tom: i just love the idea that this comes back to 1907 and 1951. all of these presidents are different. i love the distance from chicago to cleveland. we are so fortunate to have those two within the banking system. >> agreed. we've asked this question in number of times, but we need to update the answer to it. the traditional indicators, the latest on the banking situation, where do you think the fed is going to come out on that? >> things have not gotten worse. the measures of the passage of time has allowed for us to get a better sense of where we are in this process. it is too soon to tell if this is all done. we are seeing better earnings, but this is going to be a process, i believe. tom: you've always done this

over the years, a more holistic view. if we get these various worries and with all that cash that is out there, is there a shortage of bills, notes and bonds that will move price up and yields lower than we would guess? >> at some point, absolutely. that has always been the case, the shortage of collateral has been a big driver. lisa: do you feel like at this point if the fed does hike five basis points and holds it there as they keep saying, even though the market disagrees, that more things will break in a way that people are not anticipating? >> here's the thing. the fed obviously can raise rates to whatever low they want to get to but the more they raise rates, they are going to have to defend that position for even longer. the more they hike, they will have to maintain a position to or three months later.

that does cause a challenge for them because they will be weaker into the fall. it will be faced with a fairly wide range to begin with. back and start to expose weaknesses. the higher you keep them there, it is going to expose other fragility's. lisa: central bankers are concerned about the central banking crisis. how much has it been fully priced out of the market that there is some sort of banking crisis or reddit crunch that could come down the pike? > it was a bifurcation of a lot of different measures. the financial economy in the real economy. the real economy is much more aligned with small businesses. they are expressing concern about getting access to credit. we've had tightening standards all throughout. i think it is too soon to tell where we are. but i do believe that the

markets are also sending mixed signals as well. we still have the overall judgment curve well under. the bond market doesn't have to leave the ability to keep rates high. >> the 10-year between 3.60 and 3.70. meaningfully above 4%, i think if we made a move, that is going to be the real telltale sign if there is demand. jonathan: yields backing up this morning, thanks for jumping in is always. just south on a 10 year yield this morning, up by five basis points. that is the decision we've all

got to make, a range of scenarios. two, the beginning of a process that will continue and we will have to keep an ion over the coming months. lisa: it seems like people believe it is a process. how to play that out through markets. i was struck by what blacklock had to say. basically saying it is not going to work, we have to be much more stack-specific. this is not a market set up for stack-specific type investing. we've gotten completely obsessed with indexing and the broad themes and the beta of what is going on with the fed. jonathan: we could talk about single names, job cuts, the world cup. another price cut from tesla on one specific model. the second one in the last month or so. tom: my amateur take is -- good morning, mr. musk, i know you

watch all the time. it is called brent destruction. jonathan: why? tom: the bloomberg terminal is built on this, every business has the repeat purchaser. every tesla is a repeat purchase and you are telling them the car they bought, they got screwed on, and it costs less now. jonathan: we will pick up on that story a little bit later. good morning to you all. equity futures a bit softer here to kick off today. we will get numbers on wall street, then again later, the focus turns to the regionals. lisa: keeping up-to-date with news from around the world, the first word, i'm lisa mateo. house republicans will vote next week to raise the debt limit and impose new cuts to government spending. president biden and other democratic leaders are refusing to offer any concessions.

republicans are betting that if the house passes a bill that could ramp up pressure on democrats to consider compromises. the debt ceiling has to be raised or the u.s. can run the risk of a default.another strong inflation rating is raising a likelihood of more interest rate hikes the bank of england. 10.1% rise from a year ago driven by the strongest increase in food prices and more than four decades. u.k. government bonds sank after that report. senior russian officials have raised concerns that the war in ukraine has left moscow two reliant on chinese technology. that is after u.s. and e.u. sanctions shut off access to alternative suppliers. internal russian memo suggests that moscow -- may pose a risk to security. fox news has avoided a potentially embarrassing trial. the network agreed to pay $785 million to settle a voting machine maker defamation lawsuit over the 2020 election broadcast

the settlement was less than half what dominion had asked for, but was far above some estimates. foxx had aired vocus claims that dominion rig vote against donald trump. 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. this is bloomberg. this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

♪ >> the digital world has really changed the banking market. we are in an evolving market. it is now an evolution of the business model and really it is going to be a period of tougher financial provisions.

tom: i'm looking for a western alliance transaction, would you like to break the news this morning? >> i will let others talk about this one. jonathan: the copresident at apollo asset management. good morning to you all and welcome to the program. a little bit later, earnings for morgan stanley that reflect on some of the regionals so far. we mentioned the western alliance in the premarket. stock up i about 15%. going to go through some of the price action more broadly. s&p 500 futures a little softer. yields are bleeding higher again by five or six paces. up eight or nine basis points. that repricing is real on the two-year. i repricing yields higher? tom: it is a big move, not something to look away from. the real yield, which we hardly talk about, it is a boring

wednesday. no, it's not, there is actually a lot going on. jonathan: march 8, lisa mentioned that date a little bit earlier on. the day before svb started to blow up. the day after chairman powell opened the door to a potentially 50 basis rate hike. go up to about 3.50 toward the end of march and reprice back toward about 4.30. i just wonder how much weight we put on the traditional economic away from some of the banking stress of the last month. returning back to that question. one off event we can leave in the past? tom: our guest here right now is going to say the same thing, that you are seeing financial conditions tighten. we keep score of what people do and a major theme for charles of patel's partners many years ago was it out of the way, the banks

will survive and they will have ample use of cash to raise dividends, buyback shares, and we still see what he predicted in the advance of the banks out of the crisis of 2008-2009. charles, what i love is your price-to-book value relative valuation study. and what you are saying is morgan stanley, are they up today? jonathan: yeah. tom: and the others, and may be fancy banks will come in to a price-to-book closer to the more traditional banks. when are we going to see that? >> thank you for having me. i think the next 12-24 months is going to test the franchise of morgan stanley. before i get going on that, let me just say, kudos to james gorman. he's done a magnificent job transforming this frame choice and adding ballast with the

development of the wealth management and asset management businesses. but so far, this franchise has not been tested in a down cycle and that is what you're going to see over the next 12-24 months. right now the stock is being priced as if a 20% rotc is sustainable and i just don't think that is going to be the case over the next 12 months. tom: within that caution, what is your single best buy right now within the major banks? >> citigroup by far. i think it is going to prove to be -- in terms of the stock price and i think you are going to get a rating upwards in that big discount to tangible books over the next 12 months, as they show that the integrity of the balance sheet is real. lisa: we're talking about some of the biggest banks and how much more profitable they could be. we are not talking about the

potential viability of regional banks, especially given the new model with a 5% rate on cash, which really changes the math in terms of what it will take for them to turn profits. do you think that so far we have learned that that model is not dead, disproving some of the naysayers? >> i think time will show it is a problem. we've got a crisis going on in the middle of the balance sheet in the united states. tom will remember the old bank, first bank of america that was owned by pg&e, that has the bankers -- at bank back in the 80's was down the middle of the balance sheet and was a zombie bank. we are going to see that same thing repeated again and again and to some extent, morgan danley faces that same headwind. lisa: looking right now at some regional banks. citizens financial just came out with earnings-per-share in the first quarter, slightly missing

$1.10 against the estimated $1.13. which beds of the regionals are you watching more closely to really understand viability of this model? >> it's not technically regional, but bank of america has again in the middle of the balance sheet. and then it has got $290 billion of residential mortgages. all of those are yielding less than 3%. if rates continue to remain higher for longer, which is what jamie dimon is worried about, they are going to continue to creep up. it is more of a 2024 problem than a short-term problem. in fact, we've been expecting a rally in some of these banks into may. tom: you would die have been

doing this since the wells fargo pony express was going across the tundra and the answer is you and i know the short solution is layoffs. we are seeing some actualization of headcount in this earnings season. do you predict over next quarter 1, 2, 3, 4 at least thanks are going to radically right size had -- headcount? >> you've already seen them, we've seen the numbers at goldman sachs and at bank of america. so it is going to be business by business. one of the businesses, they need to be further actualization of the capital markets. i just don't see that coming back this year. jonathan: thanks for that. morgan stanley and focus a little bit later on this morning. want to pick up on citizens financial. lisa mentioned the earnings out just moments ago. a little bit more detail here now for you. total deposits, $172 billion.

a touch lighter than the estimate. a bit more guidance and clarity on deposits from citizens financial. deposits probably stable for the month of march. tom, we are looking at credit professions a little bit higher than anticipated lighter, lower than anticipated. but broadly stable over the month of march. tom: providence rhode island. full disclosure, the coffee was terrible. bottom line is these banks, they are trading at 0.7. it has got a total return the last 10 years of 7% with the crater that we have had off of that. my question, and i have never heard charles that gloomy, wind and the rollup start? these guys just call of each other and the regionals go, let's get together and get some scale. when? we are jonathan: trying to work

that out right now. that stock is down a little more than 6%. it big week for some of the regional players. did you turn down the job because of the bad coffee? tom: it was foreign-exchange and they were really polite. a lot of bloombergs, lit up like a candle. it is a great bake. -- bank. i don't know where they fit into that anymore, but it is these regional banks that we talked about. there is a real mystery, where are they in three years? lisa: that is what charles peabody was saying. they could rally in the next couple of months because they can avert the pain and then we are going to see the effects of long-term math that does not make a position that they were in viable. i think that is ultimately a question. do you just keep dancing until you get the right answer and say well, we can make some money? jonathan: futures are down this

morning 6/10 of 1%. fantastic alignment of conversations just around the corner and this one. the chief investment strategist at charles schwab, a little bit later this hour. catch up with ceo michael o'leary. looking for what to do with you a little bit later. yields are higher. tom: did you ever fly ryan airway for the trip where you stand up? jonathan: you sit down, very tightly packed. from a beautiful new york city this morning, good morning.

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jonathan: welcome to the program. here is the flavor of the price action this wednesday morning. i think it is wednesday. lisa: it is wednesday. tom: you are not alone. jonathan: when we started the radio show together tom would always write the day of the week down because i would always forget. the nasdaq is down by 8/10 of 1%. it is a softer session. we are down across the board here. it is not a good start. yields higher by seven basis points. the two-year right now 4.2713, yields pricing higher. tom: this is able market.

people are reassessing where. -- people are reassessing where bullard is. the market resets away from the remedial effects of a banking crisis that may not come. jonathan: morgan stanley in the next hour. let's start with a euro-dollar, inflation looking sticky in the euro zone, 1.0935 on the euro. double digit cpi still above 10%. our latest reporting on the bank of japan, the full story available on bloomberg.com. "bank of japan officials are wary of curbing their stimulus in the next meeting. this according to people familiar with the matter." 144

-- 134.82. tom: it does not confirm again move. -- confirm a yen move. this is a good time to talk to liz ann saunders. jonathan: here is the quote on the federal reserve. \ " we believe parts of the market have grown to optimistic in pricing in rate cuts. any quick pivot to rate cuts would likely only occur in the face of more dire economic and labor market developments." tom: i think we have all got our memories here.

they are just that -- memories, not the clear and present. liz and the clear and present for you is factor analysis. torsten slok says maybe there are 20 ideas. how do you find the 21st security to own. stock select -- it is difficult to do stock selection. >> the last couple of weeks you have seen a more definitive bias. it may seem obvious, but interest coverage. seconded that would be strength of profit -- second to that would be strength of profit margins. it is who can maintain profit margins.

now we are going to see who has got the pricing power, and who can cover that interest. you can apply factor-based screening across the spectrum of markets. too many people think you have to start with a sector and then apply screening within. you can find value characteristics or factors within stocks in areas that may be perceived as just a growth area. tom: what you just heard there, folks, bottle. this is out of the massachusetts institute of technology one million years ago. i cannot say enough about the need to go cross sector in analysis within sector. this is gospel for me. i'm going across sectors. what do i want to avoid? >> you want to avoid to some degree the opposite. you want to avoid the companies

that are not self funding, the zombie companies that cannot cover interest expense, who can only fund their operations on the back of additional leverage. we had close to 30% in 2000 of last year could be classified as zombie companies. i think this is decidedly a place where you want to focus on what is here. positive earnings revisions, the interest coverage, strength of balance sheet,, high cash flow debt --high cash, low debt. lisa: is the pain trade higher? liz ann: i think the pain trade probably is still a bit higher. if you look at institutional speculators, recently they did

hit a pretty extreme short position on the s&p 500. that has not always been a contrarian indicator. sometimes they are dead on, as was the case in september of 2007, what i do think some of the short-term rallies we have seen in this market, particularly concentrated in january did represent a lot of short covering, and the pain associated with that. there is a decent amount of bearish positioning. i think the market has recently gotten a little overbought, not to mention we have reverted back to a negative correlation between bond yields and stock prices. this recent move up and bond yields has been met with a little more weakness in the equity market. i think that negative correlation will persist in a secular way. lisa: a lot of people are wondering "can we go back to

60-40 investment?" and blackrock said please don't. it would seem you agree. liz ann: from the mid to late 60's to the mid to late 90's you see almost an entire period had a negative impact on stock prices. when yields were going up, which inflected -- reflected infection being let out of the bag again -- fast-forward to the great moderation area, basically the 20 plus years heading into the pandemic, the entire period you had a positive correlation. when yields were going up it was typically not reflecting an inflation problem. i think we are going back to that environment like of the 30

years prior to the great moderation, which is more inflation volatility. that is not the same thing as saying inflation will stay high in a secular way. for the newbies out there who have not been around as long as i have, it is just a different investing backdrop. it is not necessarily significantly worse. it is different. jonathan: the arrow we are in, liz it -- era we are in, liz a nn, we are all indexed up to our eyeballs. are we over indexed and do we have to go more specific, narrow index or even individual stock selection? liz ann: we have stressed to the benefit of having passive strategies with the portfolio and active strategies. as you all know last year was a

year where active had its best year relative to benchmarks since twoi thousand five. think the playing -- since 2005. o think -- i think in part that has to do with the return of the risk-free rate. i think we are reconnecting fundamentals to prices, and that price discovery that has allowed -- that is allowed by the return of the risk-free rate is to the benefit of active. that does not mean sell all your passive funds and become a stock picker. i think there is still a home for both, but active managers are just operating on a better

field right now in terms of being able to outperform benchmarks. jonathan: thanks for being with us this morning. single names, i want to pick back up with citizens. here is the headline -- what happened in march was not a regional banking crisis. another name, another voice suggested it was not a crisis. what happened in march was not a regional bank crisis. they now see 4 year net interest income plus 5% to 7%. they had seen four year net interest income at 11%. tom: that is a downgrade. maybe it has to do with the restructure. maybe it even has to do with the spirit of the economy. liz ann brought up the zombie

concept, which i have been beating the drum on. i i'm not saying these banks are zombies, but digital banking. how do they compete? lisa: i think you are right. it is not a zombie. it is not a crisis. it is a slow bead. i is -- slow bleed. that is the distinction. it is harder to see it in real time, and perhaps that is the reality as we were talking about yesterday with jim's elder. that is the issue. this will take time. it is not necessarily a wholesale collapse. jonathan: the start of a process. tom: it is a journey. jonathan: my friend texted me and told me about aplin and told me how easy it was to transfer cash.

tom: this is the heart of the matter. it is the ease of transfer that got silicon valley into trouble. you can do it on your cell phone, right? jonathan: they are still there. lisa: there was actually bank of america said people tend to -- you are not alone! jonathan: coming up shortly, michael o'leary, looking forward to that conversation in just a second. your equity market is negative to start this wednesday morning. we are down about 6/10 of 1%. >> keeping you up-to-date with news from around the world with the first word, i'm lisa mateo. fox news will pay 780 $7.5 million -- $787.5 million to

settle a court case with dominion. fox executives and stars supported the -- india is now the most populous nation in the world. according to the u.n., india's population is now almost 1.43 billion, edging out china. it will put more pressure on india's government to create jobs. the defense ministers of russia and china have agreed to extend military cooperation. it is a sign of these strong ties the countries have maintained since russia invaded ukraine last year. bloomberg has learned that disney plans to cut thousands of jobs next week. that includes 15% of the staff in its entertainment division. in february disney said it planned to eliminate several thousand jobs as part of a

cost-cutting move. ray dalio plans to set up a branch of his family office in abu dhabi as part of his deeper push into the middle east. he has cultivated a close relationship with the united arab emirates' leadership over several decades. his net worth is estimated at over $16 billion. ♪ ♪ ♪

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>> q1 suggests we are seeing a reversal of the supply shocks from last year. an using of bottlenecks, much lower gas prices. as of now, 2 weeks away, i think

the baseline is that we should, indeed, increase interest rates in may. jonathan: philip lathe, the ecb chief economist speaking yesterday in dublin, ireland. live from new york city, welcome to the program. your equity market is negative this morning. yields are a bit higher by four or five basis points. the two year yield is higher by 56. sticky inflation in europe. bank earnings in america not, terrible. we get more this morning. this is from bangkok. $510 billion deposits.

lisa: this is not necessarily leading expectations, but it is not catastrophic and that was the bar they had to cross over. the average deposit growth they had year-over-year was 12.4%, and the average loans came in broadly in line at $390 billion. they missed a couple of things. the shares are hanging in there. they're not just tanking. jonathan: we have not had a shocker yet. i don't know if we will. that is not a judgment about the future. lisa: so defensive! [laughter] jonathan: i'm waiting for people to mess with me. we have not had a shocker yet. tom: i have had to be difficult here. to me these are busted marketing schemes in the guise of being a bank, and that is a pretty severe view. there are a lot of regular banks

out there that are not doing 10 year delayed principal payment mortgages from x to 0 interest. jonathan: just say the name, tom. you're talking about svb. tom: i won't be doing that. adults running a real business, adapting to what has been a hurtful crisis. lisa and i have no idea what we are talking about -- it is the guy who changed the airline business. he came over the united states, but more than anything michael o'leary is someone that all of continental europe knows. i learned this from my daughter. for jonathan ferro, it is simple. luton to naples, $69.

why don't you bring in mr. o'leary since you fly 5000 times on ryanair? jonathan: we look at some of the airlines herem and things are booming. is it the same thing -- here, and things are booming. is it the same thing over in europe? >> yes, it is booming and getting boom-ier. we have our full year results at the end of may, so i cannot comment. what we have previously said is as we emerge out of covid, demand across europe is strong, pricing is rising, we are seeing the benefit of people going back traveling all summer long. there is an invasion of europe being taken place by americans coming over here, visiting our beaches, joining our cultural experiences, and im happy to --

i am happy to welcome the bloomberg conference here in ireland. jonathan: there is a frustration with travelers in the united states. when is the capacity coming back up so we can get better airline fares and we can be more comfortable? >> we are taking as many aircrafts as we can from boeing. this summer we plan to take 185 million passengers this year, which is up 30% over our pre-covid numbers. overall, short-haul capacity in europe will still be down 5%. some of it european airlines have gone bust. italia tap has only returned at half of the capacity it was. doubling price -- capacity is a

challenge. over the medium-term, the ability of airbus and boeing to meaningfully increase production, means it will continue to be challenging for 3 it is about a limitation -- for 3 years. tom: there does not seem to be enough airports and enough gate. do you wake up every morning thinking "we have to get the underlying infrastructure rebuild for 2030"'s? >> i think there is a differential between the u.s. market and the european market. there is a focus on the 3 big airports, london, frankfurt, and paris. there are a lot of secondary

airports at man city's. the main problem for us in europe as air traffic control. the french air traffic controllers going on recreational striking 2 or 3 times a week. we have been calling repeatedly on the european commission to do something to protect overflights, so we do not have any issue with the french going on strike, but canceled the french flights,, italian -- flights, but leave the german, spanish, and english flights alone. lisa: we have seen across the board, it is getting more expensive and people are paying it without even thinking. when does it become too much? have you tested the barriers of when people start pushing back? >> i don't think we have tested the barriers. it is very unusual.

everybody is talking all winter long about energy crisis, consumer prices rising. fundamentally, europe has full employment. people are receiving their wages at the end of every month. they are spending money. people are determined to spend and spend on travel in particular. i think being locked up for two years with covid has driven people back to the beaches of europe. it is difficult to get a restaurant reservation, a hotel, or a flight in europe. even we are seeing our fares rise by 40% or 15%. this summer -- by 14% or 15%. this summer, we may get to double-digit increases of 10%.

we are nowhere near the average airfare in the u.s.. it is much cheaper to fly in europe but it is getting a little more expensive as we move through the summer of 2023. it is the airline industry, so when things are going well that probably means the next crisis is 4 days away. jonathan: michael o'leary taking some time to catch up with us during a quiet period. double-digit increases for airfares. tom: there are no frequent flyer miles with ryanair. you remember running to the aircraft? jonathan: allocated seating. tom: 40, 50 people. jonathan: you would line up, and

then as soon as you went first, everyone would pilot behind you, and you would to sprint onto the plane. i would always try and get the exit seats, then you would put the bags across the chairs and say "that is for mom and dad. that is for my sisters." chaos. tom: the middle child was flying around europe every weekend, and it was cheap. jonathan: i can get tickets to italy for 15, 20 euros. tom: flying to washington, it is outrageous what it costs! lisa: you still have to run to get the seats. you blocked off seats? you are that person? really? jonathan: yeah, i got there first! lisa: i can imagine the fistfights. jonathan: i was a kid! lisa: [laughter] ♪

>> it has been a thin rally. certain parts of the market are doing well and others continue to struggle. >> it is remarkable the way the economy has performed in the face of rapid increases. >> the billings -- business balance sheet overall. >> you are in a transition period. we had 14 years of low interest rates, the real impact on valuations takes a while to filter through. >> this is "bloomberg

surveillance" with tom keene jonathan ferro and lisa abramowicz. jonathan: things are not terrible. alongside tom keene and lisa abramowicz, i jonathan ferro. futures negative on the s&p 500 by .1% -- .5%. citizens, u.s. bancorp doing ok and it is relative to the fears of last month. tom: it comes off the big banks and the revenue pop we side major banks, including j.p. morgan. i'm not sure bca revenue pop here when the bloomberg headlines coming out, it leads with the mystery and it appears to be good news. jonathan: stabilization is the word we keep coming back to.

lisa: they did miss. let's be honest. they missed with the earnings and the deposits, there was not this incredible strength and it is pretty much a flat. people were expecting armageddon, they had priced in a true credit collapse that is not happening. does it signal all clear or that a tail risk is taken off the table and all of that bad news is pricing that could come from this? jonathan: it is all relative, the good news is things are not terrible. this is how things stand. do you see the last month as a one-off event we can leave in the past or the beginning of the process that leads to tighter financial conditions? tom: i would editorialize. we are beginning to pricing a fed that is moving from bank

crisis to bank destruction. the two tens stranded -- distraction. the two tens spread -- this goes back to the crisis of march 10. jonathan: we are pricing out rate cuts at the front end of the curve. the two-year 4.26. that has been validated by some of the recent data from the federal reserve on bank lending, bank loans more broadly. and encouraged by some of the fed speak over the last couple of days. lisa: basically saying we are going to keep rates high for a longer. of time -- period of time. there is still an expectation, the ceo michael o'leary said people want to spend. it's boom time.

they're willing to pay up for tickets even though the experience is getting more miserable. it tells you where we are. tom: we have been stranded in atlanta with delta three times. there is a brass plaque in atlanta, she set up shop here. lisa: look at those markets. jonathan: the s&p 500 down about .5%, we will give you the day ahead in a moment. equity softer and yields higher, the 10 year up for basis points. 3.62. tom: indicating crisis over the 10 year real yield, it breaks out, 1.32. i don't want to make too much of it but may 3, we are seeing a reset moving beyond angst of what secretary yellen will do about the banking crisis.

maybe there is nothing to do but figure out the marketing schemes that went wrong. jonathan: we will hear from her, on china. 79 on wti. lisa: we have not mentioned morgan stanley. we have seen shares do ok. not where people are focused because the existential crisis wasn't. -- note catastrophic surprise one way or another. we get that same tone from signature, silver gate? we have seen shares pummeled so far with zions down 38% year to date. what kind of confirmation do we see? 2:00 p.m. we get the fed beige book.

the bifurcated nature --people don't know what to make this economy. financial conditions going from deeply negative two bouncing right back, crisis over. where are we in terms of the economic cycle? fed speakers will be trying to make sense of that. the chicago fed president will, at 530 10:00 p.m. -- 5:30 p.m. and john williams has been more hawkish, that is the debate putting out -- playing out. people saying we can't send the all clear. i don't know that 60/40 will work in that environment. tom: joining us is the head of asset strategy at wells fargo.

good to see a. do you see reason to price out the rate cuts priced in over the last month? >> we do see a reason. when markets tested it going any higher, that was back in march. we saw breakage in the financial sector. we have had expectations pullback since then to the point where we were seeing rate cuts priced in but that is going too far. the data will determine if we get another in june but we think they hold from their, probably 2024 before we see cuts. tom: to your smart note, you midpoint spx at 4100, we are

basically there now. if we go to 42 or 4300, do you suggest people hold and understand them a pullback, or do you lighten up if we get the bull market to continue? tracie: we have been telling investors we are probably going to end the year about where we are today. if we move toward the top end of the range, we think it is an opportunity to start to trim and move back in if we go back to the lower end. that will be in the 37, 30 800 area in the s&p. lisa: when was the last time you are this tactic all about when to exit when the fundamental stories change every day and it is hard to get a narrative? tracie: it is hard, but our narrative has been consistent

over the past year. we have been more conservative. we've had underweight equities relative to fixed income. but for the past six to eight months, we have seen this trading range develop and the equities are having a difficult time getting past the 4200 level. we think there is a recession ahead of us. economic conditions are going to weaken. we take advantage of this strength to reposition into conservative assets like bonds. lisa: people who are more conservative say the equity market has not been able to break above 4200. the bulls are saying the fact that the stock market is hovering around these levels shows how resilient the economy is amid bearishness that has gotten overplayed. how much of a pay trade is stock markets going up given what some people are pointing to as decade

records when it comes to bearish positioning? tracie: the bearish positioning matters less to us than the valuations and conditions that we see in the second half of this year. we see the economy starting to weaken, we see a recession ahead and we see and earnings recession. we think earnings are going to fall on the s&p 500 to about 205 this year and we don't think that is priced in yet. i would point out that even in bearish conditions we have seen markets moved lower. it is possible. jonathan: wonderful to get your perspective on a market slowly repricing rate cuts. from wells fargo, talking about the recent data and the bank earnings. we need to talk about companies, to borrow a phrase.

what do companies do? lisa: they adapt and adjust. jonathan: and they cut staff. a lot of jobs to go, meta, disney . . the facebook parent company told managers they should prepare for job cut announcements today. layoffs across facebook, whatsapp and instagram. tom: i would also suggest -- particularly on wall street, there is a more sophisticated way of doing this than previous times. jonathan: would you say tech companies have embraced the sophisticated way of doing that? that is part of the strategy. tom: the site guys is silicon

valley -- roger martin from the university of toronto. lisa: they also hoarded labor. there was excess. tom: yes, but they are also finding there is an improvement in process when you get rid of the excess. amazon alone is a study. jonathan: the pandemic boom of the firing at amazon is phenomenal. the workforce essentially doubling over a couple of years. morgan stanley results this hour. ♪ lisa: keeping you up-to-date with news from around the world with the first word, i'm lisa mateo. house republicans vote next week on a bill to raise the debt limit and impose new cuts to government spending. president biden and other democratic leaders are refusing

to offer concessions. republicans are betting if the house passes the bill, it can ramp up pressure on democrats to consider compromise. the debt ceiling has to be raised or the u.s. risks default. a strong inflation reading reason likelihood for more interest rate hikes at the bank of eglin. consumer prices rose from a year ago, driven by the strongest increase in food prices in more than four decades. u.k. government bonds sank after the rich -- that. fox news has avoided an embarrassing trial, agreeing to pay $787.5 million to settle a defamation lawsuit over dominion voting. it was less than half what dominion asked for but was above and smits -- estimates. u.s. lawmakers accuse credit suisse of hindering -- they

refused to follow new leads and removed an independent one overseeing the probe. credit suisse objected to misrepresentations and says it is cooperating with lawmakers. 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'm lisa mateo and this is bloomberg. ♪ 92% still active? seems high. seriously? it's just a bike. wait. they make a treadmill with an intuitive speed knob? yeah. want to try? 92% stick with it, so can you. start a 30-day home trial today. terms apply.

>> american debt is a ticking time bomb that will detonate unless we take it, responsible action. yet how is president biden reacting to the issue? he has done nothing. >> defaulting on our debt is not an option. no strings --

>> we know there is more to do but yesterday speaker of the house kevin mccarthy -- he is threatening unless he gets what he wants. jonathan: house speaker kevin mccarthy and president biden talking at and not with each other. welcome to the program. let's talk about the next hour, never mind later this year. earnings from morgan stanley, sonali basak getting us up to speed. the broader market looks like this. we're down by .5% on the s&p. you'll tire by six basis points on the two-year, repricing the rate cut story, pricing out some rate cuts, gently a discussion

about pricing in rate hikes. in the fx markets and dollar strength reflecting some of that, euro-dollar negative, 1.0932. tom: i want to point out with all of the enthusiasm and worry, the vix 17.43 is still remarkable. in washington, our correspondent , annmarie hordern. i want to talk about on a clumsy washington day, that drip we are getting from this theft of our intelligent secrets. is it understood by people like you that we need to get used to every day -- today in the washington post it is china with a superspy drone.

annmarie: there is no forecast of when this can and -- could end. documents were circulating when they were first put on discord but that individual is to be due in court, he has not said what his plea will be but he has a court date today so potentially there will be more information that the u.s. government has regarding the caliber and level of intelligence this individual was able to leak. tom: is this so sensitive that the court process will be behind closed doors in private or will it be normal? annmarie: we don't know yet. he has not entered his plea. it is unknown how this will play out. but you bring up a good point, totally different case but the fox debated case -- dominion

case was going to have cloak and dagger's as well. it depends on the case. lisa: as we watch this, we are hearing about janet yellen giving the most extensive speech on china u.s. relations since she took her position. i'm curious, do we have any sense of what she is going to say or why now? annmarie: i would say why now is because she alluded to the fact that she plans to go to beijing. there has been interesting rhetoric from the united states when you look at antony blinken's g7 meetings with foreign ministers leading up to the hiroshima meeting on the ministry level about engaging with china. treasury sends out this media alert. i will read it. during her remarks, yellen underscored that the u.s.

proceeds with china -- confidence, they want to talk about national security, protecting human rights and taking action to advance our vital interests where needed. she is setting up how the u.s. views there economic relationship with beijing and this comes at an interesting time. the imf talking about fragmented geopolitics. emmanuel macron saying they do not want to decouple and the brazilian president just got back from beijing and criticized the u.s. for not wanting peace. the u.s. wants to make their voice heard. lisa: one is that voice? that's the issue, how closely it coheres with what the mainstream european view is. annmarie: they want to make sure

they are competing with china, they want to compete with china alongside their allies, they want to set some guardrails. you can read the tea leaves. but also want to make sure there is a lane for engagement, whether on climate or other major discussions. it's they want to make sure they're getting back to the table and discussing with china. there are a number of issues that sidelined a lot of these discussions since biden sat down with xi jinping in bali. antony blinken is supposed to go, ramonda, yellen. no one has trips scheduled because of flash points in taiwan, the spy balloon, xi jinping going to moscow and not calling zelenskyy. there are issues in the countries and they are trying to find an opportunity to engage on something like climate.

tom: what do you do on a day like that if you are president of the u.s.? annmarie: the president it's going to maryland today and will be speaking to a union, where they train at eight union training facility. according to the white house, he will be delivering remarks, contrasting his vision for the economy with the maca house republicans vision. this is almost a campaign event but not set in black and white. tom: there is a prime -- does the prime minister have a boring day? does the president think what my going to do today? jonathan: do think that happens often? tom: i don't think it happens often. i think they wake up and they go

it is wednesday, there are no big events. annmarie: he has a congress divided and he is waiting for a debt agreement and for publicans to see his vision. i sure today he will talk about the debt limit as well. tom: like president trump wanted two scoops of ice cream. jonathan: i think you are describing your day. tom: no, they are allowed to have a naji -- eight nudge-y day. sonali is on it. tom: good morning to you. what are you looking for? sonali: it is trading more richly than every one of the large banks. the market loves what they have done with asset and wealth. i was looking at this across all of the banks. it is not that people look at

goldman sachs and say let's value this based on the asset and wealth manager, same with jp morgan even though it is among the highest returns among equity on the bank. does wall street start to shift its thinking around what banking means? the reality is the deposits and loans are -- tom: is he like jamie dimon in that he is chairman and ceo? sonali: he has a stronghold. you think about the history of the leadership struggles and the fight to be president of morgan stanley, let alone the ceo. andy saperstein was a longtime lieutenant of james gorman. they come from consulting backgrounds and they are showing that their strategy and prowess that comes tom: jon comes from a consulting background. jonathan: i do. thank you.

charlie will be with us and then we will catch up with john cassidy of rbc capital markets. that is the next chain of events. equities down -- pretty brutal at dinnertime. i first had to argue. tom: i grew up in the same argument, pitch battles at the dining room table. jonathan: i would order ice cream all the time. lisa: lemon gelato, ice cream or gelato? jonathan: just ice cream, wonderful vanilla.

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jonathan: equities lower. we are down one half of 1% on the s&p 500. down three quarters of 1% on the nasdaq 100. the bond market repricing yields higher. the two year has gone from 3.50 back to 4%, 4.26. yields higher by six basis points on a two-year, the 10 year up three or four basis points to about 3.61. morgan stanley to wrap up earnings season, sonali basak, what do you have? sonali: equities trading coming in below estimates. fixed income sales and trading above estimates, four of the

five biggest banks above estimates, wealth management revenue above estimates. on the equities number, that means this is another quarter in which goldman not only beat estimates, they came in above morgan stanley and equities trading. they have traditionally been the biggest when it comes to equities trading so what is happening? are they losing share? is this a client allen's or market issue? it is a soft market but we are one large prime broker short in the world without credit suisse so why isn't morgan stanley picking up more? jonathan: wealth management revenue above estimate. look at the premarket response to this, early days were higher by more than 1%. 90.88. this line important for the whole industry right now. the investment banking opportunity continues to be constrained. no signs of picking up. sonali: it is looking ugly and

we want to dig deeper and see if they are talking about their securities portfolio or talking about the loans on their book. we are watching these banks in real-time work through these home loans before they get to the new set of lending. private equity is still raising money. goldman saying the fundraising environment is kind of muted. they are looking to the end of the year to pick back up. the headcount is up that many of the big banks. do they have work ahead of them is the question. i want to look at the asset flows. morgan stanley is supposed to be the biggest beneficiary of the silicon valley bank troubles. investment management has met revenue 1.3 billion. 4 trillion, asset declines. they have hired net interest income driven by rates. people are taking out loans from

morgan stanley. tom: gorman with a paragraph off the top, talks about investment banking constraint. i like the comment of very unusual environment. how do they differentiate forward? you are so in tune with the zeitgeist. how do they differentiate? can't just be cost control and laying off bodies. sonali: morgan stanley still has this intense base of asset managers and financial advisors across the u.s. my sources say they are having easier time hiring because they don't have the same competition elsewhere in technology or other places they may have had before. the asset flows of $22 billion is pretty interesting. tom: jon just buried, lisa, and king revenues down 24% from a year ago. lisa: which is the reason why the diversification is important.

we've been hearing about time and again, sonali, what do you make of the provisions for credit losses coming in higher than expected? the estimate less than 100 million, is that significant? sonali: it is significant because they are another bank telling you they think things are not falling off a cliff, but yet the environment is getting tougher. so far the banks have been rewarded for those provisions because it shows they are lending harder and willing to take on some losses to extend more loan and pick up interest income. tom: john cassidy joins us. he has been such a friend to the show. all of these banks not all pooled together. a sentence buried in the press release is all about morgan stanley and what we have witnessed over decades. in all this turmoil, down, wealth management moved from 4.9 billion revenue stream to 6.6

billion. does that talk about why everybody wants to copy morgan danley? >> you are absolutely right. the wealth management business is more predictable and steady versus the more volatile institutional business you have been talking about. you mentioned how much the investment banking revenues have declined not just morgan stanley but the group. wealth management differentiates morgan stanley from its peers. under gorman's leadership, he drove this over the last 10 years. jonathan: we had all of the big banks report. who won the quarter? gerard: the jp morgan numbers probably stand out as winning the quarter. they certainly drove those numbers through that net interest revenue line. certainly they also had relatively decent capital markets businesses. it was all against expectations.

the numbers as you pointed out, relative to a year ago, were very weak with respect to investment banking. lisa: we've been focusing closely on total deposits at regional banks. morgan stanley reports total deposits were low the estimate. the estimate 352.2 billion. does that matter or is this basically not a question but a rounding error that we don't have to pay attention to? gerard: i don't want to say we don't pay attention to it since we pay attention to everything. i think you are going down the right path that it is not a material issue. deposits, we have to remember that the federal reserve is implementing quantitative tightening with the intention of reducing deposits out of the banking system after they created over 3 trillion under qe. the entire banking system will see their deposits shrink and the question is the mix of your

deposits, and the regional banks and big money center banks like morgan stanley have good core consumer deposit. lisa: what will be the profit driver at morgan stanley if investment banking doesn't pick up and if you see the markets atrophy? gerard: lisa, is really the critical question for these investment banks. it is out of their control of course in dictating how the markets will behave in investment banking. hopefully the first checkpoint will be monitoring policy. the fed has to stop raising rates so we get to the terminal rate in the second quarter, hopefully the second half of the year you will see it pick up in investment banking activity because it is a more stable landscape. tom: i look at the 2013 letter of morgan stanley written by mr. gorman. there's a subtitle, "investing in our businesses." how is the

advance and e*trade doing and all the things he pieced together to win in wealth management and managing people's money? gerard: it's a very good point because they have not only grown organically but in organically through the acquisitions you just identified. in the asset and its meant business which is of course -- management business, the economy of scale is critical. as they built their economies of scale including organic growth and other acquisitions in asset management, that has helped. on the e*trade, it has given them a diversity of customers. as you know, e*trade is more of a self-directed product line versus the traditional morgan stanley wealth management businesses so it diversifies revenue. you have to give gorman credit for those acquisitions. jonathan: we've asked this to

investors and i would love for a banker to answer it -- do you see the events of last month as a one-off event or the beginning of a process tied to financial conditions? how does a bank analyst answer? gerard: from the get-go, i was saying it was a one-off and the reason being that those business models silicon valley signature had were so different. that doesn't mean we will not see somewhat tighter lending conditions, not so much because of what happened in march as it might be called march madness. it really has to do with the outlook for the economy. as jamie dimon said, it is not a credit -- banks are in the business to lend money at risk-adjusted rates of return. if they see good rates, they will lend money. that is the question, what is the outlook? jonathan: thank you for being able to sum up march madness and

through april, gerard cassidy of rbc capital markets. morgan stanley wealth management revenue better than expected, trade revenue better than expected. what do you see now? morgan stanley down a little more than 1%. sonali: equities trading is a big deal. missing on deposits, there will be questions. the number is higher, a bigger jump than the prior quarter but it did miss estimate. it is a big deal because after silicon valley bank and first republic, that clientele would have moved to morgan stanley. how much did they pick up and how sticky are those clients? lisa: also, the constraint on the capital markets business at a time that was a big profit driver, how significant and deep is that constraint? sonali: one thing that is interesting and this is not quite the advisory sense, but look at the value of the risk of

the trading desks. they are inching lower. credit losses, you have them dialing back on trade risk appetite. morgan stanley's client base, i would recommend some questions. jonathan: we have the regionals, haven't we? just as busy. sonali: and so is monday with first republic. tom: off the covid bottom, goldman sachs up 133%. jonathan: goldman has been doing ok, hasn't he? tom: i love talking to him when we go to davos. sonali elbows me. you are not talking to gorman, i am talking to gorman. what they are doing, it was wonderful up in boston, totally class act. he invented the tax mutual fund.

he goes, we can acquire this and build it up. going back to smith barney. sonali: no one else has done deals this big since the financial crisis. tom: and is quietly. jonathan: are you done? tom: i'm done. jonathan: we will talk about the regionals later. anastasia amoroso will be joining us shortly. we have been in this very tight, well defined trading range. 3800 to 4200. anastacia said we will break out to the upside and we are very close. we will continue that next. ♪ >> keeping you up-to-date with news from around the world, i am lisa mateo. fox news will pay 787.5 million dollars to avoid what could be an extremely embarrassing trial. they agreed to settle a defamation lawsuit i dominion voting systems over there broadcast. dominion says fox blamed them by

claiming they rigged about. it is official, india is the most populous nation in the world. according to the united nations, the population is almost 1.4 3 billion, edging out china. the increase will put more pressure on the prime minister's government to create jobs. here is another sign that elon musk is willing to sacrifice profits to boost the manned. the electric car maker cut the price of it model why to just under 53%. the cost of the model three fell 4.3% to just under $40,000. they report first quarter earnings today. disney plans to cut thousands of jobs next week, including about 15% in entertainment. they plan to eliminate 7000 is

issuance from its workforce of more than 220,000 four cost-cutting. ray dalio plans to set up a branch of his family office in abu dhabi as part of his deeper push into the middle east. the bridgewater associates founder cultivated a close relationship with united arab emirates officials. global news powered by more than 120 journalists and analysts in more than 2600 countries, this is bloomberg. ♪

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march 8. jonathan: march 8, the line in the sand before svb blew up. the fixed income strategist at morgan stanley weighing in. the two-year was north of 2% -- north of 4%. yields are high this morning. up and away by seven or eight basis points on a two year, the 10 year up four basis points. the equity market softer, down by a half a percent on the s&p 500. morgan stanley, let's breathe some life into this conversation, down premarket about 4.5%. better than expected. fixed trading, that's fine -- fic trading, that's fine. what do you make of the loan losses? lisa: it was twice as much as people expected, not a huge number relative to their balance

sheet but highlights that some of these banks are willing to get more aggressive with loans and have to write more off. how much does this go to underwriting activity? how much does this have to do with trying to capitalize on the fact that people are still spending even though perhaps a greater proportion may not be able to pay it back? jonathan: another note of caution around the investment bank constraint, ib constraint. tom: that is french for layoffs coming. it is the easiest place to have bodies moving out the door and decisions could be made over a cup of coffee. other cost-cutting has to occur with the big banks. i worry about the future of retail banking. like with covid, do they speed up the digitization? jonathan: and move away from branches? we've been talking about that. tom: there is an inertial force.

looking at the banks, never before have we looked at the smaller banks like we are right now. this is going to be good. this is what you need. should we talk to someone who possibly got it right? anastacia amoroso joins us now. i just love what you say, it is tough to be a bear and this goes into the panic of i am a bear and i have got to move away from that stance. where are we in that continuum? anastasia: people are starting to have a fear of missing out. the market has been so resilient around this 4100, 4200 level, that has investors thinking. you have systematic investors, ctas who have been chasing mode already and covering the shorts. yet the hedge funds have been buying court -- tech because they were underweight. that will spread to other markets. mutual funds have been overweight so they may have to

move into a market neutral position, and the retail investors. the longer this market hangs around at these levels and the longer the economy is not cratering, that will get people in. tom: lisa, you had that great chart yesterday from bank of america. it was stunning the equivalency from 2008 to 2009. lisa: basically confirming my reputation as being gloomy. tom: it went viral. as viral as it can be. lisa: the position that we could potentially have a pain trade of stocks going higher. are we dancing while the music is going even though we know it will end? anastasia: that is uncomfortable. we cannot make a call on what the economy will look like in a year from now. we can look at the next border and set -- quarter and say, the consumer is resilient and we are able to process 5% rates.

the economy is cooling and not cratering. for investors, this is a different way of thinking. we used to say low interest rates will be with us for a while and be in equities and no alternative. now you need to be more nimble and tactical and recognize you may not want to get out because recession is not imminent, but the circumstances may change quickly. for now, this economy is not falling apart. tom: did you see the alusion made to the titanic? very subtle. she goes all titanic on us. jonathan: it is not shipping and it is not leo and kate. it is meta-up more than 80%. it is not just the rate story and pricing in rate cuts. it is the cuts at meta and facebook. is there any reason to get behind the tech names that have

moved so far so quickly? gerard: i think there are -- anastasia: i think there are reasons. tech is where most of the cuts have occurred. if you look at the earnings expectations for communications and infotech, they are down 15% year-over-year earnings the klein for q1 -- decline for q1. on the flipside, if you have the consumer that has not fallen apart, maybe that bodes well for digital spending, digital ad spending which bodes well for things like google and meta. i think there is some fundamental reasons. outside of that, if you look at the enterprise spending and artificial intelligence, this is just early days and just getting started for microsoft and google. i do think there are reasons. if you think about who has the solid balance sheets, maybe it is some of the banks but shores some of those tech companies.

they are probably the least interest rate sensitive. jonathan: job cuts at meta and disney. price cuts at tesla, we used to talk about thematic stuff about ev's and you could talk about the whole supply chain years ago. where does the ev story go from here? anastasia: the ev story is evolving but the issue in particular around the price cuts, it is not just tesla manufacturing ev's. there are probably 400 or more manufacturers trying to do this locally, so it is highly competitive. when you think about the best way to position in electric vehicles, it is those enabling technologies, the batteries, battery storage. you will need that for electric vehicles and to stabilize the grid that will be powered by solar and wind. back to me is how you approach that. to be in a highly competitive

carmaker space, everybody will be there. it is inevitable that prices have to fall in order to incentivize consumers. lisa: i remember when you came on and talked about private markets and how there are opportunities even as valuations decline. what is your take on commercial real estate, given the focus on that underpinning some of the stress to come in the financials? anastasia: there's obviously well talked about risks. there is a trillion dollars in commercial real estate maturities coming up this year and next. as scary as that sounds, the underwriting standards this time around on commercial real estate loans have been tighter and better. during the financial crisis, the loan-to-value ratio was about ebony percent and reese -- 70% and recent loans have been about 52%. real estate can decline a whole

lot more than 10% or 15% before you eat through the equity buffer. as scary as low maturity sounds, there are mitigating factors. we worry about office where the vacancy rate is 12% to 15%. i suspect we will see default. commercial real estate prices have already adjusted by 15% and office 25%. over the next few months and the coming quarters, this is an opportunistic environment for investors. jonathan: anastasia bullish when many weren't. that trade turned out, anastasia on rosa -- anastasia amoroso. tom: maybe bonds can be an equity bull signal. lvmh, they did a one billion short term paper offer out i think two years, three years, 2.7 times to one subscribed.

they were able to set the yield at approximately 22 basis points, .22 percentage points below where they thought they would have to be. that's a bull market. that stunning. lisa: this is a very specific issue that hadn't come to market since the height of the pandemic 2020 and that was for an acquisition. to the point anastasia is making, there is plenty of demand, perhaps fear of missing out seems to be coming back. jonathan: it is an lvmh bull market. tom: there is other companies. they've got to row the boat. jonathan: describe another luxury player. tom: anastasia has tons. jonathan: you are speaking for yourself? tom: anastacia, it is louis v uitton. uitto(announcer) enough with the calorie counting,

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>> after the hope bank stress started that whole big stresses started, recession fears increased with that. >> if the one we is not in a recession now or recently, it has a 20% chance of recession in the next year. >> everyone says this is going

to be a shallow recession. i find that more a comp -- function of comfort than analysis. >> there is so much negative emotion in the market right now that the only surprise be to the upside. tom: good morning. we are on radio, on television. crisis over. back to watching the fed. all the big banks reporting. some of the selective regionals coming in as the silicon valley and bank of america thing -- jonathan: not terrible so far. two ways of viewing this one. it was a one-off event. two, it will lead to tighter financial conditions and softer growth and maybe fewer rate hikes. we are taking out some of those rate cuts that has been priced

in over the last month. citi's andrew has been so consistent. on may 3, a 25 basis point hike is close to fully priced and the market is beginning to afford more probability of another market hike in june. they expect 25 in may, 20 five in june, 25 in july and that the end a rate that is close to 6%. tom: dovetailing with that moments ago, ira jersey, an expert here, bond bowls, price of yield down had better brace for a bumping -- buggy road ahead. jonathan: we are seeing that this morning for a two year very close to 4.3. lisa: have stocks present in? the replaced the idea of a five rise? that is the question as we see

the nasdaq once again underperform. we are going forward. is this good enough to give the all clear to the picture we saw march 8?or are we looking at the slow grind? we sought loan loss provisions increase, deposits fall. investment banking is lethargic going forward. these are going to constrain thanks. tom: and back to inflation. how boring. you look at the united kingdom, wow, those are sobering statistics. jonathan: europe is still sticky, rate hike effort returns. i believe governor bailey mate back away from rate hikes but after that date of this morning, that will be difficult. jonathan: he did not want to declare victory and looks good in hindsight. i would suggest that the clear message at the imf meetings was that the inflation rate is unacceptable. jonathan: one eyewitness of the

imf is a bunch of people firmly in the sand talking about pre-condemning interest rates and big five-year views. we have seen such a big development in the last month. lisa: is it head in the sand work firmly in diplomacy? they had these ranges of possible outcomes that could be very different from going back to these pre-pandemic norms. they were just subjugated lower. there is a sort of feeling that the world has moved on and perhaps policy makers have not caught up. jonathan: pressure on europe. u.k., bank of england to do more. tom: with the bull market, you have the data moving. vic's 17.5. 19 or 20, there is not where we are. bull market, under 18. jonathan: welcome to the program. morgan stanley out a bit earlier.

some disappointment around seven issues, but on the big issues, wealth management doing ok, trading doing ok. stop this negative. in the every market, down .6% on the s&p. there is that bond move. yields up on the front end of the curve. 10 year at 3.61 57. we are seeing some dollar strength, euro-dollar down about .3%. tom: looking at the euro yen is a global metric, we have not rocking of the strong euro. joining us to piece this together is someone widely followed worldwide, james 80 -- athey joins us. what we write about this week? what is the theme for you when you are writing, given the immense jumble of the moment we are in? james: that is exactly how i

would think about what we are seeing. this is the signal you are getting from looking at equity and bond markets. it is jarring, very much a confused macro picture, where bonds are probably priced somewhere between bimodal outcomes in a world where both of those are bad for risk assets, but one is higher and more persistent. one is inflation and the other is lower growth. we have price for either outcome. we are just continuing to see the fact that markets are not making sense when you look at the signals they are sending cross asset. one of the clips you played earlier was about the fact that sentiment is weak. if you look at things like the bank of america from a manager survey, you could buy the same conclusion. if we learn something about

market structure and the extent to which a light of investment decisions are not made based on fundamentals or price triggers, that is where a lot of this equity buying is comforting -- coming from. jonathan: have we -- we have priced in rate cuts more recently. if you take the two year correct pre-svb high and post svb low, the two year yield is right in the middle. highest north of 5%, low close to 3.5%. it is close to begging for .2%. which we want? higher or lower? james: lower. we could overshoot because of course at the time of banks going bust, the fear of global financial crisis will come floating back. i wonder to what extent there will be a domino rally of lapses. the reality was that there is a common trigger but specific

vulnerabilities in those bank business models, but the fed has already told us that tightening lending standards will substitute for rate hikes. they do not know how many, but their best guess looks to be a couple. those two year yield highs at 5% came hot on the heels of jerome powell suggesting a height of 50 basis points. and where we were pricing then versus now suggests but it is difficult to go back to thinking about 50 basis point hikes and a higher terminal rate until we have sufficient evidence telling us that bank lending standards are not going to take enough to substitute for this rate hikes. that will take time. in that time, the current path of economic data suggest things will continue to slow. lisa: how vulnerable does this make big tech? james: big tech is invaluable. i keep hearing the wonderful

pseudoscientific analysis that goes on with it. the that the weak economy is good for big tech because it is a duration proxy. it has to be the case of those pseudoscientific hypotheses will get falsified at some stage and socks that we believed a cyclical will turn out to be much more cyclical. there is a certain element of a leap of faith or if you're missing out when it comes to big tech. ultimately, iran session is the test for all stocks -- a recession is a test for all stocks. lisa: forgive me for sounding exhausted with the way that markets have been trading over the past couple of weeks, but i am wondering how long you think we will remain in this turn where there is not a clear narrative dominating and people have to go to specific names and understand companies and go back to an old-fashioned form of investing. james: i share your wariness.

the lot of that does relate to the fact that we have had a violent move. the two year yield went from nearly 5.10% to 3.5% in the space of two trading sessions. that, even for some buddy who has been bearish for as long as i have, that felt like an overshoot in the short term. unwinding that is a bigger test from this point on. we had a quiet data we, but as we move into next month, we will start to see our significant economic data points testing the market's resolve from all angles. jonathan: this year has been amazing, narrative table tennis, back and forth from one into another. and where soft landing, february no landing. now we are at something in between our final question, james. who have you got more faith in -- federal reserve or spurs?

james: [laughter] right now, the fed. if you would put the bank of england or spurs, that would have been difficult. learn never to have faith in spurs. tom: they were torn apart. you have got this gorgeous stadium. help me here. adult loves you, emma loves you. everybody loves them. they are like the toronto maple leafs, built not to win. jonathan: the manager complained about the culture. what is it? james: it does look like a psychological block. even when we were conquering, i used to go to games. it did not matter who we were playing, i would walk in thinking we were going to when we had that manager. over the course of two seasons, we had more points than anyone else. it does feel like there is a

psychological block. tom: today, munich, manchester city. are they lobbying for harry kane? when does he say enough? jonathan: we might be close to that. he is getting to an age where he is got to make the call. tom: he just needs to be covered by bloomberg surveillance. jonathan: i can see where the -- tom: she filed for an extension and is doing her taxes. jonathan: do you think the site is the kind of person who files for extensions? futures down, deutsche bank coming up shortly. >> keeping you up-to-date with news from around the world. house republicans will vote next week on a bill to raise the debt limit and impose new cuts to government bending. president biden and other

democratic leaders are refusing to offer concessions. republicans are betting that if the house passes the bill, that can ramp up pressure on democrats to consider compromises. the debt ceiling has to be raised for the u.s. runs a risk of default. another strong inflation rating raising the likelihood for more hikes at the bank of england consumer index rose everyone percent in march, driven by a strong increase in food prices. pound edged higher, u.k.. fox news has avoided a potentially embarrassing trial. the net work agreed to pay $787.5 million to settle a voting machine maker's defamation lawsuit. the settlement was for less than half of what dominion asked for but above estimates. baker hughes is forecasting decades of growth for natural gas demand.

the world third largest oilfield services provider posted the strongest sales since 2019. baker hughes says the world is seeing the crucial goal that natural gas will have in the energy transition. global news powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ and it's easier than ever to■ get your projects done right. inside, outside, big or small, angi helps you find the right so for whatever you need done. with angi, you can connect with and see ratings and reviews. just search or scroll to see upf on hundreds of projects. and when you book and pay throug you're covered by our happiness it's easy to make your home an a check out angi.com today. angi... and done. >> it is almost like people are

determined to spend and spend on travel. we are seeing fares rise by 15%. we think this summer will be, we might get double again, maybe 10% increase. jonathan: that was michael

o'leary, the ryanair ceo, double-digit increases last year, maybe again this summer. tom: did he make a recession call? if i did not think he did. jonathan: he was talking about the invasion of american tourists on european shores. lisa: it was kind of nice and kind of like, really? tom: do we just hand him newark airport and see what he would do? jonathan: it is looking good. every time i get there, i get to the terminal, see that view of manhattan, it is beautiful. tom: the city is falling apart with infrastructure projects, including a parking garage collapsed yesterday. laguardia is a symbol of the future. jonathan: make it happen. jfk is depressing.

you leave from heathrow and are like, what happened here? tom: name 10 other airports in europe. jonathan: any international airport. it does not add up. williams is on tap talking about jfk, newark, and laguardia. mass of deutsche bank, our own forecast continues to see the fed holding steady at 5.1% before beginning to cut rates in january 2024. that is a deutsche bank call. not much between there and what has been priced interesting -- recently. tom: is interesting is to frame it around the debate out there. we have heard about it this morning of sustained inflation like is in the u.k., all the way down to talking about goods deflation. away from your arch recession call, i think all of market

economics, your call for interest rates is like richard clarida rating in the economist we will not get back to 2%. but what does our world look like with inflation the combats -- that gets back to 3.2%? matt: is closer where we expect to be by the end of this year with poor pc around 3.5%. that is progress. i would group governor waller that over the past year, we have seen very little progress. we could point to different components but we have not seen much progress. getting back to 3.5% for the fed, that matters for the context. you have a fed where the funds rate is probably higher. but if that is occurring within the context of a recession of for 5% or 5%, that will beat

what triggers the fed to cut rates. tom: at the end of your gdp call, do you have disinflation into a slowing real gdp level or quarter to quarter movement that gets us down to the new, diminished nominal gdp? matt: we do. we have mostly positive growth in q3, negative in q4. when you in where inflation is, we only have .6% growth or this year. so it is below 4% nominal gdp, but for the fed, it is what is happening with the labor market? has been the key area of debate. we have seen slowing there but still many job openings. the atlanta fed wage growth has progress coming down. that is the crux for the fed. jonathan: a lot of people lean on the quarterly spc, summary of

economic projections. not much daylight between your rates, and theirs. matt: i think they have come closer to us over time. but at the moment, there is for this year very long daylight. there is greater daylight 2024. they have their path, which i think looks something like a soft landing. they are gliding back toward neutral. our expectation is they have to cut more aggressively. get a recession, unemployment rate rises. we have 225 basis points of cuts between q1 and to three between next year. there is no doubt that there is a gap between us and the fed, but that gap has been diminished . that seems reasonable to need. you may have a recession getting in q4. lisa: can you dovetail that idea

of more aggressive rate hikes in 2024 with what we have heard from the banks just now, which was supposed to be telling from economic perspective. we would finally know how bad this credit crunch was. now we are in this, what did we learn? we are unsure. how much did we learn? matt: we are hearing from a lot of the larger banks, which were anticipated to be a beneficiary of seven stress in the smaller and medium banks. in terms of the a for an a8 data, we have seen something beyond the acute phase of the banking sector, but i think everybody is anticipating tightening of lending and credit conditions. that will reduce growth. it is part of our baseline expectations, but at the moment, it is mostly scenario analysis. we cannot have a great idea how much things are to tighten. i expect the report in early may will be quite negative coming given without was occurring, around peak stress levels. lisa: back to 2024 and your

belief that the fed will cut more aggressively, what is the bar for them to be more aggressive with rate cuts? matt: it is are we seeing a recession? there forecast for the unemployment rate is that it rises up to 4.6% and stays there. you do not see that in a recession. these things are nonlinear. if it rises 50 basis points, you get a recession. if you have something that looks more like a typical recession, which is basically our forecast with a 2% rise in the unemployment rate, i expect they should be cutting rates. they have been. they will not repeat mistakes from the 1970's. the way i would view those mistakes would be that they cut the real rate from positive to negative territory very quickly. we do not expect that this time around. they could cut rates materially and still have a positive rate. jonathan: is that a political

forecast? is there a political element to say 4.6 the next two years. i will phrase it differently. how much cookie would they get if they were forecasting -- how much political heat with a get if they were forecasting anything higher? matt: i do not know if it is much -- if it is as much politics as confidence. they have a different role to play than i do. they can impact sentiment in the economy and overall confidence and can impact with the actual outcome for the economy is. that should be viewed within that -- both their inflation forecasts but although that's also what they are showing with the an appointment rate. it is notable that they are showing unemployment rising as much as it has and that in the minutes, the fed has a baseline of mild recession. these things do not happen often from the fed's perspective.

it is a commitment showing that they are willing to take necessary action to get inflation down. jonathan: can you shape the events you anticipate? almost something self-fulfilling about that. tom: one of the best conversations i ever had was with a younger george soros talking about karl popper in the early 1950's. this is economic epistemology, religion at ucla. the idea is you get out front. can you refrain things as you go along? that is the narratives reframing. jonathan: we will leave it there. thank you. in the next hour, on the bond markets, -- on banks, can leon. jay has been super constrictive on the financials, even through the mess in march he stuck with it.

jonathan: he was way out front on china optimism. jonathan: he sees the rest of the world outperforming in a major way from a markets perspective. features on the s&p 500 -.5 percent more -.6%. yields pushing higher on a 10 year end on a two year yield, higher by six basis points. post to 4.30 -- close to or .30 earlier this morning.

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>> markets countdown in europe, from the financial centers of the world. the close with johnson in london

and alix steel from new york. tom: bloomberg surveillance. banking season, morgan stanley earlier, no we are looking at some of the smaller banks moving into today and also the coming days. we are getting ready for an interesting effort here. the data is luckier than the last couple of days. vix 17.36. futures down. we have not talked about a second day. bitcoin loses the bid. i will wait for crypto five days from now. lisa: i will let you do the bitcoin analysis. i am curious about some of the earnings. we have talked about some of the banks, morgan stanley among them, as well as regionals like

citizens financial but ally financial came out this morning. this cometh to me, was quite interesting. this is the auto lending center. is there any contraction? there was. we saw fewer loan origination's in the auto space than previously expected. you have a sense that they are tightening underwriting standards with consumers walking into dealerships with $10,000 in negative equity. others were struggling to make payments on existing loans. this goes to the heart of auto pricing and whether people continue to spend what they do not have to if this kind of credit is being constrained. tom: this is the x gm finance wing renames ally. this goes back to is olivier blend chart talking about the biden -- blanchard talking about the biden stimulus. on the back of that, what do we do? lisa: perhaps people are not running out of cash to buy

airplane tickets but what about new cars? some of the bigger industrial goods? that is the reason why perhaps you see this bifurcation between services still hot and industrial goods, which have seen a recession. tom: 22 into this, we have had a number of different views today. in the heart of that is michelle girard. i love your note. you are very consumer based. 70% of the economy outlines that some of these tensions are there. is this a point where the consumer finally gives up the biden stimulus and the boom? michelle: felt much of what you were just talking about is where concern lies. it is around the potential for a credit crunch to put restraint on the desk a strain on the consumer that we have not seen since the crisis. the consumer was flush with

crash -- cash that have high savings and his been able to extend spending long beyond what people had expected. the shock of sharply higher interest rates not putting much of a dent in demand, but we knew now combine that with the credit crunch and looking at the results we are getting for tracy to said there is some bite -- to try to see to what extent there is some bite and that, all of that will come together to put real pressure on the consumer and to the economy into a recession later this year. jonathan: may 5, i do not think this is a good number yet, 175,000, below the convention we have seen during open -- the covid boom.

what does that glide path do? david b morgan talks about a negative payroll statistic. will we see that this year? michelle: that will be our forecast, negative gdp growth second half of the year and then a recession. alongside that, we expect to see negative payroll prince, the unemployment rate rising over a percentage point, getting to over 5% by the end of the year. we expect that you will see the strength of the labor market taper as the overall economy begins to slow. it goes back to the impact of the tightening of the financial conditions, particularly now that it is exacerbated by credit standards being tightened. in general, i think there is more caution and optimism, given that the environment is more

uncertain going forward lisa:. how do you push back against people who say that in the auto sector, there is a lot of video sync and see that -- idiosyncrasies and the tightening and not the same pressures in the service sector and other spending. how do you pushback and say it will all suffer going to the end of the year as we see tighter credit conditions bleed through? michelle: that is the point. autos might have some idiosyncratic issues, but in other cyclical spending areas, they tend to be early warning signs. that is where trouble seems to first present itself. it very well may be the first area where we see issues now. it is our expectation, particularly as we think about the economy worsening, business is getting more cautious, hiring and labor demand begin to wane

-- all of that will feed through into a broadening out of the weaker spending patterns that are now evident in just some specific areas. what is the point -- that is the point that at the moment it looks focused narrowly but that is often how these things start and then they brought in out. the trends we are seeing are some of the leading indicators about where business spending and activity are going that precede broader demand changes, that is the stuff we are watching. lisa: those headwinds, will they be enough to bring inflation to where the fed wants it? michelle: we have been skeptical about inflation getting back to 2%, but now with more confidence that the economy is going to be weaker because of these headwinds, we do feel that the odds of inflation getting back to 2% without the fed having to

take rates as high as we had anticipated, we are more confident about that. we do not have asian back to target until 2024 -- we do not have inflation back to target until 2020 four, we think the fed is done. will they go again in may? possibly, but we are at the peak in rates and have the fed cutting rates in september 2024. tom: bring that to the gilt market to where we price all of us -- the yield market to where we price all of this. we are hearing from some that the 10 year yield comes in at 3% or under. i would suggest most of our audience does not believe that. are you setting a separate 2.95% -- setting us up for a 2.95% 10 year yield? michelle: we do not have it that fast.

you have inflation that is still going to remain stubbornly high and also in a sense, it will not fall below 3%, it will not get towards target. it will not for the fed in a position to lower rates until later in the year. it slows the speed at which you can actually ceos move dramatically lower. -- see yields move dramatically lower. but i think the pace of that unfolding may take longer than expected. lisa: sounds like you are conservatively position. how painful has it been over the last couple of weeks as morgan shrugged off the gloom and doom? michelle: as we know, you have got a whole host of data that can tell a bunch of different stories. the bottom line is no one can really be confident, the fed

included, about exactly what the path will be, what other events may get thrown in to alter expectations. in general, i understand the resilience. we are talking about the fed doing less. if we are open to inflation closer to target with the fed doing less, perhaps the stage is set for the past to cut rates sooner. i understand that there is some relief that goes along with that and can provide some support, but when the data they start to more uniformly suggest that the economy is going to struggle, then the question about market pricing and do market prices accurately reflect underlying fundamentals will be tested. tom: thank you. we have got to encapsulate some of these narratives. there were narrative that the

fed will raise rates and then they will raise more. that narrative is inflation is sticky, yields stay higher. we have a percent mortgage rate. -- a 7% mortgage rate. that leads to recession. the other narrative is the opposite. rates command, inflation comes in, mortgage rates come down in the alchemist he same -- a recession. lisa: the question is what are we going back to in terms of the new real rate of inflation. that is the and a lot of people have. dan saying yesterday that the resilience in the economy suggest something higher than what we saw pre-pandemic rate given the imf says we are not going back there. some color from the first quarter earnings call with morgan stanley, james gorman saying he does not believe there is a banking crisis but he does

think a few banks may be in trouble. this is nothing like 2008. earnings have confirmed that. what is the analog to this moment? that is people are struggling with, reading for what this means for credit formation in the u.s. there is the reason i think i like -- ally financial is so interesting. it hints at the non-behemoths who have more discretion in who they cater to to people who have to restrain their credit extension because of delinquency rates. tom: let's go to the tmm screen. you see that goldman sachs apple interest rate. i do not know what morgan stanley is doing, but i am looking at a five point 1% bill. this is up against recent highs. at some point, it has got to

give and got to start paying more for deposits. can they make it to this weekend without doing that? lisa: morgan stanley said that they did report fewer deposits than some expected, although in general, the stickiness of deposits has been amazing. tom: when we come back, some interesting things to talk about. futures -20 five, dow futures -110. the vicks 17.35. bloomberg surveillance. >> giving you up-to-date with news from around the world. fox news will pay $787.5 million to avoid what could have been an extremely embarrassing trial. fox agreed to settle a defamation lawsuit by dominion voting systems over the 2020 election broadcast. dominion says fox defendant by claiming and bring the vote.

it is official, india is now the most populous nation in the world. according to the united nations, india now has almost 1.4 3 billion people. the increase will put more pressure on the prime minister to create jobs. there is another sign that elon musk is willing to sacrifice profits to boost demand. the doctor carmaker cut the price of its suv by more than 5% in just under $50,000. the cost of a model 3 felt to just under $40,000. mergers in the u.s. rose last week by the most in two months. according to the mortgage anchors association, the contract rate on a 30 year six to loan rose 13 basis points. we well, the index of mortgage

applications fell 2%. global news powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪

>> you have to remember that the federal reserve is implementing quantitative tightening with the intention of reducing deposits out of the banking system after they created over 3 trillion under q. week. the entire system will see deposits shrink.

the regional banks in the big money, as well as morgan stanley have good core deposits, which are critical. tom: cassidy speaking earlier. you must listen and watch, all of you on global wall street. this is an interesting moment for banking in america. deterioration in futures, -25 to negative 28. nasdaq down .9%. a bit of a pullback. what i learned late friday at the international monetary fund meeting was that anybody with the imf that mentioned china, do not mention china. they probably would be shown the door. it was the unspoken word of the meetings. joining us now is our assistant deputy managing director of

international emerging markets saying the china word. how how did president trump say it, "ch-i-na"? why do they not want to mention it? >> it is not economically opening but geopolitical uncertainty. the u.s. and china do not have a working dialogue. that has been an overriding concern for some time, but it reached an apex over the past week. it is perhaps due to the fact that china has managed currency and what that for central banks across south east asia. it is looking to things but that's been things but look at taiwan. i want export orders tomorrow is such a big number for the tech sector, global equities, the south east asia block. it will tell us the extent to which china can grow through the second half of this year.

we know it will go for the first half, but the second? tom: which pacific rim complex or country have you seen price down or can take advantage of the stress? >> they have all seen yields of not as much as other regions. eastern europe, for example. in brazil and mexico, poland, hungary their yields are on an inflation adjusted basis, latin america looks more attractive than eastern europe. going back to egypt, because the yuan is a managed current -- asia, because the one is a managed and say, for them not hiking currencies, they are at an advantage and can manage growth better. lisa: i want to go back to taiwan. tomorrow, we get the timeline -- semiconductor manufacturing company reporting earnings. how indicative is this of a recovery that china is putting out there that is not been borne

out in international trade? >> china would probably do 10% in the first quarter, 6% in the second quarter. a lot of that is in part dependent on domestic revival and consumption. for that growth to extend abroad and to devote year, you need to see trade and exports pickup, machine reorders, semi conductor you orders pickup. -- conductor orders pickup. we have not seen that. taiwan is the apex. there semiconductor is have a virtual monopoly. we need to seek a turnaround to get any bullish, risk on sentiment. lisa: you come in in the morning, how closely do you watch the response in the commodity complex to the numbers we got out of china? people are saying they will do great. you will see an upgrade to gdp but commodities fell out of bed.

how does this make sense? >> forget about what it is. let's talk about what it means for emerging markets. it is different for what it means for us in the u.s. food and energy are bigger components of inflation in these economies. commodities are coming off and that is how lower. it is giving them the ability to cut rates more quickly when and if the fed pauses. i expect that to happen probably in latin america first. tom: i have a chart of argentina, which i can say is original. the dollar-peso, this is on a log y-x, the percentage change of the black blue dollar peso. you have never been here. the imf has put a lot of money into it. it is like a tuition payment, that big. the answer that you know about

is when do we say enough to argentina? >> we cannot. the imf's balance sheets is locked into argentina. they are now working closely. there is an election coming up and a lot of uncertainty, but the parallel rate in argentina, since the fernandez regime has come in, it is treated double the official dollar peso rate that is something crazy, relative to 200 on the official rate. you cannot invest in that country. i was having this conversation the other day. somebody was down in miami. the argentine community is huge. they come up during the winter months, work and go back in the summer months and spend their dollars. it is interesting. argentina is front and center and will be the next point for

us to determine just what we will do with this $44 billion that keeps getting restructured. lisa: damian sassower was talking about emerging markets. people are paying attention because this is the area that will outperform the u.s. and developed markets in the year ahead, even though we could see a downturn. do you think that fax edify that view? >> what part of the emerging market complex? in credit will follow corporate credit in the u.s. the spread was there. we are talking rates and defects. as i pointed out, when the fed pauses, all of the rest of the world will rush to price in cuts. from rerate's perspective, you will get that duration gain. but the facts, the dollar story, is front and center -- the fx is front and center. what we are seeing in price action is there might be some more one way for dollar

weakness. you see a lot of these currencies, some work maybe closer to the dollar. it is going to be interesting to see how long this dollar weakness holds up. tom: peso a few years ago was 21.22. strong peso's work 18, but we frame mexico as terrell borrow -- as terrible. but how do you get a strong peso? >> this is interesting. i had this conversation yesterday. emerging targets, how can we call many of these markets emerging with their gdp has not budged in 10 or 12 years. when you think of mexico, mexico is more north america. it is not verging. -- emerging. markets are emerging? south korea, poland. tom: it was wonderful speaking

with the governor of the bank of south korea at the imf meetings. this is important insight, this idea that emerging markets are not homogenous. damian sassower of bloomberg intelligence. it is spanning the globe. lisa: it is leaking in the trade data that we get to this idea that if you do not get a commodity boom from china reopening, that is suddenly a green light to rate cuts in these other markets. it shows the interconnectedness. tom: we will move on they want to first apologize. some descent, are you ok? i was like, everybody has its plight in this cold spring. i have got my transfusion. i am going to go home and go to bed and hopefully it will be better tomorrow. lisa: hope you feel better, tom. lisa: -- tom: i have got it.

we are fighting our way through it. lisa: we are not earning much from bank earnings other than we have not seen a us of crisis emerge. i am curious about when we start to shift focus to other earnings. taiwan semiconductor manufacturing company for example. what we get in terms of the ongoing demand for some of its items that have fallen off in the past few orders? tom: the bloomberg financial conditions shows accommodations .30 standard deviation. on may 3, jerome powell will get to work. futures -26. stay with us. this is bloomberg surveillance. ♪

>> good morning. wrapping up banking season. onto the regionals obit later -- a little bit later. the countdown to the open starts right now. >> everything you need to get started for the u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: morgan stanley wrapping up earnings on wall street. fed officials continued to push back against rate cuts. we begin with a big issue. is the coast clear? >>