>> the recession that everybody's been waiting for isn't coming and it hasn't come. >> we are investing into a slowing economy. >> peak -- investors are moving toward the front end. >> we think the fed will keep rates higher for longer. >> they should cut next year but not this year. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: we are here with michael block. jonathan: 151 yards out. look at that. what a shot. tom: outstanding. let's listen to the crowd at oak hill.

[laughter] jonathan: thanks for getting involved. tom: this is golf in america over the weekend and it was a club i have the fondest memories of. jonathan: what a story. tom: it gets better and better. jonathan: i don't think i've ever seen a hole-in-one like that straight into the cup. i'm told that they were charging $150 per hour for lessons and he picked up 280 $8,000 over the weekend. tom: what we try to do every day is to be understanding about the markets. the way cbs did it even with rain saturday. there is july and winter and that's it. jonathan: from new york city this morning, good morning, we will practice next time, alongside tom keene and lisa abramowicz, i am jonathan ferro.

s&p futures are slightly negative. debt ceiling talks are on and off for good or ok. we get another round later on. tom: the president is coming back home and anne-marie hordern will brief us. i believe futures right now her 42 -- are now 42 and there are lots of distractions away from a market on a tear. jonathan: let's get some quotes from the house speaker kevin mccarthy. it seems as though he wants d full more than he wants a deal. -- default more than he wants a deal. much of what they've already proposed is quite frankly unacceptable. that was the weekend. lisa: we will be doing this all week long. it will not get better until it gets worse which is what everyone says. right now, the fact that weird some rhetoric and we heard a walk out from the gop over the

weekend and mccarthy had some fiery rhetoric and all, they are meeting again today and constructive tones and moving forward. tom: i like the morning note from greg valliere said in his note. on a monday morning, what is the count to when they run out of money? jonathan: treasury secretary janet yellen says the clock is ticking. she doubts whether we can get to the middle of june. at the same time, yields are higher in the equity markets are breaking out. is this a true and real breakout? you might say the usual suspects but ultimately, there is pushback out there. tom: we will bring it to you all week, folks. globally, the first chart i looked at was london copper. it is south on the bloomberg

commodity index. it's down 26% from the middle of last year. jonathan: it doesn't generate any cyclical enthusiasm about the economy. on the equity market on the s&p 500, slightly negative, getting a week start and a bit softer with yields a little lower. six consecutive days of yields climbing higher until today. the 10 year is 3.65. lisa: we heard from jay powell on friday some indication he might be ready for a pause. today, president biden and house speaker kevin mccarthy resume talks and perhaps we will get more tea leaves that will reverse tomorrow. on wednesday, nvidia reporting earnings after the bell and this may be key because of the artificial intelligence height we have been seeing in their shares are up 113% to date. in light of the macron news with

china over the weekend, we will get to that but china banned imports from micron, saying it didn't pass the sniff test when it come to national security. we have flash pmi tomorrow and fomc meeting and it's on wednesday. on friday, we get pce inflation, the forward-looking projections for inflation. pce is not expected to go down at all. how do we deal with this idea of core pce that is sticky around 4.6% echo jonathan: that will be a big question for the federal reserve. interesting interview with neel kashkari of the minneapolis fed with the wall street journal over the weekend. joining us now to start the week is a good friend of ours. he is from ubs asset management. are we on the brink of a breakout? >> i would say this connects to

what you are saying about the debt ceiling agreement or lack thereof. with equities near the top of a seven month range, it's really difficult to see that being the proper time for a real genuine breakout. with this agreement alluded to, if this is a real battle and a war between the two sides, you have to come up with blood and scars and from what we saw last week, talks were almost going to well heading into friday. it's not a surprise to see that backpedal and test the urgency of both sides as we approach an unknown true x date. tom: you have the advantage of a terrific research combine and i would love to know the ambiguity of how you tilt. if inflation is sticky, that means nominal gdp is sticky and revenues are better than good at

corporations or if inflation is sticky, do we slow down? which wages ubs tilts? >> so far, the jury would suggest more the latter. a certain amount of pricing power has accrued to corporate and that is the part of inflation that will be relatively sticky along with maybe wage growth a little above the trend. the idea that markets have stabilized with inflation stabilizing at a high level, we have two have a lot of humility about what that last mile of inflation down looks like. most likely, it will be driven by an economic contraction at some point in the future. it's highly likely that if we get to a steady run rate for inflation without the labor market cracking, that will be a rate that's above the 2% target.

lisa: big tech used to be sensitive and many people have said this time is different. they have divorced themselves from the interest rate cycle that even at rates don't go down, they will still do well. do you buy into the artificial intelligence height? is it a bit overplayed? are you looking at earnings this week to give you a sense on that? >> one thing we think about ai, it's very exciting, technology is something we can use in our day to day and you can see some modest efficiency improvements and how you operate no matter what kind of business you are. it's unclear the extent to which that is going to drive another huge leg of outsize profit growth for these players in the tactical investments. is this something that has helped boost multiples? yes, are they elevated relative to the rest of the market? yes, even more so.

from that perspective, unless you are getting an earlier based on the ai, it doesn't seem to us that now is really the time to be leaping onto those names that benefit the most in those sectors. from lisa: is leadership going to come from in light of the debt ceiling and the fact that it can't necessarily come from artificial intelligence related tech stocks? >> at the headline level for equities, not the constructive. we think the stronger nominal growth environment is something that is going to underpin earnings but with equities quite expensive, our view has been that if things are going nowhere for seven months, you could have been clipping coupons and that something where you're getting paid to wait. that doesn't happen the stock market unless you get it at the

bottom of the range. that's more interview that the implied carry in equities is not good enough to compensate for the implied yield here. tom: we've got some breaking news but mark hafley says were looking at the toronto maple leafs general manager. how available are you if the leafs need you? >> i would say i'm an upgrade over dubis. from the long list, it wouldn't be an upgrade. from that perspective, i'm available. tom: they beat tampa bay which no one expected. they crushed the reigning champions and florida, goodbye. jonathan: you can explain how temper -- how tampa has a good hockey team. lisa: this doesn't make any

sense. tom: one day, jeffrey vinic left. he bounced around and did this and did that and all of a sudden, he built a hockey team in tampa. that's what you do and you are a boy from boston. jonathan: for better weather. thank you from ubs. it's a good conversation of breaking out in the equity market. lisa: this will be one of the big questions, how did they upgrade the outlook? capture greater profitability as they dominate the industry to such a degree that people are wondering how much more can they acquire in light of janet yellen on friday saying there may have to be more roll ups within the banking sector. at what point does the size and dominance and success come alive?

jonathan: this is jp morgan this morning. lisa: that's exactly it. jonathan: they are hiding behind one hand. tom: we've been good about this. most of these banks including the fifth bank, jp morgan and bank of america are hiding how much money they are making. lisa: is that your golf voice? jonathan: about 150 yards out. tom: michael block walking up the 15th. jonathan: equities right now are unchanged on the s&p 500 and sharon bell will be with us from goldman sachs. lisa: keeping you up-to-date with news from around the world with the first word -- ukraine reported damage to dozens of buildings and vehicles in the southern city after

another barrage of russian missiles overnight. ukrainian forces say they managed to shoot down four of the 16 missiles launched as well as 20 drones. president zelenskyy will return to kyev after attending the group of seven summit in japan where he suggested russian forces are losing control of an eastern city after months of fighting. u.k. prime minister rishi sunak is arriving back from the group of seven summit, facing another cabinet scandal and conservative party finger-pointing over migration numbers. at the center of both issues as home secretary, an advocate of cutting back immigration but has come under fire for a possible violation of ministerial rules relating to or handling of the speeding ticket last year. president biden and republican house speaker kevin mccarthy are set to meet today for talks on averting a catastrophic u.s. default. as time runs short, key differences remain.

negotiations have been whipsawed between progress and deadlock for days as the two sides simultaneously grapple for political advantage and a deal. negotiators met sunday evening at the u.s. capitol. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

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>> you just said i'm willing to cut spending. speaker mccarthy says u.s. government needs to spend less next year than they did next year -- than they did last year. will you agree to that? >> we agreed to cut spending we will continue to cut spending. but the question is, what base do you start from? calculate what it means if you take all discretionary spending and you make no distinctions other than what the percentage number of the cut is. some of it makes no sense at all. what we've done is we will have to sit down i'm hoping that

speaker mccarthy is waiting to negotiate with me. jonathan: those negotiations pick up today. that was a brilliant exchange. we will touch base withamh in a moment. equity futures are unchanged on the s&p 500, going nowhere after the biggest week going back to mars. the nasdaq 100 last month up almost 3.5% even with yields higher every single day last week on the two-year and the 10 year. the yield is lower on the tenure by a single basis point. we wake up again to another morning anticipating looking ahead to more talks on capitol hill. there are range of estimates out there and here's one from goldman. estimating that treasury will drop below $30 billion in cash.

we are taking this early june date increasingly seriously. tom: absolutely, that was obvious by the weekend with janet yellen outfront. the calendar is moving and we talk -- and we talked about this on may 10 and we are running out of time. jonathan: i think it's less about the mood of the moment and much more about substance. tom: i would go with that. the substance is the return of the president to washington. anne-mariehordern is with us. there are hallmarks along the way but may be a research piece that's out there or an op-ed piece. this morning, the washington post drops a bombshell of an

op-ed piece directly addressing the presidents age. he returns to washington for a debt debate but he also returns to washington looking at an 82nd birthday etc. on election day. how will he deal with that when you ask him tough questions? annmarie: that's what the president needs to be doing for the public to brush aside these concerns. he will have to get in front of the public, take questions from the press like he did yesterday at the end of the g7 summit. that potentially can asked ways - - assduage voter concerns. everyone's been talking about this and whether the whispers are getting louder but everyone has been talking about this because it shows up in polls. americans are concerned about his age but also in the same age bracket, i would say, is the

nominee right now that's leading the republicans and that's the former president donald trump. he is only four years behind joe biden. we will have a president regardless of these two individuals ending that next term in their 80's. tom: that was clearly addressed by the washington post. jonathan: you wake up this morning and you get the feeling that the g7? what g7? what did they talk about? he had to leave early and had to take a call on air force one and will engage in talk somewhat immediately. did he ever really leave behind domestic issues? annmarie: it's fair to say he had one foot here in japan in one foot back home in washington. even brought bruce reed with him to make sure there was an individual on the team keeping in touch with his key negotiating team in washington. he left the dinner early to have a phone call on his team and was

constantly kept up to date where the negotiations were. the negotiations over the weekend were on and off. breaking the impasse last night was the phone call the president had while he was on air force one with speaker mccarthy. speaker mccarthy said it was productive and it was one of the first times since the present has been abroad to not criticize his trip abroad. he said we are going to meet tomorrow which is today. president biden and speaker mccarthy will be in a room and that's how a deal is going to be able to get over the finish line. it's really just these two individuals being able to come to an agreement. joe biden alluded to that in the press conference saying he wants me to get home to hammer out this negotiation. that's where the eyes are and there's other topics at the g7. china was a massive focus in president zelenskyy was here in person and russia was a big focus but for other world leaders and their concerns about future economic risks, when the

president of the united states is in the room, the question would go to him. are you going to have a default on treasuries which is the bedrock and underpins our entire global financial system? it looms large over him? lisa: was this g7 a waste of time with the focus on whether the u.s. would get its ducks in a row back home or were there some substantive things that took place having to do with china. the financial times described a communiqué of the strongest condemnation of china. it left us highly confused if we are thawing or exacerbating the tensions. annmarie: i think this week was a key week looking back in history in terms of a more multipolar world. not only do have president zelenskyy at the g7. this was formerly a g8 where president putin used to think of this club he was a part of in a

prestigious way. president zelenskyy was here 600 miles away from russia's far east and you had president zelenskyy in the middle east. vladimir putin is saying -- seeing the middle east is no longer in his bag and china's xi jin ping sat down with other world leaders. when it comes to substance that happened here on the foreign policy front, it was all about china. the president reiterated that yesterday in his press conference. this administration the europeans coalesced around language about not decoupling but de-risking. i asked the president's deputy national security advisor, what's the difference? he said de-risking means we don't want china to get a hold of advanced technology for their military. we have concerns about the economy and market practices but how can you call something a d

couple when u.s.-china trade was at a record last year? that is the framework we are going into. you also bring up a great point, hours after we got this communiqué, china came out and said that micron did not pass their cybersecurity review. one thing rahm emanuel said to me as we are no longer just seeing china take economic factions against nations but they are going against companies. this is a pivotal moment in the geopolitical landscape this week even though domestic concerns were definitely front and center. jonathan: great coverage over the weekend and this morning as well, thank you. out of japan following the g7, the president in exchange with annmarie talked about things improving with u.s.-china relationships shortly and then came the headline that micron is about to get banned. make sense of that. lisa: he said he promised a real

thawing in the relationship between u.s. and china than micron cancel goods in china which is 13% of their revenues. you can see those shares are lower by more than 5% premarket trading. then you have chinese -- china's commerce and minister to come to the u.s. so i can't make sense of any of this. lisa: jonathan: the stock is down jonathan: a little more than 5%. morgan stanley is coming up shortly. good morning, your equity market is just about unchanged on the s&p 500. ♪ fresh, warm hot dogs! when i'm not selling hot dogs, i invest in a fund that advances innovations like robotics. fresh, warm hot dogs, straight out of my torso! one for you, one for you. oh, you're a messy one. cool, right? so cool. anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations.

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jonathan: welcome back to work. the s&p 500 is just about unchanged, good morning to you. it's going to be ok, five days and we get a weekend. the nasdaq is -0.1%. on the nasdaq 100, 4 weeks long winning streak. that's the longest since february. they finally broke out of the tight range. six consecutive days of yields higher on the two year and yields are back on this morning.

if you want more fed speak, plenty this week. 3 they speak today and then you get some fed minutes as well. look for that going into this week. are you excited? tom: how many are next week, four or five? jonathan: then bingo, no fed speak whatsoever until the fed meeting. minimal value. chairman powell on friday. take a look at what he had to say. >> we've come a long way and policy tightening3 . we face uncertainty about the lag effects of our timing so far and the extent of credit tightening from recent banking stresses. having come this far, we can afford to look at the data and the outlook to make careful assessments. jonathan: do they have the luxury of time not to hike in june?

i don't hear that word pause when the chairman speaks. neel kashkari of the minneapolis fed over the weekend to the journal went out of the way to make that point as well. if the committee chooses to skip a meeting because we want to get more information, i could make the argument why that makes sense. they skip to get more information is different in my mind than saying -- we think we are done. tom: cpi just before the meeting is way more important. their data dependency waits until the last moment. the senior economist from morgan stanley joins us now. thanks for coming by i want to look at the economic data today. the inflation data is friday so how sticky is sticky? >> core pce inflation will look pretty elevated this friday when we get it for the april report.

as we saw in the cpi print, a lot of upside is being driven by the good side which took a bit of a hiatus. we are seeing some nice alleviation in the housing component that's going to be key as well for the main cpi print in the blackout period ahead of the fomc meeting. tom: i have the two year yield at 4.24% so how does that change? >> the debt ceiling is of concern. a lot of the economic outlook no longer implies if we cross the x date, it will be catastrophic for the economic out look. almost 20% of household income comes from government subsidies a we're looking to get closer to a deal. it's encouraging they are having a meeting today but we know that all things are off the table if we cross that date in early june. jonathan: 20% of household

income is from government transforms -- transfers? >> you wouldn't get the social security check for the medicare check and unemployment insurance, it's an incredible amount of income. jonathan: i knew the number was big but that big? tom: i thought it may be 16%. is anybody talking about cutting off social security? jonathan: they've got to provide an outlook when the federal reserve gets together in the middle of june. let's pretend it's not playing out for our benefit, what do you think the outlook from the fed will look like in the middle of june? >> we feel confident the fed will be pausing and they will not have to deliver another hike in june. it will remain data dependent we expect to see more alleviation in sticky core services. that'sp coming out during the blackouteriod so the fed speak

wants to set up markets to be pricing and what the fed wants to do going into june. lisa: is skip the new pause? >> they want to remain flexible. if they need to hike or cut, they need to keep the door open. they don't want to explicitly use that word pause. lisa: over the past five days or so, we've seen a real about-face when it comes to banks. on one side, we so western alliance come out stronger and people cheered, crisis over and then we heard from jay powell still concerned about rapidly tightening credit conditions and we heard about janet yellen about possible additional bank mergers. neel kashkari said we need to see banks raise more capital. what is your view of where we are in thiskerfuffel of banking >>? we are getting mixed signals and share how will want to reiterate that the banking system is

stable and things are somewhat healthy. what is happening in the banking sector is basically giving us more policy tightening than what we would need or interest rates and that's what chair powell said friday. there is less risk of them doing too little at this point because you get this incremental further tightening in lending standard. tom: when you are around the table and arguing during a meeting, is a skip or is it a pause? is it asymmetric or symmetric? >> it's definitely a bit asymmetric. tom: really? >> i think the risk is probably having to do with more of the soft landings in area plays out. with all the hawkish fed speak we got over the past week, they are trying to push market pricing showing they are not cutting rates anytime soon. they are still leaning on the side of doing too much rather

than too little. we got more hawkish fed speak over the last week. jonathan: when do you have the first cut penciled in? >> for march of next year. we still have quite a ways to go before we get the first cut. jonathan: what brings about that call? >> core inflation we have below 3% and jobs have been running around 40k and unemployment rate is above 4% and it comes down to inflation. jonathan: those of the conditions you're looking for. >> inflation below 4%. tom: they are describing a whole different world. jonathan: are you going to watch the little mermaid? tom: i may. let's get back to the fed talk. the conditions that lead to a

rate cut and when do you think those conditions are achievable. >> we've had a good run on the good side, deflationary for several months like motor vehicle prices so we are not over reading into one month and prices coming back up. we feel confident that will play out in 2023. all the housing data is pointing to continued moderation and shelter inflation and even though there is a step back up, is still below the 12 month trend we have had on sheltered inflation. we are also seeing the labor market start to slacken a bit. job openings are coming off and hiring rates are declining and fewer people are leaving their job so that should be indicating that these sticky core services should be rolling over soon as well. lisa: put these together and what we are seeing now is ongoing resilience in an economy that has seen rolling recession a different industries and inflation will start picking back up in certain areas as you

start to see a recovery there. how much has the chance increased of the june rate hike in a way that they want to keep the door open at a time when the market is pushing back against what they are saying? >> if we get another jobs report and inflation report, another whopper jobs print maybe 200 or higher. if core inflation is close to .4% again next month and in particular the services component is re-accelerating, that squarely puts a june hike back on the table. lisa: the thing people are worried about is because they don't want to see some sort of financial crisis really prompted by the policy. at one point are they getting into the fragile zone? at what point will and additional rate hike be make it

or break it? >> i don't think we are quite there yet and banking conditions are somewhat stable. it's a tough call. they will launch -- watch the data as it comes in but we are not right there yet. we are just playing with 5% or 5.25% and i don't think 25 basis points is make it or break it for the fed. tom: i looked at the 30 year mortgage at smoot 6.8% -- and it has moved 6.8% in a month. >> the housing market is a big push and pull. there are affordability pressures so was signals you need to keep rates high because otherwise you will see that in flood of demand again. we get a bit of housing data this week as well. is to show some incremental improvement in the housing market but then mortgage rates come back up. jonathan: do you think it's

about inventory? >> there is a huge demand still for housing. there is lack of supplies a get this huge population of prime age homebuyers who are waiting to get into the market. once they see some alleviation and mortgage rights, home prices are came off a little bit by 1% and people are hopping back in. jonathan: we'd like to see more of that in new york. thank you for being with us. we keep setting policy for the boomers, that's the problem. we want to get in the boomers won't let it go. lisa: that clearly wouldn't work for him. jonathan: i'm recruiting you.

i'm trying to get you on my side. tom: early april, the mortgages six point 70%. complete reversal. jonathan: that's been the last 20 years. tom: you rented $4100 per month in manhattan. that was for a walk up. jonathan: that probably would get you a walk-up. tom: maybe a seven floor walk-up. jonathan: it's getting so expensive. this was great, sarah, stick around, this gets messy. from new york, this is bloomberg. lisa: keeping you up-to-date with news from around the world with the first words -- facebook owner meta-deplatforms was hit by a record 1.3 billion

dollar european union privacy fine. they were given a deadline to stop shipping dated after regulators say failed to protect personal information. meta has five months to suspend any future transfer of personal data to the u.s. and six months to stop the unlawful processing including storage in the u.s. of transferred personal eu data. china has question the sincerity of the biden administration to resume high-level diplomatic talks with beijing. the chinese foreign ministry said the u.s. side asks for communication on one side and on the other, suppresses and contains china by every possible means. president biden as he expect ties with china to improve shortly after there was a spy balloon conflict this year. china delivered the latest salvo

in the escalating chip or with the u.s., announcing that micron products have failed to pass a cybersecurity review. beijing has warned operators of key infrastructure against buying products from the american firm due to cybersecurity risks in the u.s. commerce department says the ruling has no basis in fact. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪ ♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy?

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>> there is always uncertainty about tax receipts and spending. it's hard to be absolutely certain about this but my

assessment is that the odds of reaching june 15 being able to pay all of our bills is quite low. jonathan: janet yellen with a bleak outlook for treasury and the cash balance at the moment, speaking over the weekend. welcome to the program from new york. in the equity market, we are negative by not much. yields come in about one basis point in the 10 year is 366. the headline from j.p. morgan, boosting its outlook after the purchase of first republic bank. you've been on top of this over the last couple of months. it's like they are doing this with their hands in front of their face boosting the outlook, things are ok and almost embarrassed. tom: people bust my chops about the history of it but let's

review it quickly. the nation blew up in about 1840 and andrew jackson says we are not going to do this. there was a third bank and the fourth bank was considered to be in the library of the jp morgan mansion. the federal reserve, is this the fifth bank of the united states? i don't even put the other ones in there. it's the scope and scale. it's big. it's very important to have with us s,onali basak. how is the roadshow different today? sonali: this is -- the succession has been watched closely a j.p. morgan especially because jamie dimon is been there for a long time and over the last decade or so, we've seen so much top talent come in and out of jp morgan.

many of those people are leading other companies. so this is pretty huge. daniel pinto has always been the man in the envelope. he has stepped up when jamie dimon gets sick. the succession plans lies with these two women. the question is when. that's the bigger question at even more than who. is jp morgan ready to toss the baton? jonathan: we talked about an elegant solution by james gorman at morgan stanley. i wonder if that would be thought of, the idea that someone is because jamie dimon becoming the chairman and just staying there and then someone steps up and takes the ceo role. sonali: it's executive chairman at the board.

the executive chairman is almost an advisory role but that's an elegant solution. with morgan stanley, they had folded into major acquisitions and it made a lot of progress in doing so. can j.p. morgan move on without integrating first republic at scale more? lisa: what's next in terms of acquisitions? the wall street journal article said jp morgan accounts for 13% of the nations deposits and 21% of all credit card spending at a time when supposedly you are worried about too big to fail but not really because those were the banks that survived. how much will they try to hide their scope and scale at these meetings? sonali: pretty intensively. you see high up in the presentations the conversation around heightened scrutiny on banks and the heightened cost tied to the fdic and what that could mean for future costs. the uncertainties around the different types of regulations

they will face around the world. when it comes to banks, first republic will have to waive this idea of a deposit cap to bring on a new depository institution. their rivals were kind of skeptical. certain rivals were very skeptical that the government would let them f byrc in the early days. there was more certainty at the end of the process the jp morgan could keep the cost loafer everybody. they did have to waive rules to get this to happen. lisa: the fact that this is high up in their presentation and neel kashkari came out talking about how he would like to see higher capital requirements for all banks but particular to too big to fail banks, do you get the sense this is a very serious proposal or do you get a sense this is a lot of lip service to gloss over? sonali: i worry about how much the bank regulation changes with every administration. what's interesting is that under the michael bar era for them the federal reserve, things could

change quickly. it's not without pushback. jamie dimon has been one of the most vocal critics in some of these stress capital buffers and when you look at the requirements of the stress test, we have passed them over and over. their current assumptions here are more than what you see. for this year alone, it's 5.8 percent unemployment rate. they are reserving more than what you see in the market. they say we are doing the work and we don't need more work, you will choke off the banking system which is the threat at a time when you need credit in the market. tom: let's not forget the stale, morgan stanley employs 82,000, jp morgan over 200,000. it's not a joke. are they soft selling how profitable they are? sonali: they could soft so all they want but you and i know, they have the highest returns on equity and all of wall street by

significant margin. there are some smaller banks that can do better. if you look at their statements, they have levers. they continue with fission for should -- with efficiencies. they can cut to become more profitable if they want to. they are already quite profitable. jonathan: james gorman is talking about 12 months and jamie dimon is talking about five years. it's an interesting conversation. let's finish on morgan stanley briefly. lloyd blankfein was saying it's time to go and then you have an awkward moment. waking up this morning, what will morgan stanley look like in the next several months, how much tension will there be? sonali: we have seen this flight

plate out over at morgan stanley where they say they will make an announcement and wait 6, 8, 12 months before they give folks the job. this conversation inside morgan stanley has been a conversation for many months. it's the parlor game of wall street. the pressure on ted pick and andy saperstein to perform is really something to watch. jonathan: they still haven't made that decision. sonali: if they've made the decision, it's closely held. the drama is real but have they've made their minds up? it's a tough one. jonathan: succession at morgan stanley. no spoilers. lisa: this feels many people. -- this feels meaty people. -- this feels many people - medieval. tom: if you are not picked, you

leave, right? sonali: that's been the standard. could they do copresidents? it doesn't work. do some of their key deputies leave? that's a very loyal bank in terms of the people under these two men in particular. you worry and you think about attrition. jonathan: maybe they will turn out -- turn up somewhere else? tom: it's just a banking tradition. jonathan: are you connecting that story to what has happened in the last month or so? sonali: you have to hire from within. it's a tough case on ceo's if you bring in someone externally. can charlie scharf come back in and lead jp morgan? i think it's a tough sell. tom: you are such a hitter.

all the banks are up there, were you there that -- this weekend? jonathan: it looks beautiful in rochester, new york. tom: they build it out from 1926 and they restored it. when i caddied there, those bunkers did not look like that. sonali: so much more classy than talking about the interns in the hamptons. with david solomon. jonathan: i'm not going to let you gloss over that. you caddied oak hill back in the day? tom: i had the honor to speak to lee trevino. i talked to him about driving down kilborn drive and what it was like before he stepped out. he got emotional. coming up, sonali will address

the tee. ♪

>> the recession that everybody's been waiting for hasn't come. >> consumers moving toward the front end, institutional going toward the long and. echelon end. -- toward the long end. jonathan: coming up, it of debt ceiling negotiations and fed speak. stay in bed. [laughter]

this is "bloomberg surveillance." a decent week of gains on the s&p. high yields even with the debt ceiling drama. the president of the united states resuming talks later on this afternoon. it is kind of good, kind of bad, it is ok, it is not ok. where are we? tom: we will have a great conversation on the range we are in. futures 42.01. we are at the top of the recent range -- 4200. we are at the top of the range. jonathan: yields higher in every session last week. lisa: people are saying this

time is different and you heard that over the weekend. you started the show saying we will get that ceiling negotiations and fed speak so stay in bed and i think macro is staying in bed. the stories underneath are getting interesting and it has been a theme that has been head spinning those trying to discern the theme. there are changes going on. tom: the yield the focus. can you imagine 4300 a year ago? the two year yield, four point 2365 -- 4.2365. above 7% now. jonathan: will we see the price correction? we are talking about 7% rates.

tom: was in a restaurant and someone was asking when is jonathan going to do the real yield again? we don't quote it the way we used to. jonathan: that is rude. tom: it is debt ceiling week. jonathan: morgan stanley, many technical, beginning of a new cyclical argot. here is the list provided, extreme narrowness, poor breadth , quality defensive leadership and broad cyclical underperformance. lisa: i was talking with neil data -- neil dudda and he said his first indication, none of these signals work anymore because we are in a new paradigm. are we in a new paradigm with

respect to the underlying drivers having mixed signals. the cross a current not coming up with anything conclusive. tom: this is a huge thing that goes to my favorite, the other factors. you mentioned nvidia. i don't even know what nvidia does to be honest, but the tech companies are on a shot. they are down a little bit today. jonathan: here is the price action on the s&p, down 0.1% on the s&p 500. yields down a single basis point . 3.6593. lisa: today we get more debt ceiling talks. biden in washington after his trip. tom: for those of you on radio,

couch photos. lisa: talking about nvidia, the chipmaker, reporting earnings after the bell, up on most 114% year to date. key for me is how much will they ratify the hype around ai and check gtp and how much -- chat gtp. in the data and fed speak, we get global flash pmi's tomorrow, fomc meeting minutes on wednesday. pce inflation data on friday, if you end up seeing inflation, the key metric the fed looks at as being sticky, how much does this challenge the idea of a skip, not a pause? tom: this is the new word for june. jonathan: they are calling it a pause because they don't want to

say they are done unconditionally. tom: when you are a kid could you skip rope? i was terrible. lisa: i loved it. tom: i can see you cranking it out. jonathan: i don't think so. very controversial couch photos. the hybrid shoe worn by certain officials. it is the hybrid of a sneaker and a dress shoe. a great piece over the weekend, have agreed. are you a fan of the hybrid shoe? tom: no. lisa: sartorial criticism with jonathan ferro. jonathan: if you're going to meet the president of the united states, you don't wear that. tom: what would boris do? jonathan: when you go to see the

president you don't want to ask yourself that question, what would boris do. lisa: wwbd. [laughter] jonathan: just were a nice list up oxford. -- lace up oxford. sharon bell with us, there has been pushed back with europe and china versus the united states with your peers at j.p. morgan. they close out overweight against the united states. where are you on that debate as a team? sharon: we like non-us markets because we think the u.s. is on the more expensive side. we don't have any upside for the u.s. market. don't expect a bear market

either with u.s. stocks appeared with think they are in a range and we are at the top end of that range. for the rest of the world, cheaper markets. japan has been exceptionally cheaper but europe also. tom: if you have a fats and flat range, critical question -- do you trade the range or do you almost go by and hold and just oscillate through it until you figure out what to do? sharon: it means you don't have to make dramatic shifts in your portfolio because you aren't looking at an environment in a bear market. the problem with the fat and flat range is we are towards the top of it and there is a competitor asset out there which relative to a fat and flat means

-- range looks more attractive. the optionality of upside, but when cash is offering you 5% that looks quite attractive. lisa: you are talking about how you like ex u.s. assets. we are talking about how the data in europe is turning over just a touch. at what point would that get you to rethink whether an overweight european by is the way to go? sharon: you have had industrial data particularly out of germany a little bit weaker related to china and the weakness in the data we have seen their. your is very exposed to the trade -- europe is very exposed to the trade route.

the labor market data is good. i don't see europe as overly in danger. tom: bashir sharma at a blistering essay -- saying people like you have it wrong. a gdp reset. dr. sharma says maybe not. what is the new amendment at goldman sachs about what the pacific rim in china will do and how does that fold into global prosperity? sharon: definitely china has a disappointed in the past months. the hard data, investment, retail sales have all weakened in china. we do think china growth will be reasonably good this year but we think next year at 4.5%.

chinese is particularly weak on unemployment -- unemployment. you still have the property market over leveled -- particularly weak on employment. you still have the property market over levered. there are a lot of underlying mix on china but the equity markets are expensive and that reflects some of the risks. jonathan: sharon bell, appreciate it. europe is set to boom on the services front.

do you want some reviews? eric i called out the footwear as a clear lapse in dignity. the director at gq called it awful. -- lisa: my favorite is every monday morning the one thing that get you the most just up is sartorial reviews. tom: john may not agree on the shoulder cut but i am on board with the criticism. tom: which he is coming back -- gucci is coming back. they let the guy who is doing weird stuff go and a new conservative is coming in. i was in the store and got a full briefing.

the guy is moving quickly. jonathan: agrees down by 0.1%. we will be talking about that. from new york, this is bloomberg. lisa: with the first word, i'm lisa mateo. duchesne as ukraine reported damage buildings after a barrage of russian missiles. ukrainian forces managed to shoot down four of the 16 launched as well as 20 drones. president zelenskyy will be returning to kyiv after a summit in japan when he suggested russian forces are losing control after months of fighting. president biden and republican can house speaker kevin mccarthy set to meet with talks on averting catastrophic default as

key differences remain. negotiations have been between deadlock four days as the two sides simultaneously grapple for political advantage and a deal. negotiators met at the u.s. capitol. global news, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

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>> you just said i'm willing to cut spending. speaker mccarthy says the u.s. government needs to spend less next year than it did this year. will you agree to that? pres. biden: we agreed to cut spending and we will come -- cut spending. but where you come from. to all discretionary spending make no distinctions other than what the cut is. some of it makes absolutely no sense at all. so what we have done is we will sit down, i am hoping, with speaker mccarthy is waiting to

negotiate with me. jonathan: we are waiting for that later. the president needed to leave a dinner early and he flew back taking a call from kevin mccarthy and we are told it went well. tom: i think it is just too much. who is the one person in the united states of america couldn't get through the season one of succession? jonathan: you didn't like it? tom: i don't have the time but i did enjoy it at just don't have the time. jonathan: what you are in it you want to complete it. tom: of decisions to make. -- tough decisions to make. jonathan: where are you going

with this? lisa: you think he has an answer to this? jonathan: you never know, he is such an authority it might be true. lisa: the carry-on, tom. tom: joining us is annmarie hordern. i'm sure we will catch up on the episodes. annmarie: don't ruin it for me. tom: i heard the president of the united states using the word hope here what does he hope for? annmarie: this meeting today will be important. if you look at the month-long debt negotiations, this is a biden and speaker mccarthy. they are the ones who will be able to get the deal done. what is interesting about the

phone call that took place was the president was heading back to the united states from japan on air force one and it broke the impasse for the negotiators to get back in the room on the capitol for a few hours. we will wait and see the communication that comes out of this meeting and if there is going to be a deal and then how difficult whatever deal these two men cut is going to be for them to also get through congress because kevin mccarthy has a slim majority in the house but the democrats have a very slim majority in the senate and both wings of both parties are not going to like a lot getting done if it will be a proper negotiation. tom: an unfair question but i'm going to go there, how much is this to mccarthy right now like mr. boehner?

how close is he to an exiting speaker? annmarie: so i think everyone has misjudged him in this moment, only because everyone was pointing back to how long it took them to that the speakership that was 15 rounds of voting. it was very slim how he was able to get through with 217 votes is bill he is using as leverage to get biden to negotiation in the last person to vote was george santos, potentially a member of congress that won't be in his camp at some point due to the ethics review on that individual. he was able to keep his caucus secured. many it said has that she has been informative with his caucus about what needs to get done and he was able to bring a biden to the table. the white house continues to almost do verbal gymnastics and they say they are not

negotiating on the debt ceiling but the budget. they wouldn't be negotiating on the budget and speaker are the said i am not passing a debt ceiling bill if i don't have cuts. we will have to wait and see how this works out but so far he does seem to have the support of his party behind him. jonathan: super tired of the headlines last week or two. where have we made real progress? annmarie: there is one point of progress on the republican coming in, they wanted spending caps for 10 years and they were able to narrow that to potentially around six, things like unspent covid funds. democrats will get on board with that. it is the top line figure on spending and what baseline. that is what the president was getting at in response to my question. he said he is willing to's cut

spending and speaker mccarthy said they need to spend less this year than last year. he wants revenue raises. speaker mccarthy and an interview with myself set i will not raise taxes and pass a clean debt ceiling. the issue they have is going to be how much they are willing to spend next year and what baseline that is coming from. if they are able to hammer that out today, that would be key. the other debate will be work requirements. the democrats do not want to see work requirements, especially with access and health care but this is important to a large chunk of speaker mccarthy's caucus. lisa: i feel like this is like the peanuts cartoon when you hear the adults talking, is there a greater likelihood of default after this weekend's turmoil or not? the experts, what do they say on that front? annmarie: everyone has a

probability. there used to be probability in the past that it is a 10% chance we could default. that has grown for a lot of asset managers i have spoken to and they are developing contingency plans. treasury secretary janet yellen on meet the press reiterating what she said to me which is at some point we would default on something if we are past that date. i think potentially this white house will have to start actually thinking of the contingency plans. are you just going to service debt, pay off social security recipients? janet yellen made it clear she thinks june 1 is a hard deadline. that potentially is getting some people more nervous. i think very much so for the markets it is wait and see at the moment to hear what the president and mccarthy have to say because these are the

individuals who hold the power in the negotiations. jonathan: which like the final word on the hybrid dress sneaker and we will leave it there? annmarie: my personal opinion on sneakers in the white house it is definitely a no. jonathan: that is the official word. tom: on monday she is chanel. jonathan: come on, what are they doing? lisa: i think it is much of a stretch's -- stretch to call it a fashion hate crime. that is pretty intense. tom: help me with the socks. you are the pro with socks. what are those socks? if you want to wear fancy dress socks, you have to have elegant

footwear to go with it. tom: people are driving off the road on radio right now. lisa: respect is really important and if it is seen as disrespect, that is a problem. if it is simply a fashion choice they should be focusing on other things for the nation. jonathan: thanks for that. ♪ with the lowest transaction fees and keep more of what you make. start saving today at godaddy.com you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you?

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jonathan: live from new york city, the opening bell two hours away. the s&p 500, lower by 0.1%. the debt ceiling negotiations pick up again. headline after headline. as of late last week, data from thursday, the cash balance was over $57 billion, down from 140 billion the week before. tom: there is it now? the answer is it is south of 50.

jonathan: feels that way. it is heading in one direction and that is lower. tom: what time do they meet? jonathan: i don't have the time. think the president had a long flight back from japan. two-year year, tenure, 30 year, six consecutive days of yields higher. down to basis points on a two-year to 4.2451. tom: copper going south. remember the -- i looked at euro swiss to see the dynamic and the answer is between the euro and

yen, 138.10. it is the same feel in the equity market. jonathan: breaking out at the top end of the range, responsible for the breakout has been a handful of the tech names. lisa: which gets thrown into question with respect to the tensions between the u.s. and china that we are thawing when president biden called the silly balloon roadblock in getting something. china came out and said they are going to ban mike ryan selling certain cybersecurity chips because they did not pass a cybersecurity review and micron shares are down and dragging the entire sector down with it. nvidia reports earnings later today down .8% after a 114 percent gain this year. this is one of the key

questions. i don't have the read on what is going on between the u.s. and china. the mood music was a hard line between the communique with respect to china and there practices, but you heard different rhetoric from biden and then the micron issue. will those officials go after u.s. companies, international companies in a more aggressive way and how much does that change the picture for investors looking to buy? tom: the confusion is the president because his comments were opposite from the rest of the zeitgeist. lisa: what annmarie said was important, you can say we are going to reduce the interlocking relationship between the u.s. and china except that trade is at a record between the two nations so how are we going to that as to do that without torpedoing a swath of u.s.

companies? that tension is coming out in a hard to understand or less clear kind of message from the white house. jonathan: the rest of the politicians have let the last two decades. they have been sleepwalking into it. the idea we had have president trump make this one of the big issues. president trump was chris's -- was criticized at the time had they walked back? lisa: they have said we need to harden the line is that is one of the bipartisan agreements. tom: this is on a just experience for a small group of people. 20% of income comes from government, social security, the medical system and where do those funds go and it makes for us to of republican politics which everybody has to do with including speaker mccarthy. jonathan: forget the mood music,

rhetoric, tone, follow the numbers. trade is massive, the treasury is getting lower. they have to get something done. tom: and the mortgage rate going to 7.04%, i would look at the interest payments on our debt model, $600 billion and double and even more. we talk about triple leverage on cash fund, the gross yield is down 15%. that is before fees. jonathan: i think people are really frustrated with this issue. they complained -- conflate the debt ceiling issue with sustainability but ultimately the debt ceiling is a big distraction. they did to follow the talking points but when they get into power, what happens? very little happens.

the debt gets a whole lot bigger and that is what has happened repeatedly from administration to administration. tom: most important headline buried was john williams of the new york fed saying that r-star would stay low and you have the convenience of growth. jonathan: -- neutral on rates, speedy resolution to the debt ceiling but would argue for a modestly high yields in the context of continued strength in the data. that is what we have had. we have had decent data. tom: what is important is first order academics. subadra rajappa joins us now.

i will cut to the chase, the equity markets we talk about a collar made in commodity markets the trend of copper, whatever, what is your world like when the two year yield is collared? how do you respond to a trade on yield and the derivative space? subadra: as you pointed out,, all yields across the curve in the treasury market, looking at a range for two-year around 4%. the same with the 10 year. it has been a tight range. what that tells me broadly speaking is there is no strong conviction in the market on yields going higher or lower.

the fact that we are stuck between a rock and a hard place. the data so far has been very strong. the consumer is resilient. inflation is sticky. that would argue for higher yields. you have the regional banking crisis as well as rates being high and sticky and that would argue for perhaps lower yields. we are stuck in this range because of that. tom: you are a stock, can you model out a bat for higher yield -- bet for higher yield and lower prices? subadra: what you are looking at in this environment is for the fed to pause perhaps a pause and a skip and another hike later on this year perhaps.

all that means is that if policy is going to remain stricter for the remainder of the year, that would mean ultimately you will see the economy with lower yields. we have a recession pencil in for early 2024. once we do go into a recession, the fed will have to cut rates. the ultimate destination is for lower yields. the path between here and there is uncertain given the fact that we have a lot of dynamics to get in the short term. lisa: you mentioned the regional bank crisis helping to drive down inflation. what crisis? it seems like it has stabilized. which is it? subadra: the headlines have

definitely abated. you are seeing more stability in the banking sector. but oddly the transmission mechanism for the regional banking crisis is going to come from the tighter credit conditions, greater regulation for the mid sized and larger banks. that, broadly speaking with tighten credit conditions through the rest of the year. you are seeing mortgage rates rise. yields at 1.4%. that has risen in the last few weeks. higher yields as well as tighter regulatory framework should lead to tighter credit conditions over the remainder of the year. there may not be a banking crisis now but credit tightening conditions are here to stay. lisa: do you believe right now

that will perhaps constraint yields going forward and that is the key feature with the reports coming out friday that determined what that is that yields can trade in? subadra: i think over the near yields are constrained. you are probably going to see an environment that will struggle to get past 4.25%. that would imply market pricing out cuts christ in and perhaps starting to price in hikes at upcoming meetings. they seem to be for pausing in june. as far as the long end is concern, it is much more hedged to the outlook of growth. china has had a good year this year for growth gdp being

positive peer for upcoming years, you are looking at global -- positive. upcoming years, you are looking at global growth positive. jonathan: and speak today. thank you. this in overnight, bank of america, price target, 4300 upgraded. tom: upgraded from 4000. the esg mathematics, that is a bullish take. jonathan: she prefers the pickles and equal weighted s&p. coming up, christopher marinac. this is bloomberg.

this up: president biden and republican -- lisa: president biden and republican speaker of the house mccarthy are meeting today. negotiations have been whipsawed between progress and deadlock four days as the two sides simultaneously grapple for political advantage and a deal. negotiators met sunday evening at the u.s. capitol. china has questioned the sincerity of the u.s.. a foreign ministry spokeswoman saying the u.s. side asked for communication on one side and the other side suppresses china by every means. president biden expects ties with china to improve shortly, dismissing an alleged spy balloon that caused a diplomatic spat this year as "silly."

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>> it's very hard for banks to compete with deposits when money market funds are giving you 5%. if the fed continues to raise rate, that cap continues to be wide. regions still in trouble, not so

much because of massive outflows, the business model if funding from the fed at 5%, it is hard to fund assets. jonathan: head of global rates on interest rate strategy and looking ahead to the fed talk this morning and fed minutes on wednesday. tk is just overwhelmed on the speaking later. all exciting stuff. equity markets unchanged on the s&p 500 we go absolutely nowhere. a break of 4200 on the s&p 500, well defined. rakes to the upside. it was said to us a few months ago that that was what she expected. tom: the bulls have to take a victory lap. the people that said have courage to be in the markets

look like geniuses on this. jonathan: the bearish view right make a lot of sense but it is not going. we heard from mike wilson at morgan stanley this morgan. lisa: just wait. jonathan: but you had six months of missing out on a decent rally. lisa: if you are late you are wrong. tom: i think fomo is to simplistic. jonathan: alexa people said in the first six months we dipped and then we will rip. tom: you have a bear market when you get intermediate bow market trends. is this intermediate within a long-term bear market? lab different opinions on that. -- a lot of different opinions

on that. christopher marinac jones -- joins us. we saw the oak hill this morning. you live by augusta. give us a picture of your augusta. christopher: it is the prettiest place on earth and it also gets taken down for four months in the summer and they will redo the greens and fix up some trees that fell back in a role. it is an incredible piece of property. tom: a place to relax when you are dealing with the bank stocks as well. are you at any point at masters relaxation about the banking crisis or is it vivid? christopher: it is early

innings. we have a recession to find and real estate to work through. the banks continue to make money throughout the journey but have issues to deal with the next three years. lisa: it seems like the move is toward greater capital requirements. we heard that from neel kashkari. christopher: jp morgan talks about the balance sheet all the time. i think their leadership position in the banking industry is second to none and they will provide everybody the capital. the stress tests come out in a month and my sense is the fed will pass most of the banks but politely ask for more comfort capital and require banks to raise additional equity. lisa: which banks? christopher: once in equity and then regional banks. anything that happens at the top 20 banks will get pushed down to the next 20. lisa: we talk about the

potential for profitability constraints and the regional banks. how much will be further constrained in lending mechanisms be curtailed if there is greater capital requirements hoisted on them by the fed? christopher: capital will improved because of retained earnings. you have payoffs and for sale securities. the challenge will be that raising additional capital will could be a future credit cycle in 20 -- 2024 or 2025. we have unrealized losses that will not go to zero but will get incrementally better. tom: should people by individual stocks? what is the intelligent way to play this three years out? christopher: i think a basket across all caps makes sense. my sense is there is a real opportunity in these companies,

many which are trading on tangible book value and that is growing. jonathan: when we woke up, we got park avenue and fast -- past the first republic. the next block is a chase private client. on the screens at first republic they are playing bloomberg. can you tell me what is going to happen with those branches? christopher: i think they will stay the same for a year are to end then maybe become a second office or something else. jonathan: you don't think they will just cut out these branches? christopher: i don't think so, they gave the same guidance as before. lisa: you heard from janet

yellen that you will see more akin to that. how much is jp morgan acquiring or will it be bank of america and other big banks? christopher: think the consolidation may have happened because you had three banks that failed in march and april and that represents 4% of the regional banks. if you look at the top 25 banks in the country, they represent two thirds of the assets in the fdic deposits. lisa: every analyst who comes on talks about the regional banking crisis as something that is going to tighten credit conditions and help the fed. are you pushing back and saying that is not really the case because it is over? christopher: i'm not sure the crisis really happened. we had mishaps in the month of march these failed banks but largely those were their own dealing. the contagion limited to pac

west and regional alliance which is stabilizing. i think the rest of the industry is marching ahead. we have seen deposit outflows in the industry and those may continue because interest rates to catch up for depositors. most banks are lending money and making a profit and marching forward. there is tighter credit anyway but it is not as bad as negative as headlines have suggested. tom: philadelphia, mid-atlantic states 30 to 40 years ago in banking, when do they react and consolidated being, waiting and waiting? when do they say enough? christopher: you can see two or three mergers in the next few years in the regional banks but i don't think it will be often. the fed has to change gears at the examiner level to push the mergers.

a handful of them terminated. tom: interesting. jonathan: masters tickets, have we nail that down? tom: christopher is our friend. it says to garner masters tickets is one and 200. jonathan: it is a lottery. you know people? lisa: no. tom: we know christopher marinac . hot tickets in monte carlo. the f1. tom: this is not the horrific floods in italy, really damaging. we too much death. it is somewhat of a celebration for f1 to restart today. we have to keep an american

heritage at bloomberg surveillance. jonathan: does that fit well in monaco? tom: it is different. jonathan: who have to take a look at that. lisa: did you know monaco has the top one percentile of earners. jonathan: who a bloomberg story on it -- we did a bloomberg story on an. lisa: it was something insane in monaco. tom: is it the most narrow streets for the race? jonathan: classic street race. tom: i remember being afraid of the classic james garner movie. jonathan: there is a great seen in the driver for mclaren and carr those of an goes to his yacht and watches the rest of the race from his yacht. it is a different life.

this is bloomberg. ♪

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>> there is this tension in the market. >> there is a narrow advanced in the stock market. >> the markets are pricing in a recession, far from it. >> talking about investing for

2024 looking over the horizon to what the market will look like next year and that's really what is going on in the markets right now. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. merger monday, thank you for being with us on television. when there is stress out there? japan takes out greenhill of new york. this is what we are going to see the rest of the year. [laughter] jonathan: stressed you out there? tom: it's a great roll up. jonathan: i'm going to save this and go through the headlines, not the first u.s. japan banking tie up if you want to call it that pound --. got a price, time?

$15 a share. tom: with interesting to me is morgan stanley, it's another one of these. why is this happening? going to go back to the heart of the matter all of a sudden money costs something and that's a catalyst for mergers. lisa: it's also a catalyst for being too big to fail. this is an interesting emergence. you have is you get profitability from being bigger. after decades of people saying banks should be smaller, thanks should be more diversified, all of a sudden bigger banks are more successful and that's really what you're going to see more and more of. jonathan: chevron to buy pvc energy. that's just across the wire. tom: it's important, this is not the zombie roll up this is

companies that are really quite good. i believe they are doing this seven days ago last week where there were two transactions i believe this some was $38 billion between the two. jonathan: there's confidence to get deals done an overall economic data looking pretty resilient. which is why i think we changed the language around june away from pause to perhaps skip with consideration they come back with high rates again. lisa: i can see tom's face as you say this. basically -- tom: going to see much much more of this. jonathan: still don't know what's making us laugh, do you? [laughter] tom: i've also point out with the equity markets where they are you mentioned a couple hours ago mike wilson and others restructuring a bear market were others are capitulating into the optimism you see from greenhill.

jonathan: an old tom hasek, that was. [laughter] equity futures on the s&p. let's keep it together. yields higher by single basis point, 368. tom: the dollar here turning you mentioned 108.22 -- 1.0822. commodities we've under chatted the answer is commodities are persistently weaker. jonathan: i've been talking to jim hancock about this. they are not all behind that story so let's go back a couple of steps. the s&p 500 much more construction -- constructive. likes the idea of the second verse picking up again but are we getting that kind of validation from the commodity market in places like copper? i would say no. tom: that's good to our guest

here to get a perspective. had u.s. multisector shoulders. the move we lifted up does it take us up to a caller edge yields up to resistance? or is there something going on here, lisa, that's original? >> i think the market is still flirting with this idea of is there a path where things can be ok? and, certainly, resolution on the debt ceiling which was last week's cause for optimism is a step towards that path. i don't think we will see the highest end of the 10 year range for the peaks we got to last year. i think there could be some technical trading opportunity or, for sure. tom: what are you doing on duration? not so much the price for yield

move but the that you place in maturity? >> i think duration, look, they look for bonds in our view this year has been compelling. i think we are tenured for looking at a range from 325 to 375. we like tactically trading but err for being long. economic deterioration is kind of a slow burn that i think that's what we are headed we want to come out the other side of this but this is going to be a volatile market as it really has been for the last four or five months. jonathan: what are you seeing as signs of economic deterioration at the moment? >> we are starting to see it on the consumer side. it's obviously very gradual but we have seen credit card balances on the auto loan side now really across the fico spectrum a bit of deterioration. obviously jobs remain resilient.

one of the things we are watching closely is small businesses. small business surveys have deteriorated over the last, i want to say more than a year. the deterioration is probably set to increase as credit conditions tightening these guys , particularly in light of what is going on on the regional banking side. that is where we are focused and we have to remember small businesses employ a large percentage of the population. we spend time talking about the ge's of the world but 90% of businesses are small to midsize. their outlook is pretty important and it's not particularly compelling when you look at the data. lisa: we just had chris merrin at, he was talking about the banking crisis so i wanted to get your sense of what is happening in terms of the credit tightening. he said regional banks are in better position than people assume. they are not constraining their

mechanisms all that much. >> i think it's a bit of a slow burn. the cost of capital has gone up these regional banks are under increased scrutiny. i think there will be more focused on balance sheet preservation and the type of lovemaking they are doing. in parts of the economy will see a bit of stress as a result of that. tom said it while i was listening in earlier the cost of capital has risen and that poses an issue. the fed is doing this intentionally to try to slow economic growth and they are doing it but it takes some time. lisa: given how resilient the economy has been and that we really haven't seen the credit stress materialize in a way many people expected at this point, what is the risk that the fed is going to have to tighten further because maybe the constraint

isn't that great from the regional banks just yet and it will have to be the slow burn that goes on for a wild. >> the market is flirting with that. there is a possibility of a hike at the next meeting. i wouldn't be surprised to see that with higher i think the fed wants to be cautious. if you listened to powell's comments last week he didn't explicitly suggest a policy or but he did on their to the fact that we've done a lot, we could potentially be patient and see what the impact is. they are breaking things, right? look at the move index and where it's been over the last year versus the previous several years. things are starting to percolate in the background. i don't know that that story is completely played out. i think they realize there are now some risks that are becoming

a bit more serious. i'm sure they would prefer to pause but we have a lot of data from now until the middle of june so we will have to wait and see. jonathan: clearly you won't keep hiking and so you see 2% have we seen sufficient evidence they are restrictive or is this a guess? >> that's a great question. my sense is they have probably done enough, they might go a little bit further because they are looking at data on a lag. if we could look forward six men's from now i expect inflation will continue to slow and targets and growth will start to roll over in a more seriously. i think, unfortunately, the way

monetary policy works with a lag so they will react to the data as it comes in trying to see the bigger picture. jonathan: lisa, this was great. we often underplay this how much of an educated guess the fed is taking at the moment. it's not science. tom: it's a theory. you look at the textbooks, how much of this is in the textbooks. i get too many people telling me it's in the textbooks. the dynamics are there. the cliché is it's a regional territory. lisa: which is why data dependency is frustrating for all of us. how can you rely on data that can be unreliable. i think that is the frustration with the fed speak because they are basically in this fishbowl

without being able to see outside and give you guidance from around the fishbowl. jonathan: thanks to the pandemic, that phrase. it's the worst. tom: g in cello i haven't followed it much but i took a study from 2010. they are down 82% with a $15 take out from their glory days. jonathan: would you like to share that wisdom with our audience one more time? what happens when you get stressed? tom: you have to make. [laughter] dinosaurs go out there and they have to get to 114% down from an 80 share price on long time ago. lisa: we've gone from the gulf network to animal talk. tom: the wild kingdom. jonathan: michael o'leary in the studio next.

>> keeping you up-to-date with news from around the world with first word, i'm lisa mateo. forging further into its u.s. investment banking through a deal to buy greenhill the japanese banking giant agreed to buy for $15 a share. which values the company at $550 million. it will contain leaders including cfo. ford ceo is pushing the company's plan to lift electric vehicle output at the end of 2026. the company is taking the fight to tesla. >> they've had the market themselves kind of like what we do on probe. now they seeing a lot more pressure where we compete really in ev pickup trucks, crossovers

we are going to show people today. you don't see as much price competition because not this many vehicles choices there. >> you can watch the full interview on the terminal and throughout the day on bloomberg tv and radio. global news 24 hours a day. powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo and this is bloomberg.

jonathan: live from new york city this morning good morning to you. equity turning about positive in the last 10 minutes.

6% let's see if we can add to the rally last week on the nasdaq too. tom: we have to see. the market is moving and i'm sorry i see a little lift here and to me it lifted off of the takeout news. including chevron. jonathan: did chevron get the deal done? tom: no question. i mean, that's just all there is to it. i'm flustered. i'm a father in america. jonathan: what are you researching? tom: the middle child goes over to europe opinion realize they are in school so on the weekend they can travel places and have the life i never had and you have the typical dad panic. it's a ton of money to fly how about the dublin $26, that's one way. you are all in $52, $60.

jonathan: i used to pfeiffer 15 quid, 15 pounds. the man who made it happen is responsible for my vacations in europe as a child. michael o'leary joins us right now. it's not bad is it? michael, tell me this is that the future still? or do things change? >> it is the future that things are changing. we are going to grow from 149 million passengers to 300 million passengers by the early 20 30's. there is still lots of growth. the market has searched capacity has come up we are looking across europe we are up 25% seat capacity.

we are taking huge amounts of market share from everybody else. we are offering really low airfares but those low airfares, we expect our lowest to rise probably five, 10% a year for the next couple of years because of the capacity constraint. boeing and airbus, huge backlog on orders. can increase reduction because of supply chain difficulties. i think you are looking at a european market that can't beat some of american stable capacity and or reasonable pricing going forward. jonathan: is that good for you and bad for the people traveling? >> the challenge is if you look at the general market which was built up by the german government they've only restored 80% of pre-covered capacity. airfares have doubled this year over last year. they are increasingly turning to

us because we have capacity. because we have capacity growth we can keep bears down but i have no doubt one of the big drivers is going to be the legacy carriers really driving airfares much higher than they are in the u.s.. lisa: are you willing to have a commensurate increase in your price just less? >> we are going to keep growing capacity, we intend to take huge amounts of market share from every incumbent in europe as we grow our share from 20% to 33%. lisa: people talk about the travel boom. you only live once, get out there and travel if you are not dealing with the business side as much how confident are you that that's going to continue in perpetuity? >> it's too long for my horizon. next five years, we are seeing

very strong business growth. businesses are flying around europe particularly to eastern europe. repairing supply chains. they are looking to find cheap and you fracturing around portugal, romania. we are seeing a strong recovery in our business travel. i think people were locked out to and a half years are going back traveling. travel increasingly, really surprises me the negative coverage of higher energy prices. you can get paychecks at the end of every month at what they do is they go travel. you have kids who are all over europe. when i grow up in the 70's and 80's that was the last century no they go around europe. this summer huge u.s. flows into europe the asian market is

recovering but because only 90% of pre-covered capacity has been restored demand is strong and pricing is strong. i don't see why that won't continue for a four or five year period. things will throw up our scores with the underlying fundamentals are very strong. demand for travelers and supply is constrained by aircraft manufacturers, there is a cap on what they can build and how fast they can increase production. tom: is the only question our listeners and viewers care about it looks like the u.s. airfares are a scam. i looked, 60, $70 versus $300 on the same flight in america and and look at the margin you are making, $.12 a model versus six or seven cents on united airlines why can't america get this right? why aren't you in america? >> so much growth for us in

europe why would i want to go to america when we can continue to deploy this in europe. europe is moving towards consolidation i think american airlines are slightly overplayed. they started years ago but some places it's average ticket price is $120 a seat my average ticket price last was 40. more capacity needs to be found in the american industry but the challenge is going to be for all of us because boeing and airbus can increase their production. it's going to be a challenge for the next four or five years and i think we have to be careful not to repeat what's happening in the states. we don't want to push pricing too high and that is why our aircraft is key to keeping prices low and people traveling

for the next decade. jonathan: you mentioned consolidation are you interested in that? >> no. consolidate the way and you will need to consolidate because then if you are going to be able to compete with ryanair because we have lower costs. jonathan: you don't want to play the consolidation game, no debt right now. >> we are paying debt down aggressively. we are zero net cash. jonathan: capital returns? >> i think it's coming, just yet. we are paying down debt at the moment. i have about one billion in debt left. i'm spending about over 2.5 billion a year which on funding out of internally generated cash flow. once we get through that, if we have another strong year we have

significant cash balances and we return that to shareholders. jonathan: big difference, isn't it? this was fun, michael. we have to do this more often. >> i have to do this more often. tom: bring your airline to the states. lisa: i want to know why some can offer $40. tom: aa, 80, 90, 300 is ridiculous. >> we are transport pioneers we built the roads, and i we are building the air. [laughter] were going to dominate the skies across europe. jonathan: when you talk about business travel i do wonder what's going to happen here. i wonder if the cabin is going to change? >> absolutely not. jonathan: you're going to keep the same thing? >> people keep confusing

short-haul and long-haul. this is just on time, affordable transport long-haul, 20% of the market still pays ludicrous premiums which is why long-haul and short-haul is different. we intend to continue to grow strongly in europe. and i can only do that with my beloved airport. tom: did you see the article this weekend? jonathan: i doubt they fly him undercover. michael, thank you. this is bloomberg.

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tom: "bloomberg surveillance", good morning, everyone. good conversation on the market right now. names that jp morgan congratulations to sonali for her reporting on greenhill. hundred percent lifting the stock there to get it to $15 a share. the jp morgan confidence -- conference goes on. the signs of deterioration in the economy what are they supposed to say? lisa: no signs of deterioration excepted to 84 million and they expected 81 so they are making

more money. as they look out, how much of they going to consolidate business at a time when there is this pressure with jp morgan cfo saying they do expect the systemwide deposit out those to continue? from them, perhaps less. tom: managing the message here, important data check this is a little bit of blip for the market. futures up 32. the vix dare i say the 15 print we saw but 17.08 to reset and the yield is what i'm looking at. the two year yield rounded up at 28% -- 2.8%. that would be game changing. lisa: i don't feel any momentum i see it in the micro stories but on the macro side everyone has gone to sleep waiting for

some sort of new catalysts why else is someone going to get just about anything about one way or another? tom: conviction is going to be on the job report and the inflation report before the june fed meeting. i think one other insight we can say is the whole thing is about callers, being within a range somewhere about support, depending on what you're looking at. not copper, copper is not a color trade. other than that a lot of coppers out there. lisa: is that eight macro story or china reopening story? tom: this is really important we will do more of this throughout the week on china eiffel suggest is a domestic study versus a foreign study for china even though the domestic economy is doing ok i'm almost guessing there. lisa: that's what some people say at some point how does it

get into the sector? tom: a weakness we have seen the last number of days. plunge into it right now chief market strategist, michael or burke joins us right now. what are you going to look for today? what is the key thing to focus on on a monday. >> debt negotiations, there's a lot of optimism thursday and i see a lot of positive comments from all sides. i think it was around 10:00 a.m. friday morning so everyone can enjoy their weekend. negotiations will resume today and i think the entire market is waiting for this situation to show some real progress. tom: you and i have seen the

market walk away from the bears what is the character of the day by day? grind is almost too much of a negative tone, the lift to the market what is that character? >> the s&p 500 was in the 4200 range. the nasdaq 100 highs last week a bunch of i call it the cap stocks. for stocks last week and this is people checking out the market and i think one thing that is definitely missed out there is that about 30% of the s&p 500 means are owned by passive shareholders. they are not sellers. we've punched so much liquidity over the last several years that

the pricing mechanism doesn't react, you know, as efficiently as it once did. so what we are seeing now is that drift higher because people have checked out and there's not much going on and we have the structural bid that underlies the market. even though there's not a whole lot of positives out there on the market we are seeing just multiple extensions. i think you need more engagement by investors to get real pricing out there and until we get the debt ceiling resolved or at least progress you don't see that so you just have the slope drift higher. lisa: do you think there will be some sort of catalyst to tread water as it has been if the debt ceiling debate gets resolved? >> i think you start shifting focus back to inflation where the economy is at. as tom mentioned we will have

inflation at the end of the week. i don't expect much improvement there. nonetheless, it seems to be more set for the fed to pause in june and i would expect that to be the case. as far as the economic slowdown that everybody is expecting, including myself, it's taking much longer to play out. supposed to sit here. we are still going to shift back to inflation debate and, the higher for longer i think it's going to be longer than anyone expected. lisa: you sound frustrated a bit. you're not of on with respect to trying to understand how to play a macro story at the time of just uncertainty. is there a corollary for this moment? >> i can't think of a corollary because i do think the liquidity of the policy for the past 15

years all plays into this. you talk about the banks earlier and everyone, people are talking about more bank capital, things like that. pumping so much liquidity the bank deposits went up by $5 trillion and 5%. those banks have to put money to work and surprise, you need some of that for investments so there's two sides to this. this is going to take a wild to unwind. tom: do you observe a lot of cash out there? >> i don't observe a lot of cash. tom: i agree. >> yielded 4.3% i think that is very attractive investment in this environment. again we are not seeing a lot, earnings season was better than expected but it's going to be down over the year. you can go for the safety there.

again, we are entering this period of a positive funds rate after 15 years of mostly negative. that should lead to a more challenging environment early next year. tom: michael, thank you. looking at the markets here highs of the day a little bit of a lift. futures up four. merger monday i think we had merger monday last time. my recollection, that was a huge deal in australia someone bought all the gold out there and today it's finance guys and an oil company here or there. lisa: the finance one is interesting because of some of the change we have seen in financial firms. whether it's the likes of what we saw with stepping up over on the equity space. greenhill, really interesting. tom: it's going to be

interesting to see and the heritage here out of the great financial crisis is fascinating. i remember when jason tranter left and set up stratega. every character was there and then there was greenhill, what did they do for a while? sonali basak joins us. what did greenhill get wrong for eight years? sonali: that's the question of lifetime. this was the first of its kind to go public. tom: exactly. sonali: they faced a lot of competition. one of the biggest boom cycles for mergers and acquisitions. they left the restructuring in 2008 as well. greenhill on profitability, competition as well as winning

share on deals. very significantly in recent years, the $15 share per cash stock price it was trading at 670 urso back on friday? it's more than doubled. lisa: the other question is why is mizuho going for this? sonali:mizuho has been hiring bankers so buying greenhill gives it an eye -- an immediate presence. lisa: the elephant in the room as japanese banks have a history of getting into businesses right before the economic cycle turns. i think about 2006, 2007. and also derivatives tied to them how much are people saying there is similar going on versus a real beginning or at least

entering at a good time for the business? sonali: i asked the question to the top executive why $15 a share when they were trading at less than seven just friday and he said before the regional banks fell off this is what they were trading at. to defend the japanese a little bit here morgan deal in 2008 that paid off over and over and over again. elon musk and twitter that put them on the deal next to morgan stanley. they can win if they buy cheaply. tom: this will be a study through the day with your reporting and bloomberg reports greenhill to be taken up rule number one, got to keep the horses. how does scott talk keep the trips? sonali: they can buy more chips from credit suisse. they can add more bankers. tom: listen to you. sonali: i covered greenhill for

a decade. mizuho used to have a stake in evercore. buying banks is not easy. if you don't keep the trips you don't have a bank. tom: it's just that simple. sonali basak and kuiper reporting on -- thank you for reporting on greenhill. far away from the excitement and enthusiasm of 2010. futures advance, up five. i'm watching the two-year ,basak back in the studio good morning. >> keeping you up-to-date with news from around the world with first word, i'm lisa mateo. china has questioned the sincerity of the biden administration as it pushes to continue talks with beijing.

on the other sites a press's and contains china by every possible means. president biden says he expects ties to improve very shortly dismissing an alleged spy balloon that caused a diplomatic spatter earlier this year as silly. china is likely to see the covid-19 wave peeking toward the end of june. according to a senior health advisor this comes as authorities rush to bolster their vexing arsenal. the new variant has been fueling resurgence since late april and is expected to result in 40 million infections by the end of may. general motors new president of north america spoke to bloomberg's matt miller about the f electric giggles. >> we are all in in terms of our ev you know the escalade has been the large in you suv for over 20 years.

if you look at the current escalade and if you don't complement it with the ground up, all new escalade iq it's absolutely fantastic news. >> gm says it will begin to produce a pickup truck you can watch the full interview on the terminal. global news powered by more than 2700 journalists and analysts 's bloomberg. lomita feed is 101 years old this year and counting. i'm bill lockwood, current caretaker and owner. when covid hit, we had some challenges like a lot of businesses did. i heard about the payroll tax refund, it allowed us to keep the amount of people that we needed and the people that have been here taking care of us.

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the same output as your competitors, does that mean you are going to reduce that 25%? how is it working? >> i think you're going to see from ford over many years a natural reduction skill mismatch, transition of our teams, moving some of the engineering to for labor sources so it will be a combination of things. it's obvious that we have to be more efficient. tom: james farley ford ceo speaking with matt miller. we will go to mr. miller here in a minute. we have to turn to the markets we have the bond markets moving for those who have been waiting for fed speak and, lisa, i'm as guilty as anyone about making jokes it is not a yawn by the

gentleman from st. louis this morning. james bullard moves yields higher. lisa: he speaking at a discussion in florida saying the probabilities are overextended in order to get recession under control he said the labor market is slowing but that does not mean recession. the idea of two more rate hikes this year flies in the face of what people are pricing and or saying at the federal reserve but to meet this is really the distinction that we keep hearing from fed officials. if they think things are too good, that is bad for markets because that means they are going to raise rates further. tom: let's review this. i do think this is important. bullard has been an outlier agreeing with others leading the charge. but a while back he was giving scope and scale to a really significant reset in interest

rates without any whisper of distant and. i see a recapitulation inflation staying too high, one reason for more hikes, plural. we are very plural this morning. lisa: this is the distinction between skipping of june meeting or the pause, the skip being there might be more needed as you get data that has come out as unexpected. tom: we have seen a better economy and that may include new cars with the perspective on his world of autos, matthew miller joins us out of dearborn, michigan. i don't know if you brought it up at the ford family has enjoyed the detroit lions did you and jim farley talk about the resurrection of the nfl team from dearborn? matt: we did not be focused pretty specifically on cars and the business of making cars.

tom: the business of making cars, you are knee-deep in this as a general statement, who in detroit is winning the ev war? matt: farley is winning the war as of now. ford is the number two producer of electric giggles in the united states. only tesla produces more and sells more a lot more they want to narrow the gap and put out 2 million ev's by 2026 with very importantly a margin of about 8%. lisa: the distinction right now between a lot of tv producers and the detroit lions of gm and ford gm said they didn't think they had to cut prices in response to tesla's price cuts. but for dead, why? do they not have the pricing power? matt: you are right pointing out

that distinction. jim farley is very realistic in his expectation that once production comes back online to levels we have previously seen, 15 million is like the top. once we get back to the previous level you will see much more competition in this space that price cuts are going to be eight thing of necessity. --a thing of necessity. lisa: autos have driven some of the inflation we have seen and you start to see the opposite. how much is this a ford story and how much of it is an industrywide story? inflation is an industrywide story. they pay a lot more to make their cars. jim farley has identified

6-7,000,000,000 dollars of what he calls cost this advantages. they are working on pulling those and that is in ice story. electric car production, they are starting now. in terms of the ice story, they haven't built a new factory in 50 years so they have to go back and look at everything. tom: we are going to go to breaking news and come back to mr. miller. i have to be careful here. this is not the president sleeping after a long trip to japan this is mccarthy aid commenting on negotiators arriving soon at the capital. lisa: 9:15 a.m. is the time. we didn't get a concrete time as to when mccarthy and i will meet

themselves. negotiators are arriving in the next 20 minutes to get some sort of start on these discussions. tom: we will continue to monitor that. i'm fascinated by people in detroit, never bring up shelled holder return -- shareholder return. i look at the 10 year returns of the auto companies and they are flat out unacceptable. your conversation with jim farley, is there any discussion about how to drive shareholder return? matt: that is exactly what farley and the whole team are doing right now behind me. they are talking to investors, they are talking to analysts about how they can boost that over the next few years. they see a different world. it won't be about the vehicles.

if it's not about the shell of the car that's going to make the money. you can see margins come down on the actual vehicle sales. it's about the software and services. that is where they see their growth coming in. they have an example in ford pro. their commercial arm in serving plumbers and electricians across the country. the prophet there has been a level that is exponentially higher than what you get in car making. they want to turn the whole thing that way. tom: matt, thank you. futures up too. it's about a yields, 10-year gilts three basis points higher. we do not have further curve at version but still set at 61 basis points. shows a tension friday and today.

there is just a higher rate regime here. lisa: two year yield is the highest about two months. that is where we are at as we reset. they are not going to cut rates or need to cut rates, how much does that tighten credit conditions without the fed doing anything different? what if they don't hike rates the rest of this year but they just don't cut? that will tighten given the fact that people are still pricing in. tom: i'm waiting for the disinflation path. he said we have a good shot at getting back to 2% inflation. there is the round-trip from to rate hikes up as he alludes to. no recession in sight. i'm being a little too strong there. households are flash, did you feel that way this weekend? how about those summer camps? lisa: my kids might be flushed. tom: did he ever get the summer

camps apply email? the packing list. bring a few things with you. lisa: bring 25 shirts and 55 sox. the one thing that is important to note is he is not a voting member. how much do we give or wait to certain members? this is an active discussion. tom: i've never put much weight in that. mike mckee does. i'm just looking at who they are, what they believe in and james bullard has made clear he hasn't optimism about the american economic growth. it's been a fascinating monday. i don't know what else to say about it. congratulations to sonali basak reporting on green helped. if we move forward. good morning.

karina: futures are unchanged. the countdown to the open starts now. >> everything you need to get set for the start of u.s. trading, this is bloomberg we open with jonathan ferro. jonathan: live from new york, the president returning from japan to problems at home. yellen doubts the u.s. can pay its bills beyond june. the fed chair tees up a bea