>> we are in a challenging period right now. >> the fed is keen on getting inflation down from 5% to 2% and they will continue to step on the brakes. >> we are probably at peak rates. >> the rate cut talk, forget about it. >> this is another set of for a cyclical rally. 4300 is not that far away from where we are today. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: live from new york city this morning, good morning, good morning for our audience worldwide on tv and radio, this is bloomberg surveillance. your equity markets are softer

yesterday and a touch softer this morning on the s&p 500 and -0.2% with no sign of a breakthrough in washington, d.c.. speaker mccarthy told reporters that democrats to want to spend more money this year than they did last year. apparently, that's a redline. tom: i thought we had joy 24 hours ago so where did it go? there is the reality in june or july but speaker mccarthy may have to find 10 democrats to support him to get anything we are not talking about now through. that was really the huge thing. is he going to be john boehner and get kicked out by his fellow republicans? jonathan: i love the take from mitch mcconnell. he said i think everybody needs to relax. any sign of panic? lisa: no, in fact the house

majority leader -- minority leader steve scalise just came out and said i don't know the x date is actually correct. maybe they are trying to play us. tom: please. lisa: doesn't really matter if it's june 1 or june 15? technically yes but do we care either way? tom: they are playing to their constituents. the only constituency that matters is getting the social security checks to mitch mcconnell's crew in kentucky. not to pick on kentucky but it's got to get done and is just how you do it through the political mess. we have a president deeply experienced at this gridlock. jonathan: they call this a manufactured crisis. the republican push yesterday raising questions about whether the x date is in early june or not. tom: i will defer to really smart people. it's not so much about spending

but about the money coming in and tax receipts. i'm not knowledgeable on this. i think it's pretty lumpy. they wake up on a wednesday and they go are we bringing in 42 billion or 13 billion? jonathan: we will catch up on the numbers a little bit later this morning. in this market come equity futures on the s&p 500 or little bit software but elsewhere, plenty of action. chinese equities are wiping out gains for 2023 and copper making a new low for the year. look at some of the luxury players in europe, real weakness yesterday and some weak follow-through today as well. tom: they are back from the high multiples. i would look at the suddenness of copper. from the middle of april, we have gone from +2 standard every

eight -- deviations to 4 deviations. jonathan: we've been on top of this the last month or so with signs building for maybe that enthusiasm around the global growth story is starting to crack. lisa: yes, i'm trying to parse the difference between the global growth story in the china story. are they interlinked the way they always have been. a lot of the stems from china at a time when china seems to be disappointing in a significant way. tom: there is domestic china and foreign china and i think it's a combination thing. you have an acceleration of the trend i look at the fancy room mb chart -- remember the - remembyi. lisa: we are speak waiting for janet to talk about -- speaking

at the summit and the pushback she's been getting from certain republicans. we also get a host of fed speak including fed governor chris waller at 1210 a.m. at 11 a.m., we hear from the former vice chair richard c larida the town pays attention to at 2 p.m. which is the meeting minutes from the previous fomc meeting. this will be super interesting. we will get a sense of how concerned people are about the banking crisis that was or wasn't. people can debate that for the rest of your and retail earnings includes kohl's and abercrombie & fitch around 7:30 a.m.. american eagle outfitters after the bell but can nvidia keep chugging along after gains? jonathan: what a run for that

name. tom: will it crash? i don't know. jonathan: we can talk to an analyst about that. let's get to jeff yu. the enthusiasm around the global economy, do you see signs of some cracks in the last couple of days? >> not really, one of the reasons is i don't think investors are super invested in risk on or risk off right now. it's a little bit of enthusiasm coming through in the price action and there is a coincident flow between em and dm but is there an uneasiness about the debt ceiling. people have been so underinvested in the last couple of months so they need to put money to work. is nothing fundamental right now. people are still watching this on the sidelines. tom: do you aggregate china

economics or do you look at it as a domestic entity and the foreign china story? >> i think both matter. they had something to say about the convexity of last week. i look at germany pmi. it's heading toward 60 in the manufacturing pmi is heading to 40 and you haven't seen that kind of spread in a long time or ever. european consumer is on fire right now. manufacturing is still in a weak spot. which center will converge to the other and that's the key question. lisa: how unusual is it to see a global synchronized cycle where services are on fire and manufacturing is falling off . >> it's very unusual and i think people are still releasing the penta demand from the pandemic. there is still some savings being used but the labor markets

are strengthening and i think europe is starting to realize this will be cyclical. you give people high wages and they generate new jobs and new economies and further wage gains and that self-sustaining and that's healthy for the likes of germany. for some other areas, we still need to reframe manufacturing who may not have jobs. i think it's a balancing act. i wouldn't treat all of the services on fire as being inflationary is a necessary background. lisa: given the backdrop in your, how enthusiastic can you be about the european story given that china seems to be slowing down and not that willing to pump new credit into the system? >> i agree that if i had to take aside who will convert to what, they have to convert to manufacturing. exports to china have been weak for a while.

on top of that, we need to be aware of the luxury trade. we saw there were flows into that segment already in the last few weeks. people may be taking profit from that. tourism from china into europe and elsewhere will pick up and that's not going to move the needle. tom: bring your global synthesis back to the united states. let's say at 2:14 a.m. on a given sunday, they get the that ballet solved. what happens? what's his three month treasury to? what's his 10 year yield do? do we reestablish a disinflationary trend? >> no, we don't, we consolidate the higher for longer narrative. we consolidate the rates restrictive narrative and i think markets will just hope the fed will not talk about 6%

again. we are seeing healthy data globally and u.s. and u.k. particular, much more services and less expose the global economy and that's where inflation and wage risk remains to the upside. the next phase of risk -- what is the bigger risk right now to the markets. it's still trying to chase the fed and i think that narrative will be more important over the next quarter and beyond. jonathan: this was brilliant, thank you. that point on the pmi, if you look at manufacturing china and europe in the united states as well, it looks like rate cuts performing poorly. if you look at services, there are a different picture. tom: that was fascinating and new have dish in that you have james yu in the same area.

jonathan: what converges to what? two services come down to manufacturing or does manufacturing come to services but they are different scenarios. lisa: he thinks services will have to converse to manufacturing. especially if china doesn't come back online, there is something the bricks a little bit. how much do you end up not with a soft landing but something that's sticky inflation and a two-tier economy that keeps balancing each other out in different kinds of ways. tom: i look back at united kingdom core inflation today back to 1988. there is no equivalent chart of the in the western world. it is unique to the united kingdom. we don't need the chart and it does work on radio but the answer is core inflation went higher. i'm thinking about the date you did brexit for 14 hours and i was in mayfair.

jonathan: i remember it well. tom: i was on queen street in half moon street and there is casa ferro and pasta is up 24% and all of oil is up 46%. jonathan: claim the spanish. -- blame the spanish. tom: they are doing 46 pounds for ablative -- for a plate of pasta. jonathan: we are not doing this. we want to talk about durum wheat which is very expensive last year. it's been expense because of ukraine and prices are meant to come down so the italians are pushing back aggressively and this talk about pasta strike

which is serious. we will talk about that later. lisa: sponsored by atkins? jonathan: in italy, they are accommodating of people. tom: you're sensitive this morning. jonathan: equity futures on the s&p 500 is negative 0.3%, this is bloomberg. lisa: keeping up-to-date with nusra around the world with the first word -- a complete u.s.-china decoupling is not possible but a selective coupling is taking place from former cia director david petraeus who spoke exclusively with bloomberg at theqata economic forum in doha. r>> it is certainly not a partnership without issues. we've seen distinct limits. i don't think presidentxi does not see russia as an equal when president x went toi moscow and

had his summit with putin, he didn't get what he wanted. this is a very transactional relationship at heart. it's not a relationship between two equals. lisa: the government of the state of qatar is the sponsor of the forum. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪ ♪ (upbeat music) ♪ ( ♪♪ ) woah. ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) constant contact delivers the marketing tools

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>> we could still finish this by june 1. we are trying to couldn't vince everything in a short timeframe. what else do you have been negotiate. we could still finish it in time. jonathan: we just don't know. we just don't know what time we need to finish wish does -- which is an odd thing to say. no one is being transparent about when they finish but janet yellen said early june and republicans have poured cold

water over early june. lisa: i hate to be the realist in the room here but at what point does it matter of is june 1 or june 15? just get a deal done. do they have to have a date in order to take action. jonathan: let's talk about something far more interesting it's taking place later. governor desantis widely expected now to announce his run for the presidential campaign over the next 18 months or so. he's doing it on a twitter space at 6 p.m. alongside elon musk and david sex, an interesting guy, quite conservative but kind of bizarre. tom: it's bizarre because his victory in florida was stunning. why does he need to do this? his polling in florida was shocking. lisa: i take the other side which is what does this mean for twitter in terms of social media

versus media? if elon musk is gonna be a major platform, at what point does a drug scrutiny and regulation of a media organization. jonathan: i'm not sure how many people we remember the way they started their campaign and i'm sure this will be forgotten very quickly. i remember when donald trump started his campaign at the trump tower. lisa: going down the escalator? jonathan: these things are quickly forgotten and things could change over the next 12 months but what's curious is if you are not that well known outside of this court base which is the online conservative wing of the party which david sex attracts as well as elon musk, you think there would be an effort to go beyond that. i'm wondering that -- what that will look like in the next few months. tom: did you see the headline

from reuters? white house republicans listening to lisa abramowicz. jonathan: that's not really news. that will continue and that's coming from reuters this morning. tom: we will continue to bring the headlines through the day as we stagger to june 1. now we have zach cohen. let's go to the bottom of the important summary with the team in washington and takes me back to 2015 and john boehner's survival. this is your wheelhouse, is kevin mccarthy going to need 10 democrats not named pelosi to salvage his speaker who'd given the tensions? >> i think it would be tricky to get to that point as you can imagine. after being elected speaker by the narrowest of margins in early january and after historic rounds of balloting that lasted nearly we, the idea of turning

to democrats to salvage his speakership would rub a lot of republicans the wrong way but his primary goal i think is to bring a deal back with the white house that he can sell to fellow republicans. democrats have said this is the last break moment. i think that's probably the least likely scenario. it's hanging out there and there is an option for mccarthy if he decides he needs a nexen in china moment and reach across party lines to get a deal before the x date whenever that is. tom: are you presuming something gets fixed in june or will they kick it down the road? >> there is definitely talk yesterday from some republicans questioning whether june 1 really is the deadline. that's what janet yellen has said but would be missing a couple of payments be so bad?

it would be a default on the u.s. debt and could have economic consequences far beyond what we imagine. i think there is a softening of the republican position so why do we need to negotiate with the white house? this could drag into the first week of june 5 and the week afterwards in the range of that early june timeframe that janet yellen has given and before june 15 when treasury does expect another inflow of cash from tax revenue. we can see this bump up into june especially given the fact that the senate is out and the house is not passed a bill yet. it will take a couple of days after the bill is passed before congress passes a bill and sends it to biden's desk. lisa: we will probably talk about this for many more weeks. let's pivot to the idea of ron desantis and his likely run for but republican candidate for president on a twitter space and

who is going after. i find this fascinating given that it will be difficult for him to attract trump voters without alienating them or alienating the rest of the republican party. do we have a sense of how twitter plays into that strategy? >> twitter was also the place where trump was banned into the 2020 elections was not a space he will be on anytime soon and muska's offer that to him but he says i will stick with true social which is another social media platform. desantis and every other candidate in the 2024 presidential race like the south carolina former governor nikki haley, these folks will need to find a way to not just appeal to trump space but to differentiate from him somehow and that will be tricky without turning off the same base that voted for him in 2016 and 2020 and likely will again in 2024. trump is still the leader of the

clubhouse. it's going to be hard to break away from that. trump also was in the single digit when he started in the 2016 republican primary. any of us who forget that our dreams are shattered in 2016 are treading a dangerous path. jonathan: thank you so much. it's easy to say this is silly and why are you doing this but it's ultimately forgotten quickly and is the start of a primary, not the start of a presidential run at the start of a primary. that distinction is important. lisa: especially because there is this bigger question of can someone win the republican primary and general election at a time when perhaps president biden is not coming from the strongest position. it seems like the crystal ball could get shattered. tom: i await the next adult pole. these guys are way behind trump, that's my amateur take. that's my sophisticated summary. i just go to the pole and look

at the numbers. i just go with what others think. it's not trump 38% and desantis 32%. that's not where we are. jonathan: 6 p.m. eastern time, that's what we are waiting for. the white house and republicans are expected to resume debt talks today according to reuters. that headline was out of moment or so ago. tom: when is the next headline and what will they talk about and when we get another photo shoot? we semi-could broken record. we will find that would tax receipts are from janet yellen. is it march 24 today? lisa: it's may. tom: excuse me, i got the m right. jonathan: welcome, tom to the second quarter.

lisa: we don't want to go back in time. how does this shows the recovery we hear, does that get dampened immediately? we look at housing starts yes -- yesterday, the highest going back 13 months? jonathan: i saw the numbers as well. they are doing ok. it's amazing the situation in america now. all these different points of tension, manufacturing versus services and rates are up here, the red sox not holding on. ♪ ♪ welcome to a new era of flight.

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jonathan: looking for the real view on the debt ceiling negotiations. we've got to sort that out. tom: do the commercial and thanks to our commercial vendors who make surveillance go but we need thebramo cam. jonathan: whenever we start the conversation about the debt ceiling, we get the bramo side eye. tom: in the hands get going. what's really amazing is it's like she's landing an airplane.

jonathan: don't talk to me about it. lisa: everybody is exhausted by this debate. tom: pac west, 13 month cd, five point 50. i did not expect that, i thought would be lower and it goes to what jamie dimon was saying. this is different than a month ago. jonathan: it's having a better time over the last couple of days but they got to get rates up to compete. at the same time, what will that do to profitability? lisa: it's true, this is the issue, they are game because they are selling assets which is a good thing but there is a longer-term existential question that has not been answered. jonathan: the viability of profitability of these companies? lisa: exactly.

jonathan: they are offering nothing? that's what you are up against in the banking system in america. tom: mergers are not even in the headlines. the vix is almost up to a 20 level. jonathan: it was softer yesterday and here's some follow-through on the s&p 500. down about 0.3% on the nasdaq. the biggest one-day loss in about three weeks on the s&p 500, equities are starting to break in the face of debt ceiling whatever you want to call it and the two and tenure and 30 year bond market, yields eight straight days they have been higher. a consecutive days, just about higher on the session and we come back below 430.

what's interesting is you look at the breakdown of chinese equities wiping out the gains of 2023 and copper breaking to new lows. even the luxury players in europe are starting to crack. tom: that really captures it. jonathan: this has been relentless over the past couple of weeks. it is backed up by weaker than expected data out of china not exactly fantastic data out of europe. tom: we could get 20106 level pretty quickly. it will be interesting to see. jonathan: the ecb looks like they have an intent to go forward and hike interest rates again. fed governor chris waller will speak later. the fed minutes come two hours after.

how they characterize whatever june is, it seems the debate will be on the committee june 14. tom: joining us now is the chief u.s. economist, working with carl weinberg. in your note, you don't mince words, you are looking at 70% of the economy is the consumer. we go february a slow after christmas. do you have a clue what's going on in april or may? >> good morning, that's what we're trying to assess but it's been difficult to predict how the consumer will respond. we saw a 40 year high in prices

for the consumer. we did see a moderation in february and march. our estimates suggest that april will be a soft number. the consumer is looking at a lot of challenges in terms of high inflation and if you look at the confidence numbers. if you look at what they are facing, they are facing high inflation but they are still seeing a gradual improvement. they are seeing positive real disposable incomes now and they are still sitting on roughly $500 billion of excess savings. that may sustain them. i expect a slowdown in consumption in the second quarter but i think there is some upside to that estimate. tom: if i look at consumption, you look at charge card data and the rest, how do you measure consumers, do you look at car sales? >> no, we look at a range of

things and we are looking at car sales and how consumers are spending on goods and we are looking at services. it's been the story especially in recent months. that's been since the letter half of 2022. that's where we did see a slow in february and march. that is what the fed is looking for that slow down but is not materializing in the inflation numbers. consumers are still seeing, we are still seeing strong demand for particular services, travel, entertainment, dining out. those things are still not moderating to the extent we need to see because the labor market is also very strong and job growth is strong and wage growth is moderating but it's rising at a pace that is above the pre-pandemic trend. these are the thing sustaining the u.s. economy in the u.s. consumer but it's not clear to

us how long that will last. lisa: the fed had a convenient excuse for the banking crisis to say we will show restraint because of the banking crisis. we don't know what will happen. can they make that excuse now? will they try to deemphasize that aspect of the meeting minutes given the fact that the market seems to have moved on? >> the banking crisis, we don't think it was a banking crisis. when the fed raises rates at such a rapid pace, you would expect to see a strain. the risks were not managed well. from the fed's perspective, they have done a lot, five percentage points in the employment rate has gone down so they need to keep an eye on what's happening with inflation and the labor market. what we are reading from what they are saying is we've done a lot and we don't -- and we do need to take a breather. we can look at the data and see

how things pan out from here. we have underestimated the u.s. economy in the u.s. consumer throughout this time. we still think there's going to be an impact of five percentage points and that's what we are waiting to see and that's with the fed is going to do. lisa: is it breathing space, intermission, freeze? how will they categorize this so we don't end up with some sort of repricing the rate cuts into the market that have somewhat been priced out since what we saw in terms of the turmoil in march? >> i think that's for the challenge lies. it's going to be a matter of communicating that they will take a pause. they will not raise rates in june. i think with the real message is is that if things surprise to the upside especially inflation that they are prepared to do

more. i think that is the message they need to send and the higher for longer messages still there. they will not back off until they see that inflation improve. the only way the fed actually cuts rates this year's if there is a recession and inflation comes down substantially or you are seeing the situation where we jesse inflation disappear which is not our base case. tom: i know you habtoor medicaid carl -- i know you have two medicaid carl one bird but what's the difference between pause and skip? >> i'm not sure. if they pause or skip on this meeting, it doesn't really say much. i don't see it as it saying much about what they will do subsequently. this fed has said over and over again that they are data-dependent and they will look at what's happening with

the u.s. economy in the labor market and inflation and they will respond accordingly. the message from the chair is that they've done a lot and they can afford to step back and take a look at what's happening. jonathan: thank you so much. there is a lot of frustration around this. you don't say pause now because markets are convinced pause means something else. it means the next move after that is a cuts. you take a break from hiking because you are open to see what you may need to do in the future. tom: do we have someone to blame? jonathan: i don't think that's the dead and i think the fed want to play this game but i think the market wants to so they are trying to play along and i think the chairman recognizes their people on the committee looking at the dot plot. there is a spread there. you're meant to reflect the consensus of the committee and if you start minnick into the market that there will be no

more rate hikes when you've got other team members on the committee who are talking about maybe needing to do more, how do you get that through? the chairman is open to maybe tweaking the language because the language is meaningful. lisa: specially at a time when the market is priced in a greater degree of stability into year end with rate cuts priced out of the market test priced into the market immediately after the svb aftermath and that we've going up about one full percentage point in terms of where we ended the year in december as far as fed funds rate so they don't want to go back against that. they don't want to say a skipper a coffee break or postponement or a timeout. tom: i like that, a timeout. june 14, a fed timeout. alan greenspan really wasn't interested in consensus and a guess chairman powell is. or is he not?

does he have a singular voice if they make a decision? i'm not sure that's been communicated. jonathan: because me the impression that that's the consensus on the committee. marry drive used to be criticized all the time -- mario draghi used to be criticized all the time. lisa: he had the luxury of rates that went nowhere. jonathan: i also think marriott drug -- mario draghi have the chops to do that. td securities is coming up shortly, from new york -- was i diplomatic? lisa: you almost were. 1 jonathan: this is bloomberg. lisa: keeping up-to-date with news from around the world with the first word. nouriel roubini is warning the talks to avoid u.s. default could drag on with failure to

agree on a debt ceiling likely to hit markets and damage confidence in the dollar. in an exclusive conversation with bloomberg at the economic forum in doha, he said he believes the u.s. and china are headed down a path of confrontation after a g7 summit in japan. >> i would say there is mike i be any thought between the west and china. they say others are ganging up against china. but this will get colder. lisa: he signal the threat of a geo the political depression facing markets, pointing the fallout of russia's invasion of ukraine and the possibility of escalation between iran and israel. florida governor ron desantis is set to make it official and announces 2024 presidential campaign. he will join a twitter space livestream with elon musk at 6 p.m. this evening wall street time.

the announcement would end months of anticipation and set up a bitter confrontation with gop front runner donald trump for the party nomination. the governor of russia's belgrade region is reporting that what he says was a large number of drone attacks overnight cause damage to buildings. he said most rinsed -- intercepted by air defenses but repairs to gas and electricity and water services were taking place following the border incursion by attackers across from ukraine. he said more than 500 people fled their homes during the fighting. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

how can you sleep on such a firm setting? gab, mine is almost the same as yours. almost... just another word for not as good as mine. save 50% on the sleep number limited edition smart bed. plus, special financing and free home delivery when you add any base. only at sleep number. >> are we going to get through the debt ceiling? >> we may get to the last hour before there is an agreement or it's possible they don't reach an agreement and if it doesn't

happen, the market will crash and that may force an agreement in the next few days. jonathan: nouriel roubini with francine lacqua at the qatar economic forum. very on brand. lisa: it works, it's the assessment of the debt ceiling. jonathan: as if we needed that. lisa: if it doesn't happen, disaster. jonathan: he's a good friend of errors -- of hours. mitch mcconnell, everybody needs to relax. everybody needs to relax is what mitch mcconnell has to say. we got a headline from richard suggesting they will be some talks today between the white house negotiators and more republicans expected to reconvene later. tom: i'm assuming mitch mcconnell is a young guy but he and the president are from a generation where howard baker and sam ervin said let's relax.

none of these younger people left and right have any desire to relax at all. jonathan: i'm not sure anyone is panicking though. tom: i agree. lisa: i wouldn't mind it if there was a little more panic in washington, d.c. to get something done. is it really june 1? it's probably june 15. if that's the nature of the debate, that's not really freaky. jonathan: i said is june next week? equity futures are a bit softer at the moment and equity futures were a little bit lower yesterday. big attention going into the fx market at the moment with a breakdown on the euro, 107.50. tom: that's a big difference from 107 seems small but a trend

is in the right direction. this is the global head of fx at em strategy at td securities and it's really a perfect time to talk to him. i want to talk about the mccormick reset. you wrote an end of year research note that was codified is brilliant. that's ancient news. how do you write the may 31 research note? what do you say on the dollar? >> a big part of it is market positioning not matching the current narrative and that has changed dramatically in the space of three weeks. there is a lot of focus on the debt ceiling and the impact it has for the fed but the one thing the fx market cares a lot about is china. we've seen data surprises in china go from three standard deviations positive to flat within two weeks. essentially, all the tailwinds

the euro had that came from the debt ceiling creating issues for the fed and the banking stress in the u.s. and the slowdown in the u.s. relative to other economies has not even paused, it's sharply reversed in three weeks. the emphasis now on the debt ceiling maybe being allowed disallowing the fed to tighten a little bit if they get through the brinksmanship in a last-minute resolution. in the matter of a couple of weeks, u.s. data, high-frequency data is the u.s. outperforming europe and china which reverses the positioning built up in the last couple of months. jonathan: we sat around the table with people in london a couple of months ago and asked who will do more this year and they said the ecb and i think that has changed. the data has changed and taken the euro from $1.10 in april down to $1.07 50.

we are taking a bite every single day against his big short position building up in the u.s. dollar. what's left of it? >> the euro still tracks high honor models in terms of being overbought. it's not at extreme levels as to where it was but it's a nice way to say 50% of the currencies we track were long against the dollar. we are at about 40% having to standard deviations. the euro since in the first bucket which is long. the euro is trading a little bit cheap relative to what we call high-frequency per value. it should be $1.09. big part of it as you mentioned is we expect the ecb to generally out hike the fed but when you lose china, you lose the growth narrative. what we saw with the industrial production data in china's imports were very weak and that's a big part of what the euro to rebound. we are also seeing slippage in european data with german

informationweek. there is conflicting stories for the euro that the terms of trade is still important and still providing tailwinds. the current surpluses coming back which is good for capital flows in the euro zone and the ecb is better placed than the fed if you track the speeches. the fed has been more dovish than the ecb in that context. the euro is in a tug-of-war but the more focused we get on the u.s. being in a better position, the more focus on china being in a bad position and that pulls the euro lower. lisa: people are coming around to the idea that they underestimated the dollar. goldman sachs said they believed the dollar has more room to strengthen. they said dollar depreciation is typically associated with strong growth in the rest of the world, not weak growth in the u.s. and weird to waiting for a challenger and the euro is not stepping up just yet. do you think perhaps the story of dollar losing its hegemony

has been overplayed and it will continue to strengthen or be range bound into year end? >> i think this is a summer play. as you match the narrative we talk about for a couple of months, it's been overplayed by positioning. what we see in our models in terms of how markets are trading ideas and strategies, trends, last year, we had dominant macro factors like inflation trade that had solid performance in fx but this year, we have looking at equity and inflation in rates and those things are kind of making money but they are making less money than the key drivers last year. the one thing that's happening is our positioning models are extremely elevated. the other thing people are missing is we can move into a trade were bad news in china is good news for markets. if r theemembtyi weakens too

much, we will get a policy response. most central banks will move to the sidelines. we are limiting the surprises from central banks and inflation is moving in a better direction. on the whole, i find this more of a consolidation. it's maybe a one month move. a fed pause in june and a good inflation number away from resetting the boundaries of where data surprises are moving in the markets want to find that new narrative. i would say we're still quite bearish on the dollar into the second half of the year. i would be more focused on the consolidation and turbulence in markets now. jonathan: interesting, thank you so much. there is an unwilling is now to call this a longer-term story. there seems to be a willingness to embrace what's on the screen because it's happening on the screen and say that over the

next month, maybe this could continue but we are taking away a big leg of this, the growth side of the narrative around the single currency against the u.s. dollar and the dollar weakness people were looking for. tom: this whole thing is silly. i don't think we can get to labor day. the key thing that i agree with his they talk about corporation depth and central banks and governments adapt in the chinese government, i don't care what the politics is, has an ancient history of adapting aggressively late sunday in the evening. jonathan: how willing are they to adapt and dude more to support the economy? this is not the reopening that many imagine several months ago. lisa: especially if they can ignite internal growth even if it doesn't become external with respect to how much china

interacts with the global economy. you see sometimes in the domestic consumption picking up but they are not necessarily investing in the manufacturing side of things. it's tricky to understand the policy response in a china this dramatically changed with respect to the comet's party over the last four years. tom: i think it's a lot about social, not unrest but the social dynamics of china. jonathan: can we say hello to someone? can we say hello to lindsay. your husband says my wife says can we watch something else, these numbers are making me nauseous. lisa: they are making me nauseous, too. jonathan: we will take a break and no numbers. then we will come back and go light on numbers. tom: tang mimosa. jonathan: lindsay, give it a chance. there is something for everyone here.

from new york, this is bloomberg. ♪

>> we are in a challenging period, and anticipatory one. >> the fed is keen on getting inflation to 2% and if that is the case, they will continue to step on the brakes. >> we will probably peak rates. >> the rate cut talk, forget about it. >> this is a set up for a cyclical rally. 4300 is not that far from where we are. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: it is one of those

weeks, as it only wednesday? tom: it is so bad it is march. jonathan: good morning, for our audiences worldwide, this is bloomberg surveillance on tv and radio alongside tom keene and lisa abramowicz, i'm jonathan ferro. futures done by point 3%, debt ceiling talks resuming in washington. tom: i don't know what is going to happen. the number i want to know right now is the good people with secretary yellen, what is her calculation of the cash in the account and the cash room at the treasury? jonathan: follow the numbers. don't listen to the moon room. it is going back and forth, impacting talks again. lisa: it is difficult to get any indication from the mood music. i liked your suggestion yesterday -- or happy things. people are ignoring it all.

how close are we and can we get any consensus or are we risking technical default? jonathan: every time a politician in washington speaks, they should have music, violins. when it is happy, it is happy. clown music might be appropriate. lisa: you could dj. jonathan: i'm sure everyone would love that. maybe not. we have a breakdown in cyclical stories, copper south of 8000, a new low. luxury names performed in a monster way in europe, breaking down yesterday and today. china whopping out -- wiping out all the gains. tom: you do have an acceleration, obviously managed by the government. i thought they mark mccormack interview 10 minutes ago was critical. he said these central banks and governments are going to react. how does a government in beijing

react to what is a bloom off the 6% rose? jonathan: starting to question this gross narrative abroad. it still has not happened, puts her to question it internationally. lisa: this is actually a big trade. if you get a stronger dollar, how much does that disrupt the narrative of the first five months of the year in a way that people are under appreciating developing markets, going to risk? if you get an upset, it could catch people offsides. jonathan: as if the nasdaq move was not enough. some weakness the last couple of days including this morning. equity futures on the s&p 500, negative by 0.3 percent, similar on the nasdaq. the biggest one-day drop on the s&p about three weeks. the fx market is one to look at. euro-dollar, 1.075.

lisa: that could be a macro driver. janet yellen will be speaking in london at the wall street journal ceo summit. she pushed back against questions around the exit date? this to give us something more concrete about when the u.s. will be able to -- be unable to pay their bills and could that expedite drama? some people it is already there and others disagree. we do get a fed meeting minutes at 2:00 p.m.. you can get a sense of that, also richard clarida to speaking and then christopher waller at 12:10 p.m. at uc santa barbara. to the lien into the idea that a pause is a pause and not the beginning of rate cuts? we are getting colds earnings, abercrombie & fitch in half an hour. american eagle outfitters after the bell. we expected video to be key --

in video to be key. coles, the estimate was a loss per share of $.40 and they are spiking up about 10% in premarket trading perhaps because the company got so beaten up before. jonathan: never been. lisa: i used to go in milwaukee when they would visit family. it has some good deals. jonathan: thanks for that. if you want an endorsement, coles -- kohl's. lisa: it caters to people on a budget and it is the lower end of that kind of sore. i'm doing an awesome job. tom: 10 year total analyze, -4% per year. jonathan: they can send you the check. lisa: how much? jonathan: the chief investment

officer at wells fargo admit, should i be trading on robust pmi's or dreadful manufacturing once deco what world am i in? >> it is the latter. it is housing, manufacturing, the consumer, services. people think it is different and a will get us to a soft landing. you go back every recession since the 1970's, they are always rolling, they always happen at moments when you will have different pieces of the economy. it is hard-pressed to look at manufacturing and think anything is not in outright recession right there. the services and the consumer has held up. what is interesting, speaking of retailers, the retail stock activity has been dreadful. if you look under the surface, retail company stock performance, energy performance,

all of the cyclicals underneath, below the tech side of the skew to the index is just driving things in the ground and telling you the economy is slowing unconditionally. tom: you have so been here before. ed kelly stolen from credit suisse about eight years ago, he follows big-box retail, number one ranked on bloomberg and walmart. the wells fargo clientele is scared stiff i assume. what you tell them in st. louis? darrell: you have to fade those at that price level. there is no way you can pay that kind of earnings multiple in a contracting economy. you are paying for earnings three to four years ahead. tom: extending out your hope. darrell: yeah. everyone is banking on the consumer. we saw a big drawdown in savings, always down to 2.7%. and it bolstered consumer

spending. if you look now, it is back up to 5.1%. it has gone back up. you can say it is a good thing or a bad thing, it gives dry powder to extend the consumer spend, but if the consumer does not spend that money, which i don't think they will, you start to lose the engine of the consumer into the back half of the year. lisa: you said when you take a look at retail stocks, they have done terribly. energy stocks have struggled. in light of the bifurcation of the index with big tech, nvidia, apple and everybody else flying -- flat on their backs, do you see this kind of world you can see tech range bound and other shares catch up even in the midst of some sort of slowdown or recession? darrell: i doubt it. if you look at the evaluations, they are not where risk reward is compelling to me. i have got my equity risk premium sub 200 right now. usually i need that 350, 400 to

get paid in the equity market. if you lose tech, take retail, energy, cyclical stocks, throw in small caps. the russell is gone from being 800 over the s&p in outperformance to four to 500 under, a huge swing. if you take that apple and microsoft arc it cap alone, they are more than the entire russell 2000 index. think about that. two companies. everybody knows the narrowness of the market, the skew of the big five or six names. and to put it in perspective, those are 53 -- 53% of the nasdaq 100. jonathan: it keeps coming up, if you are in a market cap waited s&p 500 index now, a lot of people are -- people listening

to the program. doesn't matter when it is this narrow? wilson of morgan stanley is pointing out the flaws of this. he brought up the narrowness that you describe. he set in your seat yesterday at bank of america and said it was not that important. is it? darrell: it is important from a technical standpoint, technicals versus fundamentals, but i think it is a good fingers on the pulse of liquidity. what people miss in this year to date back-and-forth of the market is we know what the banking crisis, the balance sheet expanded $400 billion. we have now taken 300 of the 400 back out and through the summer months, assuming you don't get another crisis that forces an emergency injection of liquidity, you keep drying up liquidity. when you dry up liquidity, you drive breath, support. the technical indices roll over

on themselves. lisa: how much more difficult is a getting from a psychological perspective to stay cautious of? darrell: we talked about this all the time. we win perish february 22. it is now may 23. our clients are tired. they want to put -- bear markets are exhausting. but it would be just like a market heading into a recession or contraction to suck investors in at the last moment and give them a bunch of false positives and narratives. it happens every recession. every recession, you will find investors find a reason to jump it. one more point. think about 2008, on the precipice of going into the trough in march of 09. the three back quarters of 2008

were 2.6, 2.7% gdp growth and everyone said the world is fine. we are growing 2.5%. the data was supporting it. investors have to be careful. it is psychologically hard but you have to look at the fundamentals and signals, where am i getting paid to take risks and where am i not? to date you are not getting paid to take risks. jonathan: michael hartnett from beck of america said that last week, one of those moments you get sucked in before it goes whack. i find it fascinating. we become therapists, get them around the table. market therapists. lisa: everyone is going to run off a cliff. tom: you should see the bills. jonathan: good to see you. coming up in the next hour, liz young of sophia, about 45 minutes away.

this is bloomberg. lisa: keeping you up-to-date with the news around the world, i'm lisa mateo. a u.s. china decoupling is not impossible but a selective decoupling is taking place, from former cia director -- who spoke with john micklethwait indo hall. -- in doha. >> we have seen distinct limits. i really don't think president she does not see -- president xi jinping does not see russia as an equal. and he went to moscow and talked with putin, he did not get what he wanted. it is not a relationship between two equals. lisa: the government of the state of qatar is the underwriter of the economic forum powered by bloomberg. hong kong leader joining state

leaders in blessing pacific airways over an incident where flight attendants were making remarks about mainland chinese passengers. the flagship airline said it would investigate the incident before announcing it had fired three flight attendants. local news powered by more than 2700 journalists and analysts in over 120 countries, i am lisa mateo, this is bloomberg. ♪

>> we will be interviewing ron desantis. he has an announcement to make. it is the first time this is happening on social media, with real-time questions and answers, not scripted. it is going to be live and let's see what happens. jonathan: campaign manager, elon musk, twitter ceo. announcing effectively that ron desantis may be announcing on twitter. looking forward to this at 6:00 p.m. eastern time, governor desantis alongside david sachs.

entrepreneur, venture capitalists, longtime friend of elon musk. the conservative voice. an interesting podcast if you want to listen to it. available on spotify and streaming platforms. i some good promotion. -- sound like a promotion. paul: tom: -- tom: there is a long history of being a governor and running, like bush of texas, or being from the house and running. he is a governor and why is he doing a presser at 6:00 p.m. with elon musk? jonathan: these are indeed -- voices conservatives listen to. you've to bear in mind this is

the primary and once you get to the broader direction -- auto -- the broader election, i also said that ultimately, the first steps, are they that important? how many campaigns to be remember the start of end say that is where the magic was? lisa: you some of them for other reasons. i think this is a move for him, if it were to be on cbs it would have less residents. you on musk always generates a lot of headlines, helping to get this going. twitter is a first. all of these reasons to amplify the message. jonathan: we will see what happens. i will be watching and many others will. tom: symptoms of jet lag, daytime fatigue, insomnia,

dehydration, our chief japan corresponded annmarie hordern back from the g7 meeting and we welcome her back in washington. coming back is the hardest thing to do. the jet lag the president has, he does not have much time for jet lag. ? -- how is he doing? annmarie: he did not have much time to work this off because he had a meeting on the debt ceiling with speaker mccarthy. he told me for he left he hopes the meeting can get it over the finish line. there was an impasse as of last night. we did not know there would be meeting but reuters is reporting the negotiating team will be meeting today. but we are eight days out from what janet yellen is describing as a potential date we could see a default, treasury would run out of funds. time is of the essence and at

the moment there is still no deal. patrick mchenry says he is unsure what to expect next, though he did say his phone is blowing up with text messages from exd while streeters -- angst e wall street or's -- wall street. there is pressure to find an agreement but it is not there yet. jonathan: let's get away from some of the issues. have established the red line speaker mccarthy. you ask the president about this over the weekend. have seen a shift from leadership, saying it may be a compromise, keep spending flat. we are going somewhere, aren't we? annmarie: i would say it is a baby step. we heard from the president, what hakeem jeffries thinks is

reasonable. this is what the president was talking about, at what base do you cut from? it gets into other issues because the speaker mccarthy does not want to keep spending flat. he wants to cut spending. the president also said he is willing to cut spending but he wants residue -- revenue raises. he also said he will not raise taxes or pass a clean debt ceiling bill. there is a negotiation and a standoff on the caps of spending for next year. a little more into the details, work requirements are becoming an important issue in the negotiation. the president said before he left for japan, he said he will not be on board for work requirements to access health care. but he did not talk about other programs. but this will pin the white house directly against progressives in their party. work requirements for things

like access to food and groceries, items like that. this is becoming another major point. we are not seeing movement yet. lisa: i wonder what you make of steve scully's saying we would like to see more transparency. why this discussion around whether it is june 1, june 23? annmarie: there is talk among republicans that they do not believe treasury secretary janet yellen's june 1, which she talked over the weekend about a hard deadline. they think they have wiggle room, a week or two. you had chip roy from texas, he calls this a manufactured crisis because of how much the initiation is putting on that june 1 date. matt gaetz telling reporters to ask the treasury secretary about her quote ouija board. in the mccarthy camp on the right, they think they have more

time and they do not believe the timeline the treasury department is putting out. jonathan: this is how accidents happen. i have to say, do you get the sense that is a game the treasury secretary is willing to play? annmarie: i get the sense the treasury department is concerned. they do not want to see a default, especially on janet yellen's watch. this is someone beloved at the treasury department, a former fed chair, brilliant. many republicans think this is someone who is a safe pair of hands and they don't want to see a default on her watch. if you are the treasury secretary, i think it is fair to say if you are in that position, you want to be as conservative as possible. you are not sure how the politicians are going to be able to get across the finish line. but if you look at what goldman sachs, morgan stanley are talking about, you have analysts

on wall street talking about maybe not june 1, but maybe june 8 or ninth. it is a little wiggle room but not a ton. jonathan: what is a week between friends? great work, thank you. tom: the treasury is not a politician or a clinical base. they have greater restraints than what is in the zeitgeist. lisa: when you have a friend who is always late, you lie about the time, 15 minutes or half an hour earlier, could be an hour. if they were to say to you, i question whether that is actually the time -- at a certain point you are like you're going to get here late anyway and now we are dealing with the deadline. i understand why if they move it back a week -- tom: what hamilton invented, these are not the politicians,

they are constrained. jonathan: the prudent thing to do is bake in a cushion because you don't know the date either. tom: no. fair. jonathan: tax receipts are lumpy. in the middle of june they might get another big load of tax receipts but can they make it to the middle of june? when she came out with early june, it was conservative. it had a decent cushion. based on the treasury cash band evolving over the last couple of weeks, we can acknowledge it has come in a little. from new york equities, greg peters. ♪

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jonathan: welcome to the program. live from new york city, equities negative on the s&p 500, similar on the nasdaq through most of today, down yesterday on the s&p. biggest one-day drop on the s&p, we add to that. more taken away from the rally. in the bond market, big moves in the two-year. eight days on the two year yield. on a 10 year, 4.67 85, more interesting might be on the long end of the curve. for the recession talk, the talk of pre-pandemic norms, what is

the third -- 30 year doing up by 4%? in the effects market -- fx market, means for the year, interesting with elected in the commodity market. a new low for 2020 three, interesting stuff in european luxury that we can discuss this morning. all of that means eight weaker euro over the last couple of weeks, losing enthusiasm over the economic story. trying to stage a balance in the last three minutes or so. about 1.07 69. lisa: the macro story is interesting as we get the earnings. we got numbers from abercrombie & fitch, seeming to follow from what we saw from coles, first quarter net sales of 836 million, the estimate hundred --

the first quarter of brush earnings-per-share, basically flat, a different story at children's place, where you can talk about inflation, potentially taking a bite out of purchasing power. talked about how coles raised their forecast, working down their inventory problems. up almost 12%. i do want to point out, new parents who have constrained incomes and are facing inflationary pressures perhaps will be less willing to share -- shell out for pants kids will outgrow quickly. that is interesting. tom: these strollers cost like $3000. jonathan: what strollers are you looking at? tom: they are running these babies around in fancy hardware. jonathan: children's place? have you been in one? they don't typically have

strollers. they cater to lower income, but they are people who will push back on pricing pressure so you see signs of this indifferent pressure. tom: i'll seven, tuition place. they sell walkers for the grandparents. you should trade out. jonathan: did you want to talk about nvidia? lisa: it will be interesting after the bell. they have accounted for a significant portion, do they deliver? what is the china risk, given the tit for tat with micron? what is the demand for semiconductors? is in a bellwether of the artificial intelligence cra

ze? jonathan: debt limit talks stalling. investors paying for it default protection in the near term. peters saying we went out the curve somewhat as our sneaking suspicion is that it will continue year after year. the congressional disruption ntc is not going away anytime soon. is this the normal? tom: i am so glad you picked this paragraph. this is the fixed income note i have seen in 10 days, maybe two weeks. greg peters on where we are moving forward. joining us. it is complex. i think we need to talk for an hour with you this morning. but i want you to set up what the market reaction is going to be if we get pj -- pj -- pgim consistency in yield. or do we go to 5.8 or the 6% yield? happens when we get there taco -

- what happens when we get there? greg: if you look at the move we have seen in the front end on the banking crisis of march, there was a steep move lower and that does not make a lot of sense to us. we are looking at the curve, we feel like it is mispriced, already pricing in a recession. when you look at risk reward, if you do get a recession, which is still probable, will you be rewarded? the question on the table suggests no. tom: credit default swaps. say there is an efficacy follow the cbs market. for your mortals listening and watching, explained the linkage of the world with the -- with

this world. greg: it is a measure of the credit risk of the u.s. sovereign. what we have seen is the risk is elevated. the debt ceiling debate is creeping in to the risk of the market. you are seeing it in the cbs curves. investors pay up for short data protection in the event of a default or disruption. to be clear, this is a drop in the ocean type of trade. we have decided to not pay up for the couple of months or one year because we think it is a persistent problem. we worry about a -- this clinical debate around spending

and using the debt ceiling as a prop will be a common occurrence. with that, we think it is good to have protection. jonathan: can we go away from the front end, all the way to the back? what is the 30 year doing near 4%? greg: it has different characteristics than the intermediary part of the curve. what you have in the back end is the need for duration. investors have to hedge pension funds and ldi accounts have to be on the back of the curve. there are different characteristics there. the informational content out of the 30 year is a lot less worthy than the intermediate and front end. i look at the front end more than the 30 year. it is important, but not as important from an information

standpoint. lisa: do you consider corporate debt of highly rated companies to be more creditworthy than the u.s. government itself? >> i think that is a tenuous, i have heard that argument and it does not make a lot of sense to me. that crops up every several years or so. i push on that. everything feeds off u.s. treasury and u.s. rates. if the risk-free gets repriced, everything gets repriced off of it. high-quality credit hiding out seems like a fools errand and you are not going to protect yourself in a way that you think you will be protected. lisa: do you think people going into risky credit right now are also engaging because of the risk of defaults or the washington turmoil continued --

continuing and the idea of a recession getting priced in to the curve? >> if you are going down in quality, you are essentially betting there will be no recession, there will be a soft landing. that is also a difficult case to make. community, there is more value up in quality and not going down, deep or cyclical type of companies. being down in quality does not make a lot of sense to me. i am not sure you are getting paid for it either. it is too early. a simple premise, i have yet to see credit spreads tighten into a recession. if you have a high probability of a recession, you are leaning against that narrative. to me it is a high-quality gain. dispersion is superhigh.

there are lots of opportunities and we see a lot more than corporate credit. jonathan: there were headlines about a security they came to market with eight yield of 6%. it had at risk maturities next month. can you explain what is the risk there with that security? ultimately, doesn't it get paid? greg: hopefully. this is the debate on the table. but the question for an investor is why would you target your sulfur that maturity? if you do the math, it is a higher yield divided by 365 times 10 days, is it worth the risk? it is somewhat of an anomalous math equation. i would not be so worried about the 6%. that is not what you are going turn. for most investor perspectives,

it is not worth turning yourself and getting thrown into a potential default rule. hopefully that does not happen. jonathan: greg peters, thank you. explain some of the bond math, sometimes they don't look like what they think they mean. lisa: i thought it was interesting, how do some financial firms use this as a liquidity instrument if this is baked in? there could be a swath of fire. jonathan: this can get so messy, so quickly. the use this as collateral. this can get so messy so quickly. -- lisa: maybe it is eight days later.

if it is a missed a step, they externally go into default. tom: why do we think this is going to go away? we had a huge amount of debt, people looking at this as a one-off challenge, i don't buy it. jonathan: what has developed over the last however many years as we don't negotiate budgets in washington. we negotiate budgets for debt ceiling defect. that's how we do it now. lisa: it is political suicide if you try to cut that if it's on any level -- limits on any level. jonathan: oliver chen will drop by, on the slump in luxury retail. that is coming up.

lisa: keeping you up-to-date with news from around the world with the first word, i am a lisa mateo. traders at five nature banks allegedly colluded in chat rooms to swap sensitive information on u.k. bonds in the wake of the 2008 financial crisis. richins antitrust agencies as citigroup, deutsche bank, morgan stanley and royal bank of canada each unlawfully shared details on pricing and trading strategies between 2009 and 2013. the competition and market authority says morgan stanley and royal bank of canada have not admitted wrongdoing. many large european banks are emerging from key stress tests on robust financial health, prompting regulators to question whether they should push harder. it gives insight into the preparedness of whether shocks and feeds into the capital requirements. pakistan is considering banning

imran khan's political party, increasing the tense standoff between the government and the military. violence erected when he was briefly arrested by the graft agency and some protesters attacked military offices and buildings. global news 24 hours a day, on air and on bloomberg originals, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

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there are early signs that may be consumers are beginning to hold back, early signs of cracks for the u.s. consumer. jonathan: and economist at apollo global management, he was not talking but the luxury consumer. a conference in paris hosted by morgan stanley, information suggesting we have a softening of demand on these aspirational luxury goods. lvmh trading down yesterday, down 1.9%. a lot of talk about what is happening in the u.s. and maybe the china factor as well. though i am not sure how much is reflected in the numbers because demanding -- it demand in the last earnings season look. tom: i looked at one company where it pulled back, i don't have any wisdom other than to say my theme for the year as governments will step in, corporations will adapt.

i think the chinese government will adapt. jonathan: will they go back to ovi mage? tom: i don't know that. lisa: it is not a good look. tom: right now we are getting a reef and there's no one better than oliver chen. senior equity research analyst plugged into our aspirations as well. mr. ono -- mr. arnaut has done this, he brings his sons over to an american icon, tiffany, it is it right to say they blew it up? oliver: it has been tremendous and innovation. tiffany is iconic, partnerships with nike, elevating the assortment and this flagship is one of the best stores in the world in terms of what they are

doing them a experiential retail art, one of our top ideas. it is quite material and we are watching near changes, the mrna will be important. jonathan: you have coined a phrase that i love. i can spot this poking out of your pocket and then there is printing, the aspirational stuff. the people who one of outside of the gucci stores and to i now pay later, $50 a month, get a hoodie, a big branded front of it. we were talking about this. has the letter started to crack? we used to see all of these lines around luxury stores. and the consumer was changing. they were moving away from dropping $5,000 on hand back -- handbag. has that started to fade echo

oliver: in terms of aspirational entry point luxury logos, sunglasses and footwear, they can be gateways to luxury. it has been softer. we have seen this at neiman marcus for the same reason. it is about materials, touch and feel, looking great at work. a trend that has been working. as consumers become more cautious, we have seen many shocks. lisa: how much are we parsing through the k shaped recovery we seem to have forgotten, where people with the most spending power are spending it on luxury and able to do so in bulk and you are seeing others fall off as the price increases catch up more broadly in the economy? oliver: we are deftly seeing a consumer discretionary recession, the market as a whole facing negative trends. we are still seeing shifts where

dollars are spent on travel, services, hotels. at the high end, that customer is strong and robust. we are still seeing strength at the high end, more the area below the high end, the aspirational, where there is a lot of pressure. the wealthy consumer always has money. it is about sentiment and emotions. certainly financial shocks have been disturbing in terms of putting the customer on pause. consumer confidence has been volatile as a whole so it is something we are watching. lisa: the overlay of china and what is going on there, is there a sense based on the luxury players that are more exposed to the chinese consumer and less exposed of where the trend is, is it falling off? are people seeing a shift? oliver: china is the biggest deal in luxury, 30% plus, and more growth. louis vuitton is the largest market cap company in europe. it spends about $10 billion on

advertising and promotion. tiffany renovation is well over $250 million in new york. china will be important for the long-term, but it will be volatile as we watch these issues unfold. the name of the game in luxury is flagship stores, stores that make you forget about price. being there physically is important, as well as a modern upgraded rethinking the metaverse, a digital experience connected as well. tom: art department source dead? -- are department stores dead? what is the future of bergdorf, nordstrom? oliver: bergdorf is exciting, it is right there in the magic corners. it is iconic. our recommendation is macy's. department stores are transforming rapidly and needing to offer service.

they need to get the younger customer in and it has been a epic struggle. we are following kohl's, the gross margins were better, and we are expected back to the basics for retail, inventory management, supply chain. i teach at columbia, it is about magic and logic, bringing things you did not know existed and wanted in retail. tom: he is the only one who can conflate calls and tiffany us. jonathan: macy's. what is it about that that you like? oliver: rethinking the loyalty program, our official intelligence will play a huge role. macy's has a loyal customer. it needs a younger customer. tom: we are not doing a giveaway of succession, he has to watch

it. oliver: the family is doing a modern child rethinking prints and captivating a younger customer, elevating rents. it manages for the long term. tom: what happens in season three of the lvmh story? oliver: competition, and interesting battle for the best of the best. that is what happens. need this competitive spirit to be culturally relevant. retail is awesome, luxury is awesome because it is always changing. you have to be in touch with how moving -- music is moving, tv. jonathan: this is great. a stylish dude. double-breasted suit, a lapel. lisa: i'm going to postulate that if you had a meeting at the white house, it would not be wearing casual sneaker shoes. jonathan: you got a word on the

hybrid shoes? oliver: this is brooks brothers, back from basics, rethinking. fashion is about old and new, ringing traditional, mix and massey -- matching. but i will do anything. tom: what about on the weekends? oliver: cereals and heritage, how something is made, if it feels great, kashmir is here forever and stitching and craftsmanship. jonathan: beautiful shoe. british. oliver: there is a great tradition. painful in the beginning but worth it. jonathan: i agree. tom: i would kill to get at a larger desk, oliver chen, michael burke who ran bergdorf said vanessa friedman of the new york times, altogether, from london.

he takes it so seriously. jonathan: as you should. lisa: it is a multibillion business. tom: what do you do if you put a sweatshirt in the dryer and shank at? oliver: you have asked about this before. it defense the material. sometimes you want to shrink it in sometime to don't. lisa: sometimes one wants to trinket. oliver: he was rethinking a real stature in the shade. jonathan: i think we are done. thank you. tom: i have been ordered to see lagerfeld at the met. jonathan: so fight next on the market, not fashion. 0.4%. debt ceiling talks will resume between negotiators on both sides of the debate in washington, d.c. later.

♪

>> investors have worked themselves up into a frenzy. >> the signal and the noise are incredibly difficult

to parse. >> no one should doubt that a recession is on the horizon. >> morning, everyone. jonathan ferro, tom keene, and lisa abramowicz on bloomberg radio. far more importantly, what do you do in a market when you stagger to june. futures are -17. >> there are people itching to put capital to work. on the nasdaq -- stewart kaiser now that yesterday. "the story is that the fed will pause, money will move back into equities, and underweight positions will be pressured to the upside. a fomo trade will --

there are people itching for that trade. >> the bears wrote over the weekend and reset where they are. there is a huge divide here. the vix is back up to 19.64. jonathan: morgan stanley, i mentioned them a couple times. they said that is a false negative. the equity market can keep going higher. she likes the equal weight s&p, she likes the idea of cyclicals. playing the cyclicals at the same time one is talking about the possibility of recession! >> to me what we heard in the last hour, may 70 minutes ago is

the idea of still and elevated savings rate. we have depleted our pandemic savings ended has built back up. what is the firepower now that jon alluded to in the beginning? >> you have darrell cronk who said do not get sect in before you get your face ripped off. this happens, by the textbook, before a recession. crosswinds of tech and the -- tom: i see the 30 rate bank -- 30 year bankrate mortgage break off to a new high, not to a recovery high. anthony fell put published, they

are watching the u.s. a real yield breaking through resistance is their language and could you see this come out? jonathan: the international story is front and center this morning. consensus has been breaking down the little bit. stronger dollar, euro-dollar. some weakness in europe, some doubts about demand in the united states yesterday at a conference hosted i morgan stanley, and some doubt -- hosted by morgan stanley, and some doubts about china. tom: 19.67, we backed up a little bit. i will use the phrase a little bit. jonathan: equities about software. yesterday was the biggest drop in weeks.

-0.4%. yields as well. the 10 year is back down to 3.6651. tom: what is great about liz young is she rights these brutally dass -- she writes these brutally honest things. talking about the persistence of luxury, i will steal a phrase from you. we are in a million new of bulletproof to -- a m,illieu -- we are in a millieu of bulletproof demand. >> in the face of rising mortgage rates, rates that are

higher than they have been in 40 years, there is still this appetite to spend. when you look at what is happening signal wise, this is pretty classically cycle behavior. the challenging part for many investors, myself included, is that late cycle can last a very long time. it can last up to 18 months, maybe even longer. we can continue to say it is clear we are in late cycle. but could it be another six months? perhaps. that is the frustrating part. tom: brain freeze. surveillance correction. liz young is with us and i remember the first day i heard liz's story about the piano player. jonathan: i don't know this story. was she has good on the piano as

liz young is? tom: liz young on the piano is a sight to behold! lisa: you said something i want to pick up on. how do you know when you were getting to the end of a late cycle that can last 18 months? if we knew exactly what it was supposed >> >> if we all knew exec -- >> if we all knew exactly what it was supposed to look like before a recession came, we would not have all this. there could be some bumps again. we do not know when, we do not know how big. the yield curve has predicted 9 of the five recessions or

something, so it is not a foolproof indicator, but when that inversion starts to grease deepened, that is -- starts tore-steepen -- starts to re -steepen, the fed believes -- the market believes that the fed will -- if things go the way that they expect, no cuts on the horizon in 2023, the market is sending a different signal. it is possible we see cuts. when you see those yield curve inversions get more shallow, you see the expectation that the fed may have to pivot, may have to change policy at some point in the next 12 to 18 months, that

is when we will feel like the clock is really taking. lisa: given that the music is still playing, do you continue to play the stocks. are you in the darrell cronk campus sting cautious in a market that could remain unsure for another year? >> i remain cautious. it is pretty astonishing. if you are a long-term investor, and this constantly is a theme everyone is thinking about, if you are a long-term investor you should be invested in stocks at all times, however, if you are a long-term investor who does not have the stomach for volatility in the short term, you have to position.

defensively -- you have to position defensively in this environment. you are paying a lot for some of those names who have done well so far in 2023. if you do not have the stomach for short-term volatility, you need to have defensive positions in your portfolio. jonathan: liz young, thank you. writers has reported that meta- is carrying out the second part of 3 rounds of layoffs of layoffs. the the final-round, the last batch of a three-part effort to reduce headcount. tom: 77,000 employees.

this is the tone i get from ed ludlow. the founders of these companies, are they feeling successful with these layoffs? are they like "this has uncommon benefits"? jonathan: it depends on how you judge success. you go back to late last year , we were talking about the metaverse and throwing money at it and being wasteful. lisa: there is a question longer-term about what this means for the tech universe's ability to attract the best and brightest. there was a story that came out about how many college graduates are reconsidering finance jobs

as opposed to tech jobs. there is a certainty and finance. you work hard, you do well, you get paid. just from a recruitment standpoint, what do some of these cut backs do? jonathan: look at that move, 105%! gop confirmed that they are set to resume debt limit tops later -- debt limit talks earlier this morning. ron desantis is sitting down with elon musk on twitter. elon musk -- a really interesting pieces out on elon musk replacing rupert murdoch as the king of conservative media.

what happened to big jet tv? tom: it is fabulous! i watched it the other day. jonathan: oh, you are a subscriber. did you ex-pence that --expense that? tom: i did expense that. jonathan: from new york, this is bloomberg. ♪ >> keeping you up-to-date with the news from around the world, with the first word i'm lisa mateo. roubini warns that talks to raise the debt ceiling could go on. roubini also said he believes the u.s. and china are heading

down the path of confrontation after the g7 summit in japan. >> the chinese reaction to this g7 summit is that the europe, you -- that europe, the u.s., and japan are ganging up on china. >> pointing to the fallout of russia in -- global news, powered by more than 2700 journalists and analysts in 120 countries, i'm lisa mateo, and this is bloomberg. ♪

tom: getting to 7 was a huge deal and we could been in be in just a few hours. -- we could be nimby in just a few hours. jonathan: a turnaround in the last 45 minutes or so. s yield -- yields, tom, retracing the path higher. 36671. tom: 2 big stories to talk about with here. we have the theater in washington. in your research note, you talk

about three subsets, the people who will bless this, the blast, the people who will say -- the blessed, the papal will say it is -- the people who will say it is acceptable, and then the furious. who do you think will win out? >> we have gone from what kind of freeze to you wants to how will we get the votes for this. jonathan: i have to turn to what will take place later this afternoon. this talk on twitter with governor desantis, what do you make of this? >> it is an unlikely match of personalities. the thing about ron desantis is

that he is not exactly the most warm and fuzzy guy out there. to have an unscripted moment with elon musk suggests he is willing to roll the dice and try something different, or he does not know what he is and for. jonathan: do think in a couple months time we will forget this? >> i think we will forget this. we have forgotten elon musk throwing the steel ball through tesla -- ball through the tesla truck. it is important we start the one-year countdown to the presidential campaign, beginning -- lisa: how important is it to you, james, that social media is

screaming into the whole media kind of sphere, and elon musk hosting this conversation? what is the distinction between social media and media, and from a regulator standpoint, does this muddy the waters? >> elon musk likes to say that twitter is the app for everything, and how better do you prove that you are the act for everything -- app for everything than by entertaining tucker carlsen? it is right up there with amazon or netflix. the regulators are fighting a retroactive war, i think, battling bigness by breaking up into large mergers, but elon is far ahead of them at this point. lisa: some are speculating that

twitter and elon musk is becoming the main competitor to fox, this alternative conservative universe, especially if you have took our carlsen watching his own twitter platform -- if you have tucker carlsen watching his own twitter platform. >> you have no shortage of people who have tried to launch social platforms. megyn kelly has her podcast. moving into this new platform, the old media, am radio that was the home of rush limbaugh, that is slowly dying off. the old forest is dying. tom: i will go back to the legit world war ii now, robert dole

of kansas. he came out of the midwest and never related with the american public. translate that over to the governor of florida. had to see come out of florida where he won big end translate over to -- and translate over to america? >> dole was an empathetic guy. he was famous for cracking jokes nonstop. he was famous after he retired. for sending doughnuts to the cloakroom every day. the memory of bob dole is known that way. no one has ever said desantis is warm and fuzzy and that way. they are impressed with his smarts, they are impressed with his ability to lead, but you do

not hear people talking about desantis inspiring deep, personal loyalty among his constituents, among the space, among friends that bob dole did. jonathan: wonderful to get your perspective on things. james of l for partners. this is something that has been coming up with governor desantis. he is really sharp, deeply educated. if you slip up,if you have not researched, he will take you down. he is the kind of guy you can sit in front of for an interview, and you have to be very well prepared. as for the charisma, the humor you may get from someone like former president trump, -- tom: joe matthews is still in bed, but he will lead this up on balance of power.

the suburban independents, how will he attached to them? i have no clue. lisa: how will he deal with former president trump who has such a loyal following? will he go after him? that becomes tricky. how do you lure people over to you who have complete conviction in the former president? jonathan: i doubt it. at the moment, based on this? it is going to be nasty going into the primaries. things change so quickly. do you remember edwards in the race between clinton and obama? i remember the race with mccain- obama going into 2008. it was all mccain, mccain, mccain, and then all of a sudden, financial crisis.

i'm not sure those polls -- tom: i'm more interested -- lisa: i'm more interested to see how the messages get shaped. how are the messages going to form as they try to address their constituents? jonathan: we will be having very different conversations. take the news clips and compare them to what we will be saying in a year? tom: you guys do it better. jonathan: from new york city, this is bloomberg. ♪ at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns...

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tom: bloomberg surveillance. good morning everyone. we are looking forward to talking about the path forward, when gain economics and futures. the vix up 0.52%. what is a single thing you are watching, lisa? lisa: probably the eurodollar, given that we saw that break. that would up and a lot of the trades we have seen.

after i get up from the surveillance note this afternoon -- usually we tie michael mckee to 8:00:31 because we have breaking news. >> do they talk about a pause? do they talk about the possibility that they may raise rates again? there is a chance of another rate increase by july, about 50% or so. it is three weeks old. lisa: this comes at a time when there is increasing dispersion among fed members. how much do expect to hear that reflected? how much under the radar dissent do you think there really is?

>> we have names now from their speeches, but we will see how many were arguing against the idea that inflation is going to come down rapidly, and that the fed has moved into restrictive enough territory. lisa: what data are you watching to understand the new tea leaf for forward-looking information for the fed? >> we will be looking at the price indexes. we get those tomorrow, the pce index. it is hard to separate out a lot of this stuff from the noise but you look at what happened in the u.k. today with prices going up more than expected. that was largely services. we will keep an eye on service price inflation. the nonservice -- the ism

service number will be something you want to pay attention to going forward. tom: we are expecting the fed come out at the -- the fed minutes to come out at the 2:00 p.m. level. long ago and far away, i had family members working in mexico, and they have the modest issue of an earthquake in mexico city. citigroup was still involved in a bank in mexico that they really want to unload. jay fraser said they have to dump this investment. they spent a year negotiating for it sales. lisa: they're not going to attempt to sell this particular unit, instead holding an ipo in 2025. "we concluded that the optimal path for maximizing value is to

prevent from our dual path approach." how much of this is pushing it out to 2025 without icing it? tom: this comes down to all banks are the same. we look at fortress diamond, citigroup is one third of that, just under 0.50. i cannot say enough how much we conflate these banks together, and that is wrong. tom: banamex -- lisa: banamex has one of the largest collections of mexican art in the world, and that will remain part of the unit. you think of the evaluations and idiosyncrasies of some of these firms. tom: this is a big deal, folks.

right now we digressed to michael dara, chief economist, roth m km partners. i want to look at some of the -- look at the sum of the parts here. can you acquire shares this morning? do you want to be in the market? michael: i think investors should be a bit cautious here, tom. we have high valuations in the market. the s&p 500 this year has been driven by a handful of mostly growth stocks, so the s&p 500 info index is above six times sales. it was last seen in 1999-2000. 25 times is not far away from the 28 time speak in 2021 that

proceeded a 30% collapse. because interest rates are higher now the stock to bond value metrics look even worse. this is an environment where we are getting close to a recession. you have been talking about the debt ceiling shenanigans going on, and you have high stockmarket evaluations at the same time. it makes sense to be a bit more cautious. lisa: people have been cautious for about a year. we keep hearing they are sick of waiting. they have cash. they want to put it to work. how do you push back against that? michael: i think it comes down to are you being compensated to take that risk? with the short end of the treasury curve up at current

levels, 5% plus almost 6%, you are being paid to hoard instead of spend or invest, and that is exactly what the federal reserve wants to do in order to vanquish inflation and reduce aggregate demand. i think, that that is working but the consequence could mean a recession and the continent nearing of the -- continuing of the equity bear market. the, brats the advanced decline in line, record -- valuations are at quite high levels. it is not a healthy development if you want to be a healthy buyer of high-risk assets. lisa: on a broader level though your expertise lies with the question that everyone wants to know.

when will people stop spending so much on services? will that happen? will we see those expenditures strengthen growth? michael: it is a great question. the service sector has been quite robust. you are talking about two thirds of spending and 4/5 of jobs and income. it is the vast majority of the u.s. economy. that is what matters, not whether we will fall into recession are not. the service sector tends to lie get certain point -- to lag at certain points. it could come to a sudden stop and surprise people. we are not there yet. let's see what happens as we move further into the summer and fall. we have had some very successful

recession indicators flashing red for quite some time. we are 10 months into a yield curve inversion. money has collapsed up historic rates. thinking about the timing typical in a business cycle, it is 12 to 14 months after those signals begin to flash. tom: michael, in your research at roth m km, you focus on the high-frequency data. i one you to discuss what claims are telling you now, but then i one do you -- i want you to discuss what claims are telling you now, but then i want you to tell me -- link that into the interest rate dynamic, the

inflation rate dynamic and then on to the markets. michael: if we look at continuing jobless claims, those are people filing over and over again for unemployment insurance, that number is up 25% year-over-year, and if you look at the full history of the series, we have never risen 10% year-over-year without a recession occurring. in the couple -- the first time now claims are picking up as well. what that tells me is on a rate of change basis, all of these macro variables that are super robust are slowing down. what does this mean to your question in terms of irving fisher and the neutral interest rate at the federal reserve? we have a problem here with the boom and bust cycle. the fed, the first mistake was

putting a lot of inertia into the policy rate. there was a tremendous amount of fiscal stimulus, and then the fed did not respond to a massive v-shaped recovery. when they did start to react, they had to move more aggressively than anticipated. now some of the indicators suggested we are well into overreaction where the fed has gotten into a restrictive stance. if there is inertia as the economy tips into recession, that is how you get a deep downturn. boom, to bust, then a big question mark as to what follows. tom: james tobin of yale and milton friedman of chicago worship irving fisher. they could not be further apart in terms of economics. what fisher was talking about in

the 30's was what you cannot see out there. what is the mystery for you, michael dara? michael: once that happens, tom then we know we are in it. once the unemployment rate, moves when we see that the recession has started. usually you are a months are a couple of months into a recession. that will tell us the fed has gotten the policy rate above neutral, but prior to that it is estimates. that is how we use the yield curve. tom: michael dara, thank you. i have goosebumpss. that is like when you say to yourself "hw we get to -- lisa: that is why it is interesting, even though it is frequent data. tom: this afternoon will be

interesting at 2:00 p.m. this is bloomberg. teachers at -17. good -- futures at -17. good morning. >> the governor of russia's belgrade region is reporting what you calls a large number of missile attacks overnight. he says repairs, to gas, water, and electricity services were under repair. he says more than 500 people fled their homes during the fighting. citigroup is abandoning its efforts to sell banamex. the decision allows it to restart stock buybacks this quarter. citigroup had been holding off because the sale was expected to

temporarily hurt capital levels. citigroup was unable to reach a deal with banamex. in the u.k. the push to return to the office stalled in 2023. london employees were in their offices less than half of the week back in april. older workers are leaving for a shift towards remote jobs, which risks hurting city centers. i'm lisa mateo and this is bloomberg. ♪

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this could be very cyclical. you give people more money, and that begets further wage gains. it is very healthy. jonathan: geoffrey yu, brilliant there. what the show is about is a guest. michael dara from -- from michael dara to paul sankey. we have paul in our studios. i went back to amy and said "who had the worst call on memorial day?" she had to look at the surveillance rolodex.

sankey had to go from $78 to $100 a barrel and he has 3 days to do it. lisa: paul, thank you for joining us. a a lot of people thought oil prices would go a lot higher, and here we are at $74 a barrel from a high of $122, if you go back to last year. what has been the main disrupting feature? >> december 22 we got all the way down to $71. it is probably smart to call for warmer winters, but we had a cold late december, so it looked like it could be a big deal. the second thing is that russia has continued to export oil. while russian production seems to be down, they keep exporting.

production could be following, but we could see much higher than expected russian exports. china's recovery has been service led. it is growing, but not growing much in the industrial economy. the jet fuel side of the chinese economy has worked. that has been a bit of a help. it has become a nonevent because the rebuild they have talked about is relatively tiny. lisa: i believe it will start in august. we are looking right now at a scenario where saudi arabia is getting concerned about how low prices are. opec may be challenging pricing where it is with another production cut. how much does that factor into

your calculus? >> they have been crying wolf a bit. this is the third time they have tried. y yoy can squeeze expect -- you can squeeze speculates. while speculation is very low, extremely low right now, you see the saudi oil men coming out and saying we will squeeze you again. the real issue is can the saudis corral russia. russia is a threat to saudi. it is sending oil to asia and cutting the long-term saudi premium for selling oil to asia. ut is a much -- it is a much bigger deal between saudi and russia. there is a good relationship last time we checked between mbs and putin.

we will see how this plays out. next week we have an opec meeting. i was in the room in vienna in october when they announce to the 2 million barrel a day cut. everyone was agape. those cuts never showed up. tom: i'm going to think of bendel when you were working at deutsche bank. the cost is geting -- getting a barrel out of the ground, i want to bring it over to an actual oil company, say, accidental petroleum. i am thunderstruck how they have not deployed the air emerging free cash flow to shareholders -- deployed their emerging free cash flow to shareholders.

>> you probably see other companies over return. pioneer has paid specials through the roof. tom: is that a permanent fixture? >> i believe they now do realize. i was with the ceo of valerius yesterday. we were mocking him for the previous ceo's spending acquisition tendency, the last ceo in charge of valero. he came in and maintained a high cash return strategy. we have seen the refiners change and then maintain. it took until covid before the u.s. mp's got the memo. they would have to be stupid to change tactics. tom: i look at the drilling,

where they deployed all that capital to. help me with europe versus u.s. big oil. what is the best 3 to 5 year return? >> european investors are overweight european oil, so they cannot move their stocks. you need u.s. buyers of those stocks in order to make them work, and u.s. buyers, i cannot persuade u.s. buyers to buy u.s. oils right now. you could buy valero, you could by exxon. why would you go outside your benchmark and by a company with an awful track record? there is an interesting thing coming up, which is shall is having a solo meeting here in new york -- shell is having a solo meeting here in new york. june 15 we will get the new ceo

of shell. i want them to cut the company. third point, major activists have been out saying they want to see the same thing. there is the opportunity for them to make strategy changes. i was just talking to alex about what a huge mistake that was in terms of misunderstanding the cost of capital, but ultimately i think of her time the u.s. investors, if they come back -- over time, the u.s. investors, if they come back to oil, will have time. lisa: why are opec-plus meetings so short? >> if you remember at the point of the maximum crisis, it lasted a week in march 2020. >> will this one last 8 minutes

or 11 minutes? >> i think they will prearrange. i think you want to belong here oil. i don't know how long it will last. i think we will be going back to worrying about the economy. tom: thank you so much. it is wonderful to have you in this half-hour with michael dara. we have another debt headline. i think we are on a 20 minute basis this morning. lisa: they are going -- i think the bigger story as if they did not get together and they were not talking. tom: i don't know what to make of it other than how many times have we seen this before? it is a ballet. i go back to the reality that

senator mcconnell and president biden have been down this road 4000 times. lisa: i what point does not become a real risk? we will be down this road again. we have been down this road before. at some point it does have a consequence, there is a long-term transient response. tom: if they wait to later in the evening, we can hear the results as we get up to do surveillance. lisa: i think people are sick of it. is there a feeling of urgency enough to avoid a mistake kind of technical default? jonathan: thank you for -- tom: thank you for our team with some importing conversations here on the events of the moment. the 2 year yield near 4.40%. please stay with us on radio and television. this is bloomberg.

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so some of the trees had to go. i might've taken it a step too far. (chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch.

jonathan: live from new york city, good morning, good morning. equity futures a little softer. the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: coming up, global economic optimism beginning to crack as chinese stocks wipeout gains for 2023 and debt ceiling talks are going nowhere fast. everybody needs to