>> we have not seen the full effects of debt tightening. >> they cannot go on tightening 50 basis points every meeting without getting a policy that would ultimately crash the economy. there is definitely elements we are seeing. >> we discretion there is latency of this market going forward. >> "bloomberg surveillance "bloomberg surveillance this is" with tom keene, jonathan ferro and lisa abramowicz. lisa: it is the quiet period. tom and jon have ditched me. luckily for us, we have lori who

managed to ditch the kids and come on early to join us. really fabulous to see you. we are on the verge of this bull market. lori: it definitely feels like a downtrodden bowl. -- bull. lisa: we will get into all of that coming up but on a week like this, it is sort of a reset where people are taking a look at kind of a trickle of data coming out. this feeling that perhaps we are waiting on tender hooks to understand what the federal reserve is doing. is it a reset moment for you? do you feel like this is a gut pivot point? lori: i want to see what happens when the market reaches 4300. just seeing whether or not we can surpass that barrier. i think a lot of the technical community is looking at that as an important test. i want to see how we act when past that. in general, i do think we need

this digestion period. it is the summer, a time deposit and reflect and think about the second half of the year. lisa: you have been traveling a lot and we are hearing from a lot of different airline ceos and we talked about the back to work trend of people getting back to it. is that an accurate reflection of what is going on? are people getting back to work or do you feel like it has been that way? lori: they are getting back to something. i've been on the road six of the past seven weeks seeing investors. every plane is packed. i don't think it is just leisure. there are too many roller bags going to the overhead compartments. i do think people have been getting back for a couple of years but it does feel like the pace is accelerating. it has been awesome. best part of the job. lisa: getting to travel, even now? lori: not on the airplanes. [laughter] but into the conference rooms and seeing investors. some of them i've seen since the

pandemic started and others, it is the first time we have seen each other in a while. lisa: guy johnson will be at the conference of airline executives and has been giving as intel that basically the experience is to get worse. we have a lot to look forward to going forward. business people are not flying first class anymore. lori: i think there is an efficiency but we are sitting there, i was can when he about my back hurting over the weekend. just from the seats but the reality is that you have to take whatever ticket you can get. it is not quite as easy to make last-minute changes as it was. lisa: we are also going to be speaking with the president and ceo of marriott coming up. the other set of travel which is the hotel side. all of which are still struggling to staff up which is the two sides of the ism and economy that we keep hearing about. this week is a quiet one. we are watching the ism data coming out today at 10:00 a.m.

giving you a sense of just how much the expansion is happening. very interested to hear from several. a whole bunch of voices to really give a sense of what they are looking for, what sort of mess they can create some order out of because this is a fog and the fog is really from what we are seeing in china as well. a number of economic indicators out there. frankly, this to me is a big mystery underpinning so much of the macro action. we get trade data on wednesday. cpi data out of china on friday. how much is this really one of the biggest upsets in market activity that we have seen? lori: in terms of opec specifically? lisa: in terms of just where the

demand has come from, rebound in leisure and hospitality. lori: i think we don't understand the psychology of the pandemic. we are all used to sitting here plugging numbers into our spreadsheet. we are still in an unprecedented period. the reality is the psychology and the need for these people to cram onto these planes and what is a miserable situation to get out and enjoy their lives, i don't think we are properly modeling that is forecasters. we have notice in one of our gauges that the savings rate has started to go back up. we think the consumer balance sheets are in very good shape. there has been a little dismissing about over the last six months saying savings have been paid down. we really notice consumers are being cautious in some areas so they can find the things they want to go out and do. i think that is all very healthy but i think we have expected the psychology of the slow down in

corporations and all of the nervousness about recession to hit and it has not and that goes back to this idea that we are going to go out and live our lives one way or another. lisa: are you surprised oil prices are not higher this year? lori: that is what i have been noodling over this morning is how much that is going to be additive to wti. i'm not a commodity forecaster but i do think about it a lot in regards to the rotation in the market because this does feel like a stock market that wants to shift back to energy, small caps, value and get away from this tech trade which is starting to get too crowded. we really do need to see clear direction on things like oil prices otherwise you are not going to get those value parts of the market to work. lisa: let's get a deeper sense of what happened over the weekend. standing by for the past 23 hours is manus cranny of bloomberg since bloomberg was

not invited. i am curious how much of a surprise and how much contention there was at this meeting where saudi arabia agreed to a unilateral cut. manus: good to see this morning and good to see you are not only steering the car but changing the gears at the same time. that is essentially what happened here last night. the narrative was shifted and he delivered quite a shock. i wrap my head around this million barrel cut. it is worth two times the size of the previous two cuts that you had. one of them was a paper cut and then you had 1.2 in the spring of this year. this is size and scale and also, this is from the leadership of opec. saudi arabia literally bangs it out, one million barrels of a cut, comes in in july and bought

himself a call option. he apps the optionality to roll this forward if he is still unsure of the demand or if he is unsure of adherence to the supply. everybody else got up scot-free. lisa: everyone. off freak. there are a number of african nations that accepted headline cuts to production on a permit basis. some said this is window dressing of what they are already doing. the arab emirates came up with the upper hand. am i mischaracterizing that? mannus: what i mean is the russians get to continue and the african student cut. the million cut was the lollipop. the sugar at we have a million

barrels. why should you get a production increase of 200,000 barrels on the back of your ever commission colleagues and this is what he had to say. >> they have all accepted the limited production and they are being given the chance until november to demonstrate the limited production. mannus: he said you are mischaracterizing it and the bottom line is i am not. in terms of what is the production and what are you doing relative to the baselines created many years ago. this is about the realization of what is really deliverable by these nations.

when it goes for the next major cut everybody gets dragged into the narrative. the eveready's had a sweet sugar rush. -- the emirates had a sweet sugar rush. lisa: we will be with you throughout the day as we assess the reaction. dori, see no -- lori calvo see no is -- lori calvasino is with us. how much has entered -- energy underperformed given tech? lori: everything under performed. it has been not legging in terms of performance only but not in the earnings recovery. it is one of a couple sectors that have been seeing downward.

energy has been deeply negative. it is so cheap and the sector is interesting longer term i wanted to get the earnings albatross off of its back. that is my hope with getting a lift on oil prices you can improve the recovery story and let it participate in the others that sectors are enjoying. lisa: cannot happen with the out look that seems unlikely, people aren't looking for a restart of the economic cycle? lori: there are a crew of people saying we are heading out of something bad and those like me saying we are pulling out of something and going into something that may not be that the intestate. energy can have a trade in terms of getting out of the deep

negative territory. if there is a cap on how high they are able to go, they will need to get the earnings strength from other areas like cost-cutting. it is still a tough hill to climb. lisa: as we go through the day, i want to get your thoughts on small caps. they have been left behind. you think this is an area of opportunity and some have pointed that this is an area we are not in yet. we also have the head of macro at academy securities. as we turn into the quiet period with jay powell who had an interesting concert he was attending. lisa m.: russia and ukraine reporting widespread fighting along the front lines as participation mounts for a long

planned ukrainian counteroffensive. they say forces defeated a ukrainian attack on sunday. ukraine said it upheld all attacks. ukraine is gearing up to reclaim occupied regions of the country, and occupied millions of weapons. airbus said the wide-body market is set to experience lengthy wait times because airlines are sucking up long-haul jets. this is from the conference in istanbul. >> you never know where the issue is going to come from. there seems to be a tendency towards stabilization, but still crystallization and in some areas of the supply chain. lisam.: napping up lanes by the

airlines. oil advanced to open the week after it will make it extra one million barrel oil cut in july there that came after a tense opec-plus meeting over the weekend. it takes production to the lowest level for several years. global news, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪ you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! anyone can become an agent of innovation with invesco qqq,

a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

>> at the end of the day, we have to have a series conversation about how much we can afford and how it is spent that discussion needs to go on. debt ceiling triggered certain debates at certain times. it is part of the process of government. we have to be careful that we keep the financial stability and strength of the united states paramount. if we are not strong the rest of the world will not be strong. lisa: that was brian moynihan of bank of america speaking about the importance of passing the debt ceiling resolution, which

they did. i am here today with lori cla vasina. i am sure there is a soccer match that jonathan and tom went to. or more like jonathan dragging tom around. we are warring about issuance of a train dollars of debt by t-bills mostly that will drain the system of liquidity and cause potential downdrafts. that was the tenor of the notes i was reading. do you dismiss that? lori: i don't dismiss it but we have been hearing about it for a while. i understand the concern. the markets after they have run this much are fragile and you are looking for the next shoe to drop. i feel like if it happens it'll be a short-term issue and if you

still believe in the 2020 fort recovery it would be a good buying opportunity. it wouldn't surprise me if we had volatility and that is what causes it that would be fine. lisa: a lot of people we spoke to said they are keeping an eye open to see that nothing is going to come and do something unsurprising. how do you view the policy elements, whether it is the china-u.s. relationship of the debt issues as you try to view your course? lori: it is something we keep in mind we look at six drivers and that is what we look, economic policy as well. i would say it is something we can't get too far ahead of but we have to see that the markets are price ahead too much in advance. it feels like there is momentum

for the republicans heading into the 2024 election. we are seeing interesting shifts in the polling data that is helping markets. lisa: the momentum the republicans may be having from the debt resolution as it were, even if the president as he is is taking credit for some bipartisan agreement. ed: what was a couple different landmines that could have gone off between now and the election got defused and some will be beneficial for republicans but arguably more beneficial to president biden. the threat of a government shutdown has come down. they pulled for the discussion of exactly how much should defense get and nondefense get. they defuse the issue on irs

kind of budgets and audits. that could have been a huge presidential issue year. they diffuse the issue of student loans and now we can talk about the market impact of starting to repay student loans come september. mccarthy comes out of this arguably stronger but the biden team is looking at the next couple of months and two years saying what are some things that could be really problematic for us and could we get it as part of this deal as little as possible that we have to give to diffuse future time bombs. that is why they think this is truly a big win. lisa: the problem for president biden is they are focusing more on his age than they are coming to the bipartisan agreement. he is saying i am the one who can get these things across and they say you tripped over a it sandbagged. how will he get around that?

ed: i don't know. his age is his age. they are trying to focus on his accomplishments. what was another big winner out of the debt ceiling debate was what we have seen through legislative success under the biden administration is that not necessarily the extremes win. the last couple months it was joe manchin moving the party to the center more than possible and the reason why you try to keep him as president, his argument would be is that you get the middle, which is where most of the country is to get the wins and he points to the bipartisan infrastructure bill, the chips and science act and the fight with u.s. and china. i think the next thing they want to do is something on energy reform, more than what they just did and a real focus on vertical minerals as well as supply chains as the top part of their agenda to see if they can build

on the bipartisan wins. lori: i thought that was interesting about avoiding the landmines. one of the things that struck me is throughout the debt ceiling drama, biden's unpopularity and the data rose. how sellable are the things that he got accomplished? ed: one of the things we are looking at with polling data is that in our current environment, any political figure has a ceiling not much more than 50%. we don't look at it in the past where we had presidents with 60% or 70% approval ratings. that is a bygone era. we saw a downdraft in his polling numbers largely came from some of his supporters. now that there is an accomplishment, a deal signed in something avery did, we would

expect that to take up. where it goes from here, i can't predict the future in that regard. the key for republicans is getting some of the folks that supported joe biden in 2020 to come over to their camp. we will try to see if anyone can do that. but ultimately what joe biden says is don't compare me to the almighty, compare me to the alternative. this will be about choice. it is as much about joe biden as who republicans choose and if there is a third-party candidate. 2024 election is going to be a wildcard for the market the rest of this year and obviously next year. lisa: over the weekend, eight candidates went to the iowa state fair and were trying to appeal to the republican constituents. former president trump was not among them. what did you make of that?

who is not there in the lead up to the announcements that keep coming. ed: when you look at the polling data and former president trump is in the lead. i think for the time being he is happy to kind of let that be the case. what we will ultimately see is how many other people get into this race and does that diffuse the non-trump vote or is he able to consolidate and keep power and we are several months out before we have any true inkling as to where the republican late -- race is going to go. lisa: ed mills, thank you for taking the time. this is probably fun for you because you are a political science major. how do you understand how this is going to play out with respect to equities? i am looking at the idea whether it is the student loans having to get repaid and what that means for disposable income and think about what this means in

terms of fiscal drag. do you feature that in any of your research? lori: it is something we look at for the student loans for consumers. biden has given tailwinds and those landmarks are sort of defused and ultimately that can transcend -- transition into polling data. lisa: people are happy about inflation possibly being not the issue. we will talk about that with the u.s. strategy had at bank of america global research. and then will: a week without fed speak and then the big meeting. this is bloomberg. ♪

we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet.

i was just trying to improve our signal, 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. some thingsiteral ton. in life never feel good, like paying your property taxes. did you know there's ways you can reduce your property taxes? i started ownwell to make reducing property taxes easy and affordable for everyone. at ownwell, we bring together local tax experts and cutting edge technology to maximize your tax savings. you can sign up in 5 minutes online. we'll do all the work for you. and you'll only pay if you save. see how much you could save today at ownwell.com.

lisa: welcome back. tom and jon are both off today. we are talking with lori calvasina. a softer tone in s&p futures as well as nasdaq, basically unchanged, softness basically is perhaps an overstatement. the russell is a down .2%. crude bouncing after saudi arabia came out and said it

would cut one million barrels. they will reassess that at next month's meeting and it was done without concessions from some of the other opec-plus members. we are seeing oil prices of 1.9%. we have yields on the bond market a touch higher as sweet reassess payrolls data from friday. 10 year yield at 3.7%. same across the curve as people expect there will be one more rate hike but nothing to write home about. what we are watching is going on in china, a slew of economic data. getting a sense of dovetailing into what we can expect. our bloomberg reporter in washington, how much are you focused on the data we are getting whether it is the trade balance and what we get with cpi and ppi?

enda: the opening in china was meant to spur terrorists around the world but like you mentioned we will get inflation out this week, it may show factories sliding deeper into deflation and also not expecting much in the export story. china, not much demand for chinese goods here we are not seeing big china spillover from the services sector. the broader china recovery story has been somewhat subdued and seems to be ending quicker than people expected. lisa: how much did that way in at the foreign defense ministers in singapore, the idea of the

u.s. and china delegates didn't come to anything other than a handshake? enda: i think the geopolitical tensions are on the economic story no doubt. those talks in singapore and gathering of defense officials didn't show much progress. within the speeches from each, china's defense minister pushing back and saying they won't hesitate to move on to one -- two taiwan. none of it pointed towards a broad reconciliation. we know there are some steps happening in the background. it is suggesting both sides are looking for middle ground. the worry is the tensions remain deep and taiwan is at the

center. lisa: thank you for taking the time. i want your thoughts as tensions ratchet up. if you go into korean equities and thailand equities in the international story in em you are going to do well, do you agree? enda: like that he said the optimism was china early in the year. they want to take money out of the u.s. and put it in e.m. and we's -- we have seen that take the hit. one of the things i have seen until recently as there was a lot of complacency on china from global investors about the short-term narrative. the fact that the data is not coming in as strong. we have seen uncertainty and a lot of advisors didn't want to hear it in that story is

gathering momentum. not only is it negative or china but for u.s. equities. lisa: have you turned more bullish in the last couple weeks on the u.s. equity story over international? lori: make calls on the u.s. but look at it as a cross current and we think the headwind is lessening. flows still positive and things in the u.s. are stabilizing. lisa: we have seen some dollar strength and we can put that into the narrative. there is also the big cloud that now that we have the debt ceiling resolution, we will have a lot of issuance that the u.s. has been holding off and now the expectation is a net issuance of $20 mostly concentrated in t-bills and the focus is on raising capital and how much of the money in equities in lower rated bonds will have to come out and into the t-bills.

bank of america global research has been parsing through this to understand how much mobile tightening this could be. how much have you found? mark: we expect there will be a trillion dollars or more of issuance from june where we are right now through the end of august the average annual bill supply in the five years of covid was $200 billion. we are getting five times the annual supply in three months. that will have an impact. we have written that we think this equates to roughly a one or maybe two money market rate hikes. what we expect here is all the supply will cause a cheapening of money market rates and front end rates. when we look at this we use

three-month bills which we think are the proxy for the bill market. in the last year they were trading roughly 20 basis points rich to expectations. we think they will trade 20 points cheap to fed funds and expectations. that is a 40 basis point swing as a result of supply and that is how we do the division to the hike or two in terms of the overall money market impact. lisa: a lot of people saying it is negative for risk appetite. before she asks you, i am curious from your vantage point why you think this is a massive headwind if it is tightening on whatever the fed may deliver given what we see in the labor market. mark: massive headwind may be a bit of an overstatement.

you are going to have a supplies surge that requires an adjustment in the price of the front and risk-free rate, roughly equivalent to what the fed does when they hike. this time it is happening because of supplies surge. even if they stay on hold it sounds like they want to skip on june. if you get that, that will raise risk-free rates at the front end and raise the price of essentially anything else that prices all of that in the front end, including short-term wholesale funding, commercial paper, rates that banks that will have to be on levels that are with all of those instruments. lori: i well understood is this by market instruments and how long will it take to play out? mark: the market has done what

we think is a reasonable job pricing in the expectation of supply. is it more than 50%, yes, definitely. there will be a little bit more of a headwind as we see the supply hit and the supply will most notably hit this week no the president signed the bill over the weekend and that clears the way for new debt to settle this week. we have 90 million of net issuance from the treasury. you will see a similar pace of issuance every week for the remainder of this month and maybe for every month of the summer. most of it -- there is a good understanding in the fixed income world. from the equity market analysts, maybe less well understood but it will be a headwind and will hit the banks. the banks compete on deposits, not essentially with the fed but when he market mutual funds and those will be up with all of the

supply, another headwind for the supply. lisa: i love what he said that it is 50%. is that the issue? lori: even in my meetings with equity focused people, this is coming up a bit i do agree it is more than 50%. i would bring up the point that there is a difference between how fixed income investors inc. about the world and how much equity folks think about -- income investors think about the world and how much equity folks think about it. they don't want to talk about 2023 anymore they want to talk about the 2024 forecast. to me it is not what is moving equities. lisa: mark, i would love your thoughts on the bank tightening sphere because that has a longer tail that is harder to quantify. this is what we have seen with money market funds getting cash from apposite accounts.

how long will that to -- take to play out? mark: we think it will be in relatively quickly. the supply will result in likely a further cheapening and the rate sphere and we expect money market mutual funds will be capturing those instruments and passing through that into their yields which increases the competition in relatively short order in the banking industry. we do think we will see it over the course of this month or over the next several months. it is another headway for the banking industry. we know the banking system has been under duress and we go there is an incremental, ongoing increase in emergency lending that is happening to some banks. this will be another challenge and that is the midst all of the

higher rates. lisa: thank you for being with us. i wonder if that will be one of the things that will keep people from investing in small caps and banking. lori: the most interesting thing he said was there is another reason to be cautious on the banks which could push people into tech and that could keep the s&p afloat. lisa: we will discuss this more in depth later. we also have the qantas airways ceo to tell you about 16 hour flights and 19 hour flights that cost more. from new york, this is bloomberg. lisa m: ubs expects to wrap up the acquisition of credit suisse next week. they will be delisted from the stock exchange june 12 and a swiss stock exchange on june 13.

ubs agreed to take over credit suisse in an emergency deal and fears they were headed for bankruptcy. morgan stanley strategist anticipate a sudden pullback in corporate earnings and will slam the brakes on a u.s. equity rally. the bank strategists. earnings-per-share for the s&p 500 are set to drop 16% this year, one of the most barest predictions among those from bloomberg and goldman sachs anticipates mild growth. a defense form in singapore kicked off with a handshake from leaders. there were other signs the two nations could avoid a collision. but austin chided china for the refusal to meet unless the u.s. lifted sanctions.

top college golfer has gone from ncaa champ to lpga champ in less than two weeks. the 20-year-old captured the americas open with a par on the second playoff hole sunday. she is only the second player ever and first since beverly hansen in 1951 to win an lpga tournament in her professional debut. global news, powered by more than 2700 journalists and analysts. i'm lisa mateo. this is bloomberg. ♪

the first time your sales reached 100k with godaddy was also the first time your profits left you speechless. at the counter or on the go, save 20% with the lowest transaction fees and keep more of what you make. start saving today at godaddy.com >> things are really busy. we had a great memorial day weekend and bookings for summer are strong. the priorities have shifted

where travel is higher up. >> the industry is lest -- less vulnerable. >> we are seeing people want to travel. >> things show the demand continues. there are challenges but despite those challenges, we remain cautiously optimistic this will be a good year for airlines. lisa: this surprises no one who has gone to an airport anytime recently. there was a meeting in istanbul and it feels like this is a secular shift were airplane travel will be more expensive and less enjoyable. lori: i think so and i think people can adjust for that but i think it is a trend that is here to stay. any travel related company in

the u.s., the commentary is very robust and goods companies are down in the dumps at the same time that the trends are real. lisa: are you overweight that particular sphere? lori: we are under weight consumer discretionary but we are generally of the opinion that the demise of the consumer has been prematurely written. lisa: guy johnson is with the qantas ceo. guy: i am doing fine. i will take you down under and talk to alan joyce, the ceo of qantas. he will be stepping down after 15 years. nice to see you. are you going out on a high?

alan: qantas is going to make a profit this year. it is a billion more than we were making before covid. we are set up to take a new aircraft every three weeks. we have projects coming in 2026 that will increase earnings. we have a frequent flyer program that will increase productivity. guy: you think this demand will be with us for a while? alan: we do. you have a balance between supply and demand but that will be corrected. hundred percent of pre-covid that we get there on international and then we are back to 100%.

we are seeing revenue come down and costs come down we think the numbers have had a change in economics and that step change is because we are talking billion dollars. guy: let's start off, why is business coming back? alan: part of it is people not being in the office and getting people back to do trips. we are around 80% of pre-covid corporate travel. what we are finding is day travelers at 60%. in melbourne, around 60%, a second largest pairing in the world. in the other sectors we have the

leisure market massively ahead. there is a balance. we were talking, people working from different locations. after working there, they are compensating for the corporate trips. guy: when they are hike aggressively. allen: travel within states and australia, people willing to spend on travel and cutting back on alcohol and eating out. there is a 30% more intent to travel mystically than internationally -- domestically than internationally. the demand for domestic travel is twice what it was before

covid and the demand for international travel is 80% more. guy: a regulator saying there is not enough competition. allen: fares are high around the world. the reality is there is more competition in australia than there has ever been. we have five. for years it has only been to. 10 million people will be carried for under $100. that is with the supply still being an issue. airfares will come down even further next year. guy: where is china travel at? alan: it is very weak. i don't think it comes back to where it was before covid. we have flights to india that we

didn't have before covid. we look at india as growth and we are putting more capacity in. in north america as well we are seeing huge travel from there and europe. the markets will compensate. guy: do you think geopolitics will get in the way? alan: the relationship between australia and china has gotten better with the new government. we are seeing that from a business community rebound. i don't think tourism will be the same as it was before covid. there were cities in australia that were heavily subsidized that we don't think will come back. we have a big order in and we

have delays. we have some arriving and we have a six-month to one-year delay. there are delays in aircraft arriving. we would have wanted more but we are managing the supply chain issues. vanessa has to implement sunrise and is fully behind it. we have to double the earnings of loyalty over the next seven years. still a lot to do and she is very excited and is the right person to do it. guy: great speaking to you. i look forward to seeing what will happen next.

lisa, back over to you. lisa: great work as always with the qantas ceo. we are here with lori calvasina. i want to get your thoughts on consumer discretionary. what would it take for you to be overweight? lori: we cover small caps as well as large and the problem with the consumer discretionary space is valuation. if you look at small-cap sewer discretionary it is cheap. we have been telling people push it down and look at things like restaurants and lower quality retailers, so to speak. more u.s. focused stories compared to international diversified stories. it is valuation pressure. one good thing we are seeing is earnings revisions turning positive. that is a very good sign and challenge. lisa: do you we have already had

the recession in different sectors? lori: yes and that is what is so hard with consumer discretionary. last year when the russell 200 made its low, we had two standard deviations, where it always goes in a recession and it started to recover. large-cap never experienced that we haven't had that same opportunity. lisa: this week is a quiet week. people are talking about jay powell being at a grateful dead concert. what are you looking for over the next seven days to get a sense of how to pivot? lori: you have scared me. i don't think there is ever a quiet week in equity markets. let's see how we manage this 4300. lisa: it has been so wonderful having you. we are seeing basically no action ahead of a day which is

going to be perhaps uneventful or perhaps i have jinxed it. we are seeing oil prices 1.9% higher. ♪

when i was his age, we had to be inside to watch live sports. but with xfinity, we get the fastest mobile service and can stream down the street or around the block. hey, can you be less sister, more car? all right, let's get this over with. switch to xfinity mobile and get the best price for 2 lines of unlimited. just $30 a line per month. i should get paid more for this. you get paid when you win. from xfinity. home of the 10g network. bridgett is here. she has no clue that i'm here. she has no clue who's in the helmet. are you ready? -i'm ready! alright.

xfinity rewards creates experiences big and small, and once-in-a-lifetime. hi, i'm lauren, i lost 67 pounds in 12 months on golo. golo and the release has been phenomenal in my life. it's all natural. it's not something that gives you the jitters. it makes you go through your days with energy, and you're not tired anymore, and your anxiety, everything is gone. it's definitely worth trying. it is an amazing product. with 5-hour energy. it's perfect for when you're feeling coffeed-out. coffee in the morning... 5-hour energy after. your stomach will thank you. discover 5-hour energy. ♪♪

>> we have not seen the full effects of fed tightening. >> they can go on tightening 50 basis points every meeting without getting a policy that will ultimately crash the economy. >> we question the resiliency of this market going forward. >> i don't see any evidence for rates coming anytime soon. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. lisa: a quiet week and they've

gone quiet. tom and john are both off and i'm so lucky because with me today is peter's sheer of academy securities. good morning. thank you for being here. it's quiet for the fed and you think it's quiet in more ways than one. peter: friday was a clear signal the fed is behind us. maybe they hike once or twice more. we can start looking at where good news will be good news for markets. and bad news will be bad news to pray -- bad news. it's the first time in three or four years that the fed is not driving investment decisions. they are still important but a little bit out of the way. taking a backseat. lisa: jay powell is a little less focused on monetary policy.

there were a number of twitter post of jay powell at the grateful dead concert. jake of punch bowl put out a tweet. dead end company retweeted saying the chair of the federal reserve by day, deadhead by night, thanks for coming to the show. it seems it's not just us that are focused on other things. peter: we are starting to price in review get the soft landing. lisa: you're a perennial pessimist. there seems to be the sort of sanguine feeling that right now we are on an uptrend. how many people said entering a bull market today. peter: i'm not really there yet. the establishment service, of the household survey said it was weak. unemployment went up because we lost jobs not labor participation. we are starting to see the consumer get tapped out.

we are seeing credit balances go up. delinquency rates go up. all of those headwinds there. when we look at the jobs and what's going on with the consumer it's the hiring consumer feeling more nervous than the lower end. there are plenty of low-end jobs out there. >> yet consumer discretionary spending doesn't seem to be a problem at the high-end. >> you start to get good earnings warnings last week that it was at that mid to high level. just at the lower retails. i think the whole consumer thing with the student at having to get repaid again. a bit of a slowdown. >> you not see much of anything after the melt up yesterday. it feels like yesterday. basically range bound on s&p trying to pump up against what lori was saying was the 4300 test. the euro losing a bit of steam versus the dollar. it's been a steady grind higher.

just a touch higher about five basis points. crewed up 1.9%. what you make of the opec-plus agreement but we were hearing about for the weekend with one million barrels from saudi arabia cut? peter: it could be just for a little as a month. it also the last time opec cut they seemed to know the demand was really declining. that's the question what does opec know out there. his demands declining. is the slowdown starting to accelerate. maybe they know something we do not. >> this week is relatively quiet ahead of next week which is a pretty blockbuster one. today is the ism services index data. the bloomberg best conference will be happening. a lot of incredible names. don fitzpatrick. lot -- mark lasley good brian moynihan of bank of america of goldman sachs.

we also have weinstein of sabah capital. a whole host of names. we also get china data. i have to think this sometimes get lost in some of the economic issues. we may trade data -- trade data on wednesday. we get cpi and ppi for the month of may. after that we get some credit indications. how much is china the focal point for you right now? >> outside the u.s. is where we are looking the most. china to us is important. we are starting to see that china is not getting the domestic demand that they need. i think we will see weak data out of them. we not getting this opening trade. on the other hand that's going to accelerate this trend we've talked about. going from made in china to made by china. china will start more aggressively trying to sell across the globe and peter -- compete with us. i really think the strategy will

be they will offer products that are maybe 80% of the quality of what we have put in 40 or 50% of the cost. that will be the benefit and look to a lot of emerging markets research rating more directly with china. i think that's the shift. in three or four years we will view this is not this big industrial land, they will be competitors on the final product side. >> why does opec -- what does opec-plus know about china that we don't. senior fellow at the atlanta council. after that one million barrel cut that saudi arabia agreed to unilaterally go through with even though the united arab emirates was notably came out and did not have to make a similar cut. what do you make of this announcement and the lackluster response? >> i'm not surprised by the somewhat lackluster response especially because a one million barrel a day cut across the board from opec-plus was being tossed around over the weekend and so the fact that this did

not come through and instead we've got this saudi lollipop of a one million barrel a day cut unilaterally for the month of july i think that the market sees that as less significant than across-the-board opec-plus cut extended maybe for six months. i think the market is a bit downplaying the significance of the deal that renegotiated the baseline production levels because starting in 2024 these will come into effect and that's can it bring more clarity to the market because one of the issues we've seen with opec is they push through a one million barrel a day cut but it won't be one million barrels a day because a lot of the countries that are participating are not producing up to their max level. their capacity is down. their production quotas back from 2016 and its 2023.

things are really different. once these new baselines come into effect, opec's production rate will be more reflective of what's actually on the market and the market will appreciate that clarity. >> do we have a sense of how much demand is actually fallen off versus the forward look of demand falling off. in other words our prices accurately reflecting the slowdown that some people are saying is transpiring in china and other places. >> i think prices are reflecting the fear of the slowdown much more than what any actual slowdown is mostly because we are not sure what that slowdown will be. we also don't how china will react to this. will china push through some big manufacturing stimulus that will push up demand. plus there's always this -- china tends to buy more crude

oil when it's cheap to put into storage maybe for rainy days or just to resell the process and resell around asia. so there's a lot of cheap crude available on the market now. russia is a huge purveyor of liquid but there's also iranian in venezuela in crude that china can get. so they may be buying more crude oil than they are using and that's papering over any kind of demand issues but we are seeing. peter: one big wildcard i've been wondering about, what's going on with the strategic petroleum reserve. to me it's a bit concerning that it got so low and it's staying this low. >> that's a big issue. part of it is maintenance needs to be done in some of the storage facilities and so the government is hesitant to start making purchases before it's

completed those maintenance things which is an issue and i do think needs to be addressed but i don't think -- i do think they can purchase more than they are and the fact that they are not particularly when prices are in a good spot is concerning. i also think that when they do purchase finally which i think they will. whether it is this government or another administration, we will see a big bump in demand and that will push prices up. i don't think they are prepared to do this and i also think opec is waiting for this to happen. they got very upset when the government -- the biden administration said we will purchase when it hits this level and then they didn't. opec was like we were expecting this demand bump now we will have to cut supply. lisa: thank you. really interesting, something

they were frustrated about that there was a signaling and lack of follow-through and they said forget it. peter: that's been one of the things with the u.s. is we send these mixed signals and countries are certain to move away because they don't trust us to follow through. we are two short-term focused. lisa: with the general political sphere, i'm curious from your vantage point how much are oil prices a signal versus noise considering the distortions with russia and some of the other supply and demand dynamics. peter: it feels like we sat into this new status quo, i think it is back to being as well as copper. what is going on and too many people kind of front run this trade but it's worrying to me at every level that the spr fails to get a bill back up because that something we should have. lisa: do you think it's

something that is a next year problem or just a longer-term existential question mark of not having that protection? peter: you always buy insurance because you don't know when you'll need it. why don't we have insurance now. we don't know what will happen geopolitically. we don't know will happen across the world or the economies that might cost us. >> coming up we will discuss that more. peter will be staying with us. coming up later this morning, the president and ceo of marriott international hearing from the airline ceos the demand will not quit. perhaps we hear the same from tony. ♪ >> keeping you up today with newsom around the world with the first word. russia and ukraine are reporting widespread fighting along the wars front lines as anticipation mounts for a wide ukrainian

counteroffensive. moscow says its forces defeated a large scale attack in the donbass region. u.k. says it repelled all russian attacks. -- ukraine says it repelled all russian attacks. billion supplied by steve, u.s. allies. oil advanced to open the week after saudi arabia said it would make an extra one million barrel a day oil supply cut in july. the announcement came after a tense opec-plus meeting over the weekend. the move takes production to the lowest level for several years following a slide in prices. hong kong's office towers among the most expensive commercial real estate in the world have never been this empty. data shows a record 13 million square feet of office space sits empty with an overall vacancy rate of nearly 15%. that's more than three times higher than 2019 and tops new york city rate of 12.5%. western banks have been cutting

space as dealmaking slows and china tightens its grip. appleshare set to hit an all-time high ahead of the companies worldwide developers conference today where it's set to introduce a mixed reality headset. it's apple's most significant launch event in nearly a decade. apple is poised to add $16.5 billion of market cap. global news powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo and this is bloomberg. ♪ conventional thinking delivers conventional results. at allspring, we break away with purpose. harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible. ♪

because investing isn't one size fits all. ♪ allspring. purposefully divergent.

>> at the end of the day we need is serious discussion about how much debt we have in this country. that discussion needs to go on. the debt ceiling trigger, certain debates at times. it's part of the process of government. whether republican and democrats have to get together to do it. we have to be careful we have to be careful we keep the financial stability paramount. if we are not strong the rest of the world not be strong. lisa: that was brian moynihan speaking on face the nation after the president signed some debt ceiling wrecked -- reconciliation.

there is going to be a net $1 trillion of bill issuance. tom and john both off today. how concerned are you about that. >> i think we will digested well. it's well telegraphed. people are waiting for this and what we saw was the investment-grade counter was huge in the last month or so. so investment-grade issuers take advantage of the facts treasury couldn't and that will be replaced. that will be a relatively smooth transition. lisa: there isn't much to say after a while and it was debt ceiling dominating it because the news was slow. let's worry about the net issuance of t-bills. how much is manufacturing something to talk about. >> i think we will digested. it's not in a move markets. we will get through it and then get back to a normal pace in a month or two. >> can you say the same thing about the discussions at shangri-la when the foreign defense ministers came together

including those from the u.s. and china. there wasn't much to munication other than a handshake. the foreign minister of defense came out and said he was concerned about the lack of communication between the china and u.s. officials say not having communication between friends and more so potential adversaries is like f1 drivers on the same circuit driving blindfolded. i am curious is this something you see as perhaps more significant? peter: i'm lucky. we have 17 retired generals and admirals who serve in our geopolitical advisory board. one thing we often talk about is the debt plate level spread when you have good relationships you want the action to be able to communicate. so captains of ships know each other and that's how you develop strong relationships and it tends to be useful if you have these conditions pretty mentioned earlier taiwan, that

is a real risk is you get some sort of inadvertent action that takes place. china is doing a great job expanding their efforts in that area. the more activity they have and if we counter that with more activity get these risks of something going wrong. it becomes really risky and it's been a problem across the globe where we are not talking to enough leaders of other countries, we've lost a little bit with russia. the other thing out of this conference was i think the world is growing tired of the russia ukraine war. it feels countries are saying figure out some way to stop this. lisa: let's get some details to discuss this. annmarie hordern joining us to discuss this. what stood out to you given that they didn't really tamp down tensions at all based on that u.s. ship that was interceded by

chinese officials? >> it did not tamp down concerns and the rhetoric you have even though we did see this friendly handshake between lloyd austin and his counterpart. but when lloyd austin got up to speak he said a friendly handshake is not enough for substantive discussion. the u.s. wanted to have at this shangri-la dialogue in singapore a sink -- sit down between these defense ministers. they want to start having disengagement with china. we have seen a number of outreach is happening on the part of the administration. in the chinese perspective they were not willing to meet almost sanctions put on the minister and 2018 for overseeing some transfer of russian military equipment, unless those were lifted they were not going to have a meeting. i asked the president about this would you consider lifting the sanctions. the chinese were saying we are

not going to have a meeting. there was this friendly handshake but the rhetoric was red-hot. something he said, we will never hesitate to defend our legitimate rights and interests let alone sacrificing the nations core interests. as the lyrics of a well-known chinese song goes as friends visit us we welcome them. when jackalscome we will face them with shotguns. you what a warship of the u.s. transiting through when a chinese vessel came through. that is the concern of every other defense minister in the room. it could be an accident that could happen but brings these two even closer in terms of a potential conflict. >> i think the chinese rhetoric has been picking up. when they pulled out the peace plan for ukraine they were careful to make sure was worded in a way that china could take over taiwan and could not violate any other piece things. they're focused on national

alliances. where do you see them going? we see them expanding their international efforts in a way we haven't seen in the past. >> they view this moment is a time where they need to shore up their own alliances and allegiances in the asia-pacific as they see the u.s. do that as well. not just on the military front but also the economic front. the u.s. wants to take this multilateral approach. european nations are in line with them when they go after things like export controls or what they will do and are waiting for details of this restriction on outbound investment. china is going to do their own version of that. they have belt and road but they have doubled down on backing of president putin. the peace plan very much so for china really gave russia an out.

it could stop the war but russia wouldn't be able to hold onto territory it had -- would hold onto territory they had. but for ukrainians it is a nonstarter. lisa: i want to get your view on how you play this. i hate to sound mercenary with it. ultimately there's a bigger more substantial and existential concern here. is this something that's market moving or just something hanging out there is a potential risk. >> partly because it's corporate moving. corporations were already reducing their exposure to china. they're considering where they want to be in southeast asia. as you start looking at china and their ability to flex their might in the region, japan is an interesting place. they are finally getting -- they are definitely ill at early and politically powerful enough to act as a real front to china. i think you'll see growth there. i think people will shift around that. what those alliances are and at

the bottom end what china is doing in terms of trade. they're trying to get more and more trade. they won't go after the dollars in reserve currency but you have to figure out how you deal with emerging markets, how you compete with them when china starts offering goods and services. in the emerging markets as it might be easier to deal with than the dollar. maybe it's why emerging market bonds have done so well this past year. >> do you think people of underestimated the small amount of trade in dollar -- in crude valuations in the u.n. >> -- you one? -- yuan? >> it's only good to be a small portion. one day five or 10 years from now they will look how did this all happen and it will be very clear all the steps that were taking place happen. china spends a lot of time

lobbing these international agencies. tries to be on the important committees of the united nations. all these things we take for granted or don't think much about. china sets that framework and they will go after the weakest link which i think will be emerging markets. they will see some appeal. >> do you think the dollar isn't good to be the range bound or reflected lower? peter: i think ultimately our own problems, people are losing trust in the dollar. lisa: we also have tom of strategic's joining us talking about the fixed income space and perhaps the u.s. and how that dollar story plays into that space as well. a bit of softness today although pretty much range bound. this is bloomberg. ♪

get help reaching your goals with j.p. morgan wealth plan, a new tool in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside and the other goals along the way wealth plan can help get you there. j.p. morgan wealth management. aany questions?dy -yeah, i got one. how about the best network imaginable?

let's invent that. that's what we do here. quick survey. who wants the internet to work, pretty much everywhere. and it needs to smooth, like super, super, super, super smooth. hey, should you be drinking that? -it's decaf. because we're busy women. we don't have time for lag or buffering. who doesn't want internet that helps a.i. do your homework even faster. come again. -sorry, what was that? introducing the next generation 10g network only from xfinity. the future starts now.

lisa: welcome back. tom and john left me alone in my prognostications. we head into a quiet period for the federal reserve. when it comes to economic data and corporate moves. what we are seeing in the market right now pretty much flat. a little bit of softness on the nasdaq. reassessing some of the gains we are seeing year-to-date. russell 2000 underperforming again. over the weekend notes really questioning if we can enter a new bull market without the participation of the russell

2000. crude prices materially higher. 2.4% gain on the nymex after saudi arabia said they would cut by one million barrels unilaterally without participation of the united arab emirates and the yield space. you're seeing yields about five basis points higher through the curve. a little bit less of the long end. looking at 3.5%. taking a look at the ongoing dollar strength and euro weakness. peter scheer was saying he didn't think it would last. i want to run through some other names. we are seeing in the specific equity space exxon and chevron responding to what we sought opec-plus. exxon up 1.5%. apple shares up almost 1%. what's notable is they are near all-time highs. they are bumping up against records ahead of their conference that they will have

later today. what do you make of this. peter: it's interesting given that the move for the last few years was higher was worse for big tech. they continue to make twist in terms. it's an incredible company to watch. i like the energy companies as well. i think people forgot back in the day the energy companies of the future are likely to be the energy companies of the past. they have the resources, the skill and investment style to grow the sustainable energy we need. very cheaply. i still think they oft attractive value. the profit from what's going on in the traditional energy markets but will be the driver of sustainable energy. lisa: exxon shares down 2.5%. peter: i like that entire sector. we got out of some of it late last year when things were taking a turn for the worse in

terms of energy price. now's a good time to reenter. i think in the 5, 10 year plan that will work out the best. lisa: before we move onto the yield space and curious what's going on there. do you think it's everything is looking ok. you got the tech space that used to be yield sensitive. people are managing to deliver on the ai and some of the other initiatives and progress. in other areas the valuations don't look as extended. peter: i'm not yet bullish but i want to get bullish at some point. why are those lagging so much? are seeing real extreme divergence within the nasdaq 100. i'm not yet ready to pull the trigger but i think that's where i want to be and try to take advantage of these laggards. >> tom joining us now head of

fixed income research. i'm wondering do you agree. is this a moment where you're not quite bullish would want to because things are not turning and you are seeing that resilience in the economy? >> i'm and take the opposite approach. i am expecting the u.s. economy and the second half of the year rollover to recession and i'm expecting to see risk assets wobble lower as a consequence of that and expect to see treasury yields also move a good bit lower particularly in the belly of the curve. we are still expecting that recession to drive risk assets lower and drive yields lower along with it later this year. that recession is not eminent now continue to have to push that expectation with the timing of that further into the future. >> what's going to drive us there if it's not jobs or necessarily roll over in some of the interest rate sensitive

sectors? thomas: i think eventually it will be jobs. we still have a situation where households, particularly lower and middle income households are spending more than they take in and their credit card debt is growing. although they're not large drivers of the economy they can move on the margin. you are looking at modest fiscal drag coming from the debt ceiling agreement. that should hit in the second half of this year. on top of that you of student loan repayments in the fall. that should also be a drag on consumption. the bottom line is companies retain employees which are continuing to show negative productivity. we can see this in operating margins but you also see these in productivity numbers. this is not sustainable long-term. can we do this for three weeks, absolutely. somewhere between three months and three years, lawyers will have to pull back because they are holding employees who are

not producing and that's a recipe for job losses in the future. peter: definitely bearish on the markets on that side. looking at the yield curve for example i think lower yields long term we seen the two stands go around -80 basis points. year ago when we got inversion everyone talked about it. do you make much of this? >> we always make a lot -- a big deal about inversions. we argue they are a sign of policy mistake by the central bank which eventually if left unchecked will cause a recession. the timing of that is difficult to predict because it's variable and it depends on whether the central bank continues to tighten. this yield curve and deeper inversion we've seen the last three months since march is telling us markets as the fed is intent on continuing to tighten into a swelling economy. i do think the fed is driving us

towards a stall speed in this economy and when you're at a stall speed becomes unstable. >> do you think the fed still matters. do you think it would make much of a difference? >> on the margin it probably keeps the dollar from pushing lower in the near term. it probably puts more of a net interest margin compression into the financial space. beyond that it won't break the system. nonetheless it delays the point at which the fed will begin rate cuts and that does matter perhaps more than additional rate hike. and if the fed tightens in july i think we push that back another month may be into january or march. >> where you putting your money to stave off some complaints from clients saying things haven't been doing that badly so i can we get those returns. >> we continue to love investment grade corporate credit here and at some point in time we will have to pull back

or overweight in that space. right now we continue to see no reason why the economy is going to enter into recession in the near term and that means investment-grade credit is also a good place to pick up yield and credit spread. we like longer duration investment-grade credit. we are overweight in that sector and continue to be. beyond that we are not very positive on the fixed income space in general. i do make the argument that yields could just as easily pop 20 basis points higher here. we are not optimistic. we are not optimistic or bullish on more stressed or leveraged portions of the credit space. we are sticking with that sweet spot. triple b plus rated investment-grade credit. lisa: thank you so much for being with us. you pretty much agree with that that it's time to be cautious in collecting.

>> investment-grade credit will do well. to the extent we have valuation issues the big drivers and investment-grade credit, of the microsoft and apple's of the world even if something happened to their stock market value the credit is just fine. it's going to be a good ig story. we like structured products. there will be value and structured products. lisa: meanwhile the consumers keep spending and they spend to travel. guy johnson has been hearing all about it at the annual meeting in istanbul. what's your take away after a number of wonderful interviews with executives? guy: the bulls are here. they think the outlook for their airlines is fantastic. bear air has decided not to attend for probably good reason. the industry is super optimistic. they see consumer still

spending, revenge travel story has been strong. the business travel story is not coming back as strongly as they would've hoped for but premium leisure is delivering right now. their visibility is probably six months out. maybe nine months tops. they can see what's happening this summer. after that things get more cautious. there is a kind of strong cyclical element to what's happening here and they are under the surface a little bit cautious about that. what they say is this is a heavily supply constrained market. they can get the airplanes or engines. can't get the faa to work. all of these things are happening and what they might do is keep the downturn, the gradient on the downturn to be smoother. on the upturn now we can get to the downturn. all that supply constraint will mean may be the glide path is shallower. a little bit more manageable for these airlines. >> we will be catching up with

you and seeing some interviews that you do throughout the remainder of the day. i wonder how much we can get some reception from downturn with people still willing to spend double the prices in some cases. just flying to some of the routine locations. peter: i think travel will continue to do well. we have the shock on the good side over bought on the good side. i think people post-covid realize they want to see family and friends more. the bucket list became more realistic. life is short or can be short. people have a very different view towards travel especially the elderly. i think elderly travel will be a part where they used to see their kids. or they fly their family together you continue to see that and that will replace goods over time. >> at what point is the hassle, the bother of the experience enough to say i'm fine. peter: i would say in my own

life if it's a less than four point 5 hour drive, it's much easier than trying to make it to the big airport. we're doing a lot more business travel. we've been pretty adamant about getting on the roads. clients want to see us more. it's been fun. it's great. there's nothing that replaces meeting someone in person, talking and doing business that way. lisa: do you enjoy flying? peter: i actually do. lisa: do you have status? i had a horrible local flight because i did bloomberg tv and the day after super max crashed. >> coming up we get the other side with the president and ceo of marriott on where people stay when they go on those trips. this is bloomberg. >> keeping up to date with newsom around the world with the first word i'm lisa mateo. the treasury will kick a barring spray that some estimates could top $1 trillion by the end of

the quarter. analysts say their replenishing process could have unwanted consequences. bank of america has estimated the debt insurance wave could have the same economic impact is an interest rate hike by the federal reserve. wall street banks may be forced to boost capital reserves by 20% after the collapse of smaller regional lenders this year. that's according to the wall street journal which says the revised requirements may be proposed as early as this month. they expected to apply to lenders with at least $100 billion in assets. airbus says the wi-fi aircraft market is set to experience lengthy wait times because airlines are rapidly stocking up on long-haul jets. the airbus chief officer spoke with bloomberg's guy johnson from the conference in istanbul. >> we are still in an area of turbulence. you never know where the issue is going to come from. there seems to be and i say this

carefully, tendency towards stabilization but there is still crystallization in some areas of the supply chain. one of the issues holding us back. >> airlines seeking to capitalize are snapping up planes out of fears of being relegated to the end of the line. global news powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo, this is bloomberg. ♪

>> in the end it is sustainable, it's going to continue. we see a structurally higher level at leisure demand. a couple of reasons for that.

hybrid workplace toward the holiday gives people more time. you have more time to travel. i also think coming out of covid spending two years on lockdown. people will no longer take for granted their ability to travel. lisa: executives in the experience sector have been incredibly happy recently. that was scott kirby speaking with guy johnson at the general meeting. everyone is a bull there. with me today is peter of academy securities. tom and jon both off today. peter: i'm traveling for two or three days a week for the next four to five weeks. we go see clients paid some by train and some flying. we are out on the road. lisa: the person sitting next to you is smiling bigger and bigger as you speak.

the president and ceo of marriott international. things have been upbeat. does it continue or do people start pushing back against the cost? tony: what we've seen the last couple of years as the resilience of travel. we seen it across segments and borders. when we reported earnings at the end of the first quarter. we saw a recovery across every segment. of course leisure continued to be strong. the leisure segment brought us out of the pandemic. but group has been remarkably strong. when we look at the remaining three quarters of the year we are up 26% year-over-year. business trends that many had predicted sort of the demise of business travel. you made the point. increasingly folks are recognizing or reminding themselves of the power of getting in front of their clients, the importance of

immersing new employees and company culture. as a result we are seeing set -- steady quarter over quarter business transient demand as well. lisa: are places like san francisco not seeing any kind of revival because of the outflow there? tony: certainly markets like san francisco are seeing slower recovery but even there i was listening during the break to scott kirby's comments is this phenomenon of blended trip purpose i think serves markets like san francisco well. this idea that through the pandemic, more and more travelers learn they can work from almost anywhere. where we saw this in the data is we look at recovery by day of the week and what was remarkable is two days we covered most rapidly were sunday and thursday. pre-pandemic were really shoulder days. what that told us was increasing frequency is business and group travelers are tacking on leisure

days pre-or post-trip and that has the potential to help markets even like san francisco which have some leisure appeal. peter: i try not to take many days off because you can work from your hotel for an hour or two. you can do a lot. you get these extended stays. especially with the air travel. sometimes it's a bit painful. we tried to do as much of that. i think it makes sense. lisa: how much are we -- are you able to increase pricing then tony: compression drives pricing. what we see is in leisure destinations and some of the urban destinations that have a strong leisure orientation like new york we see a lot of compression and as a result of that we see strong pricing power in a market like a chicago or san francisco where there's less

compression the pricing power is not as strong. lisa: are there markets expanding -- in florida how much hotel prices and i know from experience when i've tried to visit family it's a new experience when it comes to cost. is that continuing or are you seeing a leveling off? tony: a bit of leveling off to the benefit of the international destinations. this morning i was reading statistics. if you look at outbound u.s. to europe airline bookings for the summer, they are up nearly 50% year-over-year and what that suggests is a lot of u.s. travelers might've gone to destinations like south florida or southern california last summer with increasing frequency they're going to france, italy and greece so that's may be eliminating a little bit of that compression pressure in south florida to moderate pricing a bit. lisa: how much are you trying to cater to the high end

? tony: luxury has been exceedingly strong but we have a portfolio of 31 brands across multiple price points. in the luxury tier we see strong pricing power but that's just one that we operate in. just last month we acquired a brand which signaled our entry into mid-for the first time which is now the lowest priced tier that we operate in. >> if you've been seeing a drop off with respect to the housekeeping, some of the other amenities around the experience? peter: i have not actually. i had a great trip in argentina. lisa: did you pay him off before coming in? [laughter] peter: we've been talking about a resurgence in asia travel. that's something we've been hearing a little bit about. tony: you almost have to look at

china and the balance of asia. mainland china has fully recovered but again driven largely by domestic chinese travel. international airline seats in china are only 40% recovered to where they were pre-pandemic. but the balance of asia pacific particularly markets like japan, thailand are booming right now. in fact i was looking at some statistics. someone asked me a question about what are the most popular summer destinations. the list i looked at. some you would expect. italy, france, greece but japan was in the top five. lisa: are there any markets you are getting out of? tony: we suspended operations in russia a couple years ago, but other than extreme circumstances like that, no. we operate in 138 countries today and in our pipeline there

are another 20 new countries. >> there is this issue of doing business in china. we talk to every executive about how complicated that is going into the biggest rival right now economically. how much can you operate freely there. how much conviction do you have in the fact the chinese communist party will allow you to do your business. tony: our business model serves us well there. we have 8500 hotels globally. we only owned 20 of those physical assets. it was principally managing a hotels of the roughly 500 hotels we have in china today. most the entirety of that portfolio was owned by chinese companies and so i think that serves us well even against the backdrop of some complexities of doing business. lisa: how much longer can this trend of let's travel around the world last? tony: i do not see it ending any time soon.

i think there was a shift away from consumption of hard goods towards investment experiences and if anything the pandemic served as an accelerant and caused that trend to spread across generations. lisa: thank you so much for being with us. peter i will say this is something i've experienced. my children are much more focused on traveling and physical goods as well. maybe it's just them. peter: my daughter just graduated and is heading to tokyo on wednesday. she's following exactly what you are saying. lisa: it will be interesting to see if this continues and how much longer it can continue given discretionary spending. thank you so much for being with us. is there anything you are looking forward to this week that stands out? peter: getting some rest. this was tiring for one hour. [laughter] i'm good to be focusing on the

data this week and where the economy is headed. whether this recession is been put off or there's more negative headlines out there. lisa: we understand jay powell was at a grateful dead concert last night. dead end company saying -- coming up next, lara rhame will be joining us. right now and markets pretty much range bound, a little bit lower when it comes to the nasdaq. oil surging after saudi arabia. ♪ >> novak djokovic dominated vari llas as he punched his ticket into the elite eight. he hasn't dropped a set so far and is now one win away from a blockbuster matchup against the spanish wonder kid in the

semifinals. ♪ you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪

♪ >> the recession is having the intended effect. >> i think we have weak spots. >> the disconnect is we are not

seeing though slowing in the labor market. >> to me, the cover story is the 2024 story. >> my guess is it is consistent with a skip, but one never knows. announcer: this is "bloomberg surveillance." >> it is ism services monday and tom and jon are both off. good morning. tom and jon are both off, whether they are together, i do not know. formula one is not linking up with her absences come but with me is lara rhame, chief u.s. economist for fs investments as we look at a quiet week for the bed, but not so quiet for the data -- fed, but not so quiet for the data. what are you looking for in

terms of ratification for a recession or soft landing? lara: one thing that has been extraordinary is the economic data have been coming in much stronger than expected. there has been one outlier, the surveys. and one of my favorite, the bloomberg surprise index is at an 18 month high, so it will be interesting today with services ism coming out because if there is a downside surprise, we need to be mindful of the hard data, which ties back to payroll taxes, are really still looking strong and continue to be upbeat. lisa: in the equity world, people say it is the beginning of a bull market. people are talking about how consumers will keep traveling. the traveling executives are happy with themselves. but what could torpedo this? is good news just good news at this point with the fed on hold? lara: i think the fed being on

hold it should not be confused with job done. as we look at july, july 26 is a long ways away, but that data as it stands really point to continued fed rate hikes. we have the debt ceiling interrupting that it we had the banking system in march derail the fed expectations, but it seems to me we are heading bac to their trajectory we were atk in march which would imply 5.5% or more. lisa: you don't think that is absorbable in markets as they are? lara: well, we have the bond market with alarm bells for a recession but equities are pricing in steady earnings with acceleration in 2024. everything is great when these kind of large cap stocks are pulling the whole thing higher but we have to be concerned if there is a correction priced in,

and it starts being the anger that pulls the whole thing down. lisa: morgan stanley says he expects a decline in earnings-per-share, so perhaps that is where you get some of the assessment. right now there is a little bit of weakness led by the nasdaq. but not a lot, this is a slow morning when it comes to the s&p. you see 2/10 of a percent decline in the nasdaq. a little bit of dollar strength. yields are marginally higher, but nowhere near 5.5%. in the two year space, 4.5%. crude prices up on the heels of the saudi arabia unilateral one million per month barrel cut, given the sense that they want prices higher. they want more to shake out the shorts. what do you make of that? lara: they are pushing against a concern about global growth slowing.

and china in particular, clear evidence that their rebound is not going to be an explosive recovery but it will be a muddle with hopefully a positive slope. i think that is tough to swim against. lisa: one million barrels a day, i should say. this is where people are saying this could add to prices, but not that much. lara: it is important that they are falling on the sword, saudi arabia, keeping opec together. the best defense is a unified defense. but at the end of the day, if we are looking at some of these big industrial economies not experiencing a robust growth trajectory, it will be hard to really maintain positive momentum in oil. i think we are looking at a floor where it is. lisa: this is why you do not see so much enthusiasm in the equity stocks based. today we are lucky to have a

u.s. fixed income research head from morgan stanley. people have been talking about the worries they are casting aside is a net issuance of -- following the debt ceiling debate. people are saying it is not that significant, it is priced in. do you agree? >> i disagree. it has the potential to be significant. we are expected between now and the end of the year, $1.2 trillion of issuance. and, you know, the natural buyers for observing -- absorbing this are the money market funds. that is a good chunk of cash. they could take the money out and buy t-bells, but the people -- the yield you would get needs to be comparable and attractive

to the rate they are currently getting. they need to have a sense that the future of monetary policy, the talk of another hike is very much in play. then they will be more reluctant to take money and buy, so we think that this easy smooth change into the t-bells is not that smooth and it there is a risk there will be stickier. and the stickiness means that money will have to come from elsewhere. while the reserves, ultimately, results in -- draws liquidity in the system. lara: a question that continues

to come up, it is the slow squeeze in lending standards and credit availability. what i am hearing you say is this is the plumbing that will keep that trend moving. do you expected to really resolve over the next one or two quarters or does it lay on top of the fed? how does it move as we look at the second half of the year? vishy: we have seen some tightening in lending standards. the tightening began late last year. and coming into q1, we saw the standards, but it reflects the tone we saw in march with the incremental lending tightening in q1 that affected march and it really does not capture the incremental regulatory change

that will be coming to the banks, particularly regional banks. so, the effect with the tighter market policy -- the effect of the tighter market policy laid on top of this front end of the curve, because of the issuance and need to be competitive, it hits at the same time the liquidity pressures remain in the regional banking system. so, you can look at the continued reliance on the bank -- program. at $97 billion now. so, the front end needs to be high. and they affect of the future regulatory capital change will weigh in on the ability of the continued robust lenders. lisa: some people might be

hearing whah whah, are we going to have a crisis? when you take a look at money that might be flowing out of reserves at the banks or and other assets, going into t-bills, does it mean real risk aversion that will lead to decline in credit evaluations or equity valuations and that has not been accounted for? vishy: i think so. liquidity has been -- has really been a big support mechanism for the markets. and liquidity, through this process, has the potential to be significantly negative to the markets at large. lisa: vishy, thank you. at that is a question we have been asking all morning. lara: this is going to be one of the defining features of the second half of the year because the data today is looking

strong. the forward-looking indicators are more downbeat. then you overly credit conditions on top of that and that is the difference between a slowing economy and tipping into a contraction. will it be a slow squeeze, hopefully not a crunch -- thank goodness, but i think a slow squeeze matters. it unwinds the massive liquidity we have gotten complacent with. lisa: the wall street journal this morning reporting that regulators are thinking about increasing capital requirements at the biggest banks by 20% in response to the turmoil we saw in the regionals, yet the large banks have the wherewithal to increase capital reserves. so how much does that add to the potential of the strain on credit? lara: it absolutely adds to it. we have to ask if they are not putting that in place preemptively. the dallas fed has a good short-term indicator of lending.

i think it is something we are watching closely because the senior loan officers survey is a quarterly release. this is something we want more information on. to me, this is really going to be where the rubber meets the road in monetary policy and of the economy for the next half of the year. lisa: and this is after jp morgan put out their earnings results. so even if it does not get passed right away, the implications for the economy could be more imminently felt. coming up, we will speak with michael capon. it is -- gapen. it is economist versus economist here. this's bloomberg. lisa mateo: keeping you up-to-date with the first word, i'm lisa mateo. russia and ukraine are reporting widespread fighting as anticipation amounts for a long

planned ukrainian counteroffensive. moscow says its forces fought off an attack on sunday. but ukraine says it repelled all russian attacks. it is trying to reclaim russian occupied areas in the country with weapons provided by allies. and rishi sunak is defending his efforts to curb migration. he said today, "our plan is working, starting with a 20% decline in crossings between january and may of this year compared to 2022." but critics say adverse weather is the main reason behind the decline. at the government has been trying to make the u.k. a less attractive destination for people arriving illegally. morgan stanley strategists anticipate a pullback in corporate earnings and will be slamming the brakes on a u.s. equity rally. the strategists predict earnings

per share for the s&p 500 will drop 60% this year. that is one of the most -- 60% this year. that is -- 16% this year. ubs expects to wrap up its acquisition of credit suisse as soon next week. shares will be -- from the new york stock exchange on june 12 and the swiss stock exchange on june 13. ubs agreed to take over credit squeeze in an emergency sale backed by the swiss government amid fears that the competitor was heading for bankruptcy. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg.

♪ (upbeat music) ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) -awww. -awww. -awww. -nope. ( ♪♪ )

constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall.

♪ >> the consumer credit quality is very strong. the destruction -- disruption was pulling money out of the banking system into the federal reserve as cash, and the deposits have come down as part of the tightening, so there is less to land so that -- lend, so that is tightening credit standards pretty dramatically. lisa: brian moynihan over the weekend, talking about the imminent increase in tightness in credit conditions. we are hearing about it increasingly, yet in the latest

survey we did not see it. it has been on a lag. tom and jon are not here. evidently, they are having a long weekend, possibly at a sporting event together. hopefully, they will bring pictures back. but i have lara rhame here alongside me and we have been talking about the tightening of credit conditions and on much we have not yet seen. how do you track that? lara: the dallas fed has issued a weekly survey of lending, which is useful. and i think that more broadly you look at the ways it affects the consumer. you are looking at the mortgage applications, you are looking at car sales. something that is interesting and differentiates this cycle from the mid-2000 is the fact we have a pent-up demand for cars right now. we have a low supply of housing. there are things that are offsetting the fact that higher

interest rates are having a cyclical headwind to some of these demands. lisa: it has been confusing, one of the more confusing times as we parse through the data. sonali basak has been looking and trying to understand the banking impulse. our correspondent for the financial industry. and we have a 20% increase in capital a charger that the wall street journal is reporting. when you talk to executives, how much are they talking like brian moynihan? that this will be a dramatic shift happening over a period. >> there is that reality that there is uncertainty with with the consumer will look like by the end of the year. brian moynihan is one of the optimistic ceos but he has said that spending is starting to slow and jp morgan is also saying that conditions are tightening but we are not seeing demand up. when the coffers for the consumers dry up, does that

demand tick up? so, i think that you are not seeing the worst of it. of course, there is a delayed effect. but that o charge, sticker shock. 20% higher. you have to consider that the big banks are not the ones who have failed recently. and you have to think about whether you constrain the big banks. s i thinko there are about 4000 jp morgan banks alone,. so, when you think about the credit contraction and ripple effects, that is a years long process. lara: something we are watching is consumer delinquencies. whic areh not at levels we associate with some kind of broader economic stress. with the unemployment rate so low, we still have income generation, so how are folks like the bank ceos thinking

about delinquencies? >> you have to think about profitability here, not just how much money you are losing. think about amex, that was a big shock in the last quarter because they had provided so much for losses and they tend to bank wealthier consumers. what does that ripple effect look like for rainy days? there are other business lines going up. goldman just said they will have a steep drop-off in trading revenue, so you do not have that kind of support that pressure on the trading side. lisa: i was going to go to goldman. john wallman will be speaking this week. but he had a different tone last week. he was talking about the clients of the being having a different approach than six months ago and it flies in the face of the new bull market, that everything is going well.

is this a goldman sachs problem or something you are hearing about more broadly? >> more broadly, particularly if you have large clients or trading. the trading desks are the ones that will be facing the higher capital requirements, according to this report. is the fed concerned about future market conditions and liquidity? it is not like the trading desks lose a ton of money every year. they have cleaned up a lot. but at the same time you have folks who are worried about leverage underneath the system. the ldi crisis, you had the banking blowups, and the big worry is what is the next shoe to drop. lisa: i think that there is a feeling of, we have been worrying about this, and all of a sudden we have egg on our face and a certain point you have to wonder if we are looking at it wrong.

in the first quarter, many companies did not invest in their businesses and the demand outstripped what they were able to invest in. how much of that will be brought forward? and you will see a return to actual activity as the consumer has held in there. lara: this is where we have cyclical headwinds, but there are structural tailwinds. we have an infrastructure package working its way down to the company level. we still have shifts like ev, manufacturing that's ramping up. so, i think ai is another place where we see the tech companies -- there's talk about investing in the new technology. so i see some cyclical tailwinds, even though higher interest rates and uncertain dr biting. -- are biting. lisa: have your children been using chatgpt? lara: i have been using it.

you want to get to know it and we are still trying to work it into just finding out how it works, asking questions. it is an extraordinary technology but it is still so new. lisa: my kids use it for grading papers, for helping write said papers. they put in parameters and get a sense of what they would get, so they are aware and can move ahead of that. but i am curious how much, as the bank executives talk about layoffs, we i've also been talking about return to office and travel -- so, what is the pressure like to actually get back, especially in a time when people used to go to tech and are coming back to wall street? sonali: i heard a statistic the other day, the idea that businesses are not spending less on real estate, they are ramping up a smaller space to get people

to come back. we have talked about hotels, the idea that people have to sit at different desks at different times. that's a complicated calculus. so, you do have businesses spending, less than aggregate. they want to list people to come back because it is less productivity. so that is the easy way to say what is happening right now. and they want to be in the office. lisa: thank you for being with us. are you back in the office? lara: we are, but we have the food. we have the exercise. i think that it is -- lisa: is that a job offer? we have the food and exercise. lara: anytime you want to come, lisa. the important point is it cannot be the same old office space. it is a dance. regionally, you look at different areas -- i think the northeast will be a place where it is harder to get people back to work, but in the sun belt

people have been back since three months after the pandemic. lisa: are people traveling for business travel through first class or economy? lara: i know it is economy for me, and it is a lot of business travel. at the end of the day there is demand to get people face to face. lisa: a lot of the guests are flying economy. they are saying it can be physically uncomfortable that many hours a day. coming up, we have a conversation with michael gapen as we head towards ism monday. a quiet week for the fed, but anything but when it comes to the economy.

202 pounds on golo.'ve lost so the first time i ever seen a golo advertisement,

i said, "yeah, whatever. there's no way this works like this." and threw it to the side. a couple weeks later, i seen it again after getting not so pleasant news from my physician. i was 424 pounds, and my doctor was recommending weight loss surgery. to avoid the surgery, i had to make a change. so i decided to go with golo and it's changed my life. when i first started golo and taking release, my cravings, they went away. and i was so surprised. you feel that your body is working and functioning the way it should be and you feel energized. golo has improved my life in so many ways. i'm able to stand and actually make dinner. i'm able to clean my house. i'm able to do just simple tasks that a lot of people call simple, but when you're extremely heavy they're not so simple. golo is real and when you take release and follow the plan, it works.

♪ lisa: welcome back. this is a special edition with just lisa abramowicz because tom and jon are both off, they will be back wednesday. we do have some data so far for the week, including ism services data coming out at 10:00 a.m. right now, we have a softer tone in the markets, though in the s&p it's flat. it little bit of dollar strength, weakness -- we are trying to figure out if it has directionality to it.

and 3.75% for the 10 year. crude valuations are climbing to near session highs at 2.6% afte saudi arabia agreed tor cut one million barrels per day from production at least for one month. ism it starting us out this week. michael mckee is with us here. what are we expecting to learn this week after a jobs figure on friday that seems to have been forgotten? mike: the ism is about the only number that anybody will care about, may be a little bit with a little bit with jobless claims on thursday, but the economy has been stronger than anybody expected. ism services will either refute tha for underlyingt it -- underline it. and we will see if it matches up with other numbers where the service industries are still

looking for a lot of people. and what it means for prices paid because services is the largest component of the expense report. ism manufacturing is where we saw a drop in prices, heavily influenced by raw materials and commodities. we will see if it confirms what the fed is seen with a stronger-than-expected economy.i'm not sure it will make a big difference in whether decision will be. lisa: lara rhame is with me. it will be a battle of the economists now. we have a table full of economists with us. before the next guest, i am curious about the main issues of contention. i think inflation, how high the fed can go, how significant the bank lending tightening will be and how long consumers can keep spending -- elo the remaining feeling of the day.

lara: i will add whether or not there will be a recession. there has been a herd mentality among economists. when the fed raises rates, historically we get a recession. the horror movie might end a different way but the seventh installment of halloween ends the same way the others did. i've been in the camp that we will eventually get a recession, but that is a disconnect and you are seeing a groundswell now of hope that there will be a soft ending. lisa: the fed is in a blackout period ahead of the june 14 meeting. gapen saying that the jobs report is a particularly difficult one for the fed to parse. coming out of them a meeting, we argued that the fed was inclined to stay on hold in june, and the

onus would be on the hawks to justify a hike. we think the main jobs report is just soft enough to justify a whole. can you give us a sense of what the threshold is now for them to stay on hold? michael: you need to see some material softening in the data. i think that they would prefer to skip. i think there was enough mixed messages in the employment report where they can do that, but personally the establishment report gives them better signals, i think. some in the household survey. but there is resilience in the labor market, resilience in the consumer and stickiness with inflation. if the risk backdrop is diminishing, then their communication should shift back in the direction of pushing the policy retire. that is probably the debate-- rate higher.

that is probably the debate they will be having a suite. lisa: i am curious how high they can go, whether that this is going to be another quarter hike, but it will not materially change the outlook in terms of the benchmark for the fed. michael: back in march, before we had the banks -- pop up, i think that they were going to guide markets to 4.5% or 4.6%. could we get to 6% or above? it is possible, but i think between here and 5.75% to 6% would be restrictive. we have seen evidence that past hikes are working on at least parts of the economy, so i am not convinced they need to ramp back up, but if issues have dissipated the fed should fill that gap. two or three months ago they thought it would be at 5.5%

or above. lara: something unique about this cycle is inflation, and the decision there -- and the disinflationary processes happening, but it is easier to go to 5% than 2%. one thing that has come out of the tsunami of fed speak is markets pricing out the rate cuts. and this is really looking around the corner right now, but when you think about the fed, the rate hike cycle winding down, i think the markets rush to price in the next leg down, so to me this is looking like a different process. it would not be the elevator down that they usually take with rates. any thoughts on how that could evolve? michael: when we look at how high and how long, both of that is in the discussion. i think that you are right, maybe markets did not pace with cuts this year, but with

distributions you ended up with a lot more weight in the hard landing. if risk factors are improving, those cuts come out as a result. so, if you are not, if they are looking to find tune where the policy stance is, some of that is the how long. and i think that markets have done it correctly in first you price out the cuts and we will debate on how high things go. the psycho could be a different one where you are right, where getting inflation down to them mid 4's has been relatively easy but how we get it to two is still in front of us. lisa: is it good news? michael: it is good news if you include the risk backdrop, less risk. so you should get more fit hikes in the. we are back to the good news is bad news world. lara: there has been a lot made about corporate margins being

relatively healthy, and they are starting to narrow somewhat. there has been talk that that is a factor adding to inflation, the fact that companies are being a little bit greedy about not wanting to, as would make sense for their shareholder value, not wanting to give up that margin. how much is that a driver of inflation or is a reaction to the economy? michael: it is both. what has surprised us most about inflation and the forecast is how little goods prices have come down. i think we were on the shoulder story and the pass-through seems to be happening as we expected, but to me the shock is you have these big durable items, used cars, appliances, that have been basically flat. that is what you are seeing. the margins have been getting squeezed, the they got widenedn out. and corporations are deciding on

what is the elasticity of a price cut at this point. so, a strong economy has meant goods prices have not come down as expected. conversely, to open up the room for inflation to go back to two, you have to moderate demand. so that is why the good news is bad news. michael mckee: since you both have traders at your offices, the anecdotal information i get is, yeah, fed fund futures have been up and down about cuts, but traders have not. the expectations at the desk is the fed is going to stay high and maybe even raise rates again, so we are getting conflicting signals from the trading desks and from the fed funds futures. michael: that is fair. there are some people that play that game more than others. i would say the majority of investors i meet with, two out of three are on board for the

higher for longer and likely no cuts this year from the fed. but there is a group i meet with that are concerned, and they see that as being more material in people like me are too complacent about it. they say the lags will hit later this year and we will know it when we see it. but i would say that there are more than not saying that higher for longer is where we are going. lara: i would say the same. on our desk, there is a mix that reflects the futures curve and if there is a vocal group, perhaps smaller in number, that feels like the fed is raising rates. they will break something and we will see yields come down sharply should the economy slow. i think that is one of the reasons why we have this kind of fight in the one year ahead fed rate expectations, but a lot of us ar still in a campe that they

will not have the room for that. lisa: in the past few weeks, it seems like there has been a shift in tone where a soft landing is back. how long will it stay back? michael: until we get guidance that the rates are going closer to six. [laughter] lisa: do you think the fed will break it? michael: the soft landing cannot be ruled out. i think as you mentioned in the lead in, history suggests it is more likely than not when the fed moves this quickly into counter inflation you have to pay a price at some point, so i think we are thinking, ok, now it is more likely than not. but it is a different cycle and we cannot rule out that they will hit it just right. it is back on the table at the moment because the risk backdrop has improved. and now we see it moving in that direction. lara: i think it always looks like a soft landing until it

isn't. michael: we are in a recession forecast, so i will not talk away from what the view is, but you know, i still think in the end it is more likely than not that we will have to pay a price to bring inflation down. given what i said about goods prices being firm, the consumer being resilient, you have to lean on the. michael mckee: i guess a soft landing is when bonuses are kind of lost. [laughter] lisa: michael gapen, thank you for being with us. you get the economists around the table and if things get perhaps more gloomy. [laughter] next, what is going on in the tech sphere. this is bloomberg. lisa mateo: here is your first word news. there will be a bahrain spree today that estimates could top

$1 trillion by the end of the quarter but the replenishing process could have unwinding consequences. the bank of america has issued the debt issuance wave could have the same economic impact as an interest rate hike by the federal reserve. lose capital reserves by 20% after the collapse of smaller regional lenders this year. the revised requirements could be proposed as early as this month. they are expected to apply to lenders with at least $100 billion in assets. apple shares are going to hit an all-time high ahead of the company's worldwides developers conference today where it is going to introduce a mixed reality headsets. it is apple's most significant product launch event in nearly a decade. apple will be adding $16.5 billion of market cap, bringing it closer to historic $3 trillion valuation. oil opened the week after saudi

arabia said it would make an extra one million barrels a day supply cut in july. came after a meeting over the weekend. the move takes production to its lowest level for several years following a slide in prices. prince harry's phone hacking trial against the publisher of the daily mirror kicked off today without him at court. his attorney says he has taken a flight from los angeles after his daughter's birthday but the judge had said he should be in court for the first day of the case. this is the first of his lawsuits against the media to go to trial. i'm lisa mateo. this is bloomberg. psst. virtual real estate is a lock. ♪ cold hard cash ♪ j.p. morgan wealth management knows the world is full of financial noise. i'm looking at your asset mix and plan.

you are right on track. great, thanks. our easy-to-use app and local advisors are here to help you figure out what's right for your investments. j.p. morgan wealth management. ( ♪♪ ) woah. ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) ( ♪♪ )

constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. somebody would ask her something and she would just walk right past them, (laughs). she didn't know they were talking to her. i just could not hear. i was hesitant to get the hearing aids because of my short hair. but nobody even sees them. our nearly invisible hearing aids are just one reason we've been the brand leader for over 75 years. when i finally could hear for the first time, i could hear everything. unlock our best deal of the year during our 75th anniversary sale. call 1-800-miracle today. >> i could argue that ai adds another 30 or $40 per share to the apple store. >> what is that about? >> i think what he will talk

about is ai could be really another foundation another monetization of the growth story. lisa: that was dan ives on may 26. apple shares today rising toward record highs ahead of the worldwide developers conference. i always think it would be what would apple do as wwad, but it is this -- apple shares are up more than 1%. joining me today is lara rhame. tom and jon are off today but they will be back on wednesday. and we will be altogether. i am curious how much this apple and tech dynamism can continue with ai charting a new course for potential growth in the sector. lara: tech has been in the crosshairs of so many stories this year.

layoffs causing broader concern about the economy. and i think that these companies recently doing more cost-cutting kind of shows that they are moving away from growth and needing to behave a little bit more after 20 years or 25 years, and little more like traditional large-cap companies. finally, what is the impact of ai going to be? i look at these calls and i hear about more spending on investment, not less, but that is a debate that will be reaching. -- raging. lisa: let's get to that with our top tech reporter who is always breaking scoops on apple and beyond, looking at the developers conference and that apple is holding. what are we expecting to hear about with artificial intelligence? >> thank you for having me. i am not expecting a significant announcement related to ai for artificial intelligence today but i think that we are about one or two years away off significant new announcements on the ai front.

today will be about mixed reality and software updates for the ipad, iphone, the mac and apple watch. not expecting any major ai initiatives. not sure where that speculation came from. lisa: mixed reality, will it be another metaverse play where people will talk about how it will be the new thing with gaming, yet people will not necessarily go to the game consoles and it will be obsolete like something that will never take off? mark: this is going to be a mixed reality headset. the difference is apple is not focusing on the social network based 3d worlds where they believe you will interact with people through the headset and the online world there, it will be more about productivity, consumption and a gaming device.

this is something that could one day replace the iphone, ipad and even the mac. the underlying technology is the same as the headsets where they really push the metaverse, but the functionality in push will be essentially entirely different, more on the productivity side than the social. lisa: is there a talk at the conference about production duplication, moving production out of china? lara: i feel like that has been a place where apple is one of the bellwethers for production in china and duplicating that supply chain or enhancing it -- i'm interested in how the discussion will go at this conference. mark: they will not talk about production or anything like that, this is a consumer conference and they never discussed manufacturing plans or anything regarding operations at these conferences. that is behind the scenes. i can tell you that they are

pushing more mac production in two places like vietnam versus china. but that headset is something that will be produced in china, it is a little bit too complex to be pushed offshore to other parts of south asia. lisa: but this is one of the bigger questions about how long they can continue to grow at this pace if they get pushed back from china -- how much can they move beyond $3 trillion and go for a growth in a new innovation rather than services, rather than the iphone and continuing to upgrade it? mark: i think that this headset could eventually add money to the bottom line. i think it will be a revenue growth driver, along with newer versions of the apple watch.we know the iphone is pretty stagnant at this point but the growth opportunity is strong. i do not think it will come to fruition in the next year or

two, but five years and be on wearable business will be part of the apple story. the other area to consider is the self-driving car. this is something apple continues to work on. that could really doubled their revenue over time. and really contribute to the growth metrics at apple. that is something that will not come to market for five or seven more years. eventually it will come. it is still being worked on. the combination of the car and wearables indicates a long-term story. but this is long-term, it would not move the needle in the next few years. lisa: we just heard from michael gapen -- lara: the fact goods prices have not come down much. that continues to be a place where we see companies really trying to protect their margin. are we continuing to push prices? obviously, the headset is

looking quite a solid investment, but the rest of their goods and wearables, will they push prices up as well? mark: they will come in around $3000, so it will be a low-margin product for apple. it is something that has new technologies inside and very pricey development. so that is something that apple will have to price at cost when you incorporate r&d, logistics, shipping and packaging, as well as of the materials. on the other side, you're likely to see pricing of the apple watch continue to go up as they add new functionality. ultra has raised it considerably, given that they have the $800 starting price. and you are likely to see more expensive versions of that hit the market, probably into 2025. new versions with the bigger displays. they have in-house display technology to replace components

from simpson and others. you are likely to see revenue growth just by the fact that asp's are going up. in the near-term, i do not expect them to sell more than one million units of the headset, so you are talking about $3 billion to $5 billion that will not necessitate much growth. but as they escalate in terms of volume over time, i think it could add a considerable amount of new revenue to the bottom line. lisa: thank you, truly a clinic and it is wonderful to hear your point of view, especially given it will cost $3000. i'm wondering how much gamers on average can spend, if it is $3000 on a headset? lara: it will not be on my children's list this year, i can guarantee that. i can guarantee parents are saying that right now. only one million sales,

considering the population it is for a select group that can make that investment. then over time it could really change. lisa: this has been fun. lara: absolutely, i loved the economist throwdown. lisa: you get a economists around the table and they talk about all the negativity, how the world is like a halloween episode. lara: but things look good for now. [laughter] that is an important point. mild recession come i want to reiterate that. lisa: coming up, carrying forward the conversation with matt miskin, joanne feeney and tom forte. tomorrow, i will be joined by three more great guests. greg peters and others. i'm curious to see how much they also look toward some sort of soft landing or imminent

recession. honestly, it is a difficult time to parse through exactly where we are at. people talking about a new bull market. the s&p has turned positive. i'm curious about the russell 2000 in particular, especially given it has not led to date. crude is up by 2.5% on the nymex. as we look at the one million barrel per day cut that opec has been working on. this is bloomberg.

a third kid. what if she likes playing golf? it's expensive. we're outlawing golf. wait. can i still play? since we work with emower, we don't have to worry about planning for a third kid. you can still play golf... sometimes. take control of your financial future to empower what's next. and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com lisa: we are 30 minutes away

from trading on wall street. crude is very much leading the charge. can down to the open starts now. >> everything you need to get ready for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. lisa: coming up, oil prices rise after saudi rabies cut.

-- sa