♪ >> market is going to pay premiums that scarcity of growth. >> barring some sort of crazy financial market event i think that we should have a fairly stable move here. >> it is really unclear that the trend lower extends. >> the oval state of the economy is better, certainly much better than people expected. >> it's very possible that the recession slowdown, part of that is already being brought forward if you want. announcer: this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: live from new york

city this morning, good morning, good morning. the audience worldwide, this is bloomberg surveillance. i'm jonathan ferro. getting your week started with equity futures on the s&p, just about positive. here come the upgrades. raising the price target of 4500. something close to 5% upside from 5 -- friday's close. tom: every note this week since look, here we are, up 20% off the total. critically, as you say, this got the same vision now to where we are going, which is sort of kind of like us, but we really don't want to reach out there. jonathan: the potential, lisa, for this rally to broaden out, something we were looking at her last week. today, it's pretty clear. outperformance on regionals. still on the map, and we had how

many weeks of gains now? lisa: how long this to continue is anyone's guess. the fed is going to pause, whether it is hawkish or not. also, you are going to get anymore banking collapses. jonathan: just to build on what lisa said at the hope that we don't get more banking collapses. we are seeing a genuine rotation on just repositioning. the move is more driven by short covering than adding long. tom: we covered this last week. you are on the mat, you are down. the first bounce of is that. it is the gloom crew getting wiped out. certainly we seem regional banks.

tonight wilson's plant at morgan stanley, you got to earn that with some earnings to the. jonathan: morgan stanley pushing back, wondering if that happened just yet. he will no doubt publish a little bit later this week and we will see if he changes his tune a little bit later this week as well. if you just tuning in, welcome to the program. cpi tomorrow, then onto the federal reserve. your equity markets slightly positive on the s&p 500. in the bond market, yields just about unchanged. lisa: you were talking about the week ahead. today, a bit slower, particularly becomes -- because it comes at the pivot point. the federal reserve coming out thursday.

how much have we basically priced out additional fed hikes and what does it mean if they don't deliver? if they do hike rates or if they don't hike rates and they say they are not going to necessarily hike rates are there. how much do they become the bull market fosterer vs. the bull market killer? there he curious to see whether we see more inflation there. it might be more important than the set or any of the central banks. and in politics, former president donald trump is expected to appear in federal court in miami on tuesday. he's expected to appear before a judge at 3:00 p.m.. how much oxygen is this going to suck out of the room as we all wait for the fed decision? jonathan: recent polls, that's the elephant in the room. 61% trump, 4% mike pence. that is the latest poll. tom: talk about fluid to say least. i would like to see the elephant

in the room is tomorrow's lesion or. all of this discussion await on a single statistic. core cpi month over month, no other number matters. if it is up, all hell breaks loose. if it is down, all hell breaks loose. governors and presidents, they feel the same way. jonathan: having a better year this year. let's talk about it. we were discussing not just a headline move, but whether this is a genuine rotation away from the outperformance of medic cap tech were just a subtle repositioning over the last couple of weeks. how would you characterize it? >> thanks for having the on this morning. i'd have to say that where we are right now is beginning to see a rotation that carries on from last year.

leasing information technology, communication services really take off. but now you are seeing gains and industrials with consumer expression area. from there, we'd seen the broadening into small caps and mid-caps. tom: i want to know -- and congratulations on being in the market and participating, you absolutely nailed this somebody walks in today, institutional investor. they've missed this market. what is the first thing they should do? what is the action plan to catch up? >> of course it depends, but what we can say for the first level, the point of view would be in a broadening rally, you might want to consider some of the cyclicals and consider

opportunities among growth, and we would suggest market capitalizations. and so we think you may have missed some of the major move that occurred within technology that was over-sold on many levels. tom:tom: you like financial lists according to your note. this comes at a time and people i fighting off the fears of march. what gives you confidence that we are past the worst? >> we think part of it is that you saw a really fast response on the problems that emerged by the fed, by the treasury, and by

the fbi see. increased oversight by regulators, and the fact that we just haven't had much news in the financials since march and early april, as i recall off the top of my head, which would tell me that if anything else services, it will remain most likely idiosyncratic and the results of a tendency for either hubris or just disregard for basic principles of investing any individual bank that shows up in the problem. david: tom: a lot of people speculate tom:, there is one study by jp morgan that says stocks should fall by about 20%, if you believe the bond market is saying. this is big dissidents. if bond yields rise and agree with the view that stocks are putting out there, is that going

to kill the bull market? >> wouldn't think so based on historical experience and personal experience over the last 40 years in these markets. initially, when you have a fed cycle, anticipation of draconian measures do occur. but once equities get an idea that this is not going to kill business, you begin to see stability of equity prices in periods where interest rates are high. we seen that in the early 80's, talking now of the bear market from the late 70's into 1982. in going forward to 1987, there were many times when interest rates were considerably edited against equities. and yet, equities were rioting because of innovation, movement, and just general economic improvement.

jonathan: i hear you going over history and i wonder if history is helpful or confusing. i was looking at two quotes last week. she said the bear market is over, 90% plus any time the s&p 500 rises after recovering from the bear. wells fargo said history shows spx is not bottom until six months after the first fed rate cut. which one is it, and how helpful is history? >> i think it would be the former rather than the latter. history may not repeat itself, but it often rhymes. both the resilience that we've seen in job creation as well as the ability for many companies to navigate this environment and the investors need for better returns to longer turn investors, what you are looking at we think are higher prices.

not necessarily a straight line in all sectors. you're going to see periods of profit-taking as a catalyst for some selling without follow that would create some excitement to the downside, but we think the overall movement is still headed and of the woods with fundamentals improving likely to continue. jonathan: wonderful to get your perspective to kick off a monday morning, trading week ahead. constructive on this equity market. a tough year in 2022. that market is going his way. tom: the tough year in 2022 is the optimist we heard from i believe it was friday with deutsche bank. i'm also going to add to this, -- of bloomberg intelligence. yeah, you can be wrong in 1920 -- 2022 but you're wrong simply because you have to be in the game to start the move. if you wait to go into the

market, waiting for the move -- jonathan: speaking from experience? tom: a limited experience here folks. when he speaks, i take notes. the answer is that this is a huge difference in financial medians. they don't have a crystal ball. you've got to be in the game to play and we are going to talk to a lot of the people through july. jonathan: we will discuss the politics and just a moment as well. the former president's indictment. this from william barr over the weekend to fox news. if even half of it is true, then he is toast. pretty skating words over the weekend. from new york city this morning, good morning. cpi just around the corner tomorrow and onto the federal reserve on wednesday. >> keeping you up-to-date with newsom around the world, former

italian prime minister silvio died. he was a billionaire media mogul before becoming italy on-serving postwar prime minister. it is more than nine years in office were marked by sex scandals and allegations of corruption. still, he was one of the most influential figures in italian politics of the last three decades. he was 86. and part of a counteroffensive to take that russian-occupied areas underway. ukrainian military says troops that freed another two villages in the eastern region. the claims haven't been verified, fenced ministry in moscow hasn't commented. china is denying u.s. claims that it has spy operations in cuba. in beijing, a foreign ministry referred to the allegations by the biden administration information. over the weekend, the administration said chinese spy facilities in cuba date back to when donald trump was in office. nasdaq reportedly has agreed to buy software maker adenza for

10.5 billion dollars according to the wall street journal. the owner will get a large stake in nasdaq as part of the deal. they make software used by banks and brokerages. and ubs has completed the acquisition of credit suisse. it is the biggest merger in banking since the 2008 financial crisis and decreed global wealth management tighten. they agreed to take over credit suisse in march in an emergency sale brokered by the government. a confidence crisis and the flood of client outflows put credit suisse on the verge of bankruptcy. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. what do you know about rock stars? billy idol? i mean where's the skin-tight leather? my shoes are leather. where's the unnecessary zippers? that thing! billy, rock star is just how doug feels when he uses

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>> this vicious persecution is a travesty of justice. you are watching joe biden -- biden is trying to jail is leading political opponent, an opponent that is beating him by a law in the polls. jonathan: former president donald trump speaking at a rally in georgia, ending himself against the historic federal indictment against him. a sensitive government record. his u.s. attorney general william barr and his restriction on fox news sunday said this. i was shocked by the degree of

sensitivity these documents and how many there were, and i think the counts and the espionage act that he willfully retained those documents are solid counts. he finished with this line. if even half of it is true, he is toast. tom: huge deal and really leaning on the headlines. the former president will be very defensive about it and they really think it goes to the nuance of the weekend, his primal scream that this is so different than the other process we've seen leading him tuesday. tuesday, what will this judge do appointed by president trump? to me, that is my focus on tuesday right now. jonathan: lisa, what is your focus? lisa: my focus is on potential arrest -- unrest, police presence. kari lake speaking at a gop convention on saturday. basically, she lost a bid to be governor of arizona. she said if you want to get the prep -- to president trump you're going to have to go

through me and 75 million american just like me and of us are card-carrying members of the nra. this is the kind of rhetoric that we have coming into tomorrow. jonathan: we did have a poll over the weekend from cbs news, a poll that will be reflected on repeatedly to the morning. one of the questions people were asked, how might they change their view of the former president? these were the results. 14% for the better, 7% for the worse, 80% depends, and this one here, 61% won't change. tom: this is the politics of the moment. there's an awful lot of people in support of them. to me, who is number two, santos? and it is like 20%. jonathan: the former president in the 60's, the governor of florida in the 20's and then low single digits for scott, for pence. tom: this is going to get a lot

more complex and we will learn day by day of far more serious charges than what we see in new york. united states managing director at eurasia group doing this for a monday brief on the historic tuesday that we will see tomorrow. particularly, balance of power will have full coverage of this. what is this judge going to do tomorrow? she is a trump appointee. you can brief us on who she is, what will she do? >> this indictment is historic as you mentioned, and we've never seen anything like this. there's a whole host of implications when you're looking at a high-ranking political officially president trump that just aren't going to be in play with other people. a major security concern. we saw his indictment in new york. in many ways, it was pretty normal. they had the secret service walking him in, they have the arraignment. tuesday to me isn't really the

important date. it is what happens over the coming months in the kinds of decisions she will be making to omit or exclude evidence and how she instructs them. a lot of the complicated legal questions here. they key question for me, how do you find an unbiased jury for the most famous man in the world? everybody in america has thought on this guy and most people have exposure to his kids. this going to be a lot of tough questions for this judge. tom: in miami and the federal court, are those decisions going to begin to be made tomorrow? >> this trial is going to take probably months to unfold. the government said they would want a speedy trial and trump in the past has dragged out these legal proceedings as long and he possibly can with procedural motions. i can't say we think that she has a more favorable view of front promotion or not. a lot of people know she has made some rulings favorable to

the former president. but at this point, i gave her the benefit of the doubt. her ability to fairly conduct a trial unfairly indict the president is going to be a key thing to watch going forward. tom:jon just read the poll numbers in terms of republican voters who are likely to continue to keep their support with the former president. are you surprised by that? are you surprised by either how many people are not going to change their opinion vs. those actually considering one way or another what this does? >> sadly, no. donald trump has survived just about the political flamethrowers that were just absolutely scorching any other politician over the last 80 years. you look at this relative to the access hollywood tape or the fact that he just lost his for sexual assault. there are some really serious things this guy has done that have not touched his approval ratings at all among the the hard core based of the republican party.

now we have the opportunity to say that the president of the united states make this a political prosecution against them and there are people like his rival and other republicans who out defending him. so i'm not remotely surprised that he's able to spin this to his benefit. if i'm one of republican challengers to get into the new cycle here, i'm hating this because this gives them the opportunity to be the number one storyline. all the questions you're going to be asked are going to be about him and this election is fundamentally going to about his role in party and his role in the country because he is going to be so dominant going forward. tom: from an international perspective, i think about some of the allies looking at the u.s. right now and the fact that this is going on and the fact that there is such fiery rhetoric and potential surrounding tomorrow's court hearing. what does that do to the u.s. relationship with its international friends? >> i think the big challenge to the u.s. right now is that it

looks a lot like some other countries have been criticized quite a bit in the past. i think that the great thing the u.s. is going for are the strength of its institutions, and that includes both the court and law enforcement. the fact that you have half the country believing that law enforcement has been fundamentally corrupted and legitimized and that message is going to resonate around the world, it really undermines faith and belief in u.s. institutions not just domestically, but globally. that he did a problem when you look around the globe at countries like el salvador or other places where you might start to see democratic tax lighting. the u.s. doesn't really have the ability to step in and criticize anymore. in some cases, it's not even trying. jonathan:jonathan: if you are u.s. partner right now in the west, a european country, u.k., for instance, do you question how you share intelligence with the u.s. if this is what happens? >> joe biden, yes, he had some

boxes in his garage, the national archives found out about it and got them back. trump visited of unique figure here. however, the u.s. has a broader problem with intelligence leaks. this national guard, a very young guy who is leaking these documents to equated damage. the actual documented damage to national security that we know about so far, the trunk documents, while his actions were quite bad, they don't come close to some of these other cases. i don't know if this case in particular pushes allies away from the u.s. jonathan: thanks for your perspective, appreciate it. truly a historic week. if the starts in many ways on both the political side and a market side. just totally desensitized some of this because it has been a constant crisis year after year it has always been something

which has led something to believe that maybe this isn't one, either. tom: the aged from the conservative party, it seemed tame compared to as you say the way we bounce around here. and there's a real exhaustion about it and conservatives, and i think we are just all exhausted by the debate. jonathan: and some people, lisa, for that reason, having a look at the potential seriousness of an indictment of the one that was unsealed over the weekend. tom: and the other potential proponents of the republican race coming at the back trump. jonathan: they don't know what to do. going to santos with the benefit of hindsight would have waited a couple more months before throwing his hat into the ring. futures positive.

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jonathon: live from new york city this morning, good morning. we start a really interesting trading week. cpi inflation data coming up tomorrow morning, then the federal reserve on wednesday. your equity market just about positive, up by 0.1%. the longest weekly winning streak of the year so far. in fact, it goes all the way back to august of last year. s&p 500 closed for a fourth week of gains. some people think it is going to be going further. goldman sachs with an upgrade. they're looking at something

like 4500. 4000 was the previous view. they are looking for this rally to broaden not be on the nasdaq. month to date for the month of june, the nasdaq outperforming the russell. this morning, the nasdaq outperforms by 0.3%. tom: very quickly, oil. $67 a barrel. jonathon: jeff curry downgrade. did you see that? tom: yes. a little off-topic topic, but new york crude $68.48. jonathon: i don't think they are too happy based on some recent communication. over the last week or so, yields drifting higher by about 10 basis points or so. the 10-year up by 5. i think we can call that 4.60.

tom: critically, there's inversion p for those not keeping score at home, that is a big deal. we are buttressed right up against max inversion. if you get a couple more weeks at this level, that is dramatic. jonathon: interesting to see how this might connect with what's happening in the fx market. some cyclical outperformance to mystically in the united states of america, you start to see the russell outperform the small caps, the regional banks begin the euro showing a little bit of strength, squeezed out one week of gains. or how, 107.80 is where we stand. a little stronger here on a softer dollar. then -- the cpi's do not yes -- his job tomorrow. "there appears to be enough support on the fomc for a pause,

but the statement any projections will make clear that this is not the end of the hiking cycle paired we now expect rates to be raised again at the july meeting." this now sounds like a skip. tom: i want to make clear, capital economics, since the first essay written, has been very different. very thoughtful essays that globally tie-in regional economics. jennifer joins us now, the chief global economist at economics. i want to take a broader viewer now. not to skip the parlor game, but i want to talk about how three central banks are doing in a post-pandemic world. the banks, the fed, are they be on the pandemic? jennifer: i don't think we are, really, and several senses.

it looked like this was transitory and it was likely to fade quickly, but there has been a huge reappraisal. core inflation pressures, in particular, have remained so persistent. even in the developed markets, average inflation is not zero. yet, we have core inflation still very, very high. central banks are taking a very hard look at just lie that is and how likely it is to be persistent and to be very cautious in their appraisal, and that they have made mistakes in the past. tom: does it feel like the banks are flying blind and need more data or do they have a grasp, and handle on where they are heading? jennifer: i think they have is get a handle as they could have at this stage. the problem is that things have changed so much, there has clearly been a shift in the inflation psyche, plus core

pressures and wage pressers are problem haven't been in decades. it's extremely difficult for the central banks to get a handle on just where it goes from here. i think that's why they're waiting for evidence in the data, not relying so much on their forecasts, as they may have previously done. but thinking much more about what is happening in the data, whether we see clear evidence of core inflation come down, and crucially where the labor markets are easing up with pressure on wages. lisa: we are not getting any clear messages from the data. you can pick your message and get it correct from the data you select. i'm just wondering what data could make a difference. the cpr reports come out on tuesday. on friday in the euro region, is that going to make more of a difference and be more important to markets than anything central bankers have to say? jennifer: maybe. but particularly the core inflation figures in the u.s. case.

i think really, as i have said, wages are going to be really important out of the u.k. this week because they are likely to show wages extremely high they are around 6%. i think markets are going to be listening to that. they will be listening to what central banks say about that data, whether they are still up really seeing reasons for concern in the labor market indicators and the indicators of the underlying inflation. i think that is really what you are going to see across the board this week and next. central banks will still be really uncomfortable with where these indicators of underlying inflation sit with tightening that we still see in labor markets. lisa: what will we have to see in the numbers tomorrow for the fed to lock in a rate hike on wednesday? jennifer: i think it will probably take quite a lot. but a significant increase in core inflation in particular would be a major shock. we are expecting 5.5% to 4.2%.

we may rise even further. that will be a real tom: cause for concern. tom:but the bank of england seems to be in a different place. there was a great essay on global disinflation, where they might disagree. he ended with the united kingdom as its own outlier. how much of an outlier is the bank of england compared to the other two thanks see? -- two banks? jennifer: it's really, really high in the u.k.. it is a major cause for concern. the bank probably has a few more rate hikes to go. we are expecting another one next week. we think the peak will probably be around 5.25%. it might continue hiking for little bit longer than the fed and ecb because of that stickiness we are seeing and the

tightness and labor market. but there are signs around the labor market that things are starting to ease, including in the u.k., rates coming down, for example. tom: let's draw down to the united states, then. is the inflation data of less importance because the heart of the matter is to see employment break? jennifer: yes, i do think that is the case, actually. what we need to see his wage growth coming down, the labor market showing clear signs of easing. there is some evidence that things will improve in the future. but really, you want to see a more dramatic easing in payroll measures, so we know the labor market is really beginning to soften. that is when you could feel much more confident that services and housing would start to come down. jonathon: jennifer, thank you. always appreciate your input, particularly of a fed week.

jennifer mckeown there, of capital economics. this is about the projections on growth, unemployment, the media. tk, there is a belief that perhaps where unemployment is right now, it's where they thought it would be by year-end. it's a big gap. the data right now is that 3.5%. most people believe we will not get there. they will have to do something about that forecast. growth has been better. inflation has been stickier. all those things will have to change. if you want credibility, you should knock it out, which is basically the projection coming from bank of america. tom: do the dots show the labor dynamic? i don't think so. they are an inflation study. they look at interest rates to inflation, and back and forth. do they show a certain percentage on unemployment?

how do we get to 4%? is 3.9% different from 4.1%? if you are unemployed, there's no difference. if you have a job, you are ignoring it. jonathon: based on speeches from fed officials over the last couple of weeks, we understand where there might be some consensus that this is not the end of the hiking cycle and we don't want to declare it so. we also don't want any rate cuts priced in this year. lisa, if you wanted to find consensus on the committee, i think you could find by sitting there and saying, ok, let's take a skip and imply that we are prepared to do more. perhaps one way to satisfy the hawks is to shift things up a little more. if you are going to project one extra, just do it now. the projections sometimes are more about what they want to signal and less about what they may actually do.

lisa: i actually very much took sympathy with what andrew was saying. basically, it is hogwash. where is your credibility if you say we are going to do it, not right now, sort of signal with all of these words that supposedly have meanings that can be amended next month? there is this question about what the advantage is to pushing the right higher, versus holding for longer. that, i think, may be the core of one of the debate on the fomc this week. they signal, we don't want to raise rates, we don't break anything, but keep them here one year, two years, three years. it changes things. tom: i think we will see a wave of refinancing. i have immense difficulty of the analysis of the financial media. with jennifer, i think she was brilliant. the question is, is inflation

data or labor data having more importance or wait in the central bank? what i love about the hawkish talk is that we are basically using james bullard as this equivalent. i will be able to get tickets. jonathon: i hear you. they will be data-dependent. tom: they are completely ex post data. did you see the red sox? jonathon: i did not watch that. but congratulations to nick taylor of canada. the first canadian to win that golf tournament in 69 years. tom: did you watch manchester city? jonathon: i did, i did. credit to milan for putting up a good fight.

they were talking about how lopsided this match was. they put out some fantastic tactics to confront this. tom: the game was just lights out. jonathon: i agree. congratulations to fans. the s&p 500 up by 0.1%. >> keeping up-to-date with the news from around the world. the first word, and lisa mateo. in italy, the former prime minister died. he made billions as a media mogul before running for office. he ended up being italy's longest serving postwar minister. his more than nine years in office were marked by sex scandals and allegations of corruption. still, he was one of the most influential figures in italian politics in the last three decades. he was 86 years old. the largest air exercise in nato's history is getting underway today.

about 250 aircraft from more than 20 nations will take part in the drills in german airspace. the goal is to test the air force ability to respond to a crisis in europe at a time of heightened tensions with russia. in philadelphia, an overpass on 95 that collapsed could take months to repair, at a time when summer travel is ramping up. roadway fell after a tanker truck carrying gasoline caught fire under the overpass. that section of highway carries about 160 thousand vehicles per day. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am 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 >> we are back in the banking whole. are you back in your old office? >> yes. >> how does that feel?

>> a good feeling. i was very honored, but humbled by that and the new task that i have, and the feeling is good. but also, there is a clearer sense of responsibility to make sure things go in the right direction. jonathon: completing the biggest merger in banking since 2008. the ubs ceo speaking back in april from his office about seeing a much, much larger bank after the acquisition of credit suisse this morning. really strong leg which coming out of the ubs leadership. i have to say, tom, some of it may be going a little bit too far. there was an article over the weekend in the "financial times" about rights lines -- red lines for credit suisse takeover. there was a line that said, "after taking on credit suisse staff, we are worried about cultural contamination.

we are going to have an incredibly high bar for who we bring into ubs." what do you make of that? tom: i was stunned. we read papers 24/7. it was, without question, the read of the week. what is so important here is the culture of a bank, whether it is spc, ubs, credit suisse one million years ago. sbc appropriates the ubs name. now, we are down to one swiss bank. you talk about cultural, domestic issues. but far more importantly, this is over dinner. this is in london. what mr. keller is saying, ask morgan, ex arthur andersen, as straight and narrow as it comes. he says, we are not going to play the credit suisse game. jonathon: a lack of trust is

pervasive and pretty clear. according to people with knowledge of the measures, according to this piece from "the financial times" over the weekend, they have nearly two dozen red lines, which prohibits credit suisse staff from a range of activities. that includes taking on clients from countries such as libya, russia, sudan, and venezuela. patrick joins us now. can you tell me, did they trust their colleagues over at ubs credit suisse see? >> i hope they trust them well enough or it will be built over time as the merger goes along. it is not a merger that they really wanted. as we have all seen, first and foremost, there's a lack of oversight, and a two big appetite of risk-taking in an area that is a no go for many bankers.

what you now 90 pull off -- what you now need to pull off his rates and the moral that they want to have. the risk appetite that they want to have. investors so far like that better than credit suisse, for sure. you don't want to totally upset or annoy all of the credit suisse people. let's face it, they wanted them. they don't need all of of them -- all of them, that's for sure, but they need them to be happy to work and feel included, and be part of this merger. if they don't, i would be very careful on how this merger would work, especially with wealth management activities altogether. jonathon: hardly a great start, being worried about cultural contamination. we all know some fantastic people who work at credit suisse. i just wonder how any people make the cut based on that kind of language. jan-patrick: absolutely. and that's the thing. when a company has fallen into

disgrace, there's this immediate reaction that everybody is to blame. everybody's a villain, everybody did something wrong. but that's unfair. the majority of people at credit suisse did their job and performed well, and they will perform well in the future. i'm not sure what the intention was with that. was it another very bold statement, to say these are the rules? or was their real meaning in that? it is interesting for sure. tom: is this about bad behavior by revenue producers over cocktails at the hotel in zurich or is it more of a london-based or new york-based warning? jan-patrick: i would not say it is a warning. yet at this difficult thing to manage out at the new ubs. he went to integrate credit suisse, make it work, get people

on board, and have them feel comfortable to do their job as they did before. but to make absolutely clear, what happened at credit suisse in certain areas with certain people, it will not happen again. language is very strong, but this is the framework we want you to operate in. if you do that, you are more than welcome to do so. lisa: my question was, who are they talking to? are they talking to credit suisse employees or people they don't want to go away? will they double down on which banks they put their money with you? how much of this is an issue that they are not getting the funds they want from credit suisse clients? jan-patrick: that's a good question. there were a lot of people responsible for the mishaps over the past two years who have left the bank. who are you addressing here? is it the normal frontline working people? it is a very

interesting thing that they're trying to do. and of course wealth management, they will need those people because every single dollar and outflow will be scrutinized in every quarter from here on until eternity, basically. they have to show that they can manage this, keep the clients happy, keep the money, and even attract new money within new entities. that is the core of the whole merger. it will be super hard hit these goals. we will see if investors are patient enough to give the new bank some time to show this merger is actually working. lisa: today, the merger closed. they officially acquired credit suisse after one hundred 67 years of independence. what does this mean? jan-patrick: something we've seen in the past with banking is you can have an institution that does well over decades and decades. then, you have a period with the wrong management, wrong decisions, too much risk appetite, maybe too much greed

in some cases as well. then, it goes down fast. it tells every investor that investing in banking stocks needs some very thorough due diligence. you need to make sure the proper management and the level below are doing the right thing, not taking too much risk, and not too many areas, so that when things blow up, they get into an issue. we had no chaotic default, as we saw in 2008, but still, they heard the message loud and clear. there is still a risk. that is the biggest meaning for me for that whole credit suisse story. jonathon: i was going to say, what have they found about what happened that weekend, they might have a different view on things.

we also learned some harsh lessons around the banking system so far this year. what a few months it has been. tom: my head is spinning. it's good to have him here, someone with real baking experience. what this says to me, and it really harkens to ending june 30 , with banks july 25 or so -- jonathon: july 14. tom: how do you know that? jonathon: i checked yesterday. tom: ok. [laughter] i am going to suggest with respect that the challenges of september and planning for next year in february, it starts away early this year. jonathon: from a personnel perspective? tom: personnel, how do we keep our top 10%?

how do we keep the people that we have to keep in asia, america, london, etc.? this is not rocket science. give a piece of paper in front of you. of the logo says ubs or credit suisse, i will let you decide. but somebody has to write down 10 names and say, we can't lose these people. that dialogue starts early this year. jonathon: can we get back to this after a rough six months? month to date, that is where outperformance has been. we have had upgrades. goldman sachs lifting their urine target on the s&p 500. looking at this market to broaden out beyond the mega cap story. to weigh in on that, liz young of sophia is joining us shortly. equity market this morning, futures positive by about 0.2% on the s&p 500. you know the plane already, but here it is again for those of you who are just tuning in and have it played before.

talk about cpi tomorrow, then onto this guy called chairman powell on wednesday. ♪

>> the market is going to pay a premium for that scarcity of growth. >> barring some sort of crazy financial market event, i think we should have a fairly stable move here. >> core's remaining really sticky. it is really unclear that the trend lower extents. >> the overall state of the economy is better. certainly much, much better than people expected it to be. >> it is certainly possible through a recession slowdown. part of that has already been

brought forward, if you want. announcer: this is bloomberg "surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathon: chairman powell two days away, economic data tomorrow. good morning for our audience worldwide. this is bloomberg "surveillance" alongside tom keene and lisa abramowicz. i am jonathan ferro. some upgrades out there that we can talk about, including goldman sachs now looking for 4500 on the s&p. in looking for some performance to shift away from mega cap attack. you're starting to see maybe this equity market broadening out. tom: the mathematics are broadening, the mid-cap and small-cap dynamic. it is interesting to see how bonds, commodities, currencies correlate into a legitimate bull market. it makes for good financial tv, the tension between goldman

sachs and morgan stanley. jonathon: morgan stanley not moving. sticking with the bearish view on earnings. if you get into the note from goldman sachs, this is not an upgrade on earnings. this is a view that the multiple will be higher than thought. this is just saying we are going to upgrade our earnings forecast. that is not what we heard from david coston. lisa: it's a great point because we heard this from other bulls as well. even though use all revenue growth for most of the s&p 500 that have reported so far, profits are read .3% lower. again, we are getting margin compression. this is not necessarily a bull call in growth. can this continue if rates go up materially from here? could the fed kill this? lisa: -- tom: i will let the strategists strategize on this. i was really unprepared. apple, it not nvidia, but apple doing 29% of the october low.

apple up 391% from the low of christmas eve 2018. the new ipads -- ipods may not work out. jonathon: i remember that call. i was in the radio booth when they made it. tom: there were some other people there with ben, but he was more persistent on it. this is the nature of long-term investing. you are going to 1920, 19 21, 1922. you are back 4.5 years through a pandemic. but a lot of other stocks, these are huge moves that most people have not participated in. jonathon: i think you should also point out that we went through a pandemic, but arguably, fiscal support subsidized some purchases of apple iphones during that

period. tom: no question. it also subsidized some juice to the economy, leading to the fed debate here on wednesday when we have our team coverage. jonathon: equities off by 0.2% on the s&p 500. yields are up by not even one basis point on a 10-year. 3.7453. this is not starting where people would like it. gearing up for a big couple of days ahead of us. lisa: there are people cursing at the screen, saying that you jinxed it. no one is saying that. wednesday, we get the federal reserve, on thursday is the ecb. on friday, the makeup japan. that is the only developed market central bank that has not raised rates this entire cycle. i'm curious to see about how long that can continue. economic data is important tuesday, very much front and center tomorrow, that cpi from the u.s. friday, eurozone cpi. i'm interested to see how

quickly you see that deceleration and how big a change it would take to shift the market. tom: lisa's charts this morning are outstanding. that core cpi chart sets up a modest vector of disinflation. we really don't have in place, like in goods, a disinflationary trend. lisa: which is why i'm watching core cpi and stripping out more volatile sectors. former president trump is going to appear in federal court in miami tomorrow around 3 p.m. he will appear before a judge on a 37 count indictment that dropped over the weekend. very interested to see the response, the potential fervor around this. and of course, the response from others, particularly in the republican race. jonathon: what a spectacle. amh about 15 minutes away. joining us now on wall street on this equity market, liz young, head of equity strategy at

sophia. great to see you. thanks for being with us. can this market rally brought now? liz: it always can. we are at the beginning of a very important week. what we have seen over the last week or so is that you are getting some strength from some of those regular stocks. we have gotten now more than 50% of the s&p back above the 200 day moving average, which is a good sign. we're getting participation from sectors that had not participated in this rally since last year at some point. it's important to have those signals, see small-cap stocks participating, because that is what you would expect if we were in the early expansion phase or a newer bull market. the big question now, and we continue to see this throughout this entire cycle as we get to these decision points, the next level on the s&p that everyone

is watching is the 4320 hi, the intraday high last august. can we make it to that point and beyond? that continues to be the question. i don't know that we will see that strength persist through what will be a hiking cycle. tom: what are you seeing from sophia clients, customers, the people that make sophia go? what do you see what their relative gloom and optimism? i get mixed signals. liz: we tend to skew younger, especially on the investment side. tom: under 60 years old, 65 years old? [laughter] keep it up, liz. who booked her? [laughter] what is that about? keep it up, liz. liz: what you still see is headline-making names. you want the disruptors.

there still a lot of interest and appetite for those names. one of the things that has been surprising to me is that even after lester's tough market, we did a lot surveys of our investors and we would hear things like, we are still planning to invest as much, if not more, despite the bear market. it's encouraging that you have the younger end of the spectrum with people with appetite for long-term investing, understanding, maybe more so that we inspected, that their markets happen and this is part of long-term investing. in the short term, headlines do drive a lot of sentiment. something we have seen over the last week with every investor, not just the sophia -- sofi, you have some optimism start to show up in the tape. suddenly, everybody's optimism changes. that is a good appetite. however, it does sometimes skew the risk about what's working

out there. multiple expansion is not something that many investors have understood from both sides of the coin in the last couple of years. audible expansion has been supported largely by monetary policy, liquidity, and we are now in this environment where a lot of that is coming out of the system. i don't think multiple expansion is warranted right now. it is something i think starts to trick a more inexperienced investor. his big -- is big tech no longer interest rate sensitive? liz: i think it is in a growth bucket, but that is not how investors have treated big tech. think they have removed big names from the growth bucket and they are thinking of them in a different way, partially thinking of them in a defensive manner. this is the part of the economy that is going to continue to lead and be strong for us for

seemingly the rest of our lives. but there is a seven piece of it that people have gotten very enthusiastic about with the ai theme. the thing about a theme is that usually invest for a two-year to five-year period. i don't think people are going to get the gratification of the enthusiasm as quickly as they want to. if you are thinking about stocks from a growth and value perspective, big tech is probably acting different than what we would expect from a growth name. that has not necessarily changed and has served investors well over most of the cycle. there hasn't been a big reason to believe otherwise yet. jonathon: liz young, you are, as always, welcome back. thank you, as always. the pain trade gets more painful. doesn't just get more painful by the minute and the week? lisa: pretty much at every level.

even if you look at negative signs, like oil being lower, yields being lower, it is still an issue with big tech leading the way. jonathon: a complaint from the bears is that there was narrow leadership in the first couple of weeks. they start to show broadening of leadership. tom: you know what i'm going to say. companies adapt and adjust. what is interesting here is that yes, the pain trade is about people that cut whatever wrong and they have to rationalize changing their way incrementally or almost a jump, as we saw from david coston this morning at goldman sachs. but i would note that strategists not in the pain trade got it right. i would go back to investment 101. getting it right means you have to be in the game before you get it right. this idea of winning with cash and then going long is complete fiction. jonathon: getting it right for

two consecutive years is really, really tough. think about the people who got last year right in this year right, or the reverse. that has been the story the last 18 months. tom: this is what we do with the bloomberg terminal. good morning and we hope you need the terminal. it is a sales pitch. mike called and said to say something positive about the terminal. how about 421% in the last decade? jonathon: have you gotten the be unit -- the b uni t? tom: not yet. jonathon: equities positive, up 0.2 percent. from new york, good morning. lisa m: keeping you up-to-date with the news from around the world.

with the first word, i am lisa mateo. in italy, the former prime minister died. he made billions as a media mogul before running for office. he ended up being italy's longest serving postwar minister. his more than nine years in office were marked by sex scandals and allegations of corruption. still, he was one of the most influential figures in italian politics in the last three decades. he was 86 years old. part of a counteroffensive to take back russian occupied areas is underway. the cranial military says it's troops have freed another two villages. the claims have not been verified and the defense ministry in moscow has not commented. china is denying u.s. claims that it has spy operations in cuba. in beijing today, the foreign minister referred to the allegations by the biden administration as false information. over the weekend, the administration said the chinese spy facilities in cuba day back to when donald trump was in office. speaking of which, trump is

holding onto his republican base as he heads to court for charges about classified documents. about three-quarters of likely republican voters in a poll says they view the accusations as politically no debated -- political motivated. he is due in court on tuesday. one software maker will be bought for $10.5 million. they will get a 14.9% stake in the nasdaq and a seat on the board as part of the deal. they make software that is used by banks and brokerages. nasdaq's software business makes up one-third of recurring revenues. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪

>> i never thought such a thing could happen to america. as far as the joke of an indictment, it is a horrible thing. it is a horrible thing for this country. the only good thing about it is that it has driven my poll numbers way up can you believe it? >> i am shocked by the degree of sensitivity of these documents. if even half of it is true, he is toast. jonathon: former president donald trump and his former u.s. attorney general, william barr, on the president's indictment

over the weekend. we will bring you details in a moment. a developing story right now. jp morgan has reached a settlement with epstein victims. i will read you a leaked paragraph from their publication this morning. the proposed deal would settle a suit for victims abused by jeffrey epstein. here is a quote, according to "the new york times" this morning. they have reached "an agreement to settle the lawsuit on behalf of the victims. it is in the interest of both parties, especially the survivors and victims of epstein's terrible abuse." it did not disclose a settlement amount. but the latest headline is that jp morgan has reached a settlement with epstein victims. tom: this is on a fast track.

i am very hesitant to compare and contrast here, but there were previous settlements with deutsche bank. one of them is a $75 million settlement, then a $150 million find -- fine. they are working within the past experience of deutsche bank as well. jonathon: just repeat that headline, jp morgan reaching a settlement with jeffrey epstein's victims. we will catch up a little later in this hour to dig deeper into the story as it develops. i just want to touch base with what is happening elsewhere. we are going into a q. week for financial markets. cpi tomorrow morning onto the federal reserve onto wednesday. equities up by about 0.2%. tom: a 10-year tips yield at 1.55%. we will see if we get a break on that. so far, we do not see that.

we will continue on what gripped the weekend. the former president of the united states is summoned before a federal court. we get a briefing now from annmarie hordern, our washington correspondent. "balance of power" will be completely focused on this issue as we move over the next two days. i never do this with you, but i am not going to talk about the red sox taking out the yankees. an open question here on what matters for you. what is the point you are studying this morning as we move toward tomorrow? annmarie: we now have the indictment. we got those charges friday, going into the weekend. we do know, as former president trump's own attorney general called them damming. he said if even half of them are true, the former president is toast. along the release of that indictment, two of the former

president's lawyers left his team. former president said he will be announcing more lawyers to add to his team. he will be represented by todd blanche on tuesday. i'm interested to see who would be running to want to defend the former president in this case and what kind of legal team he is able to come up with by tuesday or the next few months. the other big thing i am watching, which you mentioned a number of times, is how this plays out politically for the republican party. that cbs news shows the hold the former president has on the base of the republican primary. which means he has a very clear path to win the primary nomination. trump should be able to be president. 80% said yesterday 20% said he should not be able to be president. when he gets indicted or has a big legal struggle ahead of him, his poll numbers go up. the issue, of course, is that that's not true for those

outside of the republican party and would potentially mean a failed bid for him if he was to be the candidate in 2024. jonathon: the distinction you're drawing is an important one. can we just focus on the primary a little bit longer? can you talk to how the candidates have responded to this over the weekend? annmarie: you have had governor chris christie come out. he is coming out and saying he does not agree with many of the things the former president has done. but he also wants to take this path of, i want to wait and see all the proceedings of this. everyone continues to say we are in america. you are presumed innocent unless proven guilty. that is a line the likes of governor chris christie is taking. others are having a hard time on walking this line because it's easy for them as well.

we have seen governor desantis go after the justice department and talk about how this is political. they do not want to ostracize the trump base. those voters, as you can clearly see in poll after poll, they continue to support the former president. it is difficult for them to really talk about this until there is a judgment coming from this jury. lisa: does it make it difficult for the republican party to be the party of law and order if there is question about the institutions that are executing that order? annmarie: i think it is difficult for some of them to talk about law and order in this sense when it comes to the former president, whether it is the justice department or the concern of potential riots or violence, may be protests that get out of hand when it comes to the former president on the ground in miami. i think what you see a lot of republicans wanting to do is

paste this -- is paint this as joe biden's department of justice and trying to criticize it. what we heard from the current president is that he says he has never spoken to attorney general merrick garland on this and has no comment on this case. jonathon: can you talk to me about timeline, just to wrap it up? how long this is going to take? annmarie: your guess is as good as mine. you will see the trump team use every tool in their toolbox to slow the process down. they are not going to want this to be quick and speedy. remember, this is all happening under the fog of a primary race. there is one tool that they likely would have used, but it was taken away from them, which is the fact that this is already on trump's turf in florida. this was going to be in washington, they likely would have tried to move it to the southern district of florida and have this done, this court be held in miami. that has already been done. trump has a huge benefit there,

given the fact that this is a jury of a state that he won. the judge at the moment is a trump-appointed judge. but this could be drawn out for months and go well into 2024. jonathon: amh down in d.c. thank you. just to refer back to that news, the president has 61% of likely primary gop voters paid 61% trump. desantis has 23%. scott has 4%, nikki haley has 3%. tom: it's interesting to tell us how large that primary size is compared to the rest. i know you give wonderful perspective of this. silvio was in wonderful protagonists for italy charisma. a visionary for sports. he was loved by a community. thank you, maria tadeo, for that.

here's what john grip with. jonathon: pretty emotional for the football club. he took over in 1986 and built into the powerhouse of europe. it had phenom us know -- it had phenomenal success for the 1980's and 1990's. this is it for me. the problem with the former president in this country is he thinks far more than 37 million people voted for him. the problem with media coverage is that 74 millie people actually voted for him. it reminds me of how a lot of people will cover this story. he was well loved, including by the football club. if you are just tuning in, silvio has died. ♪

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jonathon: equities advance just a little bit on the s&p 500 by 0.2 per 6% -- so .26% as well. that performance month to date coming from a surprising place, the russell small caps. one to date for june, higher. much, much higher. regional banks up by about 12% this month. a phenomenal run for some regionals, after really getting beaten down over the last few months for obvious reasons. the russell this morning up by 0.3%. the two-year at the moment, 4.61

going into the federal reserve on wednesday. might come down the cpi tomorrow morning. for others, it might not at all. even if it is strong, you can take a pause, a skip, and wait for more information. tom: on july 26, will we be at 4.00% or 3.50%? that is the debate i would suggest right now. jonathon: the fed speed will not drive that. what will drive that is possibly the economic data between now and then. lisa: which economic data? the data has told very different stories in these single names that we are watching. tesla, though shares have gained $3 billion as a result of some of the charging deals it did with ford and general motors. there is now an electric charging company as much as much as a car company. pac west also continuing their

gain, considering that that has seen a big lift, driving up regional bank shares. exxon. this, to me, is the big question. can you get a full broadening out in equity market really see? though shares are lower by nearly 0.9% after a damaging year. finally, jake -- jp morgan popping up. they did settle the jeffrey epstein lawsuit. there is a sigh of relief that perhaps there is not that overhang. jonathon: such a sad story on the jp morgan. i am sure they want to leave it behind. tom: they are. we previously mentioned deutsche bank. there is a process to this agony and it's what we are going through. jonathon: we are going to try to catch up with the bloomberg banking team later on in the program.

markets two days away from the fed decision. "in all likelihood, the message will simply be one of expect us to keep the funds rate here for a long time. if and as markets begin to bite down on that message, no cuts on the horizon, but may be some hikes, this could precipitate a stairstep higher in the yield curve." tom: we must focus on what equity pros focus on, which is the fixed income space. they have been very good with total return over the recent decade. rub it to his chief investment strategist. robert, simply right now, what are you doing to adjust for a midyear adjustment? everyone in equity land is adjusting. how does fixed income adjust? robert: to lisa's point, some

people ignoring the data. some people have been zeroed in on the narrowness of tech stocks. but the fact of the matter is that on a country basis, europe and japan have been doing really well even before the u.s. there is a breath of growth out there. the economy is doing reasonably well, but if you wondered what a price wage spiral looks like, i think you are looking at it. it has been some time here where wages have moved up. they are not surging, but some of the settlements we see around the world, coming out of negotiations, are high. inflation on a core basis is running around the better part of 5%. there's not a lot of signs of

deceleration there. maybe it is not a wage price spiral, but it is certainly a wage price race. it is a horserace out there. that is what could cause it to be a very long time before inflation comes down and brings us back to the comment of the fed being at the levels for a very long time and putting a little awkward pressure on the middle of the yield curve. lisa: there's a lot to unpack there. let's elaborate on your point about a wage price spiral or escalation, whatever you want to call it. i am curious about what data you are looking at to give you that assertion, considering the fact that fed officials, as you have said, are concerned about a wage price spiral but it has been eased. we've heard the same kind of thing, especially with deceleration recently. robert: you could make that comment from average hourly earnings. if you really wanted to be optimistic, you could even make it from the eci employment cost

index. those sample sizes, especially on payrolls, they are not particularly large. the eci is running at about 1.1% or so. trailing, i think it is around 5%. there has not been a lot of deceleration there. when you look at what's going on in the labor market, there has been huge growth in the labor force and the hirings going on at a multiple of the pace. if you want to drill down and be optimistic to find things to say this is going to be ok, that is usually the way it ends up going the way you don't wanted to go for longer than you expect. that is why i think market pricing is missing here. lisa: the argument is that jp morgan put out a paper saying that if bonds are right, they have to sell off by 20%.

but you are basically saying stocks are right. and that will necessitate some sort of response from the fed. robert: i think i'm saying the markets, to me, they actually look right. we look at these large come cap any -- large-cap companies in the stock market, growth is not fantastic, but these companies have seen a lot of action of a lust for years, just like everyone else. and they have come through pretty well. they are showing a resilience to calamity, granted with a lot of fiscal stimulus. they have shown a lot of restraint on the way back. we have a lot of cyclical resilience on the way down. they have shown a fair amount of ability not in real terms, but to hold up and keep their earnings in an inflationary environment. lisa: but what does that mean? robert: i think that is maybe what is supporting this market. overall, it looks like a good investment environment out there for long-term fixed income. but there are some things to

avoid by pressing out parts of the yield curve, in particular. lisa: how much could that midyear curve go up? robert: i think you are looking at a slow burn. tom asked the question, are we going to be here, are we going to be a 3%? prices a year or so out has 100 basis points rate cuts priced in. the market is banking on that turnaround. i think you could see a very slow increase in the range, up toward 4%. you need these cross fund fed rates for a period of time. when this is pushing up around much of the world, you can very easily see over the next one year, two years, five years, a 50 basis point slow burn higher. tom: i find it interesting the idea of ambiguity between rates

higher and lower. is the solution for mere mortals to barbell or to latter out maturities, as kathy jones of schwab mentioned to us last week? robert: i am a mere mortal portfolio manager, and yes, barbelling is an approach, and being tactical on the curve. the reason i mention in a portfolio manager is that if you are an individual and you are buying your bonds on a biannual basis, that might not be that effective. there are opportunities in terms of floating rates and high quality that will play out the funds rate, or the yields are pushing 7%. there are opportunities in the longer-term credit markets, again where yields are much higher than cash. number two, the price is been extremely dynamic. before svb and silicon valley

bank debacle, the first handful of months, that was extremely attractive. you wanted to have duration there. post svb, you may want to be short. tactically, what we have seen over the years is these cycles for the market have been compressed into weeks and days. that may not lend itself to a static barbelling approach. tom: we are out of time, but this is important. gazillions are going into money market funds. all moderators are up. as the mistake right now of piling into 5% plus market money funds? robert: my expectation would be that there are two possible problems. one is that the economy is much weaker than expected. rates drop and they end up losing income. the other thing is there is a

lot of output in the market further out the yield curve. we are obviously not going to be availing ourselves of that. jonathon: robert tipp of pjm -- pgim. tom: i look at it like ai. everyone is in ai because dan ives told us to be. all my radars are up because what is the other side of the discussion? tipp nailed it there, as he always does. and there was some really good stuff. you nailed this move. some really good stuff over the weekend on the behavior of luxury based on the idea that china will reopen. jonathon: that segments into the

next bit beautifully. there has been a big shift away from the hopes and dreams of china's reopening, the rest of the world are performing. just creeping into conversations, u.s. exceptionalism. there has been a conversation about that. why him and eric robertson think that maybe we are too enthusiastic on u.s. dominance and not enthusiastic enough about china and everything else. tom: 4360 spx. are we rounding up? jonathon: who knows. we've you get through cpi on friday. equities up by 0.3 percent. welcome to a brand-new trading week. this is bloomberg. lisa m: keeping you up-to-date with news from around the world. the first word, and lisa mateo. jpmorgan chase has agreed to settle a lawsuit, reaching an

agreement in principle. it settled the proposed class action filed by an unnamed epstein victim last year. epstein is a disgraced financier who killed himself and a manhattan jail. in italy, silvio berlusconi has died. he made millions as a media mogul before running for office. he ended up being italy's longest serving postwar minister. his more than nine years in office were marked by sex scandals and allegations of corruption. still, he was one of the most influential figures in italian politics in the last three decades. he was 86 years old. the largest air exercise in nato's history is getting underway today. about 250 aircraft from more than 20 nations will take part in the drills in german airspace. the goal is to test the air force's ability to respond to a crisis in europe at a time of heightened tensions with russia. in philadelphia, an overpass on

interstate 95 that collapsed could take months to repair, at a time when summer travel is ramping up. the roadway fell after a tanker truck carrying gasoline caught fire under the overpass. that section of highway carries about 160,000 four goes per day. a swiss company will acquire two promising treatments for rare kidney disease. they will pay $40 per share. it is a 67% premium to friday's close. another four dollars per share could be paid later if the medicines achieve certain milestones. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪

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♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ >> oil, copper, and the rest of these markets don't have a positive carry. they cost you to own it, cost you to store it.

we are going to drain down these inventories as much as you can. oil, copper, they are a liability right now. they are not an asset. until they become an asset, nobody is going to want to hold them. jonathon: jeff curry of goldman sachs speaking to the team here on friday. we have never been this wrong for this long without seeing evidence to change our reviews, then they change their views. tom: it's because of lisa. she grilled him. jonathon: 86%, down from 95% this is from a note to clients this past sunday. to be ti at 68. tom: i have to admit, i was shocked. it is so important that jeff curry said we have to review it quickly. when you have a new rate regime like it was 15, 20, 30 years ago, that does not just change the banking business, it changes every sector, every business. all of a sudden has two barrels of oil in her living room, down

43% from when she sold her oil, -- [crosstalking] tom: it costs her money to have two barrels of oil. unlike the last time. jonathon: china is a big part of the story. the latest note from eric robertson is really worth a read if you can get hold of it. arkansas losing faith in the fomc's ability to bring down inflation and china's ability to engineer a sustainable economic recovery. believe markets are too bullish on the u.s. and to bearish on china. they look to sell the u.s. dollar. tom: that is where you see standard charter protecting the copyright of all of our guests to get this important research from a standard chartered bank. we have the global head of excess -- fx research at

standard chartered. if we see dollar dynamics, let's go back to first principles. is it going to be a relative weight move or a flow move of capital? >> right now, i think it is mostly a relative rate move. i think with the market is focused on is not so much the level of u.s. rates, but the degree of confidence that is leading into it. they will probably announce one hike. we think not, but they are not raising to hikes. as long as it is the case that it is one hike priced in, then they are done, we think all of the carry trade's will be put in place. we think the market will be comfortable and they won't get blown up on the dollar side. tom: give us scope and scale up for the euro. it wakes up in 2024.

how large can that move be? steven: we are thinking 114. not a colossal move, but it is still significant. that will bring it back into the range before the russian invasion. again, it is a story that we think the ecb is not quite done. that is likely to be done after a close call. as with china, everybody is super pessimistic on europe. my colleagues were saying that they don't know if anyone who is optimistic. with a market that one way, is not a question of the economics being right or wrong, it is a question of expectation. lisa: just to double down on what you're saying, if on wednesday the fed does skip or pause, whatever, and we see some sort of signal, they may tighten more, but they may not.

will that be dollar negative in a substantial way, a catalyst for this movie? steven: they might imply they only do one move. i think partly, call it the sociology of markets. wednesday could be a landmine if they sound more hawkish than expected. a lot of investors who want to put on short dollar trades and long risk trades will dissipate. they don't need to be super taboo -- super dovish. they just need the fed to be as expected and they will put on the trade if they imply they will do one more hike, markets will be satisfied with that and sort of continue to sell dollars and by risk. lisa: is positioning more or less fragile than it usually is? we know not all people are piling into the same trades. or do you think it is perhaps a bit more lopsided?

steven: i would say they have a tremendous amount of conviction, but they are afraid to express it because they are blown up so often. the market is really waiting for a piece of news that says the fed is done, whether it is payroll that comes in at 50 versus 75, so the u.s. economy is clearly slowing down. there is indication from the fed they think they're are getting traction on inflation, so they don't have to go much further. once they get that, i think that is the moment when a lot of these trades that people been thinking about for months get put on. until they have some degree of certainty, the upside risk to yields has been really, really curtailed. they are reluctant to put on the trades they want to put on. tom: there is a devaluation. the difference between depreciation and devaluation is the power of the bank. i'm going to suggest that as an

amateur, beijing has little control over dollar-renminbi. we went from 7.0 to 7.14 on chinese yuan. and what level in your mind do things start to unravel for the government in beijing? is it 7.15 or 7.25? steven: you could be as high as 7.30. it is hard to pick these levels. chinese inflation is very low. what we see from a weak currency are not really manifesting themselves in the way you would expect them to. chinese exports are not doing that badly either. it is not a competitive depreciation a ramp up exports. what chinese policy needs to do

is get domestic going. they are letting the market take this up without particularly endorsing them. jonathon: wonderful. thanks again for the read over the weekend. steven englander of standard chartered. they went through the scores of the post meeting on may 3. the s&p 500 up around 6% since the fed last met. the real moves come at the front end of the yield curve. it has not damaged the appetite of the equity market at all. tom, the equity market in the united states is doing ok in the face of a reevaluation of where the fed is going to go, which is to take rate cuts and price and possibly more hikes. the mood changes. all, it's about the potential for u.s. outperformance through the year ahead. what standard charter is pushing back against is exactly that. to bearish on china, too bullish

on the u.s. tom: the thing i get from yours and lisa's great study of these strategist changes over the last 24 hours is multiple expansion is back in. if you like growth, you have to go find it. that is all the stocks going up. i'm going to look at the gloom side and say that 2/10 is that 90%. i look at the moving average i use on that. we are almost there. that is really showing recession, economic slowdown. jonathon: how long can you scream recession for you? we have been screaming recession cholesterol months. lisa: don't they say the inverted yield curve has predicted five of the last eight recession see? does this matter? how much is this incremental

shifts that won't jog people out of where they are with u.s. equities? or is there a threshold where tech stocks are suddenly more than people expected yet? jonathon: so contrarian when that was so consensus for most of this year. all of a sudden, that is the contrarian view. tom: what i noticed is there are no big figure moves. 107 and 114 is fine. but he is not looking for a lot of drama out there. i mentioned earlier, apple off their low. the gm equivalent, instead of up 17% per year, they are up 2%. jonathon: are you going to be able to chart your gm? tom: i can charge my airpods at my tesla charger. jonathon: i need to charge my

phone. the life of the battery is awful. tom: i think the new iphone is great. to keep the people that have been here taking care of us. learn more at getrefunds.com.

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when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> it's hard to believe we can all all -- we can have all of this tightening, and it hasn't

had and effect. >> it is probably the reaction for the consumer that will drive the effect. >> it digs into markets that the fed does not like a surprise. >> this is bloomberg surveillance with jonathan ferro, tom keene, and lisa abramowicz. tom: good morning. a most interesting fed week. we to -- we welcome all of you on air and on radio. bloomberg reports a settlement of this agreement, this horrific episode with mr. epstein and jp morgan. jonathan: there were some faults out there over the weekend, that maybe we started tomorrow. the next data point is on

wednesday. the federal reserve chooses a raise, a skip, or a pause. you have got andrew hardin horse who has stuck through it 25 basis points they will hike, that is his call. tom: all that matters is data dependency, and the data dependency is 8:30 tomorrow. lisa, help us. lisa: honestly, mohammed a came out and saidli -- muhammad ali camilla and said if they are truly data dependent, they will hike. if they want to say "we want to

see what the hikes to date have actually done to the economy," they should say that. right now the guides is unclear because they do not know what they want. tom: i think the phrase "keep it there for a while," is key. could he dare say on wednesday the duration of whatever the decision is? jonathan: i don't think he wants to bring the committee into something like that. what we have seen is a senior member of the committee, presumed future vice chair basically come out and say "we can skip." think that is why many people believe that is the consensus view. going into wednesday, we will see what those actions say. tom: on friday, he flat out

stated that they must hire. lisa: if your data dependent, they are not that close to achieving their goal. talking about a wage price spiral, that was supposed to be off the table. it is not! how do they respond about? tom: that is the result of a resilient consumer. jonathan: lisa asked the question last week, month to date over the month of june that is exactly what it has done. the small-cap is doing better. the regional bank is doing better. equity futures on the s&p are positive by 3.4%. you can pause, but get tighter,

and you can pause but get tighter because real rates stay elevated because inflation is coming down. you can maintain the nominal rate at some level. tom: that is the key thing here. we are back up to restrictive state. clearly, if we are restrictive, if we are neutral, where do we go next? this is a student of this. years ago at ubs, this was definitive with an optimistic take on the u.s. economy in the depths of '08. he is the head of global economics and strategy. can you give me some of that optimism this morning? can you be optimistic away from the gloom of recession? >> i can't. this time around we will be on the pessimistic side.

if you look at a number of indicators, claims, isn, they are all pointing towards a negative outcome for the u.s. economy. you add the increase in the unemployment rate, you look at gross domestic product, the data does not support a huge stretch in the economy. the data supports that we are weakening. if they are going to land this thing, they want to try for a soft landing. tom: do you ascribe to the idea that when rates break and move motor, they will move with rep -- move lower, they will move with rapidity? 5 i don't think -- drew: i don't think we will go that far. it might have broken this low rate environment that we have

been in. we will have to see how that works out. we do not think yields will return to the 1%, 2% level. lisa: could yields go lower and could you get a recession and to still have equities moving materially higher? drew: you could. i think equities are very much forward-looking. whereas the bond market is trying to figure out what the new neutral level is. you're having a little different will be right now without because of the inflation story, and because productivity is so weak. it is a hard guess at where the potential growth in the economy is. firms are, still hiring people even though the people they are hiring are probably unproductive. that is why productivity numbers keep getting worse. how long can firms keep doing

that? lisa: the reason i ask is there has been a surprise to the upside with respect to certain economic data. companies have seen profit compression.s they have seen some damage from more discretion from consumers, in particular. we have right now, especially the biggest companies, a removal from some of the negative economic data, and even a recession that might be mild. drew: you always see disparities as you enter a downturn. the key point for me, quite frankly, is there is a lot of faith being put on the consumer, which means it is all being put on the labor market. with the exception of the payroll number and the breath of that number. the other indicators are somewhat negative. your economists bloomberg looked

at the states and how many states are in recession. when you look at how many states are in recession, it is about a quarter of the u.s. economy.as of u.s. economy as of last month -- the u.s. economy as of last month. tom: the importance is that all of us, macroeconomistss like yourself, we aggregate, aggregate, aggregate. is metlife looking at america as two americas? drew: there are a lot of discrepancies in terms of savings, who has the excess savings, and what is it being spent for. if you look at job quitters

versus job stayers, quitters are still making more money. you have had unskilled workers outperforming skilled workers from a wage gain perspective. i think a huge amount of the strength we have seen, and a huge amount of the job openings we are witnessing, are for lower skilled work and it is not clear to me that those job openings ever get taken down because the turnover for them is so high. we could get a situation where the data is looking good, only because people are having such difficulty filling certain jobs, but other jobs are actually disappearing, and it is not being captured in the data. jonathan: wonderful you. this labor market right now america is so confused. we had payrolls looking pretty

decent. we will get another read this week on what is happening. we we'll get retail sales later this week. we will get jobless claims as well. thursday morning, claims and retail sales in america. lisa: we also get the empire manufacturing survey, which is the first read we will get on what is happening in the month of june. this highlights that we are not out of the pandemic, are the pandemic has transformed, or highlighted some of the transformations underway in the labor market. it his which, the dearth of the fiscal economy needing to be refilled,i it is the fact that the job market was decimated during the pandemic, to the bifurcation between marketing

and services. jonathan: you have seen the scramble from the airlines trying to get pilots and attendants. some of those airlines don't want it to. tom: i had the beverage of my choice this weekend, and with it i had to buy a little thing of all lives. i had to pay $9. jonathan: try macadamia nuts. tom: i said to the manager that the food was great. >> she said every marginal cost we have goes to labor. jonathan: that was a restaurant or a store? tom: it was mcdonald's. jonathan: they do all lives now? lisa: and macadamia nuts! jonathan: that is the difference between t.k. and me. on monday i never

mentioned the restaurant because i don't want anyone else there. i want my quiet. tom: we dragged afterthought there. she ordered a charcuterie. jonathan: about 20 minutes from now, shepherds of the pantheon -- shepherdson of the pantheon. lisa m.: could being you up-to-date with news from around, the world with the first word i'm lisa mateo. jp morgan reached an agreement in principle with an epstein victim last year. part of a counteroffensive to take back russian-occupied areas is underway. the ukrainian military says its

troops have freed another two villages in the eastern donetsk region. that china is denying u.s. claims that it has spy operations in cuba. in beijing the foreign ministry referred to the allegations by the biden administration as false. the chinese spy facilities in cuba day back to when donald trump was in office. google news powered by more than 2700 analysts and journalist in over 1200 countries, unlace matteo and this is bloomberg -- i'm lisa mateo and this is bloomberg. ♪ hey, david! ready to get started? work with advisors who create a plan with you,

and help you find the right investments. so great getting to know you, let's take a look at your new investment plan. ok, great! this should have you moving in the right direction. thanks jen. get ongoing advice; and manage your investments in the chase mobile app. was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

>> the prescott how -- the press conference will be the most interesting element. if do not get the numbers, they will have to surprise the market. jonathan: it is always good to catch up with mohamed el-erian before going into the week. citi does not think they skip. they think the fed will hike. this is not a consensus, he

acknowledges. just for anyone who is interested, i don't think that they just go .25 at this point. he sees 50 points coming from chairman powell in the next few months. tom: you could go the other way just as easy. i have no strong opinion, because it is still original pandemic fiscal theory. it is a cliche, but it is new territory. jonathan: you can identify where the consensus is. most people assume skip because we have been led to believe by core fomc officials that that is the direction we are going. my question is how much of a big upside to price would we need oncpi tomorrow morning -- need

on cpi tomorrow morning? lisa: it would have to be quite a bit. if they want to assess the damage of existing rate hikes, they need to wait. it is unclear why they should stop waiting, and what they are looking for. if they are following the data truly, it should not take that much because the data has come in hotter than expected. tom: i don't know. we have to wait for the data. jonathan: we are data dependent. we will wait for the data. tom: i am focused on the july meeting. i think it is way more interesting. is he going to cut the speech at jackson hole? jonathan: i cannot wait for jackson hole just to compare and contrast to the speech from a year ago. are they sufficiently restrictive? how do you go about coming to a conclusion on that? are seeing variable lags much

longer than we thought they were? if you have, again, congratulations.i t is my weekly congratulatory -- it is my weekly congratulatory comment if you locked in a 30% rate for your mortgage. tom:i i'm still not -- tom: this is an important conversation. for the last 48 hours there has been an uproar about our democracy, about our present president, and about a past president. we need to clear the air, and we will clear the air on july 23 when she issues a public good. whether you are a republican or democrat, elaine kamarck, senior fellow at brookings will redo her magisterial primary politics, everything you need to know about how america nominates

its presidential candidates. it is 276 pages. do you have to rewrite the book 30 days before you put it out? >> no. there is no way i could write the book about 2024. the book does include 2020. 2024 will, i promise you, follow some of the basic rules of presidential primaries i described. jonathan: i will cut you off and -- tom: it is as simple as this -- you're the one who studies the roles. are there rules going into this primary season, given what we will see in miami tomorrow. >> there are rules of the game. donald trump's operatives are fighting hard to get rules that are sympathetic to him. in michigan this past weekend

they had a state convention and the trump people into the not trump people were wrangling over what rules would help trump. trump people know that he is a plurality candidates. he was a plurality candidate in 2016, you will be a plurality candidate now. he needs rules where he can get 35%, 38% of the vote, have the rest of it split up, and win all of the delegates. he did that successfully in 2016 in a large field, so he needs plurality rules. he needs to hope that all of these candidates stay in the race for the whole time, split up the opposition to him. what he fears most is that someone will emerge in the early primaries who is a credible alternative to him, not an

anti-trump, person but someone who can shave off just enough of those hard-core trump people. you don't have to get all of them. add them to the never trump people and, get a somewhat normal republican as the nominee. he. is vulnerable to that what is happening in miami, what will happen in georgia what will happen with the feds on the january 6 investigations, all of those will make him an extraordinarily vulnerable first runner. i have to go back to jimmy carter and the democratic primaries of 1980 to find a front runner that is this vulnerable. lisa: if he can continue in the same way with federal charges pressed against him -- there has not been an example. what is the legal barriers here? elaine: there is no legal barrier. the reason there is no legal barrier is we forget the

nomination process is a party process. if a republican party in michigan, the republican party in california says "we are going to run our nomination process this way, we will elected delegates this way to our convention," that is freedom of association, so this is up to the republican party. this is not up to anybody else. he can be under indictment, and the republican party can decide "we are running a nomination contest, and he is in it." jonathan: big day tomorrow, tom in florida. tom: it is a huge day. the thing i have understood through the weekend is that it will not be like the big day in new york a number of weeks ago. this will be a radically different process than members sitting there at 3:00 p.m.

looking at a hallway. jonathan: i will not pay attention to it. this one tomorrow is so much bigger. so much of this country, the general public, has become desensitized, particularly republicans, and that shows up captured by that pole over the weekend -- poll over the weekend. lisa: it goes back to a disbelief in the state and larger state institutions. are they more allegiant to politics than they are to their goal? the more that happens the more there is an existential question around the united states you keep hearing from international allies. regardless of what happens with this case, we heard about some of the g7 negotiations. people were talking about this! these are some of, the things i am watching regardless of the outcome of this particular race.

tom: steve jeff miller said the uncertainty, is immeasurable right now. that is true politically. jonathan: that is one thing we can all agree on. coming up in the next hour, stephenson -- anders pete -- anders person, mira appended, and george bory. a locked to pay attention to. equity features on the s&p just about positive looking to add some more weight to the recent rally. ♪

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tom: bloomberg surveillance, tom keene, lisa abramowicz, and other than pharaoh hitting ready for the next half-hour. in shepherds and is with us. we will get to him -- ian shepherdson is with us. we will get to him in a moment. but first, we are joined -- jp morgan will move money to victims of terrible abuse.

the story is not over for jp morgan. what is the next chapter four mr. dimon and his bank? >> it has been four years since epstein died but the bank has been facing a pair of lawsuits is saying that they benefited from epstein's crimes. one is from the u.s. virgin islands. jp morgan has reached day settlement within epstein victim so that should put an end to that case but there legal tables -- legal troubles are not over. they have sued their former top executive, the person who went on to become the ceo of barclays so there is stoneham -- there is some legal wrangling ahead for jp morgan. lisa: what range does it begin

to matter for jp morgan? >> it is fair to assume that it will not be a big hit in terms of its financial, in terms of a bid number that is not what the big number is. the bigger issue is that is not just jp morgan. it is across wall street what you have seen through some of the documents that have come out. a lot of wall street was willing to stomach close associations with jeffrey epstein for his wealth and his rolodex. lisa: which is perhaps why they backed away from crispin oddi so fast. i wonder if there are other banks you are watching that could get roped up into some of these settlements end lawsuits in the coming months? sridhar: we have seen revelations of ceos out of their

banks having connections to jeffrey epstein. it is more about the industry's willingness to associate with people like that. tom: thank you so much. bloomberg reports, this is hannah lovett reaching an agreement -- this is hannah lovett. jp morgan reaching an agreement to pay out a settlement to an epstein victim. one of the good things about the shepherdson purview is that we have to watch china. you said years ago, ian, we have to pay attention to china. you people look at it every day. what does consensus get wrong about china now? ian: the first is that they trying to rebound everyone was so excited about has been a lot less impressive than we hoped.

disinflation pressure coming from china -- china's ppi is negative. it is probably going to go more negative. that is going to push into global many fractured goods prices. china is the price center for global manufactured goods so that means downward pressure everywhere over the whole of the next year. tom: they are going to export inflation. how much would you calculate the impulse of chinese disinflation will bring down u.s. inflation? ian: we are talking about goods, of course. at the margin, downward pressure on goods prices are currently at 4% or 5%. the substantial. that is due to some recompression of domestic u.s.

margins, but the china impulse will be visible and helpful to the cause of low u.s. inflation over the course of the next year, starting now. lisa: speaking to this inflation debate with china, there has been a shift away from china being the factory of the world, and increase in labor's power in general in the u.s. and europe as a lot of the manufacturing gets short. how much of a wage spiral to you see continuing right guard lists of what happens with china? ian: which pressure is diminishing, that it is still elevated. we are not seeing the kind of numbers we were seeing in 2021. it certainly had some momentum that lasted longer than a lot of people expected. we are now on the verge of a meaningful weakening in the

market. i know the re-shoring is something you can see, but the labor market is starting to struggle somewhat. the benchmark national survey has been weak for some time now. i think it will take the edge off the wage growth. jonathan: -- lisa: where are you looking out for this weakening that people, have been expecting but has not come yet? ian: payrolls. there is a real disconnect. it can resolve itself in one of two ways. the fed has raised rates by 500 basis points in 15 months. normally that would be more than enough to push the economy into a recession.

tom: this time will be different. there was a newcastle in the middle of the premier league, and your newcastle. surprise, surprise, surprise. what is the newcastle out there that will keep this economy going? ian: the consumer is always the bit that has the potential. there are still a lot of savings built up during the pandemic. about two thirds of that excess savings has been spent now. what is left now is in the hands of higher income households that are unlikely to spend it. we can't look back and say "the last time this happened, we did x," because there was no last time. tom: can you time a recession right now, or is it so original

that you give up? ian: in real time it is very hard to tell, which is why the fed put so much emphasis on the labor market. i unemployment raises byf half a point, you have a recession whether gdp says so or not. lisa: if the fed does pause and doesn't raise again, could we get inflation down to 3%, 2.5% by the end of this year? ian: absolutely. the headline rate will drop, but the core is likely to soften. we will see real margin compression across retail. i think the labor market will weaken as well. u i'm hopeful the -- i'm hopeful the fed has done enough. lisa: if we do get a headline cpi print tomorrow that is above

expectations, how did they justify and say that they are still data dependent? or is that a misnomer? ian: they are definitely feeling their way. they have been clear that there is no grand plan. tomorrow's pause has been fairly well flagged. this is a fed that does not like to surprise. unless the cpi numbers are wild, they are not hiking this week. lisa: isn't it silly that they are not saying "w neede, we are taking -- we need, to see what we have done so we are taking a breather." ian: no one knows. we are incompletely precedented -- we are in a

completely unprecedented environment here. tom: you beautifully framed that active volcker. some would say they massively screwed up. others would say they got us back to where we ought to be, but what is the downside if they pause, pause, pause. ian: i don't see much because there is no residual inflation pressure if they stop raising rates for three months. we will have a much clearer idea in early fall of the lagged impact of their cumulative actions, which is what they keep writing in the statement. tom: i have the clearest memory as being at eaa. were these were up on stage and blamed her had a chart up,

saying there is no pain to just waiting for more information. that is where i am on this cause, pause, pause. lisa: i agree in theory. the problem is that a lot of these fed officials and a lot of economists are conditioned by getting it so wrong back in 2020 and 2021 do not moving fast enough and not trying to counter some of the stimulus. how much of that is a factor? ian: it's skewed the decision, shall we say. decisions, which in previous feds may have been much closer, they have gone on the hawkish side. it was politically damaging to the fed. the fed was the whipping boy for everybody. having made that mistake once, you cannot make the same mistake in the same direction twice in

the same cycle. they have raised 500 basis points in 15 months. it has been super aggressive. chairman powell said at the last meeting "w apartheide -- we are tight." tom: we will say goodbye to ian shepherdson of pantheon. i will put the surveillance court in my mouth because i may get in trouble here. lisa: about what? tom: 25 beeps up or down, lisa, 12 months out, nobody has a clue. lisa:lisa: we have guesses. tom: mike mayo next. stay with us. ♪ lisa m.: keeping you up-to-date with news from around the world with the first word i'm lisa

mateo. jpmorgan chase has reached a tentative settlement with victims of jeffrey epstein. a bank willingly benefited from epstein's trading. a settlement amount has not been disclosed. in italy former prime minister berlusconi has died. he made millions as a media mogul before running for prime minister. berlusconi's more than nine years in office were marred by sex scandals and accusations of corruption. silvio berlusconi was 86. i philadelphia -- in philadelphia an overpass on i-95 that collapsed could take months to rebuild. that section of the highway

carries about a hundred 60,000 vehicles every day. novartis will acquire 2 promising treatments for a rare kidney disease. novartis will pay a 67% helium -- 67% premium. global news, powered by more than 2700 journalists and the last in -- journalists and analysts in more than 120 countries. i'm lisa mateo, and this is bloomberg. ♪

it can happen to the people who teach us and rescue us, the people on our team and in our family. it can happen to the people who serve us and the people who served. the people we work late with and stay out late with. it can even happen to the person in the mirror. opioid use disorder is a disease that can happen to any of us. it's possible recovery can happen to any of us, too. >> would they could be a landmine if they sound -- wednesday could be a landmine if

they sound more hawkish than expected. they do not need the fed to be super elvish. they just need the fed -- super dovish they just need the fed to be as expected. tom: steven englander with all of his work over the decades on foreign-exchange as well. part of what we are looking at here with a nice lift to the market. nasdaq is up half a percent. it refuses to go down. it is part to have a memory here at bloomberg surveillance of time long ago, and the memory can be when someone is let go, but i had the clearest memory of an evening in 2004 and the uproar when mike mayo was shown the door at credit suisse.

we are thrilled to have mike mayo here off of 20 years of covering banks, of covering ubs, of covering credit suisse into the rest. let's talk about this historic day. we go spc, ubs, ubs takes on credit suisse, and here we are. was this because of greed? was this because of the absolute demand to create revenue? we do not care what the quality of the revenue will be, we just need to get new revenue. is that what happened? >> i did not officially cover credit suisse, but i can comment on the european banks, which have willfully lagged the u.s. banks. some of this is that structural. after the global financial crisis -- some of this is cultural. i lived through it.

it is growth at any price. there are some culturally flawed european organizations, several i worked at, that have played out through the numbers. goliath is waiting, and the goliaths are the u.s. banks. tom: can mr. dimon with a completely separate issue, this epstein scandal, be a change agent towards a more discerning choice of clients? >> know \ your customer i thinking 101 -- know your customer is banking 101. i have a compliance exam once a year, but there may be requirements on what clients you can take.

lisa: you say goliaths are winning. are the smaller banks losing? >> yes. we conducted an analysis. we had 4 haircuts. deposits leave by another 8%. another haircut would be provisions equal to recession level. extra expenses for new regulation. we have the fed funds rate go all the way down to 2.75%, which hurt interest margins. thanks get hurt -- goliath is winning even more. i want to make one clear statement today, and the regional banks are making some come back. this statement is that the detour -- lisa: that is so cheesy! >> detour for not owning bank

stocks is over. tom: for those of you on radio -- give me that radio sign -- that road sign! bring a stop sign next time. it is an orange sign. it is like a real sign. he stole this signoff the construction side of the bloomberg pothole at lexington and 58! lisa: why now? you talk about this potential 25% to their profits. are you saying it is priced in, we have priced in all of that and then some, so it is time to hoover up some of the smaller stocks that have gotten beat up? the large regional banks are not going to zero. you have had your failures

from events. you had three banks in the s&p 500 at the start of the year that failed. that is done. this hysteria as it relates to the largest banks is over and it has been over for the last four week. the banks have gone up over 10% in that time. they have outperformed the s&p 500 that they have in no way cut up to the broader s&p 500 so what could have legs in the market? the larger bank stocks could. lisa: in fairness they have not gotten pummeled as much as the others. i get your point. d the largest midsized banks hold up, even if you -- do the largest midsized banks hold up when the large side of the fed is still being used?

mike: there was news last week, and the only outlet that really picked it up was bloomberg. there is $10 billion of debt issued by the large regional bank. it was 4 to 5 times over inscribed. for those banks, yes. it is still to be determined how much wherewithal they will have to access the debt market if that has not happened yet. there is a divide. goliaths are waiting. once you get past, the acute stage you still have a recession with commercial real estate and most of the commercial real estate loans are -- tom: move the decimal point,. mike mayo, i detect some frazier

moves. they seem to be simplifying the process. what is the new citigroup look like -- what does the new citigroup look like? mike: the new citigroup looks a lot like the old citigroup. tom: this is gospel. mike: this is citigroup's silver anniversary. it is their 25 year anniversary, and it is not a cause for celebration. the stock is down. the stock market has more than tripled. they failed on almost every measure. tom: what is she doing now to get them back to john reed? mike: she is simplifying. the old adage is wholesale banking is global, consumer banking is local. that even predates this merger. this goes back to walter reston.

we are talking about a 30 year failed strategy where citigroup thought they could go ahead and have a customer in hong kong whose kids go to boarding school in london, and they vacation in aspen. jonathan: it is likely so -- tom: it is like lisa's life. mike: she is reversing that. lisa: you dodged one thing, so i'm going to come back to it. if smaller banks start to fail again, are all bets are off with the largest regionals? mike: the smallest banks are not systemic. you will have bank failures, but it is not going to be any bank in the s&p 500, in my view over the immediate timeframe. that phase is over. this idea of the detour away from banks has ended. tom: we have 20 seconds.

what is your best buy right now? mike: i'm going with j.p. morgan and citigroup, but i'm also adding in u.s. bancorp, which is been relatively pummeled. tom: should i hit him in the head? lisa: no! tom: global wall street livid when mike mayo was canned by credit suisse 23 years ago. to have mike mayo with us on this day is a huge deal. ew thank him for -- we thank him for being with us today. could i have said this 10 years ago when we were screaming in the phone about mayo being let go at credit suisse? you cannot make this stuff up. lisa: it was probably a blessing. i love these stories. let's not hit our heads going forward.

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it's an amazing thing when you show generosity

of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. jonathan: let's get your week started. equities are positive by 0.3%. the countdown to be open starts right now. >> everything you need to get ready for the start of u.s. trading, this is bloomberg the open with jonathan ferro. ♪ jonathan: live from new york, coming up chair powell's next meeting just around the corner as investors need for one last read on u.s. inflation.