>> the inflation story is still benign, it is cooling slowly but it is still calling. >> we are now in a 2% inflation world. >> still running at 3.25%. that is still well above. >> consensus is we are on a downward inflation trend. >> for the moment u.s. exceptionalism is a story hard to push back on. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. lisa: running and welcome back. the dark days of stop losses ended yesterday with a new record high for the magnificent seven. the focus has shifted towards unabashed enthusiasm for central bank rate cuts. the bank of canada, the swiss

national bank both cutting half a percent over the past 24 hours, now it is on to the ecb rate decision later this morning. futures losing a little bit of steam in early trading. nasdaq leading on the downside .2%, not much to write home about after yesterday's record highs. you are seeing yields climb across the board, project leon the long end in the u.s. if the fed cuts rates next week, if central banks cut are we allowing inflation to pick back up. right now jonathan ferro is off this week. dani burger is joining us around the table. i am curious what you make about some of the frontloaded rate cuts we are seeing from the likes of the swiss national bank and the bank of canada. dani: i am wondering how much of this is a willingness to decouple from america at a time they are facing the threat of tariffs. they already have weaker

economies, especially in europe. do they need to get out in front and being a place where they can meaningfully weaken their currency and how much does that come back around to invoke the ire of donald in 2025? lisa: the swiss national bank was explicit and the fact they want to bring their currency lower versus comparative currencies. the been raise the issues of directly intervening with their currencies should this not work. how much is this trying to get all the tools they can ahead of the trump presidency? dani: it is also bad news for the swiss franc. it has been a haven. they are trying to say we need to pump the brakes and back off on the strength in the frank before we have what is coming down the pipe from the u.s.. lisa: this is not just a central-bank phenomenon. it feels like governments and companies are all reconfiguring, saying we have seen this movie before and we will get ahead of whatever might come.

annmarie: the writing is on the wall and some of them are pretty jealous of elon musk and his ability to have this relationship with president-elect trump and the bet msuk made before the election. meta-donating $1 billion -- donating $1 million. this is not a lot for meta. they did not donate to president biden's inaugural committee or president trump 1.0. this is tech companies, this is leaders. how many leaders? emmanuel macron, blow to mirror zelinski. they want to make sure they are in his orbit for that dealmaking. lisa: what is fascinating is how different this is than 2016. there was outright rejection of what donald trump brought to the white house back then. this time it is completely different. there is a feeling that we've

seen this movie before, we can work with it. how does that set the trajectory on a different course? annmarie: for some executives it is exciting. we heard from jeff bezos who is very optimistic about what this can mean. in the nbc interview donald trump said everyone is calling me. lisa: we will hash through that today at a time the focus is on the ecb at 8:15 eastern as well as ppi and initial jobless claims followed by the press conference with christine lagarde. coming up this hour brian levitt of invesco as the nasdaq notch a fresh record high. m&a under a second trump administration. and soren radde head of the ecb rate decision. the s&p 500 snapping a losing streak and fading a little bit. traders boosting bets on a fed rate cut next week. brian levitt writing "the

backdrop for risk assets remains sound given resilient growth in fed easing. there is little to success -- there is little to suggest this is a business cycle that will be ending." lisa: we are talking about all of the reasons there seems to be an outward bout of enthusiasm. does it worry you everyone is lining up on the idea we can get strength without inflation? brian: i am not overly concerned about inflation. instead what i am concerned about is this idea that the u.s. could potentially move to a new higher sustained level of both and people focus on tax cuts and deregulation but not necessarily think about what the uncertainty around trade could mean or what fiscal consolidation could mean. it does not suggest this is a cycle that is ending, but it comes down to how you want to think about these markets. if you think you're going to a new high or sustained level of growth that is a very different

investment backdrop then if we are going to continue what will be a resilient growth path but not one that is really accelerating to new heights. lisa: steve ricchiuto came out yesterday saying -- sell bonds, buy stocks. at what point if you have rate cuts around the world disproportionate to the united states does it make it more attractive? traditionally you chase the rate cuts, and that is were friend, whether in bonds or stocks. brian: in 2017 everyone was aligned on the u.s. first story and non-us markets did well. people are not even thinking about the fact that markets outside the united states can perform well because the expectation is this persistently strong dollar. the u.s. should do fine. the median stop in the u.s. is not overly expensive. the s&p 500 is elevated, the median stock is not.

other parts of the world are priced very modestly and you just need things to be a little bit better than what they currently are and you are seeing some improvements in chinese economic indicators, european economic indicators. maybe that is a surprise to investors next year that you start to unlock some of that value? dani: how low is the bar to say i can buy something out of the u.s.? brian: the bar is very low. everybody is on this america first. i am not running away from u.s. stocks, but the idea is you get a broader market in the coming year which would surprise people , broader meaning beyond the united states. the bar is very low. you think about the united states in 2023. people were very worried about elevated inflation, people were worried about the tightening.

there were a lot of people bearish coming into that year. you and i discussed foam oh. -- you and i discussed fomo. things needed to get better. you needed inflation to come down modestly. things will get better outside the united states. you think about the dollar being so strong. the fed maybe will not price as much. a lot of that is already baked into this. dani: there was an assumption in the u.s. there would be a broadening. the most recent highs have been about the same players, have been about the magnificent seven, has been about tesla, how much of this is a preview of the false dawn of the small-cap broadening for 2025? brian: if you think back to 2016 or 2017, interest rates jumped, cyclicals outperform defensive, the whole trump trade which did not persist in 2018 because of the uncertainty around the trade

war or fed tightening. this time is different because you will not get fed tightening but you will have uncertainty around the trade war. i would expect markets to broaden out largely because the earnings differentials are likely to moderate. that is nothing bad about the mag seven over the last five to 10 years. pretty significant investments they made. earnings growth moderates. annmarie: during the first trump administration when potentially information was leaked to the press after pulling out of nafta and stocks sold off trump reversed course because he cared about where the stock market is. do you think we get that similar tone from the president? brian: i do but you have to remember sometimes these things can get away from you for a bit. we have not had any market volatility in a long time. it has been a benign period.

typically market volatility rises when you have policy uncertainty. annmarie: what is that catalyst? brian: i keep coming back to the fourth quarter of 2018. it was not an ideal christmas. the market was down 20% by christmas eve from three months prior and that was the uncertainty around the trade war. yes the administration stepped in to provide clarity on where that was going on the federal reserve backed off. it was a sign the administration cared. my sense is you may get a pullback in 2025 that people are not expecting, a policy driven pullback. that is not the end of the cycle. annmarie: when you say policy driven, that catalyst will be something like tariffs? it will be because of the trade war. brian: if you say today this is where we are going and that is where we are stopping, businesses will adjust.

the challenges we had an 2018 was a full year of trade conflict. any time we went back to our current uterus we would see it -- any time we went back to our computers we would see a new tweet about something. that is how the incoming president likes to conduct business, keep your partners on your heels. the challenges business investments load and actually stalled at the market started to look if we keep going down a tighter monetary policy path and ongoing uncertainty around the trade war, we may have a recession. that is what the fourth quarter of 2018 felt like. the administration adjusted path because they do care with the s&p 500 comes. this is the trump put, not just the fed put. that is a buying opportunity. end of cycles do not feel like what we are looking at right now. lisa: this does not sound like you are a raging bear.

you do not feel like as much of a fomo kind of guy as you used to be. brian: we just had back-to-back years of 25% to 30%. lisa: are you taking advantage of areas outside the united states? brian: it is worthwhile. you are very concentrated in the broad u.s. market so if you want to add some size, add some value, add some non-us, you will still be exposed to the u.s. market. take advantage of other opportunities over the next one to three years. lisa: including china? brian: including china. lisa: brian levitt of invesco, thank you so much. potentially more insight into what we will get him a whether it is issuing debt or vouchers for individual consumers. consumer stocks in china coming out. the latest is also more trying to get ahead of donald trump becoming president. annmarie: they are talking about

continuing efforts to stabilize the property market which has been a huge drag on the vested population. before we got the headlines we also heard from china's commerce ministry saying they're willing to strengthen dialogue to manage difference. they're trying to get ahead of trump 2.0. one thing we have yet to hear is whether xi jinping has any plans to make his way to the united states. lisa: we will talk about that, whether he will also donate $1 million to the inauguration plans. let's get you an update on stories elsewhere. yahaira: french president emmanuel macron is expected to name a new prime minister. the replacement will look to form a new government and restart formal budget talks. emmanuel macron faces a deeply divided national assembly which ousted michel barnier last week. parties across the political spectrum have agreed to vote in favor of a special law to avoid a government shutdown. staying on china, cbs is

reporting donald trump invited chinese president xi jinping to attend his inauguration next month. xi's attendance would be unprecedented for several reasons. no chinese leader has ever joint inauguration ceremony of a u.s. president. in fact no foreign head of state has attended one in more than a century according to state department records going back to 1874. shares of adobe are falling more than 10% in the premarket. the software company offering a full cast that fell short of analyst estimates, adding fuel to concerns about the company's ability to compete against emerging ai startups that are making headway in the space. adobe has been adding gen ai features to applications like photoshop and plans to offer a new higher-priced ai model. lisa: up next, gearing up for an uptick in mergers and acquisitions. >> i think we are on the verge

of a big uptick in m&a. we have seen the change in administration which will create a more favorable regulatory review and competition approach. lisa: that was one of the most bullish interviews i have ever heard. we will be talking about that coming up next. this is bloomberg. ♪ i can't believe you corporate types are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar. i've got another one.

lisa: markets are little bit softer, the s&p lower .1%, almost .2% after yesterday's record high on the magnificent seven. you can see yields higher. yesterday fascinating to see that even after the cpi print in line, after an option that went well, then people started to get nervous about what this meant for long-term inflation. under surveillance, gearing up for an uptick in m&a. >> we are on the verge of a big

uptick in m&a. we have seen a change in administration which will create a more favorable regulatory review and competition approach so we look at 2025 and we cannot wait for it to get going. my prediction is other than 2021, this could easily be the best m&a year we have had in 10 years. lisa: president-elect donald trump naming andrew ferguson as incoming ftc chair. the move raising expectations for mergers and acquisitions under trump's second administration, the news coming just as grocery store chain albertsons backed out of a merger agreement with kroger after it was blocked by a federal judge as well as following up with a number of vicious back and forths in the legal space. frank aquila joins us now who focuses on mergers and acquisitions. we heard the incredible bullishness. how much is that what you were hearing from every single one of your clients right now?

frank: we are definitely hearing it from the investment banking community. paul is someone i've worked with for a long time and he certainly knows what is happening in the markets. what we are hearing from clients is deals they talked about 18 months ago for a year ago, they are now talkingabout now is the time to do it. one of the concerns under the current administration is that even if you got approved. 98% of the deals go through. it was taking 12 months for deals that had no competitive aspects to it. there was a real concern that you get tied up in the process and it would freeze you from a strategic financial point of view. the view is things will happen much more quickly. certain deals will get blocked,

certain deals will get challenged but it will be a distinct minority. lisa: is there a clear sight of what will get blocked? is there a certain type of transaction that will come into focus, whether it is foreign money into a steel company or a tech company looking to pick up another smaller firm? frank: we have to remember that even in the ronald reagan era, which was pretty wide open in terms of merger clearance and antitrust, there were deals blocked. anti-competitive deals have been blocked in every single administration and i'm sure we'll get blocked now. which sectors will they look at more closely? certainly tech. health care a certain extent. retail. things that directly impact the consumer. those things are definitely going to get looked at very closely. annmarie: what you see the

appetite for foreign companies and is it driven by the carrot and stick idea of tariffs or is it because they want exposure to u.s. exceptionalism? frank: i think we are going to see a lot of inbound m&a from europe and asia, particularly japan, even if harris was elected. the drive is the u.s. is growing, the markets in europe and asia are fairly stagnant. the second thing is if you're producing and selling in the united states, you want to be producing because the cost and the potential disruption in the supply chain becomes more difficult. it will be increased now. annmarie: what would have been your advice for nippon steel? once to overtake u.s. steel.

both biden and trump said they would block this deal. frank: i think that is pure politics. pennsylvania was the big state in play. annmarie: maybe don't do it around a huge presidential election with the number one swing state? frank: hopefully that still happens but we will see. dani: i wonder for companies that are private equity or looking abroad and companies that have international supply chains and they are faced with a potential reality of tariffs changing the entire cost of business, is that putting deals on ice? are things getting a second look because of the risks in 2025? frank: i think people have been focused on supply chain issues, not necessarily because of tariffs but since the pandemic. that is where we saw the first disruptions, a lot of which led to inflation. companies are very much focused on that. i think it is a driver of transaction as opposed to an

pitted me of transactions. dani: one of the other hopes for a driver of transaction -- there is a fear in the market the fed can only go so far. maybe it is a cut next week and then a pause. what does that do to deal activity? frank: interest rates are historically low. we think about the last couple of years when they were extraordinarily low. if you look at the japanese economy where they have had close to zero interest rates and very stagnant business activity, i think if the economy is growing and you can build in a 4% interest rate you can make most transactions work from a financial point of view. also right now you have a tremendous amount of cash, whether it is private equity groups, strategic buyers, they have cash on their balance sheets so they do not need to

borrow as much. that is the driver as well. annmarie: -- lisa: valuations will basically take a hit as a result of rates being higher now compared to when companies got founded or were bought out by private equity companies. this is a reason we've not seen more activity. how much will there be a reckoning in valuations even if some of these deals get back on the market? frank: one question is whether or not companies will be valued much longer term. not looking at the next 12 months but 2, 4, five years out. to the extent you are doing an acquisition, i think you are going to be prepared to look at it much longer term. in terms of the exits, i note talking to people in vc and private equity, they have not

had a lot of exits last few years. they are looking forward to a number of exits next year and they are also, whether it is through sales or ipo's i think the ipo market will be hot as well. that is not my area but i think it will be hot. annmarie: you agree it will be the fastest m&a market in 10 years? frank: yes. lisa: frank aquila, thank you for being with us. really insightful as people talk about how much activity there will be in banking or the private equity sphere. dani: i find the point about deals happening faster to be fascinating. earlier this year i had a conversation with orlando bravo and he set the process was so gummed up, that they had to completely change everything they do so that they could get deals done, but to frank's point it was taking a long time. annmarie: if you are thinking of doing any m&a this year why would you do that before a

presidential election, particular if you know you will get the same kind of regulatory overhang, versus maybe waiting it out and a new sheriff in town. lisa: are you advising nippon steel? maybe not during an election in a swing state. coming up, bloomberg's david gura on his exclusive sit down with treasury secretary janet yellen and some of her warnings on tariffs and trade going into a different administration. this is "bloomberg surveillance." ♪ we're harnessing breakthrough innovations to increase production in the u.s. gulf of mexico. our latest deepwater development, anchor, produces previously inaccessible oil and natural gas, allowing us to deliver the energy we all need today so everyone can follow their own road. that's energy in progress.

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lisa: stocks taking back a little bit of what they gave yesterday with the nasdaq losing the most. u.s. exceptionalism once again ascended in big tech. right now the nasdaq down about one third of 1%. s&p futures down about .2%. or interesting was the yield space yesterday. cpi came out in line with expectations, rising the most going back to earlier this year. at the same time you saw a rally in the bond market and then

something changed as the session grew older. dani: you had a strong bond auction. maybe it is the fear that the fed will cut. cpi being not too caught, is that really a good justification to be cutting? there are some nerves in this market? lisa: especially because it came in line and everybody said that is so good and then you start to get the roundups, then you start to get the exact decimal places that are higher and people started to say you saw the biggest increase year-over-year in a year and a half and all the sudden people are wondering if the fed cuts and you have the ecb cutting in the s&p cutting and the bank of canada cutting, what does this mean for inflation? suddenly the long end saw the selloff. dani: you look at the rate sensitive sectors of the economy , things like housing and manufacturing. they are wobbly but they are not

getting worse. you can make the same argument for europe. inflation is still too high. there is weakness but it is more the politics and the fear of what is coming in 2025. the here and now may be does not justify 50 basis points. lisa: right now you are seeing a strong focus on the fx market because that is the main transmission mechanism of some of what you are seeing particular in europe. you can see a weaker swiss franc this is by design. you are seeing the euro strength and a touch versus the swiss franc. the euro strengthening just a touch versus the dollar. the swiss franc weakening deliberately after the swiss national bank cut rates by 50 basis points, leaving them with a .5% interest rate that is their key rate. then this morning, a headline dropping that the snb does not like negative rates but they do work. annmarie: but they work.

opening the door to the fact that because they have such little dry powder they are willing to take it negative if need be, especially as they see a more protectionist white house coming into play in 2025. lisa: under surveillance this morning, evidence mounting against the alleged suspect in the shooting of health insurance executive brian thompson. the nypd saying luigi mangione's fingerprints match evidence from the crime scene. police are also investigating wanted posters of senior executives that have been hung in parts of manhattan. this is the big question mark. how much can police get ahead of any kind of copycat action that might threaten executives? annmarie: this nypd bulletin is scary. it says prior to and after the perpetrators arrest online users across social media platforms

reacted positively to the killing, encouraging future targeting. saying we need to upgrade our personal security. dani: various security heads said they have been fielding more calls. there was a gathering of security experts for companies looking at spending more. there is a fear at the moment that translate to how strange this case is going to be, how strange the trial is going to be. the idea of them picking jurors, defined people in the public who are not swept up in this disc consent and concerns about the -- in the discontent and concern about the health-care industry. there's so much evidence against him but the trial could be difficult depending on that fact. lisa: in d.c. the associated repressed -- the associated press reporting trump invited xi jinping to attend the inauguration. what gives here?

annmarie: no foreign head of state has been to an inauguration since 1874. the inauguration committee constantly reaches out to foreigners and has some kind of representatives, usually an ambassador that shows up at the inauguration. some of this is trump using his raw power. he constantly spoke he has a great relationship with people like xi jinping and could be the guy to get the deal done. maybe he invited him over to say come to mine operation. what xi jinping is doing is preparing for what trump 2.0 means. lisa: i'm trying to -- dani: i'm trying to understand what the upside of xi jinping being in the inauguration would be? jesse him and the crowd bundled up. annmarie: it is not happening. dani: imagine trump saying something and he cannot respond and he is sitting there in the front row. there is little upside. lisa: this reminds me of when you have two girls and one has

been trash talking the other one and the other one invites them to the party they will show up and no one will like them, it is just a massive power move. i will put that aside. nvidia ramping up hiring in china. sources telling bloomberg the employer will -- up from about 3000 and the start of 2024. that included 200 people added to a team in beijing working on new economist driving technology. fascinating that at a time we are talking about china cracking down on u.s. companies you have a major u.s. company, the largest company expanding in the region. annmarie: china cracking down on nvidia, earlier this week saying they were probing a takeover. you feel jensen wong in the middle of these two world superpowers trying to navigate them both. certainly after trump was elected wong said he would agree with any restrictions. he was also just in hong kong addressing that china is a great

place for ai innovation, even if they cannot sell the most advanced chips into china. in one way you can view this as a diplomatic overture, saying we will be hiring in china. annmarie: at the same time you have incoming officials like marco rubio, jamison greer going to the ambassador, basically saying we need to decouple. there is no silver bullet when it comes to china and their dumping of excess capacity on foreign markets and also how they treat u.s. companies saying we should decouple. how much harder is it going to be for any company to start ramping up hiring like we have seen at nvidia? lisa: print -- current treasury secretary janet yellen urging the u.s. to maintain open

channels with china in an interview with bloomberg's david gura. also expressing concerns about wider tariffs. sec. yellen: broad-based tariffs , almost all economists agree they will hurt prices -- firms that need inputs from china to acquire them and hallmark the competitiveness of firms that rely on those imports, a broad-based approach. i have serious concerns. lisa: bloomberg's david gura joins us now. what was the main takeaway given the fact janet yellen knows her time as secretary is limited and she is handing over the reins to administration with a very different view? david: i went into this interview wondering how she was going to be. was she going to be wistful or worried or running for the exits? i think she retains optimism that in the time she has left she will convey to the american people all this and ministration has done in terms of economic policy but also convey what is

important. taking china as an example, she has the best conduit of communication between washington and beijing. she believes rebuilding that was crucial and it is important to maintain the integrity of that. she wants to convey to scott bessent and his team there should be an effort to preserve that whether president trump will be in favor of universal punitive tariffs. you misspoken called her secretary of state, you can be forgiven for that because she had such a huge diplomatic role. she is someone who has embraced the international bravado of this job and that is something she is trying to convey to scott bessent that there is more to this job than tax policy. you are a huge policymaker for the country and a huge person on the world stage and she wants to emphasize that. annmarie: the two did have a call and i wonder how much this centered on tariffs. it is interesting for her to say there should not be blanket tariffs because she lost that

argument in the administration. any insight into how that could have been handled differently? david: we did not talk about the history but it is a very good point. she is someone who is trained and worked as an academic economist and relies on the literature of what we know, the effects of the tariffs, and it is funny to hear that in the moment when the rhetoric seems to have shifted so much to the way the future trump administration thinks things could be or how the tariffs might work out where the advice they might have. she is still somebody who recognizes the usefulness of finely tailored tariffs, not broad-based one but a very good point about how they lost that fight. annmarie: they have six weeks left. potentially they will go a lot harsher on russia right before they leave the administration. you get a sense they are ready to cripple russian oil revenue with even more sanctions?

david: very grateful you had that story. i asked if you could confirm the discussions were taking place, but she did talk about the opportunity that comes with oil. probably a dissatisfaction with the russian economy has proven to be more resilient than she would've hoped or expected it to be. that is not to say it is what it was before the incursion began, but this is a thing they could target, p that exports, p that the fleet of tankers. she did -- be that exports, be that the fleet of tankers. dani: i was fascinated by what she said about fiscal sustainability. there is some iron he given fiscal deficits ballooned under the biden administration. david: here there was that wistfulness. she is someone who has been identified as a fiscal hawk and

that has not been a facet of her tenure in the treasury department. it began with all of the spending because of the pandemic. she brought this up in a wall street journal event. she leaned on the fact that in the budget the president proposed there were efforts made to reduce the deficit. the budget has come to pass. i think it is something she does have regrets about. she said that explicitly. she recognizes there is a failure of progress. i asked her are you worried about the state of fiscal matters in this country going forward. it is something she said is of concern to her and i think there is recognition of the fact it does not seem that is likely to change markedly. dani: do you get a sense about how she feels about her legacy, may be looking forward to not being in that position. we are about to get a very different treasury secretary under different washington, d.c. david: she talked about the institution she has been a part of come at the white house come at the federal reserve come at the treasury department.

things are likely to change and the backdrop to all of this is the policy she has pioneered and been a party to, supply-side economics, multilateralism, these are things she has worked for, worked hard on, tried to manage for come in we're at the point where all of that is changing. she was not evincing any sort of sadness in that interview. it is a moment where things are starting to change and she is recognizing that as she goes back to perhaps california. lisa: sounds pretty rough. wonderful interview. really exciting to date in. you have another interview coming up which will get to in a minute. let's get your update on stories elsewhere. here is your bloomberg brief. yahaira: china is bowing -- china is bowing even more fiscal support. officials are promising rate cuts, a higher budget deficit,

and efforts to boost the property market. comments come from a central economic conference in beijing. china is facing uncertainty in 2025 with the threat of new tariffs and a possible trade war under the incoming trump administration. the international energy agency expects of global ill glut next year despite opec-plus delaying supply increases. the agency saying if the group continues with its plans to revive output in april, world markets will still face an oversupply of 1.4 million barrels a day. they say if opec-plus were to cancel hikes for all of next year, there would still be a glut of 950,000 barrels a day. microsoft will take an $800 million charge after general motors shuts down its economist cruise operation. the tech giant had announced a minority investment in the initiative in 2021. microsoft said in a regulatory filing the charge will have a negative impact of about nine cents a share.

that is your bloomberg brief. lisa:, the u.s. versus the rest of the world. >> people are long u.s. versus the rest of the world. it will take something to shift the background. lisa: that is next. maybe someone who has a different take. this is bloomberg surveillance. ♪

lisa: futures pulling back a touch after yesterday's all-time high on the nas.2% decline in t. yields higher. i am watching a space at a time you had an ok auction yesterday. 10 year yields 4.2964%. yields in europe following lower. the u.s. versus the rest of the world. >> people are long u.s. versus

the rest of the world in the equities base and it will take something to shift that. the position the incentive has set up is to lisa's point on the u.s. being exceptional versus the rest of the world. it is hard to convince someone to sell the u.s.. for china you could have episodic periods of outperformance. lisa: under two hours away from the final ecb rate decision of the year. the central bank widely expected to cut rates for the fourth time this year as it looks to boost the region struggling economy. soren radde writes that the governing council is set to put more emphasis on downside risks -- skewed more strongly to the downside. we expect dovish rate guidance changes." soren joins us now. i would love your take on how low the bar is for the european economy to outperform. >> good morning and thanks for

having me on the program. i think the european economy is going to have a difficult year next year. there are a lot of headwinds. some have to do with the international environment and the potential of a trade war. some are homemade like political uncertainty in france. in an environment where fiscal policy in europe has little by way of the capacity to be against that, it is hard to see for europe to outperform those low expectations next year. the ecb is the only game in town at the moment. lisa: this is the reason people are calling for a 50 basis point rate cut. broadly everyone is expecting 25 basis points if they will not following the footsteps of the swiss national bank. maybe this is a concession to the more hawkish members to create a more dovish tone as to future guidance. is that your take as well? soren: ecb decisions and

communications are usually a package and a compromise that make some people happy. ecb president lagarde strives to have a broad consensus in the governing council and that often means they take -- not radical decisions -- but essentially come up with a package. today that will mean 25 basis point cuts paired with guidance changes in the guidance changes are the bone of contention. dani: i am interested by the idea you say the ecb is the only game in town. there have been other games presented. that is the mario draghi report. with little expectation of that happening is an ecb that continues to cut rates, is that enough to get the european economy off the ground? soren: we don't think it is enough to get the economy off the ground in the near term. that is why our forecast for growth is .8%, below consensus, and about one third of where we

see u.s. growth. there are factors looking into 2026 that can make us more constructive. hopefully some former trade deal with the u.s. is one of them. the effects of ecb easing is another one. we expect the ecb to cut rates further than they think they will. another one is the potential truth of whatever form in the ukraine with secret construction efforts, reconstruction efforts. there are reasons to be more constructive about 2026 but i think all of those factors will take time to shape out and so 2025 will be a tough lift. annmarie: there is still -- dani: there is still an irony of the ecb if they continue to cut because inflation is not at target and it presents an argument of moral hazard that politicians are acting recklessly because they know they have an ecb at their back. do you put any credence to that? soren: i would say to the

inflation, we are now expecting inflation. the ecb will be a bit below that next year and essentially staying at target with risks to inflation coming lower. core inflation is still running above target but the central bank faced with such a weak growth outlook should be more forward-looking. we have heard from several speakers, including christine lagarde, that is the direction of travel and they expect to become more forward-looking. they are not there yet. inflation is not really the main concern. as your question on moral hazard , i think in general financial markets are pretty powerful disciplining devices. we have had a lot of political turmoil in france and in the end we expect the deficit in 2025 to be not much smaller than the one we are likely to get this year. in other words with a six handle. on the other hand we have seen financial markets are reactive to political uncertainty and will exert pressure and that will have an impact on fiscal

policy eventually without the ecb having to administer that kind of discipline. annmarie: the former ecb head mario draghi called what is going on in europe low productivity a crisis, you think the current ecb views at the same? soren: i think there are concerns. there is broad agreement around the governing council, they are very concerned about potential growth in europe, structural headwinds, high energy prices, lots of competitiveness, trade fragmentation is another headwind. a war on the doorstep of europe. the macro environment is challenging. there are lots of transformations going on. the disagreement is whether that is something for the ecb to fix. i think they are concerned about it but disagree whether that is something monetary policy can fix since monetary policy is a tool that can shift --

lisa: you used to be in economist on the ecb. i would love your thoughts on what we heard from the swiss national bank resident when he came out and said nobody likes negative rates but they do work. do you agree? soren: by and large, yes. i think in europe we have had that experiment. the ecb has experimented with taking rates into negative territory. they work in economic theory. i think they work in practice as well. something that has a big impact, strong currency channel, they also have a signaling channel, it is a step to take rates into negative territory and no central bank does that lightheartedly as the swiss governor said. if central banks to that it says something about the path and through all of these channels i think it has an impact. if i had to judge the standing today, what is more likely coming in europe and the future is more qe or negative rates.

at the moment the pendulum has swung in favor of negative rates as being the instrument that comes with less side effects and can be reversed more quickly. if i think it my own time at the ecb when i was a staffer and thinking about the unconventional instruments, the received wisdom at the time was the other way around. qe was more of the favorable tool and negative rates. i think the fortune have turned a little bit in terms of the preference for these two instruments. lisa: wonderful insights. soren radde, we appreciate you being with us ahead of the ecb rate decision. coming up next hour, peter tchir, ed mills, holly o'neill, and mike collins of pgim fixed income as we are about one hour and 15 minutes away from that key ecb rate decision and 15 minutes after that ppi and

initial jobless claims. this is "bloomberg surveillance." ♪ to go further, you need to be ready for what's down the road. as energy demand continues to rise, we're harnessing breakthrough innovations to increase production in the u.s. gulf of mexico. our latest deepwater development, anchor, produces previously inaccessible oil and natural gas, allowing us to deliver the energy we all need today so everyone can follow their own road. that's energy in progress.

>> right now, the market is very happy with the fact of a soft

landing. >> the economic growth has been surprisingly upside. >> my confidence of the economy growing over 2%. >> the intersection between quality and value that we think and power markets higher into 2025. >> this is a good economy for financial markets. can we sustain it into 2025? >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. lisa: 75 minutes until an ecb rate decision to synchronize rate cuts. we got some from the bank of canada, the swiss national bank, and we expected 25 basis point cut from the fomc next week. today come the expectation is for the ecb to deliver at least one he five basis points of a cut with probably dovish language. markets pulling back after yesterday hitting a record high on the nasdaq 100. it seems we are shifting towards an environment where people are on the margins less concerned about near-term inflation and

looking more to how much different central banks around the world can cut rates. dani: we saw from the 50 basis points, what happens in 2025 when they face tariffs and external pressures and they don't have the kind of power power that they need come of that the ecb is the only game in town. you don't have some sort of cohesion among governments in europe at a time when otherwise they want their exports to give them some sort of tailwind. you are seeing the efficacy of cutting by 50 basis points. anne-marie, we're going down to 0.5% with their key borrowing costs, which isn't leaving a lot left for potentially some of the tit-for-tat that we can expect. annmarie: that is why you have the snb saying they don't like negative rates but they are effective, especially if you're dealing with higher tariffs. we have a difficult export environment. maybe we would have to go there

with a negative rates. it is not to central banks. china coming out saying they will have looser fiscal policy, the chinese commerce department sink they would like to have a dialogue with the united states. meta donating $1 million to donald trump's inaugural committee, symbolism across the board of countries, central banks, governments getting ahead of what is coming down the pike next year. dani: they are concerns. i go back to how much of that contrast with the animal spirits. central banks are fearful, they are taking actions. stocks are continuing to bump up against all-time highs. every ceo survey is so optimistic. the small business survey sentiment is really optimistic. there does seem to be a disconnect with all of those things. not to mention the bond market which recently has been selling off. lisa: there has been a real question about how this time is different from 20 16 in part because of the learned experiences back then and the fact that the world adapts and adjusts whether to central banks

or companies. coming up, cpi boost rate cut bets near-term. raymond james with a tax cut hike looming on capitol hill. holly o'neill from bank of america on the outlook for consumer banking in 2025. we begin with stocks slightly lower, lead downward by the nasdaq 100. yesterday those tech stocks hit a new record high. the s&p 500 snapping a two-day losing streak boosted by tech as it all but ensures more fed easing. peter scheer is coming back with us saying, bottom line, the fed cuts by 25 at the next meeting and it should be a neutral to mildly hawkish 25 basis points. the underlying data based on back bad months in the household survey is likely to be deemed the outlier. peter, thank you for being with us. when you make of yesterday price

action? reading the tea leaves can be a full sirens, but it seemed odd that the initial reaction was to buy bonds and then something changed. peter: i think everyone has these animal spirits. trying to say that there's a real chance that trump cuts redtape, reduces regulation, promotes business. we might get worried that the rest of the world will slow down enough that it drags down the u.s. for now, it is the excitement that all of this not in my back yard gets thrown away and we see progress, investment done, and build outs. i think that is what is outweighing yields. lisa: what is behind that move in yields given the fact that we are basically counting on the federal reserve to cut rates by 25 basis points next week, and you have central banks around the world chopping away as quickly as they can? peter: i think we won't see a

much lower inflation picture in the u.s. because companies are front-running. you have tariff fears, so there is buying on that. frankly, it will be more expensive to do it here than elsewhere. we have been doing it here already. i think there will be some costs associated with that, build out in logistics, we will need infrastructure to do that. i think it will keep inflation high. you are seeing the data centers growth. on the equity markets, i see some froth and nervous, but as we talked about earlier the week it is hard to short anything in december. the seasonal factors are in your adjustment. let's not forget the amount of money made in crypto in the last few months is helping spur christmas and holiday shopping. it is doing everything. while bitcoin keeps going up and everyone is excited, i think that it feeds to the overall we have to buy more of this stuff. dani: i wonder what the housing market looks like in miami after the bitcoin surge? all the way up in the hiking

cycle, there was a fear of diverting from the fed because you want your currency to stay strong enough to continue to fight inflation. the opposite is happening now. you have concerns from different countries about the weakness in their growth. do you think that this will be a diversion cutting cycle? that you will see other central banks that want to get in front of the fed and have bigger cuts than them and would welcome a fed that goes on pause and 25? peter: i think they want and need to do that. europe is kind of a mess. germany which had been the juggernaut and the anchor in support of everything, they themselves are struggling that will leave the ecb job very difficult. always thought that a big chunk of the tariffs, if any get put on, would be absorbed by a stronger dollar. that is what we are seeing. the dollar strength will offset any tariff prices and that will keep the pressure lower than it would be otherwise. dani: romans go you said the animal spirits are dependent -- moments ago you said the animal spirits are dependent on everyone thinking that we could growth won't affect the u.s. when does that change? peter: everyone is focused on the holiday season, but january

and february, how long can we continue? we saw headline from you that it will be a bigger theme next year, uid is outpacing volkswagen in brazil. my view has been that china is trying to buy time to make sure that they can sell their brands globally. i think that we get excited about this growth in stimulus and in the end we have to be more prepared for china trying to sell their brands globally, particularly in emerging markets and more and more in europe. european weakness place to china. annmarie: if the walls go up on everyone, china will have to find a place to dump their exports. when it comes to the idea of potentially animal spirits starting to wane, do you want to look elsewhere? places like china and europe? peter: the chinese stock market is interesting. it sold off from one, but i think that will be a mistake. a, they have to continue with the stimulus. and they will do everything they can to help their brands and their stocks. i don't think it will be great for global growth. there is an opportunity for

chinese stocks as a trade, not an investment. commercial real estate has become one of the theme. work from home is winding down. i think the dog, or whatever it is called -- lisa: doge. peter: all federal employees working from home will be pushed into office. yields, 450 with the potential spike to 5. a lot of commercial real estate can do well in that environment. annmarie: if you are a traveler and not settler in terms of the chinese stock market, how significant is it that walz and jamison greer have called for deep decoupling from china and the united states? peter: we should be concerned, on the other hand trump is proposing president xi come to the inauguration. it is china's interest to become as coupled as possible. long-term we would be better decoupling but we will be sucked into short-term trades that

favor china over us in the long term. dani: you have a fascinating view you have been writing about for some time that trump could go for what looks like a win with china, but actually gives china an advantage in the u.s.? peter: we see the problems the chinese economy is having and u.s. companies don't want to invest there and are running their factories at a minimum. the only way china will grow is selling the product. they need to buy time to do that. they're struggling now and they will come up to a deal that looks good to us. three to five years down the road we will regret it because it will have given china time to continue to build up their manufacturing and their chip industry, which we should be concerned with. we talk about it from geopolitical front, it is their chips in their ai focus that we need to be worried about. i don't like any deal that buys them time and takes pressure off of that and lets them grow. to me, that's the risk because they have the longer term horizon then we do. dani: what does a longer term horizon look like? peter: they can think in terms of decades. something like ai and chips,

this is a 3-5 year thing where they are trying to play catch-up aggressively. they don't have access to some of the high-tech technology, but two things are going on. they're able to make smaller chips than we thought possible. they make them inefficiently using old machines, but they are getting those. the bigger advances in the chip industry are coming from packaging and how the chips are layered in the semiconductors. that technology is easier. china might be able to get some pretty good advancements, even while we are trying to restrict it. on top of that, we are seeing how easy it is to get around restrictions anyways. lisa: what do you make of nvidia expanding staff in china at a time when there are supposedly these restrictions? they're trying to find ways to maintain their presence and business in the region. peter: that is going to be a difficult thing. companies like that will unfortunately face rusher from this administration. no matter what trump would like to do from a business side, i am a believer that some level of national security has this high on their agenda.

it is bipartisan. no matter what you might think, once you get read in on what is going on, the what the fears are, there will be pushback keeping chips and technology out of china. you look at some of these hacks that have been done to impact our infrastructure potentially, this is a real issue. that will be a struggle for all of these companies trying to figure out what can be sold into china, because it has to be, and about 80% of the chips sold to china come back to the u.s. and various products. it is not an easy answer. china has now started to try to retract some of the dual use chips making their way into ukrainian drones. this will be messy and i don't see any way around that. lisa: wonderful to talk to you. peter scheer of academy securities. nvidia saying that they will keep hiring at that they have hired about 200 people in beijing to beef up a team of researchers.let's get an update on stories elsewhere. here is your bloomberg brief. yahaira: the wall street journal

is reporting that hamas has conceded to two of israel's key demands for a cease-fire dealing thousand. the militant group agreed for the first time to allow israeli forces to remain in gaza after fighting stops. also, they handed over a list of hostages that it would release, including u.s. citizens. prime minister netanyahu and knowledge developments in the talks and said that it was too early to tell whether a deal was within reach. president joe biden announcing that he is granting clemency to nearly 1500 americans. sentences were commuted for inmates placed on home confinement during the covid-19 pandemic and who have successfully reintegrated into their families and communities. the president also pardoned 39 people who were convicted of non-violent crimes. the move represents the largest single-day grant of clemency in modern history. the fbi director christopher wray announced he will resign before president-elect donald

trump takes office. he said in a speech to agency staff that he plans to resign at the end of president biden's term next month. trump, who appointed christopher wray in 2017, made it clear that he wouldn't keep him on as the director of the fbi, even though he is serving a 10-year term that does not end until 2027. trump plans to nominate cache patel is the new director of the agency. lisa? lisa: next, the deficit threat. >> i believe the deficit reduction is necessary to keep us on a sustainable fiscal course. there is a threat going forward. >> i threat that someone else should deal with, because there's always a sense that it becomes concerning, then you get into office, and one thing leads to another. this is bloomberg surveillance. ♪

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dani: a little less than an hour until an ecb rate decision is markets in the u.s. take a breather after another record high for the nasdaq 100 led by a couple of stocks. s&p futures are off by less than two tens of the percent. you can see a little bit of dollar weakness, although really it is basically flat. euro-dollar at 1.0498. 10-year yields now crossing the 4.30 mark as people look to if the fed cuts next week what does that mean longer-term about their ability to cut given the fact that inflation has been, in certain areas, pretty sticky? of course there is the deficit. under surveillance this morning, the deficit threat. >> i believe the deficit reduction is necessary to keep us on a sustainable fiscal course. there is a threat going forward

that many of the provisions on the individual tax side, many republicans have expressed a desire to keep all those provisions in place. cbo said that would cost $5 trillion before 10 years. that would be a blow in the situation. lisa: treasury secretary janet yellen sharing her concern over the ballooning deficit highlighting the potential cost of trump's previous tax cuts if changes are made. "on taxes, it's looking increasingly likely that we could see a four-five year extension versus a 10-year extension. that will keep the cost down and be easier to pass." ed, it seems like everyone finds fiscal religion as soon as they are on the exit path from any kind of office. how much is there going to be a realization of the deficit by current people who are making a lot of noise around that now who are going to enter office early next year?

ed: something i've always said is folks are really concerned about the debt and deficit until they win the election. they get in and all of a sudden they want to have other issues. they feel that their team should be the one who wins on policy. it's rich to have treasury secretary yellen saying that. a lot of the fiscal stimulus that occurred during the biden administration was driven by the fact that she was pushing for it. the inflation reduction acts, the american rescue plan, pushing jay powell on a lot of monetary policy. those were the economic decisions of the biden team driven by secretary yellen. her statements probably give more boost to doge versus any conversation related to tax cuts. dani: this helps the incoming trump administration find someplace to cut the spending?

when it comes to what we can see at the start of next year, the sequencing of some of these policies under trump, i'm trying to understand, is he going to be one package or two packages when it comes to the border, energy, and of course tax cuts? ed: i think the chair of the house ways and means committee who will be writing this package wants to know if it is one or two himself. i think that the senate preference is to have two packages. i think the speaker of the house's preferences is two packages. the house majority, it will start to 17-215. we talked about in that scenario everyone is king.getting everyone on board to get to 217 it will be difficult to get that done once come not to mention twice. if there are two packages, then immigration, energy, defense package could see a significant boost to spending in each of those areas. if we are living in a world

where instead of significant budget cuts to the defense department we are seeing hundreds of billions of dollars in additional funds to the defense department, that is interesting and different than the narrative out there. i think that the most likely thing we see if we decide one versus two, those tax cuts will be extended, but to do it for four to five years, that is under $2 trillion. the full 10 years plus other things donald trump talked about, that is where it is north of $5 trillion. i don't see house republicans being willing to support anything north of $2 trillion additional debt over the next 10 years and a reconciliation package. annmarie: what is left on the cutting room floor when it comes to tax cuts? ed: i think something has to happen. when you look at it, annmarie, what i told folks at raymond james is that there are a good

number of republican still from new york, new jersey, pennsylvania, california, and if everyone is king, there are at least a handful that aren't going to vote for something unless something is expanded on salt. my base case for salt is what was proposed previously, increasing the salt tax limit from $10,000 to $20,000, but having a tax limit on who gets the advantage. maybe only households below $400,000 or $500,000 get the additional $10,000 deduction. that scores at $130 billion. it is a lot of money, but not in the trillions that if you were to waive salt altogether. annmarie: one package or two will cost a lot of money. what is the offset? ed: one, they are going to say that the tariffs are going to pay for a portion of this. that is the political offset. i'm skeptical that things like

the inflation reduction act are going to be meaningfully changed because of the narrow vote in the house. i see some money potentially coming through entitlement reform, particularly on medicaid. i think that there will be a conversation about other sacred cows. will it be about closing a loophole in salt deductions? closing the tax benefits on municipal bonds? taxing endowments? will people have to realize is, if you aren't on the table -- at the table in d.c. will be on the menu. i don't think that you will need much more than half a trillion or trillion worth of offsets. it isn't what people thought you would have. maybe the pain will be a little less than feared. lisa: peaking of trying to be at the table -- dani: speaking of trying to be at the table, we see tech executives trying to do that. meta donated $1 million to trump's inauguration fund after not doing that for biden or

trump's first term. andrew ferguson heading up the ftc has been critical of big companies. but the pieces together. what you expect policy to look like and enforcement to some of these big tech companies? ed: the $1 million donation by mark zuckerberg and meta is being at the table. that is recognition that if you were to continue down that path that policy has been, it is going to be another tough four years for big tech. is there a way to change that conversation? i think when i look at the elevation of ferguson to ftc chair, gail at the antitrust division at the department of justice, these are folks who are going to continue a lot of the antitrust push that we've seen over the last four to eight years, but there will be a subtle shift. over the last four years, we have been focused more on the size and bigness of the companies, workforce issues.

i think that these are individuals who were probably go back somewhat towards a consumer welfare standard. applying a consumer welfare standard big tech deals is something that was favorable to big tech for a number of years before the move towards populism has come over. how long that lasts, or can they get a settlement out of some of the pending litigations, those are the big questions i've been getting at raymond james. lisa: is buying tesla a policy trade right now? ed: it seems to be. elon musk has done quite well. the run-up in tesla and the fact that you have elon musk at the head of a lot of these regulatory changes, potentially being part of the conversation with china, he has positioned himself well. the question that i get is, how long is his shelflife with donald trump and who decides that this relationship is over first? it might be that this is so valuable to musk he wants to keep it going as long as possible. lisa: is there someone else in

running to be first buddy? it seems may be mark zuckerberg wants to put his name in the hat should the relationship fall apart. annmarie: we have seen a few olive branches from mark zuckerberg. when he was shot. also he had dinner with him ahead of thanksgiving. now he is throwing money at the inauguration committee. lisa: you make a great point. how long will they have to see this to avoid the antitrust? dani: especially with andrew ferguson coming in. lisa: and of the rhetoric to enforce that. holly o'neill from the bank of america on the outlook for consumer banking in 20 25. how much firepower do they have left in their bank account? quite a lot. this is bloomberg surveilla ♪

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lisa: 45 minutes until an ecb rate decision. the expectation widely is a 25 basis point cut. an all-time high in the tech sector, not necessarily the s&p. two hours away from the cash open. here are your morning movers with manus cranny. manus: adobe has the software,, the software for creative's and they are trying to monetize that more aggressively. the disappointment comes when not only did they guide later in terms of revenue, dmrr, and

mouthful, but they say that that will grow by 11% as opposed to this year which was 13%. you can try to monetize your ai, up sale your ai, it is about how much are you prepared to pay as a customer for the additional functionality of ai, the tiered description? this is disappointment all the way around. uber, they were on the stage at barclays. above the u.s. average. you have tourism. autonomous vehicle experiment going on in san francisco. the strategy after the cfo meeting with them. we just talked about nvidia. what are they deploying 200 new people in autonomous vehicles in china? we will see what elon musk has to say about that to the president-elect. the price target is 269 dollars come sustain double-digit growth, compelling valuation relative to their peers and in

the best position to prosper. good morning. lisa: under surveillance of this morning, sources tell us that bloomberg president-elect donald trump is scheduled to ring the opening bell at the new york stock exchange this morning. trump, during his first term, tied the stock market performance to his economic policy that raises the question about how much he will do the same this time around. annmarie: is there going to be this idea that this could be a check on some of the incoming president's policy proposals? what we saw in the first iteration of trump is that things would leak out to the press about pulling out of the trade deal in the stocks would go lower and maybe there would be a phone call between him and president xi or someone else saying, we are thinking about doing that just getting a better deal. i think he is just going to walk in and say that my trump trade, how much richer are all of you because of that? dani: it is so fitting at the end of 2024, in the middle of

this rally -- i want to know who will be with him. i feel like this will be another airplane photo op moment, elon musk standing in the background, who is they are and who is not there? lisa: and who might be position to determine their wealth? elon musk raising the most net worth. spacex alone boosted his net worth by roughly $50 billion. dani, raising a question of what is the value of having a closer seat to the president? dani: we say tech company is grappling with meta donating $1 million to trump' is inaugural fund. every day since the election, given that he is worth over $400 billion now, he added $7 billion per day. you can argue that that is the worth of being so closely connected to trump, because it's tesla, spacex, and all of his companies. it's really valuable thing. as ed mills was saying, it's

only as valuable as that good fortune lasts. annmarie: the concern is for people who may be like dan ives who are putting this money and hype and optimism into elon musk's companies, is what happens if that relationship falters? other executives are taking notice. mary barra, the gm ceo, said the regulatory framework for self driving cars, which elon musk has been suggesting to president-elect trump, would be better than state-by-state patchwork. she goes on to say, i think there's a lot we have in common, her and donald trump. this is someone who worked so closely with the biden administration. the tide is changing and you're seeing executive after executive in the tech and auto space lining up to try to get a seat at the table. lisa: microsoft is expecting to take an $800 million charge as gm announces the terminations of its autonomous tax initiative -- taxi initiative citing the high cost of tech development building out a fleet of vehicles.

microsoft announced an minority investment in crews in 2021 that was part of the $2 billion investment round. it feels like people are assessing what their investments are in tech. which are paying off question mark cutting the cord if they are not. dani: so many people saw the future to be autonomous vehicles. it feels like bubble is too strong of a word, but something that popped. maybe enthusiasm? apple is another case. they plowed it so much money into driverless technology and had to completely reverse course. i was looking at some calls in 2017. every car and technology company was saying that this is the future. by the 20 20's we would have a thomas vehicles on the road. uber was saying by 2020 they would have a taxi service that was a helicopter. people got over their skis and spent a lot of money and are now taking losses. lisa: i hope that they come up with a taxi service that is a helicopter. it comes down to the consumer and what the appetite is. we want to focus on the u.s. consumer. the bank of america releasing its final consumer tech report

of the year, saying that there are no signs of consumer resilience in november -- resilience waning in november. spending momentum carried across all income cohorts through the gap from higher, middle, lower income households. spending growth is narrowing. holly, it's wonderful to see you. how much power is there left in bank accounts, desire, spending trends you're seeing? holly: as you said, the consumer resilience is not waning. across all of the metrics that we look at, they look really healthy. the dry powder is there. when you look at the money in checking's and savings accounts, it is significantly higher than it was even pre-pandemic. we have seen that come down, but it is still higher so they have cushion across all income cohorts. hi, middle, low peer the low income cohorts look even

stronger when you look from a percentage basis. from a liquidity basis they look strong. from a borrowing perspective they also look strong. they are borrowing around the same levels that they were pre-pandemic. when you look at our credit card data, that looks good. they still have borrowing capacity. the credit environment from a bank perspective is fairly normalized. i think that the resilience of the consumer looks strong. they are -- they also have spending look good and we are the peak spending period of the year. the spending was up in november. that matches our data, our surveys that we take preholiday. what are you expecting to spend it the holidays? lisa: the reason i find this so interesting is, first of all, this is what has driven u.s. exceptionalism is the envy of other countries. also, it runs counter to what we are hearing from the guidance of

retail companies in particular. how do you square that? holly: i think that the consumer, you have a difference in sentiment versus actual behavior. we look at the actual behavior of the consumer. what are they spending? what are they spending on? like i said, spending is up. the holiday period is also up, expecting to spend $2100 this holiday period. that is up 7%. within that, we are seeing trades more discount stores. so, they're looking to stretch their dollar a little more. they are seeing the benefit of some lowering prices. gas as an example. in gas we are seeing a higher number of transactions, but the dollar amount is lower because prices have come down. they're making trades within their spending behavior and they are making their dollar go further. dani: how do you distinguish the sort of trading down scenario?

how do you say that is stretching the dollar versus this is weakness and something that may show some cracks? holly: i think in my opinion it is the consumer making good choices with the money they have to spend. they are very informed. the overall spending number is higher year-over-year. within that, they are making trades and adjustments. at the same time, liquidity levels are strong and they have borrowing capacity. all of those things working together i think are showing a good, strong, resilient consumer. dani: the trend has been to spend on services, airline spending is robust, cruises are robust. could we have rotation back into goods spending? holly: you could see that rotation. during the pandemic people really upped the ante on the durable goods, washers and dryers. we haven't seen that come back because those have a long shelf

life. i think as you see that maturity, you could see a shift back. the spending patterns remain fairly consistent. travel, experiences, services. those are very strong. we are seeing in this holiday spend, electronics come back a little bit. so, that is also a beginning trend. annmarie: speaking of the holiday season, retail analysts have said they are focusing on five less shopping days, because it is basically a shrunk holiday season between thanksgiving and christmas. you see that having any impact on consumers willing to spend? holly: no. overall, the consumer is going to spend for the holidays. it is a more truncated period, but we adjust for that when we look at the hague year. for the two weeks around eggs giving, and it is as late this year -- around thanksgiving, and it is as late this year as it can get, spending went out. it will be more truncated.

period. annmarie: what would you look for for cracks in this resilience? holly: spending patterns first. borrowing we will always look at as a bank. the borrowing behaviors are still really strong.they are still paying credit cards off at a pace faster than pre-pandemic. that is a good sign. the liquidity in there checking and savings accounts. we have seen that flatten a little bit. into 2025, i would expect to see that start to grow again. lisa: i'm trying to build on what annmarie was talking about. there appears to be a disconnect. on one hand in the survey you talk about the gap between the wealthiest and the lower income cohorts narrowing marginally. you talk about robust firepower in their bank accounts. you talk about the ability and willingness to borrow. then they're looking to stretch their dollar.

this is behavior you typically see on the brink of something that feels like, to dani's point, weakening? why aren't people spending more in a traditional and freewheeling way when the data seems to suggest they would be in a position to do so? holly: i think that we have seen a permanent shift in what the consumer wants as a liquidity position in their account. i think they got used to that during the pandemic. i have more cushion in my bank account, and i'm going to keep that there. they are making the trades into lower-cost goods to make sure they keep and maintain that level. i think that is one of the trends. it's the consumer who is very educated, very aware. there are deals everywhere. they are in social media. 30% of our clients are planning to buy on social media this year, which is interesting.

they are aware and informed and making choices. dani: is at the same thing as price fatigue? we've heard from companies that they can't keep expanding their margins because there are fears that people are not willing to pay. is that a different side of the same coin? holly: it could be. it is consumers making very informed choices and taking control for themselves as to where they can spend their money and budget. lisa: holly o'neill, thank you. holly o'neill with us at a time that 30% are going to buy on social media. that was stunning to me. dani: that is huge and it speaks to why companies like macy's are struggling. if you're accompanied you haven't kept up with that and adapted your brains come you're going to struggle. people demand something very specific. annmarie: i've only done that

once, social media buying. i didn't like what came through and now i never buy. lisa: right now, let's get to an update on stories elsewhere. here is your bloomberg brief. yahaira: south korea's opposition filed the second impeachment motion against president yoon. the motion was filed after he made a defiant speech in which he tried to justify his martial law declaration last week. insisting that he would fight any case against him. if the motion is successful, a court ruling will determine whether yoon would be forced out of office leading to a presidential election being called within two months. the latest on the investigation into the united healthcare ceo brian thompson's murder. the newark police commissioner said that the 3d printing gun that luigi mangione had when he was arrested this week matches three shell casings found at the crime scene.she also said that a crime lab was able to match the person of interest's fingerprints with

those found on the water bottle and kind snack bar found near the scene. luigi mangione is in custody in pennsylvania. meta donated $1 million to president-elect donald trump's an all girl fund as part of an effort for the tech giant to build a positive -- inaugural fund as part of an effort for the tech giant to build a positive relationship. trump's accounts will reinstated in 2023. lisa: i got schooled. it is not an age thing, it is a coolness thing. >> the inflation story is still benign. when the federal reserve looks at it, they will have to have one eye on what is really going on in the economy and one eye on what might be coming in terms of policy. lisa: this is bloomberg surveillance. ♪

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dani: less than a half hour until the ecb rate decision. after that ppi for the alphabet soup of inflation that we talk about. initial jobless claims come the key question will be, how much do people feel like longer-term yields are going to stay at these levels? under surveillance, the fed's balancing act. >> i would say the inflation story is still benign, cooling slowly but still cooling. the question is, what are we going to do when we attacked this with policy changes next year? when the federal reserve looks at it, they will have to look with one eye on what is going on in the economy now and one eye and what might be coming in terms of policy. it is a good economy, can they sustain it in 2025?

lisa: a slew of unknowns weighing on the outlook for growth and policy and between 25. "economic growth in the u.s. remains outright strong, but we still believe that growth will moderate do to most consumers running out of discretionary income. interest rates will remain restrictive and much of the rest of the world is struggling. " thank you for being with us. i have been trying to make something of this and everyone has been shutting me down. i want to get your take on this. yesterday i thought that the price action was interesting and bonds. we got cpi bang in line with expectations. a selloff in the long and as people started to worry about next year. did you take any signal from that? >> i think that the markets are confused, just as the fed is about the data. as mr. kelly said, they're looking at the current environment which is really strong. if you look at all of the gdp expectations, we are poking towards 3% on a pretty

consistent basis. inflation has obviously been running higher than the fed's 2% target. all else being equal, the rate today at 4:30 feels like it's fair value for the current environment. remember, the fed and the markets are supposed to be forward-looking. what is the world going to look like in terms of growth, in terms of inflation, in terms of the fair value of interest rates in a year or two years from now? that is where i disagree that the current environment is not really sustainable and eventually the rate structure will be lower. for now, it's hard to argue with rates at these levels. lisa: what gives you confidence about that? how much conviction do you have to be buying with both fists at a time when everyone else is saying that we could see 5% again? michael: i just don't think that that's sustainable. that level of interest rates, as you saw in that summary, is to

restrictive -- too restrictive the fed gets that rates are really restrictive now and that the real funds rate you can argue is probably 2% right now. 100 basis points above for the fed has previously said that the fair value of real rates, our star, is. they're are very restrictive now . it is biting. it is biting consumers. you're talking about consumers trading down in your last segment, and that's happening in a big way. retail analysts are seeing it. two thirds of the sales growth in retail sales right now are coming from amazon, costco, walmart. if that is not tell you what consumers are doing with their pocketbooks, that is a real strong signal i think of the pressure, the pushback on this high level of prices. dani: if i can jump in on that point exactly. lisa and i asked holly o'neill about that and said, how is that not a sign of cracks? she said, because the overall

spend is higher. it is just consumers who want a liquidity buffer in their bank account not weekly consumers. they're spending more, delinquencies are falling, and the spending gap between higher and lower income consumers is shrinking and they look incredibly healthy. what you say to that kind of data? michael: the wealth effect has helped. it isn't just housing in the stock market, but increasingly younger people have owned things like bitcoin and cryptos, which makes them feel wealthier. there is a big difference between the average household, which is generally what the economic data portray, versus the median household. i really believe that there is this huge cohort, may be 80% of the consumers in this country, that are really struggling. i have three kids in their 20's and i think that their average bank account has zero dollars in it. i don't think that that is not representative of the broader economy of young people who have really been hit hard by higher

rents, insurance, food prices, auto prices, you name it. it's brutal. i think all of those things are going to bite. they haven't yet, but over time those higher rates start to bite, and i think the fed will have to capitulate at some point. i don't think it will be next week's meeting. those dots will probably come up in the amount of rate cuts the fed expects for next year, and maybe into 2026, but ultimately the average funds rate over the next 10 years is probably going to be a lot lower than what is priced in today. dani: it sounds a good difficult time to be bank of dad at this moment, so my sympathies go out to you. there is a sentiment that the animal spirits have been reawakened and there is positivity among companies that they want to do more capex, that a wave is coming back and deals will be flourishing in 2025. that something will be happening, in the water, that reaganites inflation, whether it

be that or policy linked to tariffs and tax cuts. could that outweigh some of the fears that you are speaking of? michael: that is all possible for sure. in the near term, that is what is being priced in. in the near term, the markets are pricing in a continuation of this really strong economic growth outlook. a continuation of the sticky inflation. a continuation of the restrictive or really high interest rates. the markets are pricing in a funds rate that gets down to 3 and 5/8 and stays there forever. could we remain in that for the next 12 months? absolutely. as long-term bond investors on behalf of our clients, we are looking at the 10-year yield at 4:30 today and that is supposed to be the average of the funds yield plus terms premium over 10 years. we are trying to take a long-term perspective over which way the market is leaning it if

that is right or wrong. now, they are leaning to a persistence, an extrapolation of the current environment continuing to be robust. that is where i have my doubts. annmarie: we have -- lisa: are you buying long-term treasuries and selling lower risk credit? michael: absolutely. that is the trade. adoration on backups. we have been consistent for the last 12 months on this, lisa. as the rates back up to the high end of the ranges, closer to 4.5, i get excited and my clients get excited, and we are asking them to add duration at those levels. the spreads keep retching tighter even though you will have credit risks increasing across the macro climate that you're supposed to cut credit risks. those are the two big themes that we are instilling in our portfolios. lisa: thank you for being with us. in the next hour, dana peterson

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>> the inflation story is still benign. it is cooling slowly, but still cooling. >> you basically live in a 2%

rather than 3% inflation world. >> you're still running well above where they want to see it. >> consensus are we are on a downward inflation trend. the fed doesn't seem to worry about inflation being a little sticky above target. >> american exceptionalism is a story that is hard to push back on. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. lisa: all eyes turning to europe with an ecb rate decision in 15 minutes with the broad expectation of a 25 basis point rate cut following significant rate cuts from the swiss national bank and bank of canada. markets are pulling back a little after yesterday's gains, snapping a two-day losing streak. we saw the outperformance and big tech. today, were taking it back. nasdaq 100 futures down, leading the declines lower, down .4%. really, the key is going to be

how much can other central banks outside of the u.s. front load some of those rate cuts to get ahead of the uncertainty of 2025? dani: it seems like there is a desire to decouple from the fed. we were talking to peter scheer about this that on the way up you saw different central bank's one to stay in tune with the fed because they didn't want their currency to weaken. they needed a stronger currency to battle inflation. it is the opposite. the snb saying that they are cutting 50 basis points to weaken the swiss franc. are you going to see something similar from the ecb? they want to get ahead of not just the fed, but of an incoming president donald trump? annmarie: this is the first decision is the president of the snb. not only cutting rates but saying that we could potentially go negative if we have to because negative rates work. all of this is a reaction ahead of potentially today's point. what comes down next year? the rhetoric coming out of the trump administration on what protectionist america, snb, ecb will have to find a way out of it. lisa: how much is this time

going to be different than 2016 given that you have companies and countries trying to get ahead with the reactions coming before even president-elect donald trump takes office? dani: they have learned the lessons of 2016, 2017, and thereon. they have learned that it can be useful to be transactional. not only as a country but as a company. if you want to escape the broad wrath of tariffs community to be someone like tim cook who meets with trump and tells him how horrible it is to have tariffs on iphones out of china. that may be the only way to escape. they learned that lesson. lisa: we will be closing out this year and starting another year where we will talk about all of those. coming up, anastasia of i capital. the fed versus the ecb and the diversions that we are seeing. as well as dana peterson of the conference board reacting to ppi and initial jobless claims. we begin with the stocks steady

the nasdaq hitting a fresh record high digesting and in-line cpi print all but guaranteeing a fed rate cut. anastasia amoroso saying that even if the fed slows or stops their pace of cuts in 2025, there should be 100 basis points of relief by this december from the 5.5% level seen this year. that is already meaningful. another 50 basis points p the current market expectation would help more. this should support growth, stay with positive momentum for equities. anastasia, it's wonderful to see you. i am wondering how much of these rate cuts are supportive at a time when maybe rates are not as restrictive as some people think? anastasia: they are certainly working their way through the economy in terms of the rate cuts. when we came into this year, we wrote about the sizing of the u.s. debt piles in the corporate market and consumer market in the u.s. government and we were thinking about the floating-rate

exposures were a concern. the opposite of that is happening today. what i mean, private credit for example, if you are private credit borrower, leverage loan borrower, you are paying an exorbitant lehigh interest rate and you're starting to see some relief because those coupons are resetting lower as we speak. if you are a consumer may be carrying a floating-rate balance on your credit card, you are also starting to see some pullback. the more that this happens, the more months occur, the more relief actually accrues to the u.s. consumer, the corporate, and also the real estate operators. and that is just a start. if we have another 50 basis points next year, the rate relief is that much more. lisa: especially at a time of the rate cuts elsewhere are so significant. the expectation from ecb is a 25 basis point rate cut. i wonder, how much the fact that international capital has been piling into the united states also seeking yield, seeking economic growth, how much that

turbochargers the trends you're talking about? anastasia: it certainly helps. the 10 year treasury yields have been incredibly sticky, partially because strong growth in the u.s., partially because of the concern about the budget deficits, and partially because the economies elsewhere are fairly weak and rates are being cut. i think that will send flows back into the united states. next year, we were talking about this, is likely the year of protectionism, of america first policies. that too is going to send flows to the united states or at least keep them coming. dani: if you told someone we would get the america first policy, by the end of 2024 we would have 75, now 100 basis points of cut by december, you would have said it will be a huge month for small caps. small caps will be off like a rocket. you saw that postelection. since then the rally has begun to concentrate. it has been the mag seven, it has been the tech traders.

is this a sign that the small-cap trade may not play out as expected in 2025? anastasia: i don't think so. i think what is happening is that investors are being active in terms of their exposure, and there is definitely trading starting to take place. they are chasing the near-term laggards and selling some of the near-term winners. thaa is what happened -- that is what happened after the election. a great month regional banks and financials. you paused with that and you looked at big tech, for example. semiconductors, software, all of that is having a catch up moment. it is about a series of rotations. i don't think that investors have given up on the fact that it is going to be domestic economy first and 2020 five, domestic revenues first. i would probably broaden out the small-cap trade and say prioritize companies with a high share of domestic revenues,

whether they be small, medium, or large. if going to end up in an environment of what i call plenty of wildcards in 2025, we talk about terrace before tax cuts. that probably has a few risk off moments. maybe small caps is not the only place you want to be. you want to be in the high share of domestic revenue companies that may be have a quality tilt to them as well. dani: if you worried about tariffs and domestic policy, is it useful to stock pick depending on which co is reaching out to donald trump, depending on who is at mar-a-lago? anastasia: that might be a factor. some managers will choose to incorporate that in their models. next year is about the dispersion of sectors, factors, different stocks. you want to be positioned in parts of the economy that are growing and also have a high share of domestic revenues. obviously, engagement in the administration is also a good thing. that is why we are looking at financials, regionals, utilities . we are also looking at software

stocks relative to the semiconductor stocks. speaking of chasing laggards, semiconductors have had a stellar year in 2024 and 2023, but i think some rotation into the domestically-tilted software makes sense now. annmarie: building on dani's point, do expect this administration to do with they've done prior when they were in power? for some companies you will have to offer carveouts? anastasia: it's definitely a possibility. annmarie, i would say that the title of our outlook next year solid underpinnings for the u.s. economy and plenty of wildcards. the truth is, we just don't know which wildcards we are going to get. the wildcards i'm thinking about her tariffs, taxes, budget deficits, and the direction of fed policy and also the direction of big tech regulation. the truth is, we might get an administration that imposes the unilateral, universal tariff, or

maybe they have a threat of it, or maybe there is an agreement that gets negotiated in the process. we know actually know what the ultimate outcome is going to be. that is why, for investors, it is really important to stay pro-risk, pro-growth, pro-solid economic environment. recognize that the range of outcomes is going to be wider. lisa: anastasia amoroso, happy holidays. thank you for being with us. we appreciate it as we count you down to an ecb rate decision followed by ppi and initial jobless claims are this get an update on stories elsewhere. here is your bloomberg update. yahaira: president-elect donald trump cap to kari lake, former tv anchor, to be the next director of the federally funded broadcaster voice of america. she ran an unsuccessful senate and gubernatorial

campaigns are the bank of america promoted 387 employees to managing director, 16% more than last year. the promotions are according to people familiar with the moves. more than half of those elevated to the senior roles for women or people of color, marking the fifth year in a row that historically underrepresented groups made up the majority of the class. former new england patriot coach bill belichick is moving the college football. the athletic reports that he and the university of north carolina agreed on a deal worth $50 million over five years. it makes the 72-year-old one of the college game. in his 24 year tenure at the patriots he won 333 games and six super bowls. lisa: i think that we are going to leave that story there. the ecb rate decision will have the details. the reaction from j.p. morgan private bank, next. this is bloomberg surveillance.

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lisa: a little more than a minute head of the ecb rate decision, the broad expectation is for 25 basis points of cuts with a dovish inclination as to moves coming out next year. state of play in the u.s., what you can see is a selloff building and the nasdaq 100 futures, down .4% in the yield space. in the u.s., you are seeing

things inflect higher. in europe, it is significantly lower as we look to potentially lower rates by the ecb. the swiss national bank coming out this morning and not only cutting by half a percentage point, but with the new head of the snb saying no one likes negative rates but they work. dani: if your rate is .5%, you need more firepower for the economic weakness coming from a weaker currency and weaker general environment and for what might happen in 2025. they want to have the ability to grapple with whatever comes, be it tariffs or just further political and economic weakness in the region. lisa: the ecb decision is the expected headline. with respect to the future guidance, curious to see how much they signal a willingness to allow some sort of negative rate policy.

we're still waiting for those headlines. the expectation is for 25 basis point rate cut. you get that 25 basis point rate cut to 3%, the broadly expected estimate. they are not pre-committing to a particular rate path. they are expected to lower the three key rates by 25 basis points. i'm curious what the breakdown will be. the key is, they are determined to ensure that inflation stabilizes sustainably at its 2% medium target for inflation in the region. the key question is, how much are they going to counter weakness?they see 2025 inflation at 2.1%. the prior expectation was 2.2%. at 1.9%.lation they are keepi anything standing out to you the get your attention in these headlines? dani: an ecb with a single mandate that cares about inflation. these lines speak to that, saying they are determined to

get inflation stabilize sustainably at 2%. the fact that they did not change their outlook for 2026 inflation. nowhere at least on these headline so far do you see an ecb ready to pump up the firepower and get cuts in to support the economy at this point. lisa: lizzie, what do you notice from some of the commentary and breakdown of the vote? >> we were expecting this quarter-point cut from the ecb, 2%, 3%. the hawks were not going to back a 50 basis point move when you have a rise in negotiated wages in the third quarter. it isn't that long until the next ecb meeting went donald trump be back in the white house and there should be more clarity on the tariff threat. the euro area is very much in the firing lines. the focus was always going to be on the path ahead. what is interesting is, you have the updated forecast and a slight downgrade to inflation this year. they have seen 2.5% -- excuse

me. they have downgraded the inflation forecast slightly. at the last press conference christine lagarde said that the inflation risks were tilted to the downside, so this revision is not a surprise. we will be looking ahead to the press conference. i'm sure that madame lagarde will be asked as a frenchwoman in germany about the political hurdles, should we put it mildly, and france and germany and the impact of the fiscal tightening potentially on the ecb. if there is less fiscal tightening does the ecb have to do more work? i'm sure she will be asked to 50 basis points were on the table at this meeting and about the neutral rate. there is surprising alignment between the hawks and the doves on the governing council about the need to get to neutral. the question is where neutral lies. dani: you are seeing a reaction. the euro is weakening .2%.

just crossing come the ecb has dropped their reference to restrictive in their statement. how much of this might be a win for the doves that the balance of power might be shifting to them? lizzy: this is a dovish tilt and what we expected. previously, the language said that they were going to keep rates sufficiently restrictive for as long as necessary. therefore, it is a dovish tilt that they have changed that language here. it is what we expected given that the picture had darkened in terms of inflation and growth since the last meeting. not least because of the political collapse of the government in france and germany, but also with the return of donald trump in the white house and continued problems. the economic weakness in germany, second straight year of contraction, and the wars in ukraine and the middle east. lisa: thank you for being with us. joining us now from j.p. morgan private bank, sam zeif as he

watches these headlines across. what is your impression? sam: you guys have nailed it. the central banks between the fed and the snb and the ecb are trying to ensure that inflation stabilizes at 2%. how they're going about it is different. the fed is thinking how do they encz towards neutral keeping policy restrictive enough -- inch towards neutral because policy is restrictive enough. i would argue that the snb and ecb with the drop of restrictive and the terminology is are going how far below neutral would we need to go to ensure inflation stabilizes a 2%. that divergence between the european central banks in the fed is what underpins our view that the dollar will be strong against these types of currencies. dani: does it go far enough? robin brooks has been arguing that europe needs a weaker euro. you won't get what draghi outlined if you're coming together and spending more. the budget standoff in france shows they have little fiscal

room and because of that they should decouple from the fed and do larger cuts. do you think there is to that argument? sam: i don't know if a weaker euro will spur innovation investment, but clearly the economic trajectories are different. the fed's or u.s.'s will be tilted to the upside. the european economic outlook is tilted to the downside when it comes to growth. i don't think the euro is the main policy, but there is room to move into accommodative territory. that will be the ecb priority. it will be the rate that they focus on. annmarie: we see the euro dropping after this decision against the dollar. you see parity next year given that it's a weaker growth environment in europe and on top of that they are dealing with a donald trump administration? sam: i wouldn't rule it out in the private bank. the lower range of what we are

looking at in 20 25 is 102, but i know the difference between 102 and parity is going through a few days of trading. a test of parity isn't something that were ruling out and one of our high conviction views that were talking about with our private bank clients, underweight european assets, favoring the dollar, funding euros come all of these things that benefit the same thing. annmarie: given the fact that france and germany are dealing with a tougher environment in terms of potential trade wars in 2025, the ecb says that they will follow a data-dependent meeting by meeting approach. is that correct, or do you think that madame lagarde when she gives her rhetoric and answers questions is going to tilt more to the dovish side? sam: the most interesting thing from the press conference i will be watching as they have gone by 25 basis points today, but the market is pricing in a 30% to 40% probability of a 50 basis point move in january or march. whether there is a nod to with that could be on the cards -- so

far they have been cautious against guiding against a 50 basis point move, but because the market pricing is there it will be important to watch if they endorse that type of possibility. that will be how i take the press conference to me if they are moving in a more dovish direction or not. dani: should we talk about negative rates like the snb is? sam: what they said, to be clear, is no one likes them, but they are there and they work. particularly for a country that is really using the currency as their main tool for monetary policy.i don't think the snb will go back to negative rates unless the ecb forces them. think when they went into negative rates last time here the ecb went negative and the snb felt like they needed to respond. that would take not only economic weakness in europe to think about that, but really if you want to call it a crisis or a deep recession, if that comes to fruition i have no doubt that the negative rate to option is there in the european union. they've used it before. lisa: the ecb dropped the reference to keeping rates

restrictive in this latest memorandum, the latest rate decision. how big of a shift is that to underscore in their rhetoric, and their approach, when previously they've been talking about inflation is the preeminent concern? sam: i think that everyone knew that they were going back to neutral. the market was already pricing some probability they go to accommodative territory, but this crystallizes the break between the ecb and fed. the fed is talking about keeping rates sufficiently restrictive to bring inflation down from the high side. the ecb is officially basically endorsing that they are going to need to go not only to neutral but maybe below, and that is how they will stabilize inflation. lisa: with the diversions potentially widening, at what point do we worry about a strong dollar becoming a disruptive force in global markets? sam: it tends to be not only the strength of the dollar but the magnitude of the moves.

when you get multi-standard deviation moves over a month or three you start to see other central banks, in emerging markets or others, respond throughout right fx intervention or trying to not cut as much as maybe the market is pricing. the dollar is not as strong as it was in the second half of 2022. it is not as overvalued. i think that the dollar is the byproduct of this divergence. at least at the private bank, we are leaning into it and we don't think that this trip is over. lisa: thank you. other people will probably say that the trip to europe is probably not over from the united states. what we are seeing, to reiterate, is the ecb cut by 25 basis, as expected. but really, the rhetoric going forward is catching a lot of people's attention. dani: they had in their statement in the past they were keeping rates sufficiently restrictive and they drop that from their statement. sam rightly points out that this is the diversions. they might be cutting 25 basis points the fed is expected, but they are leaning dovish in a big way that shows that they are now trying to support the economy

versus dampening inflation. annmarie: the rhetoric when christine lagarde comes out will be about, is she leaning towards doing this in january for the 50 basis points or down the line in march? are they going to try to get ahead of the tariffs coming out of washington, d.c. or weight to see what trump does -- or wait to see what trump doesn't his first months in office? lisa: coming up next, breaking down ppi and jobless claims in the united states. the expectation for ongoing resilience, the strength, the idea of how much inflationary pressure is this as we talk about the potential for negative rates in europe. both are here to react. ♪

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lisa: about 25 seconds until we get ppi, as well as initial jobless claims. we are seeing equities pull back a little bit from earlier lows, but still lower on the day after yesterday nasdaq, closing in all-time highs. we are expecting here for ppi year-over-year to be 2.6% versus two point 4% in the prior reading. maybe this is why yields are inflecting higher. let's head over to michael mckee , who has all of the numbers. mike: this is a bit of a disappointment for those who are hoping the fed does not move

interest rates, or actually hoping the fed does, because inflation comes in faster. on a headline basis up .4%, which pushes up the year-over-year to 3%. you were suggesting the consensus was for 2.6%, so this is a big jump over last month. core comes in up .2%, down from .3% in october. and core minus trade services as well is only up .1%. put those altogether and it is not as bad as that headline number sounds. we will have to see what pushed that up. on a year-over-year basis, final demand 3% food and energy core, three point 4%, up from three point 1%, and export energy and trade, 3.5%. jobless claims. here is an interesting one. 342,000.

a big jump after 225,000 the week before. there is a case for weakening in the labor market that perhaps the fed wants to take a look at when it considers whether to cut rates or not. lisa: here is what you are seeing in markets. kind of interesting. it seems like bond traders are taking more of their tell a from an claims than they are ppi. yields lower across the board. on futures you are seeing an extension of those declines. 2-year yields, now actually lower on the data 4.15%. initial jobless claims coming in at 242,000 versus the expectation for 220,000. ongoing dollar strength, because it -- but it is not because of the u.s. side of things. this is about it being worse on the others out of the pond, but lessening some of that dollar dominance we saw after the ecb rate decision. i want to get your thoughts on why we seem to be seeing a

market that is focusing much more on the jobless picture and initial jobless claims then to the fact that ppi came in significantly hotter than we previously expected. mike: the market is looking at what the fed might do and the fed has talked about its concerns about the labor market weakening as its major sign of weakness in the overall economy that could be coming. they are going to react to labor market data more than they will to inflation data and ppi does not translate specifically into cpi, and this is just the headline number, and there is a very good reason for it, and i know annemarie is going to be interested in this. according to the bureau of labor statistics the jump in the headline number was 80%, because of final demand foods. as far as that is concerned 54.6% jump in the price of eggs. remember what donald trump said

the other day. he was elected because of the price of eggs. he saw a little bit of this in the cpi, but that is a huge jump for egg prices. lisa: thank you. our chief egg correspondent, michael mckee. joining us now is dana peterson of the conference board. i want to get your take on what we are seeing right now, which is definitely signs that inflation is sticky in the united states, but this 242 thousand initial jobless claims, should we be concerned? dana: it is one number. certainly to hunt of 40,000 is low. very few people being let go. companies are not looking to let people go. at least when we ask the ceos of the largest firms. they are also paying higher wages. i do not see a labor market right now that is weakening. even in the payroll data we did see was all mainly very good. dani: unfortunately i feel like this is becoming an evergreen question. looking at the data we have been

getting, how much is it distorted? how much can we trust the data? are we working through some of these weather effects, strike effects, things like that? dana: i don't think so. i think we are beyond the weather and strike effects. it is important to see which states popped in the week. you can see reversals in the next week. jobless claims, he need to look at the ultra-week moving average. when it comes to inflation a lot of the egg inflation is because of the bird flu. it is not necessarily because companies are trying to get away with something. it is really just this external shock. but inflation is sticky. we saw that in the cpi data. some of it is structural. you had fewer people working because they are retiring. that is raising wages and following through in inflation. insurance costs are rising and shelter costs are not falling as quickly as you would expect. annmarie: putting the

idiosyncratic story around eggs specifically, the fact that ppi final demand is higher, are you more concerned with inflation or the labor market? dana: i'm more concerned about inflation. the labor market seems to be doing well. even when we had bumps and bruises it comes back. most people are working the unemployment rate superlow. the number of people who are saying they are unemployed, any of them are new entrants or returning to the labor market. we would not do that if you felt the labor market was not strong. i think the main issue is inflation. you have structural fact there's and these supply shocks driving inflation higher. things the fed cannot lean against. certainly as we head into next year we could have shocks from either trade or fiscal policy that could cause inflation to be even higher and the fed is going to have to lean against all of that. dani: one thing i know you know well is sentiment has started to shift. we know how closely a lot of the sentiment is tied to the

political environment. previously in the biden administration you had this mismatch where the hard data was strong. the soft data just did a 180 to catch up. does that mean reality is more closely aligned? or are you all of a sudden going to see this big change in behavior in consumers and companies? dana: our measure of consumer confidence was sliding earlier in the year and then recovered. even though -- even the november reading was strong. when we look beneath the surface a lot of it is about jobs. consumers think the labor market right now it is easier to get a job than not, and looking out into the future our expectations gauge has been positive for two months. that is after almost a year of being negative. even though most people were working. i think the fact that consumers are more confident that they are going to stay employed, that is going to support consumption going forward. is there a lot of uncertainty,

especially around taxes and if there are any trade issues? yes. consumers are thinking about that. but for now they are confident. lisa: dana peterson of the conference board, thank you so much. joining us now is scott chronert of citi. as we ask how bullish you can get, scott, why are you not the most bullish one on the street? scott: i think we have to allow for the starting point. if you look at total month returns from the starting point the s&p is down 9%. if you look at where the sentiment indicators are, from these levels historically, 12 months returns down 9%. in april -- it potentially get better as we get further down the trump policy path. have to allow that somewhere in here it is a big term for me. we have to look for the risk of some shock effect coming in that

distorts the euphoria we have been contending with over the past couple of months. particularly as we have seen this major flow surge on the heels of the election. dani: it is a weird one because there is so much uncertainty. there are so many unknowns and a lot of known unknowns. yet everybody is crowding around a very list case for 2025. in putting together your outlook how difficult was it? was it a pretty simple call to say we are going to keep rallying, things are going to look great? or was it more difficult than most years? scott: the data says you ought to be cautious here, right? the way we are navigating this is that when i look at the transition from administration, we are going from alexion uncertainty to policy uncertainty. we are starting to see appointee lists extend. what we have to prepare for is there is going to be noise as we get further down the policy path. what does the platform look

like? how do you implement these initiatives that trump is all about? on the other cited that you start looking and thinking about policy opportunity. we have digested the news, we have gotten the platform, we have the appointees in place, and all of that is happening during the first quarter. as q4 earnings are being reported. from there you start looking more constructively at the outlook because at that point you alleviate the uncertainty, you ought to begin to see corporate's more aggressive with young's like growth, which is a good leading indicator of future growth. ultimately where all of this goes, we have to navigate a first quarter where we are looking for a volatility episode , but then beyond that you begin to extend out into the middle part of the year, you look forward to 2026, earnings growth continues and the world is a pretty good place, particularly if you are focused on u.s. large-cap equities. we think the opportunity is better in that context going into small and mid-cap.

all told we are constructive on the outlook for u.s. equity fundamentals. it is just a question of timing this around the current set up as we go through this flow into year end. annmarie: what is to say the shocks might be for something on the downside? donald trump is going to be ringing the opening bell today. scott: look at who he is surrounding himself with in terms of appointees, i think the good news is there is a market aspect, and there is an attentiveness to how you stimulate growth, how you balance that with some of the tariff talk, some of the deregulatory talk. but importantly what i think is most encouraging for us is that you've got some individuals in place that are more focused on the spending side of the equation. six months ago as we were navigating through the election there was almost no focus on how to think about cutting spending. the market really wants longer-term his a sense that

there is insanity or care. that we need to stimulate economic activity, but do it in a judicious fashion. lisa: your base case is 6500 for next year. the bear case is 5100. i'm curious within that, you said you are constructive down cap. do you think small caps will do the best, scott: i don't think it is contingent on rate cuts. the valuation hurdles, the lowest of the various asset classes within equities. it is really important his where consensus numbers are taking you is that small-cap does not have any earnings growth for the past two years. it has been lagging behind large-cap. large-cap earnings growth for the mag seven begins to decelerate off of large numbers going into next year. the consensus numbers are also

pointing toward small caps seeing a growth acceleration. what you are looking at is this bigger theme of what we are going to call earnings growth differentials narrowing. what that ends up doing is supporting the case for areas such as small-cap. bubbly devalue side as well. it allows you to expand the economic side of the ledger as well. the broadening we are looking for from a fundamental perspective is part of how and why we stay constructive. it is just at this point a matter of timing your entry points. lisa: scott chronert, wonderful to see you in person. scott chronert of citigroup with us in new york. setting you up for the day ahead, including christine lagarde's news conference. this is "bloomberg surveillance." ♪ ♪

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lisa: futures, lower ahead of the opening bell in new york after getting initial jobless claims that exceeded expectations. s&p futures by dashed down by about .25%. what you can see is yields marginally higher in the west. dollar ascendant as you see rate cuts across the board. here is the trading diary. after the ecb press conference with christine lagarde in moments, monday we have the s&p global pmi's. on tuesday we have retail sales. on wednesday we will get a fed rate decision at 2:00 p.m. eastern followed by a chair powell news conference. thursday, another round of jobless claims and core pce and university of michigan sentiment as we watch christine lagarde come to the podium. what are you listening for to hear what she has to say? dani: clearly the doves have had their way in terms of moving the

statement. is this a lagarde that is going to be really reserved in talking about data and the meeting depending on that rather than projecting forward any sort of accommodation they might need further the weakness to come? annmarie: for me it is the split screen. the difference of the ocean. whether it is the ecb and how much more difficult their job is going to be because donald and his presidency, and he is going to be, ringing the opening bell at 9:30 this morning. lisa: this was an ecb that removed reference to keeping rates restrictive at a time when they are concerned about growth. there is going to be a question asked in this press conference, why did you not cut by 50 basis points at this meeting if you are concerned about growth? how she answers that could determine what we see in markets. annmarie: potentially and what we could see next year. does she go for a 50 basis points in january or wait for march?

lisa: you have to wonder how much this doesn't leave the dollar ascendant at a time where it is hard to see where the notes of growth are. the ecb did cut rates by 25 basis points. what they are looking for is to remove restrictive, in terms of what they want to see for their rates. right there you see opening statements from the head of christine lagarde -- statements ahead of christine lagarde's speech. at what point do we end up seeing this diversions be a difficult thing to maintain? we talked about, at a certain point you had to see that gap close in a global market. dani: and at what point does a strong dollar become a problem for everybody? we are seeing the dollar strengthened this morning. lisa: christine lagarde getting underway with her news conference. madame lagarde: they decided to lower the three key interest rates by 25 basis points. in particular the decision to lower the facility rate, the

rate through which we steer the monetary policy stance is based on our updated assessment of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission. the disinflation process is well on track. staff see headline inflation averaging 2.4% in 2024, 2.1 percent in 2025, 1.9% in 26, and 1.9% in 27, when the trading system becomes operational. inflation excluding energy and food staff project an average of 2.9% in 2024, 2 .3% in 2025, and 1.9% both in 26 and 27. most measures of underlying inflation suggest that inflation

will settle at around our 2% medium-term target on a sustained basis. domestic inflation has edged down but remains high. mostly because wages and prices in certain sectors are still adjusting to the past inflation surge with a substantial delay. financing conditions are easing as our recent interest rate cuts gradually make new borrowing less expensive for firms and households. but they continue to be tight, because our monetary policy remains restrict if and past interest rate hikes are still transmitting to the outstanding stock of credit. staff now expect a slower economic recovery than in the september projections. although growth picked up in the third quarter of this year survey indicators suggest it has

slowed in the current quarter. staff see the economy growing by zero point 7% in 2024, 1.1% in 2025, 1.4 percent in 2026, and 1.3% in 2027. the projected recovery rests mainly on rising real incomes, which should allow households to consume more and firms increasing investment. over time the gradually-fading effect of restrictive monetary policy should support a pickup in domestic demand. we are determined to ensure that inflation stabilizes sustainably at our 2% medium-term target. we will follow a data-dependent and meeting by meeting approach to determining the appropriate monetary policy stance. in particular our interest rate

decisions will be based on our assessment of the inflation out look in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. we are not pre-committing to a particular rate path. the decision taken today are set out in a press release available on our website. and i will now outline in more detail how we see the economy and inflation developing, and i will then explain our assessment of monetary conditions. looking at the economic act committee, the economy grew by .4% in the third quarter. exceeding expectations. growth was driven mainly by an increase in consumption, partly reflecting one off factors that roosted tourism over the summer and by firms building up

inventories. but the latest information suggests it isn't losing momentum -- it is losing momentum. manufacturing is still contracting and growth in services is slowing. firms are holding back their investment spending in the face of weak demand, and a highly uncertain outlook. exports are also week, with some european industries finding it challenging to remain competitive. the labor market remains resilient. employment grew by .2% in the third quarter, again by more than expected. the unemployment rate remained at its historic low of 6.3% in october. meanwhile, demand for labor continues to weaken. the job vacancy rate declined the two point 5% in the third

quarter, zero point 8% below its peak, and surveys also point to fewer jobs being created in the current quarter. the economy should strengthen over time. although more slowly than previously expected. the rise in real wages should strengthen, housel -- should strengthen household spending. more affordable credit should boost consumption and investment. provided trade tensions do not escalate, exports should support the recovery as global demand rises. fiscal and structural policies should make the economy more competitive and resilient. it is crucial to swiftly follow up with concrete and ambitious structural policies on mario draghi's proposals for enhancing european competitiveness and enrico letta's proposals for powering the single market.

we welcome the european commission's assessment of government's medium-term plans for this: structural policies as part of the eu's revised economic governance framework. governments should now focus on implementing their commitments and framework fully, and without delay. and this will help them down budget deficits and debt ratios on a sustained basis while prioritizing growth and enhancing reforms and investment. turning now to inflation. annual inflation increased to 2.3 percent in november, according to flash estimates. from 2% in october. the increase was expected and primarily reflected an energy-related upward base effect. food price inflation edged down to 2.8% and services inflation

to 3.9%. goods inflation went up to 0.7%. domestic inflation, which closely tracks services inflation, and again eased somewhat in october. but at 4.2% had remains high. this reflects strong wage pressures and the fact that some services prices are still adjusting with a delay to the past inflation surge. that said, underlying inflation is overall developing in line with a sustained return of inflation to target. the increase in compensation per employee moderated to four point 4% in the third quarter, from 4.7% in the second. amid stable productivity this

contributed to slower growth in unique labor costs. staff expects labor costs to increase more slowly over the projection horizon as a result of lower wage growth and higher productivity growth. moreover, profits should offset the effects of higher labor costs on prices. especially in the near term. expect inflation to fluctuate around its current level in the near term as previous sharp falls in energy prices continue to drop out of the annual rates. it should then settle sustainably at around the 2% medium target. easing labor cost pressures and the continuing impact of our past monetary policy tightening on consumer prices should help this process.

longer-term inflation expectations stand at around 2% and market-based indicators of medium to longer term inflation compensation have decreased measurably since the governing council october meeting. so, let's look at the risk assessment. the risks to economic growth remain tilted to the downside. the risk of greater friction in global trade could weigh on euro afferent area growth by weakening the global economy. -- euro-area growth by weakening the global economy. this could be amplified by geopolitical risks, such as russia's unjustified war against ukraine, and the tragic conflict in the middle east, which could disrupt energy supplies and global trade. growth could also be lower if

the lagged effects of monetary policy tightening last longer than expected. it could be higher, if easier financing conditions and falling inflation allow domestic consumption and investment to rebound faster. inflation could turn out higher if wages or profits increase by more than expected. upside risks to inflation also stem from the heightened geopolitical tensions which could push energy prices and freight costs higher in the near term, and disrupt global trade. moreover, extreme weather events and the unfolding climate crisis more broadly could drive up food prices by more than expected. by contrast, inflation may have surprised on the downside if