♪ >> it's going to be a volatile year, and there's going to be a lot more frequency there. >> all of that policy changes out there for us. i do think it is out there in positive in terms of where it is heading. >> we don't see inflation accelerating. inflation is going to be demand driven, i just don't see enough demand. >> there are a lot of things out there that i think are going to be adding to volatility, but i don't think that we are headed for a new bear market. jonathan: live from new york city this morning, good morning. for the audience worldwide, surveillance starts right now, coming into tuesday looking for just a little bit more relief in the equity market. equity features positive by 5/10 of 1% on the s&p.

up by close to 0.7 on the nasdaq 100. the bigger gain directly coming from abroad. in europe, in china. the advanced by about a full percentage point. overnight in china up by 2.6%. the dollar weakness in the mix, this story right here from bloomberg. according to people familiar with the matter, key members of donald trump's income economic team discussing slowly ramping up tariffs month by month. lisa: and anne-marie will tell you we've been talking about this for so long and she will talk about how we talk directly about this with individuals that are coming into the trump administration and that this is actually just a proposal, it hasn't even necessarily been presented to donald trump which raises the action are we adequately pricing in just how much volatility there is going to be around the hearing this week, the week after, and all of these different policies that are potentially going to whip around gold markets? annmarie: i was in palm beach this weekend and one thing that stood out to me as the foreign

policy in terms of the trait approach. more unpredictable on purpose. there's an element of the donald trump wants in terms of keeping adversaries. maybe sometime some of their allies on their toes. but what the story says to me is that scott bessent in his wing of the cabinet is winning out at this moment. if the sausage making in real time. jonathan: we had three different versions of this story and we have more from the washington post, another from cnn and another from the team at bloomberg and they all acknowledged they haven't actually crossed the desk of the president yet. but i think this one is important. scott bessent said this on this program back in the summer when he was running to become treasury secretary. he talked about negotiating with a partner. i think that is really important. another important factor is the objective, to put a lid on the prospect of inflation increasing. that tells you they are sensitive about that as they are coming into power. lisa: at a time when even jd

vance is talking about bond yields. i wonder how much markets are actually going to be an check on the president. is this not only able herself or scott bessent and what he is going to be presenting to the president but also a rehearsal of the market reaction to competing proposals and how it will be taken in markets? annmarie: before he got tapped to become incoming treasury secretary he was a little bit more loose with his words obviously because he could be, and he talked about trump and this idea of a tariff ring around the united states. he said that is an opening gambit. his idea was to percent-5% every month, fusion payment, call us when it starts to bite. jonathan: elon musk at tiktok check this out from the team and bloomberg? chinese officials evaluating a potential option that involves elon musk inquiry u.s. operations of tiktok if the company fails to fend off the controversial band of the short video at? you are raising your eyebrows at this.

>> does that mean they are going to lower the price and sell it to elon musk as a token of goodwill because they also have a good relationship with elon musk, with cast in china? if this becoming a state negotiating tool or is this actually about ownership of tiktok and number two, is this sort of a concession that china is willing to sell it at all, which is sort of interesting ahead of where all teenagers are freaking out because tiktok is going to get banned? annmarie: you brought up a good point. is this a point of leverage for the chinese government to use? they would choose elon musk but also someone may know because of his work and dealings with china and tesla, can he do this deal alone? what i'm hearing if there are lots of other people also interested in this. does he team up with someone like meta, and what kind of antitrust rules could come into play given the fact that they already own social media apps? jonathan: equity features right now on the s&p posited by 0.5%, and we will see this move

sticks. rising bond yields as a positive for equities. he hated the pangea policy at the trump team considers a gradual approach the tariffs and deutsche bank calling for no rate cuts this year. we begin this hour with stocks rising and the dollar weakening following a bloomberg report that donald trump's team is considering a gradual ramp-up in tariffs and listing negotiating leverage in avoiding a spike in inflation. joining us now, stir kaiser of city. what did you make of that report, how are you thinking about the trait approach? >> i don't want to call it the best case, that of the market is hoping for, a more rational, gradual approach. one of the reasons markets have been in the week to start the year's people are concerned about what next week is going to look like, what kind of headline risk because face. if you're getting things that seem more measured in balance, that is probably a net positive for risk sentiment.

jonathan: you've been focusing on why, he said a million times that higher yields are take that so long as it is underpinned by stronger growth. isn't inflation a factor in this boost in yields feet? >> it is hard to tease out but if you look at the move in 10 years, real yields are 30 basis points, so that quick and dirty would say about a quarter of the move has come from the inflation side of the ledger. but if you are weighing the risks, more of the risk aspect i think has come from the inflation side. from our perspective as you know, i think if i'd handle on 10 years is better than a three handle in 10 years because to get back down, you really the growth. you definitely don't want to completely dismiss the risks of the speed of the move we've seen in the tenure, but we do think it is coming from a more positive place in the markets are giving it credit for. lisa: which raises the question, which are the least sensitive to it and continue to lead performance at a time when there

are worries about longer-term borrowing costs and what this does to small caps and mid-caps and the like? >> i think there's a couple beneficiaries. one is banks and people already love banks. people probably a little more comfortable in a safer credit risk equity. last week was interesting because what you saw was everything sold off, but the people waited s&p outperformed the cap waited s&p. people also moved a little bit down the structure and think what you are seeing is a trade-off between i want to be in more value stocks because value benefits from higher yields, but i don't want to go all the way down to that small-cap stock quite yet. people moved a little bit down and they stopped around the top 500 stocks. what is benefiting banks and value mainly, but i think that move has been limited by the fact that people are still a little bit concerned about what is going on in the background, they want to stay a little higher in the quality spectrum.

lisa: the main drivers of growth have been big tech for a number of years. yesterday we saw an ongoing development, which is nvidia and apple over selling off pretty significantly. they sunk inflation here that is typed yields, maybe tied the policy. what is the main driver, how do you view this at a time where a lot of people view that at the ongoing ballast of performance? >> if you look at earnings growth this year, the mag seven forecast earnings more than 20%. that is still the core driver of your earnings growth story in the u.s. i think what you see for the last few quarters is going into the quarter there tends to be even within the mag seven a couple of favorites and a couple less favorites. and you could be that a product cycle on the apple side maybe is not convincing people. nvidia, their leadership is basically in a headline war with the biden administration last week so there's clearly some policy risks that are going on there. in my view those things that

perform so well you're going into an early-season. you do have some policy risk on the sideline, and that maybe gives people a little bit of a trim up on risk ahead of earnings and the inauguration. annmarie: you sound very constructive about growth but the fact of the matter is if we are in this moment of so much unpredictability and with sawing sometimes with headlines that are pushing markets around, cannot hurt growth, could it be in paralysis for some businesses? >> it definitely could. the flipside of the argument is if i am worried about tariffs, i am going to frontload my inventory cycle obviously the policy uncertainty can play into what ceos are feeling and thinking because if you believe the trump positive growth impulse, and a lot of that is somewhat blind faith that he is going to be positive for the business community. he's going to give us more clarity and allow businesses to invest from medium to long-term. and a lot of pms have told us

i'm going to run long the dollar, but long risk up until about the inauguration because i'm not exactly sure what next week is going to look like and for that reason i need to be careful how i manage risk. annmarie: so what do people do next week after january 20? >> a lot is going to have to do with the headlines. if you get a more gradual approach people are going to be more comfortable having wrist on. if you get hard-core on the tariffs side and very disruptive, people are going to pull back on risk. there's not a lot of specific event risk priced in for the inauguration, but the rest of the week is at a modest premium to the rest of the month. people are not sure when the news is going to come and what it is going to look like but they are basically saying from tuesday to friday i need to add eight or 10 basis points of implied move into the market because i'm not sure how this is going to come out. the uncertainty aspect and the effect on business is real. jonathan: i think we all know we are going to get a string of

executive orders at some point in the next week, we just don't know on what and how much of it. a fascinating change. in early november we talked about this positive growth for financial markets that we need to digest. yields were higher, at least up alongside them. that correlation has totally broken down coming into the new year and if you look to equities at one point yesterday, we completely wiped out the post- election trump bump just like that. lisa: this is also coming with the rise in yields is completely, indisputably a positive thing coming on the heels of growth. real yields, which is basically the yield term premium have increased dramatically, particularly at the long end which raises a question about deficit concerns and how much supply is as much a part of that yields rise as growth is. annmarie: and unlike the washington post story that talked about tariffs, we have yet to see a truth or a treat that this what is wrong it, and they wonder if that is because trump is recognizing that the markets don't like the tough talk on tariffs right now.

jonathan: give him a chance, can those carrying a little bit more weight next week? good to see you. equities at the moment positive by 0.5%. a busy week kicks off a little bit later this morning. ppi tomorrow morning, cpi and then the bank earnings tomorrow morning. tons of them on wednesday, a few more on thursday. let's get to your bloomberg breed and cross over to dani burger. >> southern california faces another round of dangerous fire weather. the u.s. toward production center warned of wind gusts exceeding 50 miles per hour through tomorrow. the wind may limit opportunities for firefighters to make progress against palisade and eaton fire's from the ground and the air. the blazes have scorched nearly 40,000 acres and leveled entire neighborhoods from the pacific palisades on the coast to the foot of the san gabriel mountains. joe biden and donald trump both say that they are optimistic about a cease-fire between israel and hamas. the leaders said a deal could be

agreed to within days, pausing the more than 50-month-old war in gaza. israeli officials said that they presented a detailed outline to her mastering indirect talks in doha. the first phase would involve a 42 day cease fire and the release of 33 israeli hostages in exchange for palestinian prisoners. starbucks rolling out a new code of conduct across cafes across north america. the coffee chain is reversing a policy that allowed anyone to use its cafes, patios and restrooms regardless of whether they made a purchase. they are also reintroducing ceramic mugs and expanding its free refill policy for non-rewards members. jonathan: thank you, appreciate it. up next on the program, the tariffs agenda taking shape. >> tariffs pause a stronger dollar, so a weaker dollar with tariffs, it is an economic abnormality.

>> that would mean income for terrace, so that is a big number. jonathan: that conversation up next. live from new york this morning, good morning. ♪ ♪ where ya headed? susan: where am i headed? am i just gonna take what the markets gives me?

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♪♪ ♪♪ ♪ jonathan: stocks positive here by zero point 5% on the s&p 500. on yields contained for now. your 10 year, 4.78. ppi data in america, the appetite for the big one tomorrow morning. cpi just around the corner. the tariff agenda is very much taking shape. here the latest this morning. donald trump's team weighing a gradual approach to which tariff policy, ramping up the levees month by month to boost negotiating leverage and avoid a spike in inflation.

terry haynes writing markets likely hit with downside reality as it becomes even clearer that tariffs won't be all one or the other. neither robust overkill for gradualist bark with a little of bytes, but a mix of the tactical and overblown focus. terry joins us now for more after that very helpful quote. no much weight did you put on our reporting this morning, the trump team is putting this together, the president-elect himself hasn't looked over it. what do you think he will decide on? >> i think your reporting has judged it appropriately. this is in the early stages, trump hasn't signed off. as the quote you put up indicates, it has been more on team gradual for quite some time. but i think what will end up happening is that the blustery rhetoric will ramp up to frankly obscure the relative gradualness --there is another one, right --relative gradualness coming

in, and also i noted that in your reporting, that the word emergency is used, economic emergency. i've been telling market since before the elections certainly in the last two months to look for trump using more aggressive emergency powers, and i think that will discomfort markets. they've been soft peddled by the previous administration and trump for good or ill is going to be much blunder about where we are geopolitically and economically. annmarie: when you look at our reporting, and you really coined the term the cabinet of rivals, would you say that scott bessent and kevin hassett are the ones that are winning out? >> i certainly think they are doing everything they can to win out including putting things in the press. the thing i would caution, markets tend to make the same mistake over and over about washington, the same mistake here is assuming the treasury secretary will go tackle the president and make sure that he

doesn't do anything crazy. that's exactly where markets were four years ago with janet yellen. they shot she was going to be the centrist that took the progressive edges off what biden had made deals with, or deals with its progressive wing on, and that turned out very much not to be the case. annmarie: if i could just interrupt you, janet is not scott bessent. janet yellen did not come in with a relationship that scott bessent has had for years with president-elect trump. and at the end of the day what we saw from trump 1.0 is that he was regulated by the stock market. you would see some reports elite that quickly changed because of the reaction of that report to the stock market. do you still think potentially trump 2.0 is going to be regulated by with a dow jones industrial average is trading on any given day? terry: trump will be very influenced by what the markets think about what he is trying to

do. at the same time i think what is going to end up happening is markets always think that that means they have the whiphand over trump. i don't think that is the case, particularly as it goes to geopolitics and geopolitical concerns are going to play a much bigger role in the economic news of this administration then they did the first timeout. lisa: in the meantime, people are looking to january 20 at the real event risk. and when i say people, i'm talking about people and markets. what sort of illumination this week with some of the hearings down and washington, d.c. to confirm some of the potential nominees? terry: people have been sitting around for over two months now wondering what it is that trump is going to do and they will certainly illumination over the next few days. i expect very closely on exactly what the administration policy

is going to be on day one and going forward, and talk about a lot of the linkages that you brought up in the present clips coming into this segment. how he feels about strong vs. weak dollar, how tariffs are going to play in to that and what his relationship with the president is going to be. lisa: do you think that is going to be the most seminal hearing or do you think there are others, whether it is pam bondi or even omb nominee russell voigt who has some pretty radical proposals for how to addressed -- adjust the united states? terry: i think bessent is the most immediate pack on the markets but one of the things for markets, what the trumpet

ministration is going to about fiscal debt and episode. we are in a world where debt service is the biggest to do anything about fiscal debt and deficit and you've got a lot of counter pressure. the l.a. wildfires alone and the estimates of how much money that is going to take play major role . annmarie: to any of trump's picks not get through? terry: yes. annmarie: who? terry: [laughter] i think -- i don't have one that is absolutely doesn't make it, but i think pete hegseth has a very tough time, i think bob kennedy has a very tough time. annmarie: especially for someone like pete hegseth, his hearing is just in a few hours. why go through with it if they

don't think they have the votes? terry: they don't know whether they do or not so it is a little bit of a dice roll. the thing with pete hegseth, this will begin interesting test of the seriousness of trump defense policy. you put somebody in there who is a change agent more than anything else, that is fine, but the concern that comes from the senate fundamentally is well, change agents can't run bureaucracies, can't run the department, can't direct things in a particular way efficiently and effectively. so that is a lot of the problem with hegseth frankly, and what we are going to see with him really is a commitment to trump defense policy, exactly what that is, frankly. jonathan: appreciate your time. there are going to be a couple of contagious hearings in the next several weeks. that one in a few hours.

annmarie: it absolutely is going to be contentious when it comes to pete hegseth and axios has his statement in full talking about this idea of warrior and coming back into the pentagon. when he speaks today, i think you need to remember this was an individual who was on combat tours. he will be speaking to those men and women on the front lines. lisa: it is going to be interesting to see how much pushback on a trump get from fellow republicans. at least the role that joe manchin played to joe biden. is this market adequately pricing and the potential risks when it comes to upside potential or was it a more stringent use of tariffs? this is the reason why there is this jumping is.

don't jonathan: try to fade this move in the bond market. i've seen a lot of people talk about freight worries. deutsche bank came at yesterday and said some people believe this run-up in yield has nothing to do with the risk around trade because the risk around trade is not clear at all. lisa: even the threat of tariffs is causing this backup and yields, however if you take a look at real yields, the idea of this term premium baked in. this is something else driving that and i think that has to be recognized. jonathan: watch out for hegseth. fantastic broadcaster. the presentation is going to be very good. the back and forth, back i shoves fast. annmarie: he's a professional at presenting so i think it's going to be contentious but he will come prepared. jonathan: one to watch a little

bit later. one to watch up next, dan ives on the chances that tiktok u.s. could be sold to elon musk with china's blessing. we will get into that in just a moment. equity futures this morning posited by four tens of one person on the s&p. the dollar just a little bit weaker. the euro, a little bit stronger. ♪

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jonathan: big turnaround been the stock market yesterday. so far, so good. equities a by .4% on the s&p. .5% on the nasdaq 100. check out the 10-year maturity. yields just about unchanged. some commentary from the south side yesterday saying don't touch this. barclays. "we believe it is too early to selloff." lisa: how much they conditioned by the past couple of weeks? anyone trying to fate this got their face ripped off. you pointed to the idea that deutsche bank pointed to not necessarily putting aside the university of michigan sentiment survey. if it is coming from growth, that's positive. small business optimism came out

at the highest level going back to 2018. a lot of facets to this. jonathan: self-limiting is a phrase we have heard on repeat. we don't think the yield move has reached the point of becoming self-correcting. to your point, where is it going to be self-limited in the markets? have you seen enough damage the risk yet in the economy? lisa: it goes to the ultimate question, are rates restrictive? matthew luzzetti saying no. they will take a sabbatical this year because this is not showing restrictiveness anywhere. are these rates sustainable? don't buy the dip because it's a new reality of companies -- and companies are doing just fine. jonathan: matthew luzzetti coming up later this morning. the dollar a bit weaker today. euro stronger. euro-dollar this morning, 102.59

, positive by .1%. southern california bracing for another round of dangerous winds as firefighters struggle across the region. winds exceeding 50 miles per hour are possible a loss los angeles and ventura counties today and tomorrow. lisa: there is insight into what caused it, including some fireworks during the new year that never were fully put out, one of the potential consequences of dry weather. how do you pay for it? how do you recover? the politics have gone back and forth and gotten pretty aggressive. annmarie: putting that aside, how much this is going to cost. new estimates from wells fargo says they exceed production already we had last week -- predictions already we had last week. we're talking about as much as $30 billion. this can be a lot more expensive that even that. jonathan: the rebuild will be massive.

this is not the only issue we have to face. we have hurricanes and recovery in several states across the southeast only several months ago. lisa: this goes to what terry haines was talking about. you have additional costs that will be incurred with different natural disasters that are coming with increasing frequency. what kind of physical space do you have to do that if you're already contending with a deficit -- physical space -- fiscal space. annmarie: put money towards california and the border, then the one reconciliation package. that gives the more we will room to do so -- wiggle room to do so. jonathan: bloomberg reporting donald trump's team is considering a gradual ramp up in tariffs to boost negotiating leverage and avoid a spike in inflation. when idea involves tears increasing by about 2% to 5% each month. annmarie: not surprised about

this. scott bessent, 20 was an advisor must before the election -- when he was an advisor months before the election said this is what you do. we will put on tariffs every single month. it will another 2% to 5%. let us know when they start to her and you're willing to come to the table and do a deal. a lot of members of the incoming trump administration will say trump is not against trade. he wants a realignment to make sure the trade is fair. right now they do not think that china is playing by the rules. lisa: how much of this is advisors petitioning the markets and figuring out -- do in addition? which do you want? i wonder how much that is an element here. jonathan: i don't know which advisors were behind the washington post or cnn story. this is bassent.they will be

the key players in the administration. whether the president listens or not is the key. you have to wait to hear with the incoming president has to say on the issue himself. annmarie: he will be the final decision-maker but he will convene all these people, a cabinet of rivals. those that are little bit more outspoken about tariffs. i'm thinking of howard lutnick. those like jamieson greer who think we need a full decoupling from china. you have others that went to take more of a nuanced approach like scott bessent and kevin hassett. jonathan: chinese officials evaluating potential sale of tiktok's u.s. operations to elon musk. under one scenario being discussed, x with take control of tiktok u.s. and run the businesses together. tiktok calling it or fiction. annmarie: tiktok wants to remain autonomous in the u.s.

what is interesting is is bytedance aware that chinese officials are having this conversation and basically handpicking who they deem respectable in their minds to take on this company? there are other people who also are interested in potentially buying tiktok. i would look to the likes of individuals like kevin o'leary. even people like peter thiel. where is he in all of this? where is mark zuckerberg who has made a few trips to have dinner with the president-elect and went on rogan and we need to make sure u.s. tech stays outside the hands of government adversaries? why is the chinese government handpicking who they want to control this company? two, do they get the other them -- algorithm or do they have to develop their own? jonathan: chinese officials say this is who you can be sold to.

what does that tell you? lisa: it's a carrot in the negotiations. that is a change in terms of national security. what ends up being a negotiating tool. jonathan: dan ives writing, "there's more it stake here than just tiktok's fate as the u.s.-china tension relationship at play towards an important tariff discussion and negotiations for the trump administration in the months ahead." dan, welcome to the program. your reaction to our reporting overnight? dan: it makes a lot of sense. it comes down to this january 19, the supreme court upholds the ban. the trump administration working to fix this. when you look where musk is in terms of how close he is to trump, trusted within china,

this looks like a very strategic route for bytedance to sell this without the algorithm. lisa: what is it mean about national security or potential tit-for-tat? a conflation of public and private in a new way that the business community has to reckon with. dan: the issue is it's the last thing the trump administration wants for this to come out the day before inauguration. it does set this off to a bad start in terms and negotiating with china and tariffs -- of negotiation with china and tariffs. telling the doj to not enforce this when it comes to google, apple and others. he would be easier if the supreme court upholds the ban . musk, given the ownership of x, the relationship with china within beijing, this could be a

first step. this stronglines the bromance between trump and musk. it will have a lot of twists and turns and this could be the start. lisa: it raises questions about antitrust and social media tieups and whatnot. is it a matter of who gets closer to trump is ok to be able to make these kind of tie ups and those who are not are basically on the outside and will not have access to any potential acquisitions? dan: you are seeing the red carpet monologue right from zuckerberg to others. kahn is done at the sec. we have heard -- that changes everything. it shows that they know ultimately they will need to make some deals. everyone jockeying for position. when it comes to tiktok, it's a

golden asset. it would be sold without the algorithm. $40 billion to $50 billion we get the price tag -- would be the price tag. where is larry ellison? there's a lot of areas this could take. annmarie: if tiktok is a national security concern, and we've heard that from incoming officials surrounding president trump, like mike walls, soon to be secretary of state arco rubio, why would -- marco rubio, why were they blessed deal the chinese coming's party is basically handpicking? -- communist party is basically handpicking? dan: trump was for the ban or against the ban here. if it's under some sort of, you know, musk ownership with oversight, they would have to be

blessed with ndc and the beltway. -- within d.c. and the beltway. it all starts with tiktok. the supreme court upholds that ban, they will look for ways behind the scenes and that is why trump looks at musk and this could be a viable option, even if it is a partnership. annmarie: we see a number of users going to some similar social media apps like tiktok. what is in it for elon musk to buy it if the algorithm is not included? dan: for musk, if he got tiktok, it's a game changer. the value of x would probably double just off the start. musk recognizes this is something that would be just a rare, unique opportunity, not just in terms of consumers but with that can ultimately do from a content perspective if their hand is forced in terms of

bytedance. they will say what they are going to say publicly. behind the scenes it is a totally different situation. jonathan: can a afford it? dan: they can when they get outside investment. musk would not do this solely. they would have to be a consortium approved. it would have to be approved by d.c., by those that need to check the box on the deal like this. when you look at thiel, ellison, others within that circle of musk, they could clearly be involved. jonathan: where would it leave meta? dan: on the outside looking in. zuckerberg has already gone after jobs -- after cook. now you look at musk, the next step here. musk and zuckerberg are on the opposite sides.

zuckerberg wants to get on the inside but musk is the one that has that unique platform and also he's the whisper for trump. -- whisper for trump. the one person approved by china is musk given his strong relationship with beijing. you talked about it. this would be handpicked by beijing. there's only one individual they would handpick and its musk. jonathan: appreciate your time is always. enjoy milan. good to see you. dan ives, thank you. lisa: living vicariously through him? jonathan: a few hours away from the city center. lisa: you've already looked into it. annmarie: it could have been a nice pre-davos strip. what i find concerning is how is this going to be -- acquiesce the concerns of individuals in washington concerned about

national security when china is saying is the only guy we are willing to sell with? that should raise nature medicine of questions. there are -- the ftc will be handing over the reins to andrew ferguson. maybe a deregulatory approach, but not when it comes to big tech. lisa raised the good question with antitrust issues. jonathan: equity futures positive by a few tenths of 1%. here's your blender brief with dani burger. -- bloomberg brief. dani: nvidia's ceo is visiting china this week. china is investigating the company's domestic presence. the visit might involve meeting with officials. nvidia has declined to comment. the ceo is inspected to arrive around january 15. elon musk will continue to have major access to donald when he takes office. the new york times reported that

musk is expected to use the office in the eisenhower executive office building, adjacent to the white house. musk is launching the department of government efficiency which aims to/government spending -- slash government spending. it is not clear if vivek ramaswamy will also have office space in the building. greenland's prime minister says he wants closer ties with the u.s., highlighting the island's push for independence. donald trump has been repeating his ambition to take control of the self ruling territory of denmark. house republicans have introduced a bill to begin negotiations called the make greenland great again act. that is your brief. jonathan: more from dani in about 30 minutes. paring back red capex. >> the fed has got to get more strategic and stopping excessively data dependent. when you are data-dependent and

you are looking at the future through the lens of the past, you will get more confused as we go through these changes. jonathan: that conversation is next. you are watching bloomberg tv. ♪ ♪ (♪♪) (♪♪)

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jonathan: equities positive by one third of 1% on the s&p 500. the bond market settling down. yields a little higher but not even by basis point. under surveillance, paring back red capex. mohamed: the fed has got to get more ct jake and stopping excessively data dependent. when you are data dependent and looking at the futures through the lens of the past, you will get more and more confused as we go through these changes.

they have to either take the approach of this is what we think the baseline is or we are not incorporating any new policies. the muddled middle causes all sorts of spillover effects. jonathan: investors waiting for ppi. cpi is out tomorrow. after recalibrating bets, the data supports our view with growth sturdy, the labor market resilient and inflation sticky, there may be limited scope to cut this year. the baseline remains the fed will keep rates on hold into 2026. this is not a new call. what did you see at the time and how are things playing out now? matt: we adopted that call in november after the election. expected policy changes were part of that. if you looked at the back half of last year, it's been growth has been strong.

running growth at 2.5% to 3%. we thought the labor market was showing signs of stabilizing and bouncing back. we got further confirmation of that on friday. core pce inflation decelerated modestly last year. super court inflation was higher last year than it was the previous year. with inflation sticky, growth strong, labor market resilient and policy changes, tariffs effects, immigration policy can be inflationary, we could see the fed cutting rates this year. lisa: they're not restrictive where they are? matt: there's not evidence they are restrictive enough. the nominal new to rate is around 3.25%, well above what the fed has benchmarked it at. i think the fed needs to 19 restriction -- maintain restriction. they spent could develop it from the fed's perspective.

governor waller was emphasizing that part of it. consumer spending has not slid at all. it is restrictive. is it restrictive enough to get inflation down to 2%? that's an open question. lisa: which is why you have a number of people not only taking your rate cut off the table but also talking about the prospect of some rate hikes by the end of the year. do you think that is feasible or is that too far? matt: it is not part of the baseline at the moment. we expect the next move is a rate cut but not until 2026. what would you need to get there? the concerns fully dissipate for the fed. they cannot be worried about upside risk to the unemployment rate. they could get there with the unemployment rate coming down to 4%. it looks more plausible after friday's jobs report. you need inflation up to 3% or above. accelerating, not just remaining sticky. the third is inflation

expectations. we have seen evidence of that picking up. the new york fed's gauge picked up yesterday. something to keep a watch on. for the fed, the use forward guidance, take out the rate cuts in the dot plot and see different financial conditions. the first thing for the fed would be the guide towards the right on hold before they contemplate hikes. annmarie: in your note about trump 2.0, you talk about inflation too fast. what part of the policies will be the most inflationary given the fact the sausage making we are witnessing in real time and his whip sewing based off report after report? -- it is whipsawing based off report after report? matt: growth was stronger, resilient inflation, stickier. there's a lot of uncertainty.

we had some news overnight it could be a more gradual approach. when we think about our forecast, we did bacon the tariffs. we have an increase in tariffs on china. we have universal baseline tariff of small amounts for next year. that is the inflationary part of the forecast but it only has about .2% to inflation. is there scope for that to be more if they come in more aggressively? absolutely. annmarie: what about immigration policies? matt: that can be inflammation -- inflationary as well. we essentially have immigration flows returning to where they were from a pre-covid perspective. when you look back at 2023, the biggest surprise to the economy was this big dip in integration flows and what they did to the labor force. that subtracted 25 to 50 basis points. it was an important factor that

brought the labor market into better balance without the unappointed rate moving higher. if you unwind that, it would be inflationary. jonathan: to the supply-side story distort how it actually worked? matt: absolutely. we were not anticipating it. we were not inspecting the see growth closer to 3%. with disinflation in the background that came as a big surprise. it was the biggest surprise in 2023 into 2024. jonathan: that discussion is politically charged would have bailed out the federal reserve in a big way. lisa: maybe it was why some of that was undercounted why the reserve underestimated the power. maybe the blip we saw, the weakness late last year in the labor market maybe was the anomaly, not necessarily the beginning of a new trend. jonathan: are you mentally adjusting the payroll figures from friday lower? matt: there's deftly seasonality on some of these things. the retail trade was week in

november and stronger in december. -- weak in november. the key question for markets, our labor market trends strong enough that they are stable to potentially tighten? the answer is yes. we don't have to be as worried about the downside risk. jonathan: matt luzzetti, thank you. date appointed data point. another data point later this morning. the lineup looks like this. emily roland, libby cantrill, armin papperger and sean roberts . from new york, this is bloomberg. ♪

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>> high-frequency data matters a lot and it will be noisy in the coming months. looks like a precarious stability. we see that in anecdotes and the beige book. i don't see the picture changing. >> it may take a little bit of tightening in between. >> the rate market, the tightening of financial conditions is feeding back and equities and causing risk off. >> the economy is strong, should not be good for earnings? maybe earnings start to help stabilize things. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: the second hour of "bloomberg surveillance" starts with equity futures looking better than they have looked over the past few days.

up one third of 1% on the s&p 500. on the nasdaq 100, up about one half of 1%. gains bigger and europe and china overnight. we take a little bit of heat from this dollar rally. euro-dollar positive on the session. 102.54. according to people familiar with the matter, key members of donald trump's incoming team discussing slowly ramping up tariffs, a gradual approach month by month. lisa: which points to how much uncertainty there is about policy going forward. it is still a proposal to president-elect donald trump would have such a big impact on markets. there's a larger question here. again, what is the bigger risk? downside risk to growth or upside risk to growth? does, we are seeing plan to the bond market? annmarie: it has not been presented yet to president-elect donald trump.

it is just from one faction of his economic team. it is those we knew their views ahead of the election. some of like scott bessent who talked about a gradual approach. when trump talks about 60% tariffs on china or 10% on the united states, it is a maximalist approach for a negotiating tactic. what we are seeing now, and he is a president-elect at the moment, the sausage making it real-time. jonathan: one key theme in all of this. the conversation lease as having and annmarie is having. inflation risk. the reporting from bloomberg, the objective of taking a gradual approach is to avoid inflation. this is what it is about. the worry on friday when you see a big payrolls report is about re-acceleration in inflation, not in growth. it three exhilaration in inflation -- reacceleration in inflation. lisa: that highlights the difference between 2016 and now.

the idea that inflation is at a much higher place structurally then it was at a time when there is still strength in the economy which will tie the hands of a president who is a real estate owner. he wants rates lower. will that be possible given the inflationary dynamics? jonathan: it raises questions about how constrained the administration will be by the bond market. to hear the vice president-elect jd vance on american broadcast news bringing up the pawn market -- bond market repeatedly and doing so without even being prompted. that is where the focus is as they come into power. annmarie: he was not prompted at all. she was not asking about the new wants of the bond market. he talked about how bond yields are too high. he talked about the net interest payments were more than national defense and are on track to be that way in 2025. the reconciliation package,

these tariffs, they need to have a handle on how much spending this is going to be. lisa: how long before we coin make bond auctions fred again? -- great again? annmarie: it will be a while on that one. lisa: mbaga. jonathan: next up for the market -- i will take some time to recover from that. cpi tomorrow. lots of bank earnings tomorrow. jp morgan, citi, wells fargo and goldman sachs. coming up, more on this. emily roland as stocks look to build on yesterday's gains. libby cantrill as the trump team considers a gradual approach to tears. and armin papperger and sean roberts on rebuilding los angeles. investors optimistic on a bloomberg report that donald trump's economic team is considering a gradual approach

on tariffs. joining us now is emily roland of john hancock. we have been whipsawed from date appointed data point. emily: it's remarkable. one thing we have been watching is the moves in the u.s. dollar. one thing that is starting to constrain equity markets so far this year is the significant strengthening in the u.s. dollar. think about large-cap equities which were carrying the crown of leadership last year, 40% of the revenues are derived from abroad. that could be a significant issue for large-cap stocks. this morning we are seeing a bit of a modest pullback in the dollar. that is probably helping risk assets a little bit. jonathan: rates drive beta. foreign-exchange drives dispersion. are you seeing that on the s&p? emily: we are seeing a little bit of a broadening out of leadership. we are seeing some pressure on markets. what we typically see in these environments where bond yields are backing up, inflationary pressures are potential -- or

potential pressures, value stocks do better. small caps get hurt. they have the highest levels of indebtedness which can be an issue when the cost of capital is elevated. i think value equities and areas like energy, utilities, infrastructure assets are lower beta. they have dividends. they have some element of inflation protection that we think might be agreeable to investors if we see another 2022 type playbook. lisa: this is confusing for all of us. it is hard understand where the lone star is at a time when there are many different narratives that go completely contrary to each other. i want to go back to this morning, small business optimism at the highest rate going back to 2018, 105, superseding expectations. do you want to be more levered

to a growth story or a conservative portfolio that is more protective and levered to downside risk right now? emily: we would see a more conservative portfolio. what we see now is the biggest catch-up in history between soft data and hard data. the hard data had been coming in well, things like the labor market. we added 250,000 new jobs last month. one we look at the soft data, it had been struggling and you get the results of the election and you have this massive amount of optimism and sentiment pervading the markets. we want to be mindful of watching this mini bump in re-exhilaration an animal spirits and the way business owners and people are feeling. there's a huge divergence between republicans responding to the surveys and democrats responding to the surveys. be mindful of that. we may see a modest reacceleration in the economy. the challenge is the

self-limiting dynamic of the backup in treasury yields on this potential reacceleration and growth. mortgage rates are above 7%. mortgage applications are plunging. inventories are up. housing is the economic cycle. when we see the shelter component of cpi decelerating, that can speak volumes to the process of asset dynamics. lisa: it's been a frozen housing market. everything else is doing ok. there has not been enough supply. how much conviction do you have in this call of a slowdown to go headlong into longer-term treasuries at a time when other people are saying you might want to wait a little bit? emily: it is not headlong. we have not been overweight duration. we suggested investors sitting at the shortage of the curve with a benchmark level duration. the way the yield curve is sloped we have potential for

roll down with the short end of the curve being significantly lower than the long end of the curve. what is notable about the housing market is you are seeing inventories up about 30% year-over-year. a lot of that is concentrated in the hotspots. remember when everyone left manhattan during the pandemic? they went up austin and nashville. great cities. they with the colorado. manhattan-based companies are saying you have a job in new york. guess where you have to go? you are starting to see all that build up inventory come back online in some of those areas as people migrate back to the major cities. annmarie: we have a call on how high you could see the 10-years. people debate if we will sustain 5%. emily: 5% is about the area where you see that self-limiting mechanism free been -- create in. we -- creep in. if all these overseas markets

also have a harder time adjusting higher rates, you could see downward pressure on treasury yields. do we want to do a little bond math? it is early in the morning. think about yields going back up to 5.5%. you are not seeing a negative return on the aggregate bond index because the yield is there. we are looking at yields above 5% on high quality bonds. you might have to get paid to wait on the duration front if yields chop around. think about what equity markets might do when -- with the 5% treasury yield. i don't think they would like it. jonathan: kevin gordon of schwab said it is bonds are back in really awesome. i'm not sure that is catching either. i'm getting more messages. tell her to start her vacation now. lisa's vacation begins in a few hours time. lisa: you want me to go in

vacation, i will halfway leave. jonathan: emily, thank you for being here. emily roland of john hancock. equity futures slightly positive. let's get to the bloomberg brief and cross over to dani burger. dani: los angeles and southern california are facing a second week of fears winds as two major fires burn across the city. crews have been struggling to contain the fires that have killed at least 24 and scorched nearly 30,000 acres. it is expected to be the mom the most costly disaster in u.s. history, with damages and losses between $250 billion and $275 billion. jack smith said the justice department and the president-elect could have been convicted for trying to overturn the 2020 presidential election. the report details trump's efforts to pressure mike pence to reject congressional certification of the election. it highlights trump's refusal to help stop the january 6 riot the capitol.

cleveland cliffs and nucor are looking at a joint offer for u.s. steel. the cliffs ceo confirmed interest at a media event and said he would use debt. the partnership could include cliffs acquiring most of u.s. steel and new court -- nucort could take assets. that is your brief. jonathan: more from dani in about 30 minutes. up next, setting donald trump's tariffs and motion. -- in motion. >> everyone is on board with a phased-in tariff. we will bring down hours. -- if you bring down yours, we will bring down hours. jonathan: that was in august. this is bloomberg. ♪

jonathan: equity futures up by

.2% on the s&p. bond yields a little higher. 10-year, 479.24. donald trump's tariffs in motion. >> i have spoken to the president, spoken to his team. everyone is on board with that kind of forward guidance or a phased-in tariffs. here is president xi. here is 60%. it might be 2.5% a month for 24 months. tell when you have had enough. at the end of the day, i think donald trump views tariffs as a way not to end free-trade. if you bring gun you're tariffs, we will bring down ours. jonathan: bloomberg reported donald trump's incoming economic team is considering a measured approach for him limiting

tariffs gradually by fewer than 5% per month to ramp up negotiating pressure and sidestep inflation impacts. here is tyler kendall with more. is scott bessent at the epicenter of this? tyler: he will face those questions as we look ahead to his confirmation hearing on thursday. those potential reasoning behind a gradual tariff approach could be twofold. to tamp down a concerns about any potential inflationary impacts and serve as a negotiating leverage. in washington, we have the canadian ambassador kirsten hellman on balance of power who said they are actively looking for ways to get to that negotiating table. that is nothing -- that nothing would be off the table except the acquisition of canada. on the second point about any potential inflationary impacts, i caught up with a republican strategist who told me this is

going to be way more palatable for congressional republicans who will be questioning scott bessent later this week and have already expressed concerns about tariffs and about rhetoric about any spike in prices and with that could mean to republicans as they try to hold on to their slim majority in congress . in the midterms, they would like to see unified government for the total of four years under trump's term. president-elect trump has not yet been presented with these plans. they are preliminary but they likely would be enacted under some sort of emergency power. scott bessent would be needed for that. jonathan: tyler kendall, appreciate it. euro-dollar turning negative and now totally unchanged. libby cantrill is joining us for more. libby: good morning. jonathan: base case assumptions

for you and the team. what are they? there are considerations that the president has not signed off. libby: in terms of the economic policy writ large there are more questions than answers. our view and what we are signaling to clients is that don't underestimate president trump in terms of how deep-seated the ideology is. he has been talking about tariffs since the 1980's. he's focused on the goods trade deficit that has increased with most countries, except china. china, we continue to have the highest goods trade deficit with. don't underestimate this. inflation was a huge issue for voters. he is going to be potentially -- his advisors. this plan has not been presented to the president and he's the ultimate economic advisor. he is his own economic advisor. i think we should take all these

reports with a grain of salt. what we are telling clients is less not underestimate the deep-seated ideology that under and some of these threats. while we state transaction man will be there, tariff man, he will be present. if there is forward guidance, if they try to feather it in, maybe it will not spook markets. we are preparing for increased tariffs. annmarie: he does like tariffs. over the course of the campaign he called of them as we do forward in the dictionary. he also likes deals. do you see tariffs as a means to an end or does he actually want to do them to revenue raise? libby: there is part of it where it is a means to an end, absolutely. he and his trade advisors point out the fact that other countries do have elevated tariffs on the united states. there should be some reciprocity, whether they declined to decrease tariffs or we increase ours.

a deal could potentially be on the table. this is where you don't underestimate how deep-seated and firmly he believes this philosophy that tariffs are actually not necessarily a problem but they can be a solution in terms of getting countries to the negotiating table and they can be a big revenue raise. annmarie: a source provided be of trump 1.0 at the g7 and canada. before he left to go to the meeting and north korea -- with the north korean leader he said i will lift my tariffs if you lift yours. if you have free-trade, i'm willing to have free-trade. who's willing to be first at the negotiating table with him? libby: good question. what is he except? i don't think you can talk about these countries as a monolith. some countries have different tariff rates. china in particular there may be less of a scope for a deal given

the experience president trump had and his advisors had. a lot of the folks that are advising him were also at the table. jamieson greer in particular, nominee for the ustr. he was at the table and there's a view that china never really honored their promises. maybe less of a scope for a deal with china. the eu, for instance, will be a big focus. president trump also has an issue with eu autos in particular. that may be an area where there is scope for a deal. i think there is a real question on president trump's side as to how open is he to a deal. annmarie: good point on autos. trump used to always say why don't i see any fords when i see mercedes all over the place.

what set of these is getting your clients the most concern? -- giving your clients the most concern? libby: it depends where they are located. clients overseas are focused on the risks to the economic forecast as it relates to tariffs. potentially the ditch of mental impacts of immigration on growth -- detrimental impacts of immigration on growth. the scope and the sequencing. do they lead with draconian tariffs and big actions on immigration? is that marva phasing in -- more of a phasing in and to get tailwinds from tax cuts and deregulation? many more questions than answers at this point. a lot of this will depend on scope. annmarie: going back to the five d's, i think --

jonathan: why do i feel like that is to troll me. lisa: let's move on. i think you still can say happy new year. i have not seen libby. always happy to see libby. do they offset one another or is a deficit financing really the main piece everyone is honing in on? libby: this is something the market is trying to digest now. how much of this will actually be paid for? i think the doge effort is real. they are trying to penetrate some of the nomination process in terms of this doge ito's of increased efficiencies and cutting spending. there's a natural limit to what they can get done. this is a question of how slim the majorities are in congress.

the house majority on the republican side, it's worth repeating, is that for several months of this year is going to be a zero but majority. you will have three vacancies on the republican side. republicans can lose no votes and still pass things. when they are fully seated, they can only these two votes. it's a question of it's easier to eat dessert than vegetables. it's easier to cut taxes than spending. you are actually practically impacting constituents in the house districts. it's a long way of saying it will probably be some paid for but it will be an impact on the deficit. lisa: how many representatives look at the 10-year bond yield before they go into negotiations? libby: probably not many unless they are on the committee of jurisdiction. they are small businesspeople, farmers, state legislators.

smart people and sophisticated but not necessarily market participants. is the 10-year capturing the attention of folks on those committees of jurisdiction? probably. outside of that, i'm not sure with the reaction function between the market and between washington is. much more when they hear from their constituents that mortgage rates are higher. they can't get a loan. they can get out of their house. -- can't get out of the house. that is more apt to influence members. jonathan: it is hard to tell constituents interest rates are lower but mortgage rates are higher. lisa: it's harder to explain and will cut your benefits and cut costs here by not putting as many lights in for utilities upgraded because your mortgage rates are higher. how do you explain that the people? jonathan: bond yields up by a single basis point. equity futures now positive by only .2%. libby, good to see you.

libby: happy new year. jonathan: libby cantrill of pimco forcing it out of me. the outlook for ukraine as donald trump takes office. an important conversation on the corner. the pump in futures fading a little bit -- bump in futures fading a little bit. euro-dollar just about unchanged at 102.50. ♪

♪♪ ♪ three little birds ♪ ♪♪ ♪♪ ♪♪

jonathan: the pump and equity futures fading attach. up by 25% on the s&p 500. on the nasdaq 100, higher by one third of 1%. let's crossover to manus cranny. manus: elon musk has taken oxygen out of the technology round with the tiktok deal. tesla up 1.5% this morning. morgan stanley writing they are justifying the bull case. they could be $100 for them. the advancements in autonomous vehicles, that is what the market is beginning to appreciate. the leadership they have, not just in vehicles but in ai, data collection. tiktok, x, tesla, it's about data collection and power of what you do with that. it's about every appreciation of what actually is and there for the size, scale and mobility.

7.5 million vehicles in 10 years time. if you want to understand housing markets, it is hard to lock in a deal. kb homes. revenue $2 million. borders up 41%. buyers demonstrate a desire for home ownership. despite the rates price, it is in a blood we want to be involved in homeownership. the deal is not so much the size of the company, up 107%. united rentals going out to this company. it is the story. it is like the homebuilders story. it's about renting for industrial construction business in the united states of america. this is a trade on growth. a trade on u.s. growth exceptionalism and divergence.

that is what you walk away from in terms of the housing report in this particular deal. there are a number of narratives to tie together. jonathan: solid numbers coming from kb home. under surveillance, donald trump and joe biden both optimistic a cease-fire deal could be coming within days. trump saying, "maybe by the end of the week." biden sank both sides are on the brink of a proposal. -- saying both sides are on the brink of a proposal. the deal would involve cleveland cliffs acquiring most of the firm. nucor taking its mini mill assets. lisa: did you see the commentary from the cleveland cliffs ceo? japan was evil and he claimed his plant was to be at all-american one. keep on steel says we will make investments -- need pond steel saying we will -- nippon steel

saying we will make investments. jonathan: employees celebrate lunar new year as u.s. and chinese officials scrutinize the chip giant. beijing investigating antitrust allegations. annmarie: beijing is looking into nvidia. they have a probe on the company. when you talk about with the white house just did in terms of that tier approach on ai chips, nvidia blessed the administration. he's going to china now to probably talk about some of these new curves. he's going to china the same time you get trump coming in. a lot of executives were invited to attend the administration. he will do some external diplomacy. jonathan: the stock is up this morning. some weakness is creeping into that name another big once. lisa: -- ones. lisa: you are looking at a time when there are questions around

delays of certain chips and some companies ratcheting back some of their orders from nvidia. they are hamstrung between the trade tit-for-tat between the u.s. and china. this will be an interesting name since it let a lot of growth in the s&p. jonathan: nvidia higher by 1% in the premarket. let's turn to the russia-ukraine more. donald trump continuing his push to increase defense spending. olaf scholz rejecting trump's demand that nato allies increase defense spending to 5% from 2% of gdp. joining us now is armin papperger, ceo of rheinmetall, a german engineering group. good to see you in new york. armin: good morning. jonathan: we start with a serious topic. according to multiple u.s. and western officials, the russian government planned to assassinate you. this has been in the news for months now. can we talk about how things are going personally? when we you about that and by who? armin: about a year ago.

the information we got from the u.s., from the fbi. i'm very happy about that. they gave us that information. the german government took the information and the protection level is very high. i have the same protection level as the chancellor. jonathan: the same as olaf scholz and you feel secure? armin: i feel secure. jonathan: is there a reason you wanted to stay in the job? armin: i love that job. we have to work for freedom and we have to work for democracy. nobody can stop us. jonathan: including russia. let's talk about the challenge from russian now and the push for the incoming president to push defense spending perhaps as high as 5% of gdp. it's been a struggle for many nato members ticket to 2%. do you think that is doable to get to 5% of gdp? armin: it is a big value, 5%.

i believe if we get to 3% it would be great. over the last 25 years the europeans did not invest as much insecurity. i understand president trump. he's right. europe has to spend more on western security. annmarie: i reporting over the summer was they were looking at 3%. this fault anywhere from 3% to 5%. germany is only spending 2%. can they spend more on defense? armin: i think they can and they have to. at the end of the day, germany is the biggest economy in europe. they have to help to make europe safe. annmarie: it is time for europe to shift to a wartime mindset. for decades, you have to curb defense spending and outsource their defense to the united states. that failed obviously when russia invaded ukraine. do you think europe is still

unprepared for the war that is on their doorstep? armin: we are prepared. if you look at rheinmetall, we invested over the last two years more than $7 billion to build up capacities. that's important. in between i'm able to produce 1.1 million artillery rounds, more than the u.s. at the moment. i think we prepared ourselves what we have to do more. annmarie: you have production facilities inside ukraine. how quickly can you get emanation production going inside -- ammunition production going inside the country? armin: 12 months time. annmarie: the war could be over. do you first see a scenario where putin will agree to some sort of cease-fire in ukraine? armin: nobody knows that. president trump he's able to do it fast. we will see if that will happen. even if that will happen, at the

moment, the stocks are empty. especially for ammunitions. we don't have enough tanks. we cannot protect ourselves. annmarie: what about the incoming administration in terms a few indication? you are a massive player in europe, almost the only game in town when it comes to the european defense industrial complex. are you talking to the incoming trump administration? armin: i will talk early with trump administration because we have to do it. i also have a lot of investments in the u.s. i invested some months ago more than $1 billion for a company here. i believe in the transatlantic relationship. annmarie: can you partner with the incoming administration? how was the partnership with the biden administration? armin: it was good. we as a company must be politically a little independent. we have to work with all governments. that is very important.

i believe we really can work with the trump administration. i believe he is right. the pressure he is creating at the moment is good for europe. lisa: he's right with respect or spending more on defense. is he right about the u.s. retracting some of its spending on ukraine and leaving it to the european union to finance the efforts there? armin: i believe we have to help ukraine. if ukraine will fall, we will have a big problem in europe. if we have a big problem in europe, because i believe putin will not stop with the ukrainian border. what about the baltics? what about georgia? what about mold all via -- moldavia? i believe it will be helpful if the u.s. and europe are working together in this area. at the moment europe needs the u.s. because resources are not good enough in europe. lisa: is there a political will

in europe to offset any decrease in financing from the u.s. when there is upset in leadership in germany and real questions around how much the public wants to keep financing this? armin: i believe a new government in germany -- we have an election in seven or eight weeks -- the new government will create a strong contact to the trump administration. i believe they want to work out the good plan and to make a deal together. europe and the u.s. has to make a deal for security. lisa: you talked about how you are investing in the united states. i'm wondering how important it is to get a foothold in the u.s. to get around any potential tariffs or other types of issues that come down the pike? armin:. important. -- very important. i understand the issues the u.s. has. president trump wants to make deals. he's right about that. we have to take care of that.

that is why we are investing in the u.s. lisa: are you ratcheting back certain businesses in europe that will be more exposed? armin: we grow at 40% per year. we can grow in europe and we have to grow in the u.s. jonathan: do you want to make deals? do we need consolidation in european defense? armin: yes, it's possible. it's important to do it. europe needs a bigger machine in defense. i believe we need a company which makes $40 billion a year. we are only on the level of $10 billion. we expect to grow to $20 billion or maybe more. i believe consolidation is important. jonathan: you can grow organically to $20 billion? do you have acquisitions and might? armin: yes. we have a lot in mind. over the last two years we bought the lot performance in

the u.s. and a spanish company. we invested $2.2 billion in that and we have more firepower. jonathan: have you spoken to ba about a possible acquisition? armin: we did not talk about merging. jonathan: would you be open to that? armin: there is no discussion. jonathan: it makes sense. armin: i'm always open if it makes sense. jonathan: doesn't make sense? armin: i'm not sure. annmarie: i want to go back to your life was put at risk. you are on a russian hit list. it goes beyond that. dmitry peskov said your company is a legitimate target. how is a company -- as a company are you responding to worker on the continent? armin: we have a very good cyber center. cyberattacks will not come in. we are not in for the moment.

i don't have missiles around my factories. if there is a higher potential, we have to do that for sure. we will protect our factories. annmarie: you feel like the german government is a partner with you in this? armin: absolutely. we are fighting shoulder to shoulder. annmarie: when it comes to the assassination attempt on your life, do you believe it came from vladimir putin himself? armin: i don't know. at the end of the day, the information, as i told you, came from secret services. we have to take care of that. the government in germany takes care about it. if i travel to other countries, those governments care about it. i'm grateful about that. jonathan: you have been gracious with your time and we appreciate it. thank you. armin papperger, rheinmetall

ceo. the stock has been on fire in the last several years. we got another bump in early november following the election of donald trump. with an update on stories elsewhere, here is dani burger. dani: a knew while fire broke out last night in california's ventura county and grew to cover more than 50 acres. the fire started shortly after the national weather service warned portions of los angeles and ventura counties will face a dangerous situation this week. at least 24 people have been killed and 12,000 buildings have been destroyed. the sec find a number of wall street's top investment firms for failing to track their employees business communications. blackstone, kkr, apollo and charles schwab will have to pay over $63 million for not monitoring and archiving employee text messages for business purposes. investment of visor broker-dealers admitted to the violations and vawed -- vowed

to improve. two chinese social media apps have taken over the top two positions on apple's iphone download charts in the u.s. the rise of the popular chinese apps as a response to the impending ban on tiktok in the u.s. many seeking alternative platforms. a string an english thing which content showed up this week. #tiktokrefugee has garnered more than 44 million views. jonathan: up next, the cost of rebuilding in california. >> get the permit. do it in a way that we have done it in other communities that have been similarly ravaged by wildfires. the scale will require us to be better and do better. jonathan: that conversation is annexed. you are watching -- conversation is up next. you are watching bloomberg tv. ♪

jonathan: equities just about hanging in there, positive of one third of 1% on the s&p 500. bond yields just a little bit higher. 10-year, 478.83. ppi data in america. the appetizer for the main course tomorrow, cpi tomorrow morning at 8:30 eastern time. the cost of rebuilding in california. >> time value to construction. get the permits. deal with all those. create a specific timeline. we are working on the exact date. get the permit. do it in a way that we have done it with the experience at hand in other communities similarly ravaged by wildfires.

we know how to do this. we have done in the past. we learned. we iterate. the scale will require us to be better and do better. jonathan: summit california facing another round of dangerous fire whether. 24 people are dead. 12,000 buildings destroyed and fires have been burning for more than a week. wells fargo, goldman sachs estimated insured losses could be as much as $30 billion. sean roberts writing, " construction activity through the rebuild will drive construction cost of throughout southern california, an already labor constraint any spencer market rebuilding." can you walk us through and build on what you have said, how difficult the rebuild effort will be? sean: person foremost, my heart goes out to everyone impacted. thank you to all the firefighters and first responders that have been handling this. we will see a lot of changes in the los angeles real estate market.

rents are going up. home prices are likely to increase. insurance costs will go up. this is a tremendous amount of construction activity that will be happening in the market over the coming months and years in an already very expensive and trade constrained market. it is hard to build. a lot of the things that governor newsom was talking about in the clip you rolled are important. one thing concerning us is the pace of permitting. we are greta see the authorities getting ahead of that now. the devil will be in the details around how much actually changes on the ground without permits are processed and approved. that will be the key bottlenecks for getting the rebuild velocity up to a pace that can actually impact the market here in the near term. jonathan: governor newsom talked about cutting red tape. give us some real color. how difficult is it to process the permitting? how long does it typically take? sean: it can take a while in los

angeles. it can be many months. you can go through many different permit comment cycles and get lots of feedback and edits. there's a lot of red tape. some of the things in the executive order that came out recently around suspending sequel, expediting permitting, preventing price gouging, those are all good and the right direction. the devil is in the details. we can wave a magic wand on policies as much as we want but what really matters is how many people are in the permit office processing permits. the implementation of policies will be where the rubber hits the road. we are hoping a lot of staffing is put into the permitting office. lisa: can you give us a sense how long it would take if we did not have a permitting process to build a home versus how long it can take given some of the permitting had been in place? sean: it depends on what you are

building and how you were building it. one thing we are excited by is the potential for off-site construction to help rebuild faster in the impacted areas. you can put an off-site home in the ground much faster than stick building it, which is how we build. the actual construction timelines can be faster if we deploy off-site construction. a lot of off-site construction can be pre-permitted in a lot of ways. using off-site construction with faster permitting and preapproved plans potentially. lisa: how much is insurance going to become a sticking point? insurance costs are high and only going higher on the heels of this. there's a question about who is going to remain in california. sean: it is a big issue. it was a big issue before the fires and will be a bigger issue going forward. the structure of how the home insurance market in california likely needs to be rethought.

insurance companies need to charge premiums that are commensurate with the risk profile in the market, which means insurance costs are going up. that raises the cost of housing across the board. whether it is ownership or rentals. homeowners insurance increases are going to drive the cost up for everybody across the board. that probably goes up beyond california as well. the entire market resets to compensate for the risk. insurance is a real issue here. annmarie: have any calls if you got already? sean: quite a few. there's a lot of folks looking to rebuild quickly. given our focus on using off-site construction to build smaller homes quickly, especially 80 units, we have seen interest from various clients looking to find ways to rebuild quickly. we are trying to do everything we can to help. this is a full-court press with our team to find ways to be able to be helpful and get housing back in as quickly as possible.

it is still early. the fires are still going and still spreading. the windsor picking up today. it will be -- winds are picking up today. we are seeing a lot of client demand already. jonathan: there's a rebuilding effort in the southeast. the hurricanes destroyed houses across several states. have you found it difficult to source materials giving the rebuild effort even before this took place? sean: not really. the building products market is more stable than it was during covid. sourcing materials has not been a big challenge yet. we formerly built on the west coast. what is happening in the southeast is pretty far away in terms of the raw material input market. i think we will see some big changes for the cost of both materials and labor in southern california coming up. jonathan: appreciate your time and your perspective. sean roberts on the latest.

a very expensive market to rebuild. lisa: what you raised, the idea that governor newsom talked about potentially pulling back some of the permitting process and removing environment of constraints to expedite possible building. devil in the details. a question of creating fire resistant materials to prevent this from happening again. jonathan: sean talked about the changes. coming up, chris caso, sonia meskin. the third hour bloomberg surveillance is up next. live from new york city, good morning. ♪ ♪ so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa?

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>> is going to be a volatile year and there a lot of uncertainty. >> all of that policy change is there for us to accept and it is positive. >> we do not see inflation accelerating. it is going to be demand driven but i do not see enough demand. >> there are a lot of things out there that will add to

volatility but i do not think we are headed for a deep correction or new bear market. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: a massive focus on inflation. cpi data 30 minutes away at 8:30 eastern time. how are consumers and businesses handling all of this? we will get banks reporting. jp morgan ,citi and goldman sachs reporting. equity futures fading a touch and we are positive by .2%. we did see some dollar weakness but not much now. euro-dollar one point 249. lisa: how big of a potential movement could it be tomorrow when we get cpi even today with ppi, how much the market is on a knife's edge when it comes to inflation that gives a sense that maybe our rates not

restrictive that they can keep climbing with the fed in a position to be on hold for the remainder of 2025. annmarie: a key nugget about this approach to tariffs is the fact that they could avoid a spike inflation. remember donald trump ran on this agenda and he could be the one to bring prices down whether it is grocery store or gasoline or everyday goods. that might be a concern that all of the bluster about big tariffs that you've heard from other members from his soon-to-be cabinet that inflation might be a northstar. jonathan: they talked about november where you could bathe in the hopes of dreams -- and dreams of the coming administration. inauguration on monday and then you think about policies and seeing glitzy and hopes again that inflation is a northstar because if it is, great.

if this is the approach that we are reporting then we will take this step-by-step phase, two percent tariffs here and there and use them as a negotiation process that is very pro-risk. lisa: we might be bathing in the hopes and dreams of scott bessent. this week is about risk that i think some of those combinations coming before congress will be really illuminating in terms of how much permissiveness there is among republicans to move forward with certain proposals of the trump campaign versus others. event risk is a hard thing to price. the headline risk is a harder thing. it is all excruciatingly difficult when you do not know where you are coming from because people disagree on the state of the economy. jonathan: and we still have to wait a week. it will take off big time when we see those executive orders. lisa: that is why i will take a few days off. jonathan: positive 2% on the s&p

500. coming up we will catch up with barklay's on stocks moving higher. chris queso as in video gets caught up in u.s. and nvidia china tensions and ppi data. we begin with stocks a little bit higher and investors reacting to a bloomberg report that the economic team is looking at ramping up tariffs aiming to avoid a spike in inflation and helping put a lid on bond yields. "yields have entered the danger zone for equity markets and we are seeing market internals reflect this." it is good to see you thank you for catching up with us. venu: good morning. jonathan: if we are in the danger zone how self-limiting is the move? venu: this is a critical phase. once we have reached the 4.5% rate range you have to be concerned. and the principal channel it

lows through his multiples. and equity valuations have been quite full, not necessarily rich but quite full. and so, the rates risk where the negative correlation between the equity rate cakes said and we are in that territory. jonathan: why did that correlation change? yields were up and people found good and priced in a positive growth shock, what change? venu: there is a sweet spot where growth is decent and inflation is contained in the market is comfortable with a vigilant fed. once you have reached a certain point the concerns move towards inflation, deficits and the likely but eventually rolling into economic growth as well. it is that changing scenario. but to be in that zone of less than 4.5 or 3.75 for quite some time and that is a sweet spot.

at some point it starts changing. it can move back and forth as we have talked about and the market has been moving around a lot. and so, if you go towards that range we have a problem. lisa: if we are in this danger zone why is it that big tech would be the most vulnerable since multiples seem to be the highest? venu: big tech is the most vulnerable and the only difference is that you had a peak in the 34 range last year. we entered the year at around 30 times. once you start seeing rates go up anything with a high multiple will get impacted and that is a big ticket. the problem has been a fulcrum of this market and if that is correct, coalitions will increase. they are not immune to those multiple changes. perhaps the correction could be a tad lower but they are also quite full.

i think it starts with big tech and gets worse with small caps. it spills into the rest of the market and multiples alone can cause a 15 to 20% market and we have seen this before. lisa: you are still optimistic but you do not see the market going down 15 to 20% in 2025, correct? venu: we have the s&p at 6600 and that assumes that economic growth moderates -- moderates and comes to a decent level and that assumes that rates do not take off and that is one of the principal risks that we highlight. this has been something we have been talking on about for some time citing the empirical evidence of when the trigger gets hit. lisa: this is the ultimate question and to go where jon was beginning, if we see a selloff people pile into the bond market and that will help things. you think the nature of this

could be different depending on the policy mix coming out of washington, d.c.? what are you looking at to inform the sequencing? venu: what we are really looking for is how the playoff between the two variable -- opposing policy stances actually get implemented. on the one hand you have the progrowth side of lower taxes and the regulation squared off against the impact of immigration policies on the other hand. so when you have these competing factors, what you want to know is what is the sequencing and how serious are they in implementing it? what is the magnitude of change to have. the policy with dig -- with deregulation how would it infect -- impacts different sectors and stocks. it is these elements that once the administration comes in and it gets more magnified.

so far in the last two to three months, the market has been focused only on the positive aspects on the progrowth side. now we are waking up to the reality that things can be different and you could be living with the view that inflation is stickier so it will have to stay longer for higher in this environment and that has to reset expectations. annmarie: how much of those policies we could see from the incoming trump administration. you upgraded your 2025 price target after trump won? venu: the view was that the macro positive was outraged -- outweighing the margins. it starts with the two pillars of economic growth. the second is the u.s. exceptionalism. both of them in aggregate are still in place.

unless you see a significant crack, it is different. mind you from a fundamental standpoint, we will see earnings growth accelerating despite all of the policy. the principal channel to be concerned about in multiples is probably landing in the 12% range. annmarie: you are upgrading health care but negative on commodities. why so? venu: oil prices as a short-term phenomenon. oil has not reacted to all of the risks out there. so on a day by day basis the last two have gone up and the thing is that oil has not been reactive and i think that is the same. talking in negative one staples, and you have gaining pricing power and prominence on the margins and volumes.

lisa: wednesday we will start with the earnings season and j.p. morgan will kick off. i wonder how much you are expected to learn about earnings season ahead with the kickoff at a time when there is a lot of good news priced into bank stocks. venu: bank stops -- stocks the problem is that the multiples are in the 100 percentile on a 10 year basis. i think the market is more than factoring in a pickup and earnings growth. so what really matters now in financials is that -- is are we going to get guidance which will cause a consensus to move up? if not we have a problem. even in financials. that is one of the things we did , we are neutral on financials because it is played out. and now the multiples are there and we are pricing it all in. jonathan: you said this at the end of last year and we talked around it at a time when most of

the street that was the favorite sector going into the s&p 500 and 2025. lisa: the higher the bar the more anything in line gets punished so that is a question, how do you outperform at a time when everybody is optimistic and it is a stressful situation you are a kid and you will do well and then do you really want to do the vacation. jonathan: live tv not therapy. deep breath. you remember the breathing exercises you talked about. lisa: let's move out. -- let's move on. jonathan: we have some stories. let us get over to dani burger. dani: property owners in the palisades neighborhood is suing the city of water and power for not providing enough -- enough water to fight wildfires. they claim that adrian water reservoir and inadequate pressure in water hydrants hampered efforts to keep the

fight -- to put out the fire. they say that the negligent skirt -- turn homeowners to homelessness. southwest airlines is pausing corporate hiring and promotions to cut costs. the company is suspending most of the summer and internships and some employee teambuilding events that date back to the 1980's. this comes after elliott management took a state -- a stake leading to broad changes in restructuring the board. the l.a. rams defeated the vikings in the final wildcard matchup of the playoffs. they jumped out to a 10-0 lead in the first quarter and kept the vikings at arms length with matthew stafford drawing for a pair of touchdowns. they become the fort -- the first 14 win team to lose the wildcard. they -- it was moved after the ongoing fires in los angeles. jonathan: more from her again in 30 minutes. next we will get you morning

calls plus chris caso on nvidia and the recent bout of weakness it has gone through. from new york, this is bloomberg. ♪

jonathan: a little more than one hour away, one hours and 14 minutes. equity futures positive by 1.5% and coming off session highs and we are more positive than this. we will talk about the y in just a moment. bond yields are higher at 4.7883. in foreign exchange the euro is doing nicely. we are positive by .1%. i had this report coming from the team that trump's economic team was considering a

step-by-step approach to tariffs maybe 2% or 5% here and there. we faded that story very quickly. lisa: i wonder how much it is oversee traders say yes and pressing the button and other the u.s. rolls in and they are like ok. here we go again. the headline was tit-for-tat and hold on we have a couple more things. jonathan: the president has not signed off of anything. that was true of the washington post and cnn report. we put it in the piece overnight. lisa: it becomes an interesting moment when headline risk becomes something that people fade, how do we know that they are taking certain risks seriously and that is something we have heard time and again, are people taking certain risks seriously that they have to learn some of the tit-for-tat they are hearing. annmarie: a key theme is that he has just the president-elect and will not make any decisions until the oval office and this reporting is accurate but only

from one part of the cabinet that terry calls these cabinet revivals. if trump keeps teasing tariffs he will force the end customer to keep front running generating a buy across all sectors seeking to lock in lower prices and he does nothing. jonathan: it is a stimulus program. lisa: for who, china? jonathan: next week will be fascinating. you will be at the inauguration and these executive orders will start immediately and everybody at the world economic forum will be looking at washington, d.c. and responding to it the whole week. lisa: they will be responding to it but how different will it be than 2017 right after donald trump was elected to office when everybody said this is not america and this time we think it is good and he has the right approach and if we want to go to mar-a-lago, please and we will be there. completely across the board. annmarie: maybe davos should be in palm beach. not to throw some cold water on

davos, but why did they decide -- why did you do the world economic forum the same week as the inauguration and transfer of power in the united states when we are not score -- if we are not sure if individuals will have their confirmation hearing at than they actually have to be voted on. can they even show up? and these are the people that everyone else wants to talk to. jonathan: usually it is a virtue signaling and i think the winds are changing really interestingly. the company is will focus on core competency and their customers and stock prices. and we seem to be parking the virtue signaling. we got a hint of that from meta and starbucks. lisa: there will be a change of tone and there is an increase in dealmaking and we have to pay attention to that. there is a feeling that putting aside all of the feelings, where do we want to go and how do we want to do it?

it will be interesting to hear about. jonathan: let us get you some morning calls. piper sandler raising on netflix to $950. keeping an overweight rating saying that the company is a clear leader in streaming. the second call from truest on lockheed martin on a buy rating citing its pullback. that stock positive by .4%. keybank cutting its target on amd to 150 dollars highlighting underwhelming demand for its ai chip. nvidia caught between the united states and china. the ceo is set to visit shenzhen as the u.s. slaps new curbs on chip sales and beijing has

antitrust allegations. it is quit a selloff -- quite a selloff. chris: they are starting the ramp of the blackwell program and there is more in the second half of the year where we have exited -- expectations. it is a question of supply catching up to demand. lisa: it is great to speak to you because you can parse some of the noise from the signal. are you saying before we get to some of the delays, are you saying that some of the tit-for-tat between the u.s. and china is more noise for nvidia shares than other issues?

chris: so today nvidia is selling little to china directly because of the export controls already in place. some of these new things that were discussed would affect what they called sovereign ai, which is the ability of nvidia to ship to third countries and such. there is some concern that china could potentially use some of those china friendly countries the park ai servers and the purpose of the regulation is to close that loophole. and you know it is an ongoing situation and there is a new administration coming in and the rules could change. and that is a concern. the bottom line for nvidia and what is the most important for the stock is that ai demand is strong and much more than nvidia's ability and supplied. it would concern us more if supply caught up to demand and then you would worry about

incremental changes. that is not the case. supply is well below the requirement for customers for more ai chips. lisa: for most businesses this would be a positive. at the same time there was news that certain lack well chips were overheating and has been -- blackwell chips were overheating and has been delayed and that caused big tech companies to withdraw orders. how much is there a headwind that companies will not spring to pay all of this money at a time with their shareholders are getting impatient to see results? chris: on that one and i cannot comment directly on it, it is news from a different source. i consider that on the order of noise. there were some delays in blackwell that emerged over the summer where they decided to change the product and that delayed the launch by a month or two and did not have impact.

it is that the demand is so ahead of supply and there is not direct substitutes in the market for nvidia. they have the vast majority of ai demand. to the extent in which nvidia is tweaking the product and running on these one year cycles, customers are more than happy to wait. now, you also have another product cycle coming in the second half of the year, blackwell ultra. because lack well was a couple of months -- blackwell was pushed a couple of months, now those kind of product cycles get jammed into one another. and that is under consideration from big customers saying do i want to deploy blackwell and these are all things in the mix. the underlying premise that demand is well ahead of supply will drive numbers in the second half of the year. jonathan: i will not ask for a bond target or where you think

yield should be. chris: thank you. jonathan: looking back over the last several years, how has the stock tolerated the bouts of high yields, and we saw this again in 2022, 2023 and a bit in 2024. how does the stock usually do? chris: with rates that concern is what happens in the multiple. high multiple stocks as rate change becomes a concern. for nvidia and given the pullback the stock is trading in the 20's. considering the growth rate of this company this is a very reasonable multiple for a company that has been growing at this rate. at that basis given the relatively moderate valuation, rates do not concern me. jonathan: we appreciate your time. does the same logic applied to the likes of apple and others? lisa: less clear that the growth trajectory is the same.

that makes the multiples harder to justify. jonathan: earnings season for me begins at the end of the month. lisa: what about with airlines? jonathan: a sprinkle of deadline -- of the airlines and financials tomorrow. i find it boring. annmarie: i think it will be fascinating. jonathan: let's see. i will be here for it and you will be watching somewhere. from new york, this is bloomberg. ♪

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jonathan: sonali wrightson that the bank earnings are not earning. it is the firehose of numbers. i want to do this after hours. lisa: a nice table with a glass of wine. jonathan: will dashboard milk and read some earnings reports. exit he futures fading into ppi data. that data drops before cpi tomorrow morning. equities just about stable. let us cross over to michael mckee. mike: better news off of the top as the ppi headline comes in half of what was expected. the forecast was .4 again and it is only .2. the core again is at zero after a point to rise. the forecast was for .3. the trade number just up .1, the same as last month. that leaves us at 3.3% higher

than the prior month but under the forecast. for core, three point 5% which is up from the prior month and for the x trade number 3.3%. all in all, it appears relatively good news for the economy and for the fed. they do not need to worry about inflation at this point, that it does not tell them that they need to start raising rates. this should be i assume somewhat market friendly. the final demand goods up .6% and final demand services unchanged. so goods was the price increase during the month and a lot of that was gasoline. so, this is all in all a much, report than people anticipated. jonathan: thank you and that was the right assumption. as we often say you can learn something from the data and a little bit more from how the market responds. this market is jittery.

look at equity futures almost totally unchanged and up .3% coming out of it. the nasdaq up i .9 and the russell by .4. the bond market off the back of this yields down. down two basis points and on the tenure down a handful. 4.7574 and in foreign exchange a break from the euro and other currencies. we take more heat out of the euro -- out of the dollar trade. a little downside surprise on ppi. lisa: what is fascinating is that the biggest move is in the equity market, bigger than the bond market. this is a time when we are wondering what is driving treasury yields. i wonder going forward how much the prospect of another rate hike is spooking stocks and if that is taken off the table that can keep ripping. jonathan: sonja joins us. how good news is that ppi data?

sonia: very good news but to be clear we actually expect with ubs and we have been saying this for a while, inflation to be temporarily a little bit sticky in q1 of this year and then continue to decelerate. jonathan: what is it about q1 because we did this in last year. what is about the first quarter? mike: the seasonal since -- sonia: the seasonal since covid have just been off. lisa: how much do you see an actual disinflation because numbers have been noisy and ppi is something that people look through is not indicative of what will come out in the cpi. what is the other data really saying when you look at them? sonia: the ppi is more relative -- relevant for pce which is relevant for the federal reserve. the federal reserve said that they see the core trend in inflation as the core pce trend. the cpi is important and that is

what the consumer pays at the register so to speak. for the cpi we see an upside for the release this week for tomorrow coming primarily from just like here we saw an uptick in energy goods prices and we also see that in the cpi tomorrow as well. lisa: what is fascinating is people are trying to wrap their heads around the ramifications of the strong dollar in respect to corporate earnings and demand for u.s. assets and there is a question of the disinflationary impact when exports and imports have been increasing significantly. how much is that a piece of what we are saying particularly in data like the ppi? sonia: absolutely, but historically it takes time for the strong dollar to translate into prices so here we would only see it so quickly if we saw truly good evidence of a ramp-up

in imports ahead of an anticipated tariff. we do not see much conclusive data on the ground on that front the defendant lycee that this has had an impact -- defendant leap say that this has had an impact. annmarie: what do you see in the competing space, broad-based and ones that might be gradual. how do you take that and put it into an outlook? sonia: extremely difficult in the main point of the outlook is what we are expecting is uncertainty and the key area to watch his business investment and how much this uncertainty around tariffs and that businesses have already expressed in the data will actually translate into the investment plans and into the hiring plans. annmarie: everyone is talking about from 2.0 being solid for growth. the fact is if it is so uncertain and unpredictable do you have paralysis? sonia: potentially and that is

exactly right. i think the narrative has been shifting in part because there is so much uncertainty regarding what the administration will do. lisa: when we look forward we have cpi tomorrow and then into the administration. you have inauguration day and beyond where we get a whole host of executive orders. what are you looking for and what could move the needle? sonia: well, any certainty about what happens around immigration and tariffs will be important into the input into the labor market and industrial production and business invest in -- investment. jonathan: sonia on the back of ppi. ppi coming in softer and cpi coming in tomorrow. equities with a knife's left. yields are not -- are lower by a single basis point. we are down to about 4.37. the euro is slightly stronger and we are fading this a lot already. go back to what i said earlier,

this market is jittery about the inflation story going into cpi tomorrow morning. lisa: it comes at a time where it is stemming from the bond market which is the reason why i thought it was interesting we did not see a bigger move. what we saw friday was a significant shift in expectations and bond markets. ppi tends to be less loved in terms of an indicator. it is just another noise factor that a lot of people .2. jonathan: we have been talking about a bank earnings and a bit of a personnel shift that we need to talk about in jp morgan. daniel pinto to retire at the end of 2026. pinto to relinquish duties as of june 30 2025. lisa: daniel pinto just to remember who he was, the cohead of global fixed income for the global investment bank.

he has been with the bank for many years and he was head of the emerging markets demand etc.. there is a question about whether this is a rejiggering ahead of a possible secession or a question of just trying to consolidate leadership or whether after a certain period of time people just want to have lives. jonathan: they will continue in the roles and yes, i am sure that is true. i am sure that he would like his life back. given that their new building will be wrapped up in the next 12 months there will be a lot of questions asked about succession and if we are getting closer to the big man making an exit. lisa: we have seen that a lot of other firms and i think a lot of people keep asking at a time where certainly, in the private equity sphere we have seen the changing of the guards in a significant way. jonathan: daniel pinto to retire at the end of 2026 and we have this from jennifer becoming the ceo -- the coo effective

immediately. let us turn to the economic data tomorrow morning. the cpi 8:30 eastern time. we got ppi, how encouraging was that number ahead of the head inflation read tomorrow morning? tom: thank you for having me but that number is a breath of fresh air. we have seen a relief rally because the bond market needed it. clearly, we have to see some sort of improvement in cpi as well for the bond market to really see the yields push lower. we have one more nobler that we have to -- one more number that we have to look at but this was a relief to see this come in less than expected. lisa: do you think bond yields have been rising because of inflation expectations? tom: when we look at them they have been relatively muted if you look at the five year or 10 year breakevens. what we see rising israel yields. now economic and financial theory tells us that real yields tend to rise for three reasons,

one tightening, two inflation volatility more so than inflation and number three, supply. tightening affects the front end. tightening is fed rate hikes that does not affect the 10 year part. what is really affecting that part is supplied. the concern about treasury supply and not just because of future deficits but of prior deficits that were pushed into the market that will now have to be tossed back into the five to 10 year portion of the curve. the market is worrying about all of those bills that have to be refinanced. annmarie: do you think that this backup and longer end yields has a lot to go or that we are hovering as people say in the danger zone of a self-fulfilling cycle that will send yields lower? tom: there are two things, sentiment and the ability for shorts to pile in. sentiment has been supportive of yields push of -- pushing

higher. look at the jobs report and prior inflation data in the jobless claim numbers. sentiment has allowed for shorts to continue. there is a phenomenon where essentially of short starts to get squeezed and they cannot continue to put trades on. in the cash in futures markets, shorts are not being squeezed because supply is more than ample to support them. likewise in the futures and derivative markets, there is a phenomenon going on where shorts are putting on curve steepeners and are being compensated. the positions are tepid -- are technically not getting squeezed out and sentiment supports higher yields. the only thing that breaks this is on the economic side that tells us that inflation and the labor market are cooling. today's number helps but we need more. annmarie: you are critical of janet yellen and she artists -- and you are saying that she is leaving scott bessent with a

bond market prices and a massive t bill issuance pace. do you think that will continue? tom: they might have no choice to continue for a short period. the problem is that they will not have the treasury's overdraft facility which is the reverse repo facility which allowed the treasury to issue the t bills without drawing at a bank reserves. that has shrunk from $2.3 trillion down to $100 billion. the new treasury secretary would love to do what the prior secretary did, that i do not think they have the capacity to do it. they can do it for two to three months before they start taking a hard look at raising coupon options, and that could come in the third quarter with a start to coupon option increases in fourth-quarter. the new administration would love to do that and will do it as long as they can but they do not have the runway to do it

because of that first repo facility. annmarie: if they do not have that runway, what will it mean? tom: what we see right now. shorts will pile in, sort of like a george soros trade where they try to break the treasury and force them to make some sort of fiscal conservatism in the near term because absent that the curve steepeners have further room to run or absent a weakening economy. i think we will see yields trickle higher all else equal, if the data comes in at expectation you will see the curve steepening and that will eventually put some sort of roadblock on a very aggressive fiscal expansion in 2025 and beyond. we are not there yet at the shorts have further room to run. lisa: are you shooting -- are you sitting on a big pile of cash in gold bars? tom: despite the volatility we

think investors are being compensated on the excess yield not above current expectation but expected expectation. you are looking at tens at 4.70 in cash at 4.30. these are relatively attractive yields and investors can inoculate themselves from much of that forward-looking yield volatility risk by doing things like barb hhe treasury or corporate portfolios or a more passive approach. there are ways to reduce the risk and clip that coupon and fixed income. the coupon yielding above inflation. i do not need -- i do not think you need to sit in cash but there are plenty ways to manage the risk with some curve positioning trades. jonathan: we enjoyed the perspective as always. tom following ppi coming in softer than expected. tom calling it a breath of fresh air. the bond yields are about unchanged. we talked about this a few

times, i am not sure that the bond vigilantes will out supply the market just yet. mike mckee talked about this yesterday. rbc suggests that the fed has arrived at the terminal rate for the cycle which would make sense for them to trade here versus fed funds. and then you look at tens with a little bit of steepness, 40 basis points or so. it is hard to say that they are out to play, not to say that they will not be. lisa: especially if people think that inflation is sticky here and growth is good. it becomes a question of if people are hoping that the current rates in the market will fade eventually. when people see sense or is this the new reality and people are struggling to get their heads around it. jonathan: the opening bell 45 minutes away. with an update on stories elsewhere including a little bit of breaking news let us get you a bloomberg brief. dani: we start with the latest in los angeles. officials are looking into what

caused the wildfires in southern california. the l.a. county sheriff says that they are investigating whether powerlines owned by southern california edison could have sparked the fire. the ceo of the parent company tells bloomberg that there is no evidence that the lines were having issues. some breaking news in the last 30 minutes. daniel pinto the jp morgan president and coo is retiring at the end of 2026. he would have been at the company for more than 40 years and he will continue to serve as vice-chairman. the current co-chief executive officer of the commercial and investment bank will be the new coo. traffic in the busiest section in manhattan fell 7.5% during the first week of the congestion pricing plan. the data shows that troubled times fell on most major crossings and the mta hopes that the plan will reduce traffic even as driving picks up in the spring and summer. officials expect to release more data on new collection data in

the coming weeks. jonathan: thank you. speaking to the cabdrivers over the last few weeks and we have the same conversation. so, it is quieter, is it? just because it is january and cold what do you believe is congestion? what do you say? jonathan: others think it is january or the congestion pricing. tings will pick up again in a few weeks. lisa: that does not make sense because if it was just cold in the winter wouldn't you want to drive rather than walk? just saying? jonathan: maybe they are just going into the city. i am just giving you the feedback from the research. lisa: february is cold. you would have to be months away to find out. jonathan: it is my daily research. i will bring you another opinion tomorrow if you come into work. we will set you up for the day ahead next. this is bloomberg. ♪

jonathan: the opening bell and let us call it 40 minutes away. equities positive and ppi coming in softer. going into cpi tomorrow morning with morning movers and here is manus. manus: kb homes at the personification of dream ownership, net orders soared. this is the real personification and buyers demonstrate a desire for home ownership. even though rates are at 7% for a mortgage, 60% of the orders they delivered ad mortgage concession and they will use a. a deal for h&e, and united

rentals adding to their portfolio in construction. 106% up to be a share owner. i will live you the view on signet, the owner of zales and jared, the jewelry retail front. it is the worst day for them in five years. people are trading down in terms of jewelry and yes. jonathan: that is getting hammered down 15%. to give you a flavor of what is coming up on the calendar. tomorrow, cpi and big bank earnings heating up -- taking off at jp, goldman and wells fargo and that continuing with bank of america at morgan stanley. and then on friday we get housing stats. we are also keeping an eye on firefighters in los angeles as firefighters brace for worsening conditions. joining us is bill from accuweather. give us the latest.

bill: we are at a command post with the national guard and firefighters talking about yet again another rare case of a particularly dangerous situation for a red flag warning usually reserved for extreme events but we have had several. we are expecting wind gusts 60 to 80 miles an hour. the big concern is that the winds could rekindle or move the flames where there is containment with the flower -- with the fires and the threat that -- and embers could be carried and to land in the neighborhoods. we have been with firefighters in the hills where i was yesterday dousing the homes spared by the fire. they were trying to prevent them from catching fire if any embers blow into the neighborhood. i have to tell you i saw a lot of vehicles including electric cars destroyed in those moltne met -- molten metals and debris down the street.

the estimate for the total damage is now at $250 billion to $275 billion. there will be a massive ripple effect economically speaking not just here in california but across the nation. this will make the insurance crisis in high-risk areas even worse and they tell us that the preliminary estimate might climb once again. jonathan: absolutely devastating, stay safe. truly, a perfect storm. he talked about the economic impact that will distort the data and influence the data for months to come. lisa: at a time where we are dealing with noisy data. that is the least of our concerns and we hope that people are safe and we are concerned about some of those embers and what is getting burned. going forward, how do you move forward when you have to pay these kinds of costs for disasters incurred around the country and how much ammunition do you have to make sure that

people can get back to homes and keep going? annmarie: speaking about what carly said this is a day one priority when they want to maybe declare the border disaster, they will have to put a lot more money towards florida -- california and at the same time -- i was saying florida because people are dealing with the hurricane effects. we have a lot of crisis and money that has to be doled out. jonathan: a big rebuild effort in the southeast and then in california. we could focus on that later but at the moment we cannot. lisa: it raises a question about the flexibility after the crisis is over, of the labor market. we were talking about this idea of how do you hire enough people to build those homes at a time or we have already seen shortages on that level. or on the flipside, are we looking at the potential loss of economic momentum. talk about the noise coming down the pike. jonathan: already expensive and

labor is constrained and it will be a more so -- it will be more so. we will czechia up with charles schwab and peter of securities and david kelley of j.p. morgan asset management. tomorrow morning what a morning and -- what a morning. you will hear from j.p. morgan and some of the biggest banks. and then at 8:30 eastern time cpi inflation data. it is a little bit of everything which is why you should all be here at present and logged onto a bloomberg terminal and not on a ski slope in europe. lisa: i agree. jonathan: you enjoy yourself. i will see you next week in europe. thank you for choosing bloomberg tv. this was bloomberg surveillance. ♪ (grunting) at morgan stanley, old school hard work

meets bold new thinking. ( ♪♪ ) partnering to unlock new ideas, to create new legacies, to transform a company, industry, economy, generation. because grit and vision working in lockstep puts you on the path to your full potential. old school grit. new world ideas. morgan stanley.

matt: a little bit of a rebound after we finished and agreed. 30 minutes until the start of the cash trade. sonali: bloomberg open interest starts right now. matt: coming up, another report that trump's economic team is considering a gradual approach to the tariff hikes in the dollar tips on that. the latest word on tariffs, as they digest the ppi data and race for big swings tied into the cpi report. also as we kick off the earnings season. plus a shakeup at j.p. morgan. the bank names a new chief operating officer, replacing daniel pinto who retires at the end of 2