>> ultimately stocks have been a bit unsteady. volatility is part of that discussion. we are a little bit concerned because of all this uncertainty. not only have the market and fairly resilient, but the brett within the market has been quite impressive. >> the u.s. is still front and center so i think staying is domestic as possible is going to work. >> that might give you an opportunistic time to come into the market, a time to really step into that weakness. announcer: this is "bloomberg surveillance."

with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: live from new york city this morning, good morning. bloomberg surveillance starts now. coming into tuesday going into a big 24 hours. the epley market looks like this. equity features -50 point 3% on the s&p. down by zero point 5% on the nasdaq 100 and the next 24 hours look like this. later on today chairman pala going in front of the senate banking committee, and tomorrow in front of the house and tomorrow morning, u.s. cpi just around the corner. lisa: that seems to be what everyone is focusing on. do you get a confirmation of a lot of data has been coming out, although the rate did not confirm, just throwing that out there. right now the fear is possibly an overshoot of inflation at least in the near term especially with the living tariffs. jonathan: in the outlook gets a little dicier because of the looming tariffs.

the president of the european commission saying unjustified tariffs on the e.u. will not do unanswered. they will trigger form and proportionate countermeasures. annmarie: trump yesterday came through on what he said he was going to do which is 25% on steel and aluminum. basically what we are doing is trump going back to the play but we had in 1.0 which is expanding on these steel and aluminum tariffs. some of them were kept in place by biden. what is interesting here is he says there's going to be no exemptions. that means you, european union. potentially there is one that could get an exemption, australia. but why? the u.s. has a surplus when it comes to australia. jonathan: i'm thinking about exemptions within the u.s. i understand we want to get it done. understand all of that. i think we are all of the same page. this can really hurt downstream manufacturers and the pushback from them over the next few

weeks i think will be pretty loud and clear. lisa: it is disproportionately used in the aerospace industry and the auto manufacturing industry and the energy sectors. to your point it is going to be some of the sectors at a time when there's already quite a bit of policy uncertainty. they are going to be going to the president and saying you want a progrowth policy, this ain't it. jonathan: mohamed el-erian has a new column out today. uncertainty is a feature rather than a bug and it is going to be a feature of monetary policy the next few years, potentially. annmarie: absolutely, four years of uncertainty. because i spoke to a source of one of these countries that is targeted by the latest tariffs and they said at the end of the day we do think trump wants a deal. but how difficult isn't it going to be for the federal reserve, for chair powell in front of senators today and representatives tomorrow when

economist are saying that tariff risks could potentially need higher inflation and higher grocery bills and higher everyday products for american consumers? >> uncertainty isn't just something that is out there and is a host of feelings. uncertainty affects our corporate executives have planned their life, planned their company strategy. when you take a look at this index of policy uncertainty that economists put out that was cited in the wall street journal, he says it is rising to levels we haven't seen since the pandemic and this will have a suppressing effect on a lot of the growth and a lot of the dealmaking. that is really the potential consequence of a feature and not a bug. jonathan: why does the start of the show often feel like the start of a therapy session with you, a bunch of feelings? lisa: that is what people are dealing with right now. every note i read is what you should and shouldn't be paying attention to because there is so much noise out there that can be overwhelming and numbing. jonathan: let's spend this

morning talking about your feelings. negative by one third of 1%. coming up this hour, you're 60 minutes look like this. investors digest the latest trade tensions. trump raises tariffs on aluminum and steel. and fed chair jay powell is headed to capitol hill. we begin with equities inching lower after donald trump ordered a 25% tariff on steel and aluminum imports, and europe pledging to retaliate. despite tariff tumult, strong earnings are supporting equity markets, equity volatility is actually below average. so far this year, up about 10% a to date. what explains that given some of the headwinds they could be on the horizon? >> if you think about it short-term and medium-term, in retrospect if we try to analyze what happened, honestly i don't think too many people were

overweight european equities at the beginning of the year. we did initially get slightly better macro economic data. things have been better for the manufacturing pmi. we also have seen positive earnings revisions come in on european analyst and also we do have the earnings season results which have been pretty good. the interesting thing is we are still worth and in the u.s. but your expectations were really so low for europe that you have a bit of positive news. lisa: at this point do you think that trade of outperformance could continue in europe? >> that certainly is the key question. we are a bit skeptical on that. to be honest, we are neutral. countries appreciating this chance for a bit of a catch up for those countries that have blankets the election. but medium-term is really hard to make an argument that doesn't pave the u.s.. we talk about the tariffs and all these other risks but there are a lot of other positive things. fundamentally it is about earnings. we think that earnings growth is

going to be stronger in the u.s.. at the same time, we don't think evaluations are too out of line. >> how do you decide what is noise and what is sick and when it comes that some of the policies coming out of d.c.? >> one way to think about it is to try to understand the framework, what are the objectives? on one hand we know trump has already you tariffs simply as a negotiating tactic to achieve similar objectives. so the point isn't to have tariffs for their own sake, it is to achieve something. if we look at steel and aluminum, that may be more about national security concerns, even if it is on one hand negotiation. there is an argument that the administration might think some tariffs might be worth while, though it is a question of trying to look at what is the real one year and therefore to assess what is the likelihood that they actually end up being imposed or if they just get negotiated away? annmarie: at the end of the day, is trump actually forcing europe

to do something they need to do, which is act cohesively and together? >> the line here is that europe only changes in their crisis. i don't know if people are called as a crisis just for the sake of change, but nonetheless arguably it would be a positive impulse, particularly if you think about the regulation. there is i think a view among business leaders on the continent that there is a lot of regulation europe, particularly when we see this very significant deregulatory push in the u.s. the gap between the two regions becomes even greater, and that has impact on growth, about how europe achieves its own growth objectives. annmarie: not just deregulation but trump has another grievance and defense spending. do you think potentially that could be one of the negotiating tools and if that is the case, would you want to buy into some of his european defense many ventures now? >> that is something that clearly trump has talked about for a long time so the question

would be how much of that is already reflected in earnings expectations for the sector? absolutely this is one of the things that trump has addressed and you would imagine is going to be part of the discussion. jonathan: appreciate it, thanks for your time. looking ahead to a busy day. tomorrow morning, cpi, that they focus for us on bloomberg and ensure for you at home. cpi at 8:30 eastern time and a double those of chairman pal going from the senate banking committee later on today. with this to say ahead of that, growth is slowing well the fed is playing a game of chicken with the trump administration. that is quite a quote overnight. lisa: he believes there is a natural disinflationary force and if you take a look at the labor market, if you take a look at the housing market in particular you see real softness in the u.s. economy that is only exacerbated by the fed holding rates at this level for a longer time. you can debate whether that is true. you can't debate the fact that the fed right now seems to be on a path of cutting rates last

often than people expected because of the tariffs and some of the potential inflationary policies. annmarie: and how much is this latest tariff, already latest levy is going to be a massive headache for the fed? goldman sachs when the news came out, is policy impact the cost of importing aluminum into the u.s., largely passed through the u.s. prices. no direct impact on the l and e prices trading in london. jonathan: these are threats, it is just a negotiation. i think people are still conditioned by the fact we avoided these tariffs on mexico and canada. these are happening. it is on, it is happening. this right here is going to be on and happening. it is going to be difficult to avoid. lisa: when we ask that question, are these negotiating tactics or are these a goal in another itself, people say yes. some are negotiating tactics, and some our goal is to separate the u.s. industry. if you take a look at market expectations two years and five years out, they climbed the

highest levels going back to at least early 2023. the market is responding. whether or not is true, they are taking a signal from this. annmarie: you can go line by line, country by country and understand potentially is going to be exceptions for certain countries what trump would want in response. so you can imagine whether it is in canada, in bahrain, india, south korea are thinking what can we do to acquiesce the president's concerns, and i bet they are doing that right now. jonathan: a of problems for sure. i keep going back to the equity market. makes are still providing leadership and rallying over the last month or so and if you were worried about the u.s. economy albums emerging, that is not what i expect to see in the financial sector. lisa: it also would be strange to see such incredible growth in the earnings that we've seen which have been pretty strong all-around. if you take a look at the banks, they are being supported by the fact that volatility tends to lead to more training. we've seen yesterday that a

number of deals are being announced. some people who are buried at the first month of the year was really a signal of what was going to, may not be the case given the fact that those deals are in the wings -- move. jonathan: equity future this morning and good morning to you. down by about one third of 1% of the s&p with an update on stories elsewhere this morning with your bloomberg brief. dani: just to recap the deals on tariffs, trump ordering a 25% tariff on steel and aluminum imports. the tariffs will going to affect on march 12 and will also include finish metal products. speaking from the oval office trump insisted the moves health -- boost domestic production and bring jobs to the u.s. gold has another record high in traded above $2900 an ounce before paring gains after president trump announced those tariffs on metals. jp morgan has a forecast of $3000 for goal this year. a group of investors led by elon musk offered to buy the

nonprofit that controls openai for $97.4 million. openai ceo sam altman responded saying no thank you. speaking to bloomberg earlier this morning, open fire the latest shot in the war of words between the two. >> probably his whole life is from a position of insecurity. >> you feel that? >> i do. i don't think he's a happy person, i feel for him. >> there has been no response from mast on that data and that is varied. -- and that is your brief. jonathan: escalating trade tensions. >> a 25% tariff without exception on all aluminum and all steel, and it's going to mean a lot of businesses are going to be opening in the united states. jonathan: in just a few moments we will catch up from ed mills of raymond james. the latest threat to snap back.

the latest threat to snap back. ♪ i can't believe you corporate types are still at it. just stop calling each other rock stars. and using workday to put finance and h.r. on one platform. tim, you are a rock star. using responsible ai doesn't make you a rock star. it kinda does.

you are not rock stars. (clears throat) okay. most of you are not rock stars. oooh. data driven insights, and large language models. oh, that's so rock roll. it is, right. he gets it. yeah. (♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

♪ jonathan: it's a pretty calm start to this morning's trading, taken back just a little bit from yesterday's gains. in the bond market yields are higher by two basis points. this could change in the next 24 hours. we hear from chairman powell a couple of times. cpi drops, and under surveillance this morning, escalating trade tensions. from: this is the beginning of making america rich again. we were being pummeled by both friend and foe alike. essentially we are putting on a 25% tariff without exception on all aluminum and all steel, and

it's going to meet a lot of businesses are going to be opening in the united states. jonathan: trump announcing new tariff and europe snapping back. the european commission president saying unjustified tariffs will not go unanswered. they will trigger firm and proportionate countermeasures. what is the latest on what comes next? >> i think we should linger on those words, firm but proportionate. the proportionate of that is going to be very important because for the europeans these tariffs don't kick in until march 12. i think they are still hoping to negotiate their way out of it. they watched very closely what happened with canada and mexico and of course they do have a list of retaliatory measures. last time trump was in office they talked about targeting harley davidson, bourbon. at the end of the day that is really a drop in the bucket which trump is trying to address at the quarter trillion dollars surplus that the e.u. runs the u.s., about $230 billion last

year and the end of the day, steel and aluminum really isn't the lion's share of it. germany only sold about $3 billion of steel to the united states last year. it is the second-biggest provider, but again, this gets serious for the europeans when it starts to target the auto sector, the pharmaceutical sector, the machinery sector. at the end of the day they know everything negotiation begins by demanding a price. donald trump has not quite name the price yet for the europeans. we know he wants them to buy more fossil fuels. could it be about nato spending, less antitrust action on u.s. companies, greenland? they really don't know. what they have the security conference where we get the first high-level delegation from the trump administration coming into europe. marco rubio, jd vance, keith kellogg, the special emissary on russia and ukraine and potentially the outline from -- in their. annmarie: and jd vance is in paris for the ai summit as well. walk us through what europe really could do before march 12 to relieve the president's

concerns. >> listen, i think we are going to have to sketch that out at the end of the week in munich, trying to chase down the senate delegations and everybody that is going to be there including jd vance and marco rubio to basically see what they are trying to extract from the europeans. of course the trade balance is going to be front and center, the europeans do need to buy more fossil fuel, we know that is an open door that they can push on to make everybody happy. there is the question on retaliation. we talk about goods all the time and the trade between services as well between the u.s. and europe. there is a massive surplus that they u.s. runs on services trade. in fact something they could target? but at the end of the day, they don't be have large bargaining chip so i have to see what the sketches, the contours of that negotiation begin to look like at the end of the week. jonathan: appreciate it, good to hear from you. you will hear a lot more through the week as we sit here and wait

for so-called reciprocal tariffs and that is probably what the europeans are going to do, sit here and wait because this is one piece of a much bigger picture. have to wait to see what those bigger tariffs will be. before you start talking about proportionate countermeasures, how proportionate do you need to be, how big is the ever going to be? lisa: are you going to make italians by american coffee, are you going to make the french buy american stakes? at what point able underrate the stakes at a time when it is visceral and there is a real grievance that goes beyond just what might seem to make the most sense? jonathan: what is wrong with american stake? annmarie: what is wrong with ford? lisa: this is one of the issues. lisa: i would love to see a hummer. jonathan: let's continue the conversation we started with. big tariffs on steel and aluminum. and whether there will be any carveouts. what is your base case in that one?

>> i think the base case is no, that they got up here. you are 100% right saying that there's all these expectations out there that they are not coming. they are. and i think it really instructive to look exactly at what happened with the announcements on canada, mexico and china. the chinese tariffs are in, and then we move away from the mexico and canada tariffs, and then we put on a tariff on one of the largest imports from canada and mexico on steel. and this is something the biden administration was doing. one of the things we are concerned about is the mexico back door, the fact that a lot of chinese steel goes to mexico or canada and then gets imported into the united states without tariffs. so my expectation is that this is happening and it only escalates from here. lisa: so if this happens in these stick, what are we supposed to expect when it comes to reciprocal tariff that trump says we get in the next they are to? >> i think what we are going to

see is that what you see the administration talk about is what are the average tariffs? on the u.k., four point 5% for u.s.. we will probably put that on the u.k. for india, 18%. when i talk to folks within the administration, a trait experts who work for him previously, but they always tell me is that as long as the other country is willing to drop their tariffs to match ours, they don't go into effect. but that is kind of a push here to make sure that what we get vs . what they pay is exactly the same. annmarie: so who do you think of lining up to drop them first? >> i don't know if we get that immediately. it does seem like india is top of the list within the focus of the administration. i am certainly looking to see if europe is willing to do this. i do think when i talk to other strategists and other folks who are informing foreign

governments, one of the big concerns that i fear from them is that maybe they offer up something and then trump embarrasses them, just absolutely part of the negotiating strategy. you look back to 2018, we put steel and aluminum tariffs on in the first administration over the next couple of years as trump worked out deals to remove those tariffs. we will get a deal with australia. those now are kind of blown up. if a country makes a deal, could they actually see trump follow-through, or does he come out on top and do something different which makes it hard to want to be the first one that lines up to try to do something to stop this? >> the market has been pretty sanguine. right now stocks aren't really responding in a significant kind of way. julian emanuel says that this will only actually encourage the president to go further and be more aggressive with tariffs. do you agree? >> that is what we saw in the first term. we saw that whenever he was aggressive in the market and

they were ok with that, he doubled down, he trickled down. it is only when the market sold off 10%-15% where we would get kind of a tweet or a statement that there was progress being made. that would be my expectation again. we've entered into a new trump put on the market, which is let's look at what is going on within the bond market. if we see yields on the long end of the curve really start a blowout, that would be a binding constraint from him, but certainly to the extent that there is not a negative reaction, he feels emboldened, and this is one of the problems with the market right now is that they live through trump 1.0, and therefore have this expectation that if it gets bad, he reverses course, and so we are kind of stuck in his feedback loop of no one wants to be the first person to sell because there's going to be a reversal and therefore people are kind of sticking with it is a lot longer than they normally would, but that threat doesn't

mean it has gone away. >> you think when people realize that these tariffs are for real that there will be a whole host of pressure that maybe we are not seeing right now because people aren't taking things seriously, is that right? >> i think that is right. in the first term there was a massive push for deregulation, or that was one of the stories, and that didn't didn't realize. we've already seen this week a takeover of the cfpb, we have an aggressive action to try to shut that down. that is greater than any regulatory action that was taken in his first term and we are already only in the first month. so if there is this deregulatory , if the tax cuts get made permanent, if they add to those tax cuts, if the dollar remains strong, if exports are rebounding because of these trade restrictions, then the market can hold in. but if it is tariffs and only

tariffs and we have inflationary pressures in the 10 year blows out, the fed is thinking about raising rates, that is when we have the negative market reaction. jonathan: appreciate your time, good to see you. germans pal going in front of the senate banking committee little bit later on. think we might get more questions on banking and regulation then we will on monetary policy. lisa: do you get a sense that they are for stripping at the cfpb and irregularly in banking sector that has been one of the priorities of this administration? jonathan: i'm going to guess there was one senator unhappy about that. a senator from massachusetts maybe. but something to say on that. up next on the program, don't miss this. tom mackenzie after sitting down with sam altman on elon musk. that is next.

a sleep number® smart bed is perfect for couples. (♪♪) it helps reduce snoring with a tap so you both get your best night's sleep. and now, save 50% on the new sleep number® limited edition smart bed. shop a sleep number® store near you.

jonathan: a quick snapshot of the equity picture this tuesday morning. declining by one third 1% on the s&p. down .5% on the russell 2000. small caps a little softer. on the bond market, plenty of action in the next 24 hours. the data starts tomorrow morning. cpi. ppi on thursday. retail sales on friday. the bond supply. i can see you getting excited. lisa: $58 billion of notes today

at 1:00 p.m. $25 billion in 30-year bonds on thursday. these might not be interesting. max kettner said there's a lot of noise. ignore the politics, ignore deepseek. pay attention to a treasury announcement that did not shift the size of the options. that lack of supply will give some ballast to a market that is not fully positioned for an ongoing rally. jonathan: the one to watch after the cpi print tomorrow morning. the bond market picture. we have seen much volatility in foreign exchange in the past few weeks off the back of the trade headlines. the euro around 103.17 at the moment. this is just getting started. we have to keep taking a step back. this is week four for the administration. he's putting tariffs on steel

and aluminum. the europeans say get rid of the countermeasures. we don't know what reciprocal tariffs look like. the president has been taking it to european autos. lisa: annmarie was talking about no offramp right now. people don't understand that you can't train this is a negotiation or an end goal. we don't have an understanding of what the parameters are. jonathan: u.s. autos in european auto market. that is the ask. you can't negotiate that away. not like the southern or northern border issues. lisa: they could potentially drop taxes, drop tariffs, run a ford add every half-hour on their local channel. there are things they can do to bolster -- exactly. jonathan: one idea.

not sure you can do that. president trump offering the 25% tariff on steel and aluminum imports on march 12 -- ordered. "unjustified tariffs on the eu will not go unanswered." jay powell heading to capitol hill for his testimony. now appearing before the senate banking committee at 10:00 a.m. eastern, followed by the house financial services committee tomorrow. it is worth going back over. we talk, six loosely about monetary policy. banking and banking regulation has to be top of mind in this one. lisa: especially after they neutered the consumer financial bureau protection. there's been a huge deep regulatory push that has gone -- the regulatory push -- de regulatory push.

will he say yes to some degree there had been an over regulating of the financial sector? senator warren will definitely eviscerate him if he says anything with respect to deregulating the financial sector. annmarie: chairman scott will talk about basil 3 and proposals. with that we call financial regulation of the bite administration. he wants to hear powell say we will walk that back. it will be from both sides, not just the bashing from senator warren. it will be tough coming from republicans as well. jonathan: the banks are expecting things to happen. the stocks are. that has been a favorite sector ever since donald trump won the election. lisa: what happens of jay powell pushes back and says we are not going to roll back basel three and there's a need to increase him protocols -- some protocols?

usually these are sleepy hearings. this could potentially be high drama. jonathan: senate banking committee taking on chairman powell on capitol hill. round two tomorrow before the house financial services duty. looking to catch up with french hill tomorrow. president trump sankey spoke with chinese president xi jinping without specifying what the conversation actually took place. they spoke on january 17 to discuss trade, tiktok, and fentanyl. not the first time he talked about speaking to a leader without confirmation that it happened. annmarie: this is happening now with xi jinping and president putin when you see his team office gate --- they are a little bit confused. these people come in all the time. i would love to know who are these people coming in all the time.

i was at the white house last week and i didn't see the ambassador to china walking in and out of the west wing. he says we have a very good personal relationship. reporters go to the chinese foreign ministry. the only think they are talking about is when they spoke before inauguration on january 17. it is quite unclear. lisa: this happen in the previous administration? is this a new playbook to seem as though they are acting in an expedient way on a multitude of fronts when it comes to russia and ukraine as well as with israel? annmarie: it is the idea of uncertainty. four leaders might say what is he talking about? what is he trying to get at? i think is trying to prove to the american people i am firing on all cylinders. i'm everywhere, doing everything all at once trying to solve problems. it would be good to have clarity al qaeda conversations are taking place. -- it would good to have clarity on what kinds of calls are

taking place. jonathan: the phantom phone call. the equity market was lower. there were concerns about tensions within the u.s. and china. the president said this was a call between him and the chinese leader. the chinese never confirmed that call ever took place. the signal we took was something that ultimately the president worried and cared about what was happening in the equity market. i don't know if you want to take away that talks are ongoing and things are ok between us and the chinese as he rams of the pressure with action by putting extra tariffs on them. lisa: the real action and the anger seems directed not at china, the irony of this whole thing. it is directed at canada and mexico and europe. you have to wonder where the call came from in terms of a messaging signal when we are not worried about xi jinping and china. clear worried about ursula von der leyen and the auto sector. it's a different scenario to talk about. jonathan: let's get some real drama. some tension.

the story of the morning. tensions rising in the ai arms race. a group of investors making a $97 billion bid for openai. the cofounder sam saying no thank you and countering with an offer to buy x. altman taking another shot at musk. tom mackenzie from the summit in paris. >> the mission is not for sale. elon tries all sorts of things. this is this week's episode. he's probably trying to slow us down. he's a competitor. he's working hard. they are trying to compete with us. i wish he would just compete by building a better product. there are a lot of tactics and many lawsuits and other crazy stuff and now this. we will try to put her head down and keep working. >> do you think musk's approach

is from a position of insecurity? >> his whole life is a from a position of insecurity. i feel for the guy. jonathan: tom, welcome to the program. really enjoyed the conversation you are having. a short conversation over elon musk. can you explain what we saw? where the tension is coming from? how it started between the two big leaguers? tom: it turned personal. this goes back to 2015 when musk was a key factor of openai. they shared an exchange about this. they started to discuss a buildout of research focused on the openai. that goes back to 2015. how things have changed in the last two years. you have the law cases coming through from elon musk. sam altman suggested this is just the latest step change in that tactic. tactics he describes as being underhand. elon musk, his contention is

open i moved so far away from its original goals, creating open, transparent artificial intelligence with a focus on safety for the public good. what the stressant open. it is nonprofit. we know that sam altman and openai are looking at how to restructure the business. they are not looking away from nonprofit. others would say, what is the definition? what this reminds us of his is becoming personal between elon musk and sam altman. it's about control. who controls the most sophisticated technology in our hands right now and the direction of travel? at the start of national and sovereign level. lisa: when you talk about how it's becoming personal, one thing that stuck at is how rare this felt. a lot of people are not really hitting back at elon musk or any of donald trump's proposals because they are worried about retribution. can you give a sense that

conference how rare it is to hear somebody out loud actually rebuke one of the people setting policy in the united states? tom: that's a really interesting point. it is rare. sam altman is the only person i heard publicly rebuke elon musk. i asked if you're worried about the proximity musk has the president trump? he said maybe i should be more worried than i am. i get up in the morning i just build product. p has insulated himself to some extent with stargate. he came up on stage at the white house with trump around the proposal. potentially up to 500 billion -- $500 billion. can you build another stargate in my country? economic growth is a key question mark. i asked about deepseek and the chinese challenge. you were talking about that call whenever that happened. china has reminded participants on the ground china is a

competitor. whether or not they did in the measures they claim to have, bottom line is china is a competitor and that is what we are hearing on the ground as well. annmarie: is he more concerned about elon musk or deepseek? tom: good question. i think is more concerned at the delay tactics elon musk is trying to put in place around the development of products coming from openai. this is not a business that is for sale. openai is not for sale, but he did say he thinks elon musk's rationale around launching this bid is to slow them down. he talked about the fact that musk has raised a lot of money with xai. i think sam's contention is there not catching up in terms of the product. that is the insecurity question i put to him. he thinks it's a man who's

insecure. his whole life is based on insecurity and he feels sorry for him. i feel he's watching at the competitive level. deepseek, maybe they borrowed some data and trained on it. he seemed to brush that off. that's what i'm getting from other executives as well. whether deepseek has been truthful or not, you can put in the -- it has not changed the dynamic. that accelerates the shift to open ai from closed ai. jonathan: tom mackenzie leading our coverage in europe. look out more from tom throughout the weekend the interview. we will post the full thing on bloomberg.com shortly. a real tension between those two guys at the moment. lisa: you said now for this segment where talk about our feelings. this relaxing, competent of music as he talked of late --

contemplative music when he talks about insecurity. it's interesting we are talking about this at a time when it has become personal between a lot of leaders of the tech sector and more generally in the united states. jonathan: any commentary from elon musk, we will bring that to you. stories elsewhere with your bloomberg briefed with dani burger. dani: president trump told israel to call off its cease-fire with a mosque unless all israeli hostages are freed by midday on saturday. the president spoke hours after hamas announced it was indefinitely postponing the next release of hostages set to happen this weekend. the president made comments about his vice president. trump told foxnews he's not ready to name vice president jd vance as his successor, saying it was too early to make such a determination. trump said vance is capable and he's done a fantastic job so far. intech, -- in tech, meta

terminating thousands of what he called low performance. the job cuts are expected to affect around 3600 people. it is part of meta's efficiency push. that is your brief. jonathan: thank you. more from dani in about 30 minutes. of next, preparing for powell. >> the fed is on hold. they are nice. they may not -- on ice. they may not move at all this year. the fed is more likely to sit on their hands. jonathan: the conversation is up next with leslie falconio of ubs. you are watching bloomberg tv. ♪

you know what's brilliant? boring. think about it. boring makes vacations happen, early retirements possible, and startups start up. that's why pnc bank strives to be boring with your money. the pragmatic, calculated kind of boring.

jonathan: we are taking everything in stride at the moment. equity futures done one third of 1%. no real drama when it comes to tariffs. a key date is march 12. we have time to negotiate this away? do we have time to negotiate carveouts? when does this actually happen? lisa: if you look at markets, well, something might happen but wake me when we are there. we are not paying attention to what has been some anytime so for just noise. annmarie: when it comes to exemptions, trump mentioned australia. you have to look at who we have a trade surplus with. the top line figure to focus on is the trade deficit the u.s. has with a specific country. maybe australia could be saved. not sure about the others unless they bring something forward he wants to get done. jonathan: in the bond market yields a little higher.

up by two or three basis points. under surveillance, preparing for powell. >> the fed is on hold. they are on ice. they may not move at all this year. it's a high probability. right now the fed is more likely to sit on their hands. in the long-term, rates are meaningfully restrictive. easily 100 basis points too high . that is the path of least resistance but maybe not this year. jonathan: investigators or investors gazing the impact of tariffs the head testimony from jay powell on capitol hill. leslie falconio writing, "two fed cuts in the second half of 2025." good to see you. the last time we caught up last year you were looking for fou rin in -- four in 2025. what changed? leslie: that was prior to the december fed meeting.

then we cut it back to two. inflation turned out to be more sticky. we're looking for two cuts. we think this disinflation trend is not completely derailed. we're looking for inflation to come down and for fed cuts in the second have the year. lisa: is it because of policy? is it because there is more momentum in the underlying economy the people expected before december of last year? leslie: there is definitely more momentum if you look at gdp growth numbers. the light if it is at 2.8% -- the atlanta fed is at 2.8%. growth has been stronger than anticipated. people say the fed is on hold. that is priced into the marketplace. the market is pricing in 30 to 35 basis point cuts are 2025 --for 2025. lisa: think against what we are

seeing in the market. you say the market is a little incorrect with its pricing in of policy staying where it is. there a belief in the short term, two-year and five-year time frames you will see inflation move up because of tariffs and policy. in the longer term, inflation will come back down and you will see a sense of slower growth. do you reject that narrative? leslie: i don't. i think the market is doing what we expected it to do. the steepener will not come until the fed actually cuts. that's given the terrace we are seeing --tariffs we are seeing. the breakevens are what we saw from trump 1.0. you have inflation expectations. they take the cuts out. two-year goes up, the curve flattens. when you see the growth impact, the fed cuts and we will steepen . the path is exactly what we would expect. annmarie: what if we see material inflation with tariff

concerns and a tighter labor market because of what trump is doing on the immigration front? that happened your thesis for two cuts in the back after the? -- back half of the year? leslie: the long term scenario has been fairly anchored. we think this is a one-time price increase the fed does look very. unless it is organically grown, fundamentally consumer driven, re-acceleration, we do not think it will alter the fed's path. annmarie: what he respect to hear from powell today? leslie: i don't think we will hear much. in december meeting they pushed from 26 to 27. they have pushed that out. he explained enough in terms of the recent commentary, which at the last fed meeting was very boring in my opinion. he will wait for the data. i don't think he's really going to alter his rhetoric we saw at

the last fed meeting. jonathan: a lot of economist would agree that the federal reserve would choose to look through any price level and see it as a one-off. what would constrain that? deutsche bank said their ability to do so can be constrained if inflation expectations begin to rise and the labor market reemerges as a source of inflationary pressure. have we had any evidence of that in the data on friday? leslie: it was stronger than expected. when you think about the policies, we don't know the impact of immigration on the labor market or inflation. we don't know with the policy impacts are going to be. we are looking for the labor market to stay strong and growth to stay on trend. we don't think it will force them to completely stay on the sidelines. we don't think they will force a hike in the near term. jonathan: constrained versus forced a hike are two different

things. i think the price action we got on friday with material off the back of what we saw with the report, the harder than expected wages, not confirmed for the new york fed's release yesterday. it is sufficient to keep people in it. lisa: there is no reason for the fed to move. they would be notated to push them off-the-shelf. they are happy to remain out of the political noise and just say pretty much nothing and being really boring. ultimately what you will get -- i think your point is a salient one. the removal of the option of cutting or potential for cutting is enough to spooked the market. how much more would have to get priced in? jonathan: even more if you think growth is slowing. i repeated this earlier. growth is slowing. he's worried about that. he thinks growth is full and will the fed is playing a game of chicken with the trump

administration. that is problematic. lisa: you can tell a different story depending on what sector you are looking at. listen to what mcdonald's said. they had an ok outlook. he saw the rally because the upper form based on non-us sales. they said low income consumers in the u.s. are still under pressure. they said the overall market is pretty muted. the low-income segment is still feeling it. that is a significant portion of their customer base. that commentary keeps certain people finance. jonathan: that is choiceful translated. i hate that word but it is the detail we need to hear from these companies. leslie, good to see you as always. leslie falconio of ubs. up next, stuart kaiser of citi, tyler kendall, and kit juckes on the latest set of europe. european outperformance in the equity market. cannot continue? -- can that continue? from new york city, this is

bloomberg. ♪ when i started walton goggins goggle glasses, i had no idea what i was doing. but godaddy airo does. using ai to build a logo, website and social content. so i can let the world know, if your goggles ain't goggins, they don't belong on your noggins! susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

>> when we think about the potential for price impacts from something like the universal tariff, it could be quite large. >> they just stick around for a while. >> the fed will probably stay on hold because they don't have a clear picture of where that is going. >> we think the fed is likely not done with the rate cutting path in the cycle. >> take a high quality approach. that is the best way to navigate through this. >> this is "bloomberg surveillance" with jonathan

ferro, lisa abramowicz and annmarie hordurn. annmarie: jonathan: the second hour of "bloomberg surveillance" starts with equities little softer going into quite a big 24 hours. chairman powell twice on capitol hill facing a grilling, a big win in the nation's capital. we will see what we get later. tomorrow morning is u.s. cpi . inflation expectations on friday creeping a little higher. the complaint you are hearing from consumers now consistently is about tariffs. we have mark tariffs overnight -- we got more tariffs overnight. lisa: the possibility of retaliatory tariffs on the european union. all this goes to explain why we are seeing shorter-term inflation expectations in the market tick upward. you can see that in the two-year

and the five-year. they are at the highest levels in about two years. this is going to take away from the need for the fed to cut rates in 2025. jonathan: four weeks into the administration on already losing track of key dates. this one is march 12 for tariffs on steel and aluminum. a month to see if we can negotiate this away or secure some carveouts for downstream manufacturers who might be disappointed about this announcement. annmarie: great point you made. this is what happened during trump 1.0. this is what the wall street journal talked about today, which i'm sure trump will take aim at. they say the strategy to harm u.s. manufacturers and workers. they going to talk about a company which produced roughly half of the nails made in the u.s. after the steel tariffs took place in trump 1.0, the sales plunged and they had to lay off individuals and some people quit. guess what happened?

commerce department said you get an exemption. this is so important to the manufacturing base that the trump administration is trying to boost. jonathan: i'm not going to editorialize. it is a statement of fact. there will be trade-offs. this will be a trade-off if they go in this direction. lisa: back in the 2018 period, you saw industrial employment fall. industrial production fall after the implementation of certain tariffs. is this time different if there are no carveouts and there's a more comprehensive plan? people are trying to understand this. you have deutsche bank coming out increasing expectation for cpi and inflation generally should the tariffs come to fruition. jonathan: the european commission president ursula von der leyen had this to say. "they will trigger firm and proportionate countermeasures." i'm interested in the word

unjustified. if you have a 10% tariff on american autos in the u.s. has a 2.5% tariff on european autos, are they justify the come up to 10%? is that conversation available in the next few weeks? lisa: david be great to know what is on the table to take on the pressure of what unjustified tariff actually means. good point. it is not fair to say that tariffs are bad and necessarily going to destroy economic growth because tariffs went on during the first trump administration and stage during the biden administration and the big banking executives say selective tariffs make sense. how do you come up with a framework to understand what will be implement it and how it will trickle down? annmarie: autos is a sector with a huge gap. also farm products, another big gap for what europeans put on u.s. farm products. these are grievances the president has. jd vance is in europe.

you have general kellogg going to the munich secured conference. marco rubio. maybe there is something to be said about energy and the industrial complex as well. jonathan: what did micron say? plug, baby, plug. he said we can plug, baby, plug. it did not land. it was bizarre. you can have a look. it is ridiculous. how does the president of france think electricity is produced? does he nothing that europeans need to take a more pragmatic approach to energy production? lisa: it's a good point. drill, baby, drill, you get oil out. you don't just plug into the wall and get energy created. plug it into the wall. jonathan: i wish that was not a presentation. a sit-down interview and someone was asking questions. i'm not sure that is catching on. equity futures on the s&p negative by 131%. coming up -- one third of 1%.

coming up, stuart kaiser, david tinsley, and kit juckes as the eu says it will counter trump tariffs. stocks a little lower going into fed chair powell's congressional testimony. stuart kaiser of citi, " inflation would be modestly negative for stocks. it might be muted by the positive inflation messaging." good to see you. . does chairman powell have a positive story to tell? stuart: i think he will try to stay as much as on script relative to the january fomc as he possibly can. they take it seriously, which is a surprise to some people. the wages data. in general, they will repeat the strong underlying growth narrative and atlanta gdp rate. they have been very selective about which inflation metric they choose to make sure it is

the best of the bunch. jonathan: let's be selective and take the data from friday. wages hotter than expected. average hourly earnings with an upside surprise. the outlook for inflation ticking higher. is that sufficient to constrain the easing bias he is still that he still communicated at the last conference? stuart: i do think it is enough to change just yet. we had a big upside supplies last -- surprise last january. it's a survey of less than 500 consumers trying to predict inflation in the next five to 10 years. a little bit of a grain of salt has to be taken with it. he will acknowledge it but is not enough to change for the base case is right now. lisa: collaborate on the line you said, the impact of the data may be muted by the fomc's positive inflation messaging. how much is the market baking in the expectation the fed has easing bias in is going to

overcome any one-off noisy inflationary print like what we got on friday? stuart: the market has been pinned to cuts for the rest of the year for the last month or so. the market is seeing the incoming data. they are taking that at face value and trying to keep it in place. the market believes the fed has a cutting bias. to your comments earlier, we think that will get them off the cutting bias and it will be negative for markets is inflation data. i don't effect the fed to raise the flag just yet. the market has bought into the two because this year the same with the fed has. lisa: does inflation data really affect what the fed is now versus a 10-year inflation x vacation? -- expectation? stuart: the two and the five are probably having a lot because of inflation risk.

pyeongchang policy to deal with a one-off price impulse. i think your rearrest is getting a feedback of retaliatory tariffs. that is the thing that would probably change the fed's stance most directly, if china and europe start to play tit for tat on the tariffs and you get something that is more than just a one-off. it looks like something might be persistent. lisa: in the meantime, people are looking through this as a broadening out in the equity performance with some of the stock performing best that are more susceptible to the idea of the fed not cutting rates as expected. do you think that can continue if you get some upside surprise in inflation or is that subject to potential disruption? stuart: it is definitely subject to disruption. the market is trading higher for longer again, which is what we were trading in the first half of last year. that was not good for smaller cap stocks and lower quality stocks. it benefited large-cap and growth which we think you should

be invested in. there is a risk you had the trump sentiment trade that was let's get into the smaller cap, lower quality stocks. those don't work well and a higher for longer environment. i think there is some friction there and that running out, if you got cuts priced out for inflation reason would be negatively impactful. annmarie: from a policy standpoint, do we need to talk about what's going on on the other side of pennsylvania avenue, the tax cuts and deregulation? stuart: those are huge. a generally positive growth environment. the broadening trade, we are sympathetic to the story, but the problem is there's a narrow range of data outcomes in which the trade can work. you need growth to be solid but you cannot be so strong you're pushing out the rate cuts because that is a headwind for refinancing. if the russell is down, you

don't want to be and small-cap stocks. it's an interesting trade. we think there's a narrow corridor of macroeconomic data that index he works in. you need tax cuts and deregulation as a necessary condition. annmarie: it sounds like the market is treading water. stuart: from our perspective you want to be in large-cap and growth as your core position. you need to traded themes of the sectors that are most impactful -- impacted by this. the narrative flips and flops every day. annmarie: that will be the case for four years. stuart: i agree. i think that is the case. people are getting a reminder of what it is like. we highlighted over the weekend that mondays are back and play. you can't carry risk into the weekend either. you have to have your core position. they are actively trading event risk from an options perspective. to your point, they will not be calm for long. if i had to highlight something

that is resilient, it is banks. it is not going to get tariffed. he might even allow them to bank in canada. jonathan: impressive the run we have seen in financials. the weekends are in play. on the beach in delaware getting things done. annmarie: most journalists are working weekends. jonathan: i feel sorry for the people that have the work the weekend after the for years they just had. annmarie: fairpoint. jonathan: stuart kaiser of citi will be sticking with us. let's get an update on stories elsewhere with your bloomberg green. dani: the trump administration challenged a judge's order blocking doge from accessing treasury payment systems. the doj argued it presented the treasury secretary from doing his job. a hearing is set for friday.

morgan stanley is looking to sell $3 billion of debt related to the x social media platforms. the bank let us sale of $5 billion last week. the current tranche is inspected to price at $.98 on the dollar or more with an interest rate of 9.5%. the philadelphia eagles super bowl win drew a record tv audience. initial figures from fox show 126 million viewers tuned in, a 2.1% increase from last year. this was the first time the victim was available on a streaming service. 13.6 million viewers watched via tubi. that is your bloomberg green. jonathan: fantastic numbers. more from dani in about 30 vanessa. up next -- 30 minutes. up next, more tariffs.on the way we are talking about cars >>, drugs, pharmaceuticals >>. we're discussing chips.

america will be stronger than it ever was before. jonathan: a lot of play for. live from washington in just a moment. from new york city, good morning. ♪

-honey... -but the gains are pumping! dad, is mommy a "finance bro?" she switched careers to make money for your weddings. oooh the asian market is blowing up! hey who wants shots, huh?! -shots?? -of milk. the right money moves aren't as aggressive as you think.

jonathan: chairman powell coming up at 10:00 a.m. in front of the senate banking committee. this just dropping over at citi. "we expect chair powell to reiterate rates are in a good place and there's no urgency to adjust and today's congressional testimony." a snooze fest on monetary policy. lisa: if you're not, it's going to be a fascinating hearing. jonathan: annmarie excited about it. in the bond market, yields are higher. annmarie: i'm not. jonathan: i don't think anyone thought you were.

thanks for clarifying. 10-year, 452.92. more tariffs on the way. president trump: we will be meeting over the next four weeks to talk about other subjects like cars. we will be talking about drugs and pharmaceuticals. we will be discussing chips, all of which will bring in a lot of jobs into our country. cars will be a very big one and a very important one. america will be stronger than it ever was before. jonathan: more to come. president trump orting 25% tariffs on imports of steel and aluminum from all countries. trump indicating the tariffs could be expanded to impact a range of key sectors. joining us from the nation's capital is bloomberg's tyler kendall. the key date for this announcement is march 12. what is the potential for carveouts? what has the president said? tyler: we know that president

trump says no exceptions or exemptions. he did leave open the door for australia potentially, citing how they import a large meadow u.s.-made aircraft. march 12 is really the date to see if additional calls or visits get added to the white house's docket to see if negotiations can get underway. what is different about these tariff threats compared to previous ones as they are not necessarily linked to another policy priority for president trump such as immigration. the white house is insisting it's about rebalancing trade. what that could mean is it could make negotiations a little more difficult as president trump says he would like to revitalize these domestic industries. u.s. net imports make up about 4/5 of the aluminum demand in the country. 1/5 of the steel demand according to morgan stanley. this is an issue both sides of the aisle have tried to capitalize on. on election eve, something similar between the two candidates. they spent their final hours

campaigning in pittsburgh, and epicenter when it comes to u.s. steel production and workers. while producers have largely applauded the move, we are watching the manufacturers, particularly those impacted by downstream tariffs that are being rolled into this and whether or not they give an indication on how this will impact american consumers, which could be politically problematic for president trump. annmarie: trump said reciprocal tariffs are coming. any detail on when to expect those and what they may mean? tyler: still waiting on details on that. bloomberg economics said emerging economies could be most impacted. interesting to point at that india's prime minister will be in washington later this week. he's expected to meet at the white house. bloomberg news reporting india's top importer of oil is looking how to expand u.s. imports of lng, a similar storyline we saw with japan when their prime minister was in washington last

week. they would boost imports of lng. what negotiations could be underway as we look for these reciprocal tariffs? president trump says no one will be exempted from them. i spoke to one republican eight that said when it comes to reciprocal tariffs, these are not necessarily a surprise considering we saw president trump float these universal tariffs and potentially reciprocal tariffs could be used to make good on that campaign threat of across-the-board impacting multiple countries. jonathan: he's been consistent about it, that's for sure. tyler, appreciated. stuart kaiser still with us. if you go back to the first year of the president's first term, we had a synchronized level growth story. this time around we start to see europe outperform again. the rest of the world outperform a dominant u.s. story. i wonder how much longer that can last given the tariff story did not come until 2018 last time around. this time it feels different. stuart: the sequencing is

different. fact think you had already done the tax cuts. you had that positive story behind it. in terms of european outperformance, that has to do with positioning and sentiment that fundamentals. european growth has not been that great. earnings growth is a fraction of what you will get in the u.s. for european equities, if you outperform, it has a lot to do with sentiment positioning. it's been cleaned up on the sentiment side. ukraine has come up is a big potential driver of that as well. there is room here but it's not going to come from fundamentals. lisa: how much a u.s. equity traders pricing and the risk of tariffs? stuart: i think it is viewed as ongoing. this will be something that happens. our various tariff baskets either sold off or rallied. now they are in a holding pattern. the base case, i thought people were assuming 10% across-the-board tariff for

something that would look like that when you measure all the pluses and minuses. a week after the inauguration everything seemed good. the next week you got bigger than affected tariff announcements that disrupt the positioning. there's an assumption there will be tariffs. people initially were hoping it would be better than feared. now they are not too sure. lisa: i was looking at this bank of america research piece this morning. policy uncertainty underpriced? i was looking at that and thinking vix has not broken out. we are seeing gold reach record highs with the market has been fairly sanguine. should there be more of a pricing in of this inherent volatility and uncertainty that is a feature of this administration? stuart: not necessarily. the market is pricing in locally. there's a premium price for powell and cpi. a lot of risk priced in for nvidia. the market has treated them as normal days. back in 2017, the lowest

volatility year we had since the mid-1960's. that was the first year of a trump administration. the idea that baseline volatility is higher because trump is in place i don't think is correct. to get the higher baseline volatility you will need the growth data to start to come off. if you have a solid growth environment, you will have relatively low baseline volatility and a lot of event risk. you need to own weekend risk, own economic data risk. if there's a press conference or a vote in the senate, own that risk. day-to-day, i don't think you will be higher volatility unless the growth stuff starts to crumble. annmarie: what does the fed do if they continuously live in the state of uncertainty? how do they consider cutting even if the economy is slowing? stuart: you made a great point earlier. you have the fed between a rock and a hard place. if you cap federal hiring or get some layoffs and own employment ticks higher, if you put the fed

in a tricky spot. they have been clear unless a tariff isn't limited it will not be part of their policy outlook. even chair powell admitted some members -- he puts the fed between a rock and a hard place if the data evolves in that way. for now they'll have to focus on the data. in the background hopefully they are doing a lot of scenario analysis. the message is clear. unemployment will stay where it is. they will get a couple of cuts in. until these are facts as opposed to proposals that will sit on their hands. jonathan: it's been difficult to see which fed official is included. we spoke to one. they won't give you anything. lisa: no one will acknowledge they were pricing in a little bit of tariffs. to get -- annmarie: ticket truthe --to

get truth from the president nonstop. lisa: at a certain point if the proposals have been floated, it's harder for the fed chair to say we don't know what is going on. we can't assume or speculate because you can. you have some proposals. you have economists at major u.s. banks coming up with scenario analysis and figure out what that would look like. i'm sure the fed is doing the same. annmarie: china tariffs are in place. the tit for tat is back in place. we have something tangible that jay powell can maybe speak to today. jonathan: china still not a good place. no improvement in chinese demand. not just for the quarter. for the year. maybe that is a duty problem, not a luggage -- gucci problem, not a luxury problem. lisa: especially when you look at sales dropping 24% from 2013 levels. they already were somewhat suppressed. it could be a gucci problem and

annmarie can tell you about the designer kerfuffle. annmarie: it's a big problem. jonathan: that is a duty problem. -- gucci problem. annmarie: where gucci goes, the company goes. lisa: do you get a repeat of that? annmarie: i don't think so. that is my guess. jonathan: do you have a price target on the stock? stuart, good to see. up next, david tinsley on the state of the u.s. consumer as we count you down to cpi 25 hours away. from new york city this is bloomberg. ♪

(♪♪) ♪ three little birds ♪ ♪ (steel drums playing lightly) ♪ (♪♪) (♪♪) (♪♪) (♪♪) (♪♪) (♪♪)

jonathan: a little softer this morning on the stock market. on the nasdaq, negative by .5%. the russell down by .7%. let's it's a morning movers with manus cranny. manus: to could be a day to pay attention to tariffs. philip 66. they had a position. they have built that the $2.5 billion. elliott reaching into the energy sector. simplify the board, deliver. they want phillips 66 to be better. you've only done two. it is like a school report. you are better.

meta. we talked about this exhaustive 17% in 16 sessions, the longest winning streak in this morning. the longest 20 streak on the nasdaq since 1990. is doing a jack welch, cutting the bottom 5%. $.55. a three month high on the stock this morning. they raised prices by 9% in the quarter. we are scaling back at mcdonald's. never scrimp on your coca-cola. jonathan: the stock is up by 3.4%. lisa: this is the 11th straight quarter that mcdonald's -- coca-cola has raised its prices by 9% or more in the period. they are making up for pretty slow growth in the volume sales with price increases. they are still able to do so even though we heard from mcdonald's that the lower income

consumer is being much more choice will. -- choiceful. jonathan: this is a bigger part of the tariff conversation. if i find out this will end up with a company that has to sell to the end consumer and they can't ultimately pass it on the consumers and that the put it through margins and cut costs elsewhere and he goes to labor, bad things happen. are we knocking on the door of the limited consumer price tolerance or not? are we seeing evidence that perhaps there is still some tolerance to come? lisa: great question. is it different to pending on the supply chain they end up getting some of the hit? with canadian oil, the pipelines, the margins will come in. with alexa consumer products, consumers have been conditioned to not know what price they will pay after the pandemic. jonathan: about 3% in the premarket. some top stories. president trump orting 25%

tariffs on all -- ordering tariffs of 20% on all steel and aluminum. annmarie: we don't know with those firm and proportionate countermeasures are. we do know that things president gets frustrated with when it comes to the european union. he does not think they spend enough on defense. he doesn't think they buy enough u.s. lng. in his first term he called them freedom molecules. third, the autos. this massive gap when it comes to cars imported into europe facing a 10% tariff while mercedes, pugeots for those random people have a gap. jonathan: we had a 206 back in the day. we won't talk about cars anytime

soon. it is a nice vehicle. energy getting lots of comments from the defenders of macron's energy policy and france. a lot of it comes from nuclear and the french do not have the problem the english and germans have with energy, granted. plug, baby, plug will not land. you mentioned lng. i think it was one of our colleagues who said we are pushing on an open door if they want to buy more american lng. the europeans need it because of disastrous foreign policy in a relationship with russia that has totally broken down. lisa: we are coming off a period where joe biden said you cannot export lng to europe because i would increase prices back home. now trump is saying you better by more. it is molecules of u.s. freedom, the new name for fossil fuels donald would like to export. annmarie: what emmanuel macron should have said is yes, we will take us molecules of freedom.

but it is fission, baby, fission. not plug, baby, plug. that makes no sense. fission, baby, fission what have been better. jonathan: they should address that to the germans. the missing chapter that should have been in merkel's memoir. annmarie: they were shutting down nuclear and restarting coal because of this crisis where they were enslaving their manufacturing industry on cheap russian oil. jonathan: the chapter that should have been in the book, everything a did wrong across 20 years. lisa: who is next? jonathan: we are done. i try to stay out of british politics. trying to avoid that for the moment. lisa: i think keir starmer is coming to the u.s. soon. annmarie: there is a trip in the works. jonathan: very cool. when is he coming? annmarie: i would say sometime this month but we have modi, king abdullah coming today,

potentially keir starmer is the next one to head to the oval office. jonathan: there has not been too much animosity despite the differences in politics was to lisa: that is you playing nice. we will and there. -- end there. jonathan: the president's, softer hamas said they were in deftly postponing the upcoming release. trump says if the hostages are not returned, all bets are off and let hell breakout. annmarie: he said by 12:00 on saturday, netanyahu can go his own way but this is what my line in the sand is when it comes to hamas. what was more interesting is jenny leonard was part of the pool in the room. she asked because trump has been talking about how to egypt and jordan need to take it more palestinians. would you be willing to withhold aid? he said conceivably yeah, if they don't take in more palestinians. that is why the meeting with king abdullah will be

challenging for the jordanians. lisa: it raises real tension for a lot of the leaders of saudi arabia and jordan and some of the other allies of the u.s. frankly, allies of israel. a lot of people in the countries are very much for the palestinian cause. if they support what donald trump is talking about, they can face significant backlash from their populations. it is a delicate dance they are trying to orchestrate here. jonathan: speaking of delicate dances but far more entertaining, the openai ceo taking shots at elon musk after muska offered to buy the nonprofit for 97 billion dealt -- $97.4 billion. >> openai is not for sale. elon tries all sorts of things. this is this week's episode. he's probably just try to slow us down. he's a competitor. he is working hard to raise money for x ai.

i wish he would just compete by building a better product but there's been a lot of tactics and many lawsuits and other crazy stuff and now this. we will try to put her head down and keep working. >> do you think musk's approaches from insecurity about xai? >> probably his whole life is from a position of insecurity. jonathan: fantastic job but our reported tom mackenzie on the ground in europe interviewing sam altman. getting more personal as the days go by for these two individuals. he was pressed in the conversation by tom about elon musk's close relationship with donald trump and something he should be worried about. he responded, i'm not but maybe i should be. annmarie: or not. think about inauguration. elon musk was there clapping, taking videos and selfies behind donald trump at the capitol. where was sam altman? the overflow room. he was not centerstage.

where was he the day after no eurasian? in the roosevelt room -- inauguration, in the roosevelt room announcing stargate. jonathan: very much on the inner circle. look out for that full interview on bloomberg.com. if you're a subscriber on the bloomberg terminal as well. the was consumer in focus ahead of cpi data due out tomorrow. david tinsley writing, "we saw some chills with no serious shadows. spending per household. one point 9% year-over-year. --1.9% year-over-year. " we had the l.a. wildfires, a cold snap across the east coast. do you see that in the data at all? david: we do. what we see is that on the month spending dropped .4% over the u.s. as a whole.

across the regions it was the south are we had particularly cold, chilly weather,. which saw the biggest drop down .9%. not so much of a story in the west. that was pretty much flat. basically the dip in consumer spending in january is more or less a weather story. if you look past that, we are in pretty good shape. lisa: do you see over the credit worthiness and consumers at a time when they are eating into their savings? you are seeing credit card delinquencies ticking up. david: achilles some consumers in particular. in the report today we are focusing on auto loan repayments. the price of used new cars has risen a lot. the loan and interest rates are

well up from where they used to be. payments across all generations are rising upwards of 5% year on year. a bit firmer for younger millennials as they kind of trade up in terms of their car they are owning. there are pressures away from card spending. it's a little too much. by and large, the household sector is in good shape. annmarie: are you getting a sense that a lot of consumers are pulling back if prices go up to a certain degree? they are feeling a bit more strapped and you will not see the kind of acceptance you saw --

of course tariffs add to the dimension and that story. not obvious we are seeing that in the hard data yet. we are looking closely from here. annmarie: you said no chills, no serious shadows. what do you consider the tariffs to be? we see some americans consumer sentiment like university of michigan saying there is a little bit of concern about inflation ticking up because of things like tariffs. david: biggest concern over inflation ticking up. the labor market is in pretty good shape across all generations earnings growth. our data is solid, growing

upwards of 3% year on year or so. i'm not dismissing the risks out there and the situation is confusing for us and consumers no doubt. until that crystallizes, the risk crystallizes come consumer spending looks pretty solid. jonathan: i want to finish on this. credit stress. rates are saying higher for longer. any signs of credit stress emerging anywhere beyond the auto sector? david: i would point to the new york fed publishings. we have seen a rise in the liquid see rights -- delinquency rates for cars and autos. elements of credit stress. for consumers as a whole, the strong labor market growth, elevated savings and deposits, that still translates into solid

spending growth. by and large the situation is solid. jonathan: david, appreciate your time. david tinsley of the bank of america institute at a london. we have been surprised at how will this hold up over the last for years. interest rates a come back down 100 basis points and we are talking about politics of credit stress. we were thinking about way more if rates had to stay this high for this long. lisa: we have to go back to the pandemic, essentially a terming out of u.s. consumer and corporate debt. all that debt transferred to the government balance sheet. that was essentially what happened which made the economy a lot less interest rate sensitive. it raises the question about whether going back to this idea of restrictivity when consumers are managing through an coca-cola can raise prices by another 9%. jonathan: how much longer can we do this? apparently longer. an update on stories elsewhere

with dani burger. dani: despite president trump's insistence on zero exemptions for newly imposed tariffs, one country may get a carveout. australia's prime minister says he made the case for an exemption in a phone call with trump and says the president agreed to consider it based on america's trade surplus with australia. the trump administration has ordered federal prosecutors to drop their case against new york city mayor eric adams. a memo sent by a high-ranking doj official claims the case against adams was politically motivated. adams was charged with accepting illegal campaign donations and taking luxury travel upgrades from turkish nationals. he pled not guilty and denied wrongdoing. coffee prices have climbed to a new record high as supply concerns continue to grow. prices of more than -- have more than doubled with tighter supplies from brazil. prices for consumers could jump in the coming months. that is your brief.

jonathan: power columnist has an a good job covering that story. check out his work if you can on x, bloomberg.com, and the bloomberg terminal. up next, the eu snaps back. >> i'm looking to see if europe is willing to do this. one of the big concerns i hear from them is that maybe they offer up something and then trump embarrasses them, which is absolutely part of the negotiating strategy. jonathan: kit juckes joins us on the other side. this is bloomberg. ♪ ♪

so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management.

jonathan: euro-dollar down for

three consecutive days coming in today's session. euro at about 103.26 with a lot of tariffs to think about. the eu snaps back. >> i'm certainly looking to see if europe is willing to do this. one of the big concerns i hear from them is that maybe they offer up something and then trump embarrasses them, which is absolutely part of the negotiating strategy. if a country makes a deal, can't actually see trump follow through with this or does he come on top and do something different which makes it hard to want to be the first one that lines up and tries to do something to stop this. jonathan: the european union valley your response to the 25% tariff on steel and aluminum. " unjustified tariffs will not go unanswered. they will trigger firm and proportionate countermeasures." on this and more, kit juckes joins us now.

the tariff war and how much this is putting a lid on the eur o and fx market. kit: we don't have enough growth, enough political momentum here. we have interest rates that will continue falling. the biggest thing is the growth differential between europe and the united states. it is not getting smaller at this point in time. this is going to hurt europe in terms of competitiveness. the european economy does not need it. we will see where it goes but there's not a lot of reasons to make you buy the euro. until then, is just a question of how much stronger the u.s. can make the dollar. lisa: which is the real question. we saw that steady march upwards stronger at the net last year. it has faltered. the strong dollar trade has

faltered in the past month or two. people are worried there is no more oxygen at the top. are we bumping up the limits of dollar strength? kit: yeah. $65 trillion worth of u.s. assets which scares enough on its own. the u.s. net international investment deficit is $23.6 trillion. european savers are all in on u.s. investment because you have higher rates and faster growth and more attractive investment. how much more can you throw it that? .95% is the level reached in the middle of the biggest terms of trade shock most of us have ever seen, the first land war in most of our lifetimes. .95% feels like an incredibly strong dollar and we can't quite make it. my fear is we saw a nudge up against it each day. we can't go that much further.

that is where we are now, strong sting strong. the picture does not change a great deal. the european side of the equation needs probably political change, economic momentum. let's see if that comes from the german elections. then we wait for events like a possible solution to the war in ukraine and things like that to help. in the meantime, we don't have enough growth, not enough to cut interest rates here which jay powell may say the u.s. has enough growth not to cut interest rates much or at all. we will wait and see. nothing special about parity. we are trading in a very, very low range for the euro. lisa: treading water as we wait for a shift in the narrative. how much are you focused on gold as the other part of this story? kit: i bought my wife and of necklace for christmas. i don't own enough gold. i don't come close to owning

enough gold. annmarie: why didn't you get her a bar? jonathan: does your wife know you buy her gifts with a store of value in mind? kit: she was a political journalist at some point so she's pretty wise. she knows what i do for a living. jonathan: she saw right through it. kit: she likes it. she's fine with that. i should have been buying bars ages ago. the goal story in this environment is going to be pretty compelling, particularly starting from the moment the u.s. effectively weaponized the dollar in terms of wanting to challenge people who do things they don't approve of. there's more demand for gold at the moment and there is supply. there's enough inflation concerned to keep it big. i'm not a gold expert, otherwise i would own more. annmarie: you have another chance of getting your wife a bar for valentine's day. i would like to have the upper

range over to see euro-dollar trading if there was a swift response to ending the ukraine war as we have the munich security conference and keith kellogg going to ukraine. kit: i think we get back up into the teens. above 110 to 115. back to 120, we need to change the relative growth story. you have higher trend growth. all those things are why the dollar has been coming down since the fed started normalizing policy more than a decade ago. ukraine -- jonathan: say hi to mrs. juckes. it would sort out sentiment without a doubt. the growth story is not going to address the energy issue beyond france. it will not help germany unless you believe if you manage to settle this war that energy and

energy trade begins to normalize, whatever that word means. i don't see how it gets easier. talk to people in germany to set up a company relying on the price of energy at the moment, which is so expensive in certain parts of the continent. annmarie: when it comes to going back to normal, what does that even look like? there is sanctions on russian energy. do they try to do deals with russia once again? does nord stream come into play? it does not look likely at this moment. jonathan: from a sentiment perspective, without a doubt it would on the zero strength. growth differentials is the key. you have to close the gap between europe and the u.s. from the growth side. lisa: it's unclear how to do that given the government is up in question in a number of economies. jonathan:, sinead colton grant, arvind krishna, and we speak to saira malik. from new york city this is bloomberg.

♪ a sleep number® smart bed is perfect for couples

the climate360® smart bed is the only bed that cools and warms on each side and all our smart beds adjust the firmness for each of you. and now, save 50% on the new sleep number® limited edition smart bed. shop a sleep number® store near you. one scorching heatwave will leave me powerless to cool my insulin. - when the storm rolls in, my time to find a pet-friendly evacuation center will have run out. - i'm relying on luck, but who knows if it'll be on my side. vo: when it comes to disasters and emergencies, it's not a matter of if, but when. take control. 1. assess your needs 2. make a plan 3. engage your support network let's prepare so we all have a better story to tell.

>> ultimately stocks have been unstable in the last couple of weeks so volatility is part of

the discussion. >> we are concerned that there might be some negative effect. >> not only has the market been fairly resilient but the breadth has been quite impressive. >> the u.s. is still front and center. staying as domestic as possible will work. >> we could see investors step back which is an opportunistic time to come into the market and to step into the weakness. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: the third hour of surveillance starts right now with equity and futures and next session lows down about .13. just a little bit softer on the nasdaq down by 0.4 and down by close to .5 on the russell 2000. the calendar for the next few days looks like this. in front of the senate banking committee, the chairman of the federal reserve. a double dose of chairman powell

in front of the house financial services committee tomorrow morning. before we get there, the big one, cpi and ppi and then retail sales on friday. a major focal point for all of us, the amount of debt supply that we get might not be dramatic this week but it is what to watch for sure. lisa: especially when paired with cpi and maybe inflation is starting to creep up a little bit in the wrong ways. whether that has to do with eggs and coffee and steel and aluminum. a real question is at what point these options falter as people tried to game out the on game a bowl. pretty sanguine and if this is something -- annmarie: it is on game a bowl and -- gam able, and uncertain. this is a place where they could press jay powell and representatives. the chinese tariffs went into

place because we caught a pause on canada and mexico and we are waiting to see if the aluminum and steel will come off. when it comes to china about are in place and maybe they can get something different from jay powell. jonathan: the bond market, a lot of investors have taken some comfort from the words of secretary bessent. if we look at the bond market and look at the curve, the front end is one story. in the back end is another. yields have dropped as a threat of additional tariffs have gone forward. yield have been falling. lisa: scott bessent is more important to the bond market and that is what we have seen. he looks at the 10-year treasury yield. and more interested in the yield curve shape. the idea on the short end you see an idea of increasingly pricing out fed rate cuts as you do get price pressures for a riot he of reasons.

longer-term, it is less than it -- less of an issue about whether this impedes the expansion story. jonathan: polar opposite of 2024, we had the curve flattening. at the end of last year we were talking about lots of deficit spending and inflation picking up. middle of january where were we? 4.80? we dropped back into the 4.40's. lisa: if we have the fed chair saying that he targets the 10-year treasury yield and that is more important than the overnight rate that the fed looks like. and he is talking about the importance of it not getting out of control and he will not issue more debt, that will quiet people. jonathan: he might think fed chair scott bessent has a ring to it. maybe in the future and who knows. equity futures -5.3%. we begin with the top story, trade tensions escalate. >> this is a beginning of making

america rich again. we are being pummeled by both friend and foe alike. we are essentially putting on a 25% tariff without exception on all of aluminum, and all stel d and it means a lot of businesses will be opening in the united states. jonathan: the european commissioner -- commission president saying "unjustified tariffs on the e.u. will not go unanswered, they will trigger firm and proportionate countermeasures." your coverage starts now. share the date with us for when this is meant to happen and how avoidable some people think it might be. tyler: well, the date we are looking for when it comes to these tariffs is march 12. we will see if any calls or visits get added to the docket ahead of that date as these countries look into negotiations.

we know the trump administration outlines three uses as a revenue raiser, negotiating tactic and rebalancing. the white house is trying to push the latter use as these tariffs start to come into play. now, we are looking for potential other tariffs to come into play. march 12 is in four weeks, the same timeline outlined in the oval office that his administration could look into targeted tariffs as industries like pharmaceuticals and chips. and we are waiting on news for reciprocal tariffs that could be on the board. president trump said that it was simple that "if they charge us, they will charge them," likely not leaving open the door to exemption and a lot of questions. one thing is for sure, this is moving fast when you think about how his pick for commerce set -- secretary will have purview over trade has yet to be confirmed. jonathan: we are only going into

the fourth week. i want to go back to the quote. unjustified tariffs will not go unanswered, they will trigger firm and proportionate countermeasures. will they wait for reciprocal tariffs? will they wait for the prospect of auto tariffs as well? how quickly is e.u. willing to move? oliver: they have been playing a long waiting game and that is why the responses they are stressing firmness and proportionality. they want to see what is in the mind of donald trump. every negotiation begins with a price. the price that donald trump has set has not been disclosed. it could be nato spending at 5% or buying more fossil fuels. could it be something around antitrust and not regulating u.s. companies greenland? they do not know. they want to understand what he is after and what they are willing to compromise with. part of the issue that the europeans have is an issue that

a lot of others have. if you get the concessions and a delay, what does this guarantee that this will not go further to extract more. that will be front and center. steel is a small amount of the trading relationship with united states. what trump is trying to do was to close the trading discrepancy. there is a $230 billion surplus. steel, the biggest one that sells to the united states is germany with about $3 billion. this is front and center in munich at the munich security constants -- conference. that will be the first level -- high level meeting between the trump administration and the rest of the europeans. jonathan: thank you for your coverage. that word justified. the nord start -- the northstar that you said is at -- and you are dead on. that is ok, show me a deficit, are you running a surplus in the we have a problem. that is a start.

do you equalize the average weighted tariff, is that how you reciprocate? i think he goes product byproduct. he is talking about autos and it bugs him. never he talks about tariffs it goes back to autos. the europeans at the moment we have said repeatedly that they are putting a 10% tariff on u.s. autos. on the other side the americans have a 2.5%. when i hear from -- when i hear words like justify, the president can justify that and i am not sure what the response would be. lisa: they will have to come up with a response line by line by march 12, well in advance. the timeframe is very short to get an agreement if they are going line by line. and then figure out how to implement it at a time when you need to change shipping lanes and increase production and will sell the vehicles. there is a whole ecosystem that sells any product that has to get beefed up to meet some of

the requirements that might be necessary for the provisions. jonathan: the risk offer negotiation is not bad news. it started once the president won a second term. he wants to sell energy to the rest of the world. in a way that president biden did not. that is the starting point. ursula von der leyen said -- annmarie: it was after trump won the next -- the election and she said maybe we can buy more american lng. that was within 48 hours because they know the pressure points. it is energy, autos and defense, which is why the munich security conference will be important. jonathan: let us get to the market conversation. good to see you. is this a problem for the market? at a moment -- at the moment equities are doing ok. the dax is up by 10% this year. is this a problem? >> there are a couple of things we need to focus on.

the argument was that china would be first and we have seen that. the discussion with e.u. in particular, think about autos. not all european autos are actually manufactured in the e.u. but here. it is a very big pain point when you consider what has happened, for example the german car industry where they have seen such an influx of vehicles from china and the industry is not let us say decimated but badly hurt as a result. look, there has been a lot of talk and we have had tariffs for maybe a couple of hours on mexico and canada when they were lifted and there were more negotiations and we need to wait and see the details. lisa: are you saying that you would count all tariffs written against trading partners other than china as more smoke and mirrors than actuality. that seems to be how the market is treating it. sinead: for now i think that is the appropriate response because

the details matter. the sector impacts on the individual name impacts. we want to think through for what it means for inflation and how big of an impact that could be because as we have seen and are seeing, inflation getting down to 2% is hard. annmarie: how would you know if it was one time or more persuasive. a lot of the criticism for people who say that tariffs do not work and it means longer inflation will look back and said that the fed took it on the chin as a one time hit. sinead: it is complicated. there are a couple of things that could temper the impact. last time around we saw individual companies taking the impact of tariffs and the profit margins. that is one way it can be dampened. we have a strong dollar, and then lastly, if consumers start to buy more domestically produced goods and you see the substitution effect than the impact of tariffs is lessons. jonathan: we covered a lot of ground.

chairman powell is absent from the conversation. what do you expect from him on day one and two? is this a big event from you? sinead: we always listen to what he says because sometimes it is not what he says but what he does not say. we are interested in any commentary around how they are thinking about the timing of cuts. because they still do have an easing bias and they are more dated attendant -- data-dependent and the print will be important. a lot of company raise prices in january. jonathan: in some ways maybe tomorrow is more interesting. lisa: how he characterizes it and what the metrics are in the benchmark is to feel confident enough to cut rates. does he essentially indicate that rate cuts are becoming a were more -- a remote possibility? jonathan: sometimes a question of the house are a caliber than the senate. annmarie: there is an upper

chamber and lower chamber for a reason. lisa: we have insulted the french leader, the german leader. but then the house at a different caliber. look. the chairman will take issue. jonathan: he has a good friend of mine and i have a lot of respect. i'm just talking about other individuals in the house that have pet projects. lisa: so you start asking him about one program and -- in this town. jonathan: they want to make a youtube video. annmarie: it will get worse closer to the midterm elections. jonathan: we appreciate your time. thank you. let us give you an update on stories elsewhere. dani: president has officially pardoned disgrace x illinois governor in his 2008 accusation of turning illinois' government into a moneymaking operation bar himself are trying to sell the

senate seat vacated by former president barack obama amongst any things. he served eight years in prison before trump commuted his sentence. the president made comments about his vice president telling fox news that he is not ready to name vance as his successor saying that it is too early to make such a determination. he said that vance is capable and has done a fantastic job so far. a group of investors offered to buy the nonprofit that controls openai for $97.4 billion. the openai cl responded on x saying no thank you. altman fired the latest shot in the were -- war of words between the two. >> probably his whole life is from a position of insecurity i feel for the guy. i do. i do not think he is a happy person. dani: as of yet, no response. jonathan: so on how personal that caught and how strange. the morning calls plus the ibm ceo at the world government summit in dubai.

we will catch up in a moment. from new york city, this is bloomberg. ♪ you know what's brilliant? boring. think about it. boring makes vacations happen, early retirements possible, and startups start up. that's why pnc bank strives to be boring with your money. the pragmatic, calculated kind of boring.

on a deeper level, i've been waiting for this. (waves crashing) (zips suit) with the caribbean sea. thanks. sandals valentine's sale is now on. save up to $1,000 and get a sandal-lit dinner for two.

jonathan: equity futures down by point -- down by one third percent. the opening bell is about an hour and 13 minutes away. jp morgan cutting dell to $150 citing increasing margin pressures. the second call from citi, raising walmart to 120 dollars saying that it expects fourth-quarter earnings to be expectations with the stock up by .3%. oppenheimer initiating coverage of ibm with an outperform rating , expecting double-digit revenue growth in its software portfolio. that stock is up. let us take to ibm and go to the world government summit.

over to you. >> thank you. so joining the right now is the ibm ceo. the to have you with us in the uae of all places. look, i want to start off with a question that i think is dominating the discussions, which is vis-a-vis artificial intelligence. you cannot be a u.s. tech company if you are not seen to have a growing presence in a. how does an ovation keep up with demand -- innovation keep up with demand? arvind: i do think that ai is a transformative technology. a company cannot be attacked without a role in ai. we are focused on the beta be market, so we do not want to go b to c. you have to take advantage of an enterprise's private data. only 1% of enterprise data has

found its way into any form of model so far. that is the unlock that we want to do. as we bring the private data into models, whether it is used to define models or construct unique use cases, it unlocks a huge amount of value. joumanna: how has the arrival of deepseek disrupted the landscape? it was a model produced with a lower cost, but also equal utility as some of the larger models. is this a major game changer? arvind: i think it is a validation. we have been on this point that you do not have to spend so much money to get these models. if you are willing to make fit for purpose models we believe that the cause should be in the millions not hundreds of millions. so how do you distill models down to smaller sizes? get them unique for a purpose and then run them at 2% or 3%, 30 times cheaper. but as accurate and good for a

domain specific task. joumanna: do you think there could be a dame of reckoning for some of these big tech companies spending billions and tens of billions and a $100 billion on funds? arvind: probably. but i can tell you that find that the usage will explode as the cost comes down. maybe there is enough con -- quantity increase. joumanna: you have been a big supporter of open source models. in deepseek, that actually serves as a reason for the disruption to take place? what we have not seen a deepseek come to the market had there not been open source models? arvind: i do not believe so because there are enough models, not in the hundreds but definitely in the tens. it is hard to believe that there is an ecosystem that does not have a large model to start from. ideas spread. once there is an idea that gets pinned down the idea spreads.

once it happens more people are ready to copy it. joumanna: let me ask about regulation. i asked if innovation can keep up with demands. you think that regulation is keeping up with the innovation we are seeing? arvind: too much regulation early stifles innovation and does not allow those companies and those nations where the regulation is heavy to succeed. i think that the e.u. it is good at a lot of things but sometimes overregulation is an inhibitor on innovation. we should balance that. i think that is incredibly critical and i think about precision regulation as opposed to blunt force. be precise and take a risk based approach but only the most risky activities are regulated. so be more careful around life or death activities that allow innovation and customer service and productivity for your

program errors in terms of what we will do around improving the customer experience. maybe be careful in life or death activities. joumanna: let me ask you another question that is important in the context of tech innovation which is the rise of quantum computing. i thought it was interesting that in the investor day you said you updated the account -- the quantum computing roadmap and your aim at demonstrating the first quantum computer by 2028 is three years away. people are skeptical that that can be asked -- that can be achieved. arvind: we have 13 quantum computers on the cloud, all at 100 cubits, so they are very serious. we believe they will be on the roadmap to do that by 2028. and that is a commitment we made. i also believe that they will unlock a lot of value. we think half $1 trillion worth of value by the end of the decade. that is exciting.

materials, climate change, better fertilizers, better batteries, exciting areas. joumanna: do you believe that the world is so focused on one thing at a time we are not focusing enough on how quantum computing will disrupt our day-to-day lives? arvind: we can do our work and when we get there, it will be a moment, and that moment will be important. our customers are focused on it. we have 280 different people, companies and organizations that work with us. the state of illinois just announced the national quantum algorithmic center and multiple university startups and national labs all play a role. they will be running on our quantum computer and they will get others as well as they exist. and do that. i think that is the excitement. the fact that 280 institutions around the world are busy

learning how to use them does mean that they will be ready. joumanna: we are here at the uae and you were in saudi arabia recently. what opportunities are you seeing in this part of the world for ai growth and growth in your business. arvind: we are really bullish in both nations. i think the appetite for digital innovation for government services and the private sector is incredible. i think both nations have woken up that tech can be a big part of the economy. i think both of these nations want this to be 10% and they are investing appropriately. and you can look at the services they in both countries that are enabled by technology, the appetite for ai is massive. you look at the investments in the uae around ai and some of the falcon models. you look at saudi arabia with the alarm model.

i think it speaks for itself. joumanna: we will be seeing more of you. really good to chat to you. that was the ibm ceo speaking on the sidelines of the world government summit. jonathan: we appreciate it. a lot since -- a lot still to come, chairman powell on capitol hill in front of the senate banking committee. we will catch up with lauren of itr economics and sarah malik from new york city, this is bloomberg. ♪ so, what are yoinki i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch

...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. when i started walton goggins goggle glasses, i had no idea what i was doing. but godaddy airo does. using ai to build a logo, website and social content. so i can let the world know, if your goggles ain't goggins, they don't belong on your noggins!

jonathan: 60 minutes until the opening bell and equity futures just a little bit softer. down by 0.4%. nasdaz, down by .6. let us cross over to manus cranny for more. manus: you have a nice bed from phillips 66. it took a chunk out of bp. they are petting -- putting more pressure for it to deliver. they made us promises and step up and delivered to the plate and the $3 billion worth of customers you promise.

that stock is up 3.5%. raising prices by 9%. kellogg's, where are you on your syria or -- serial? do you go or not. kellogg's delivered and the talk about a challenging environment. the higher prices they are charging are not translating to more consumer buying. it is a bit of a conundrum. versus the challenges that you see in the market. jonathan: that stock is up by more than 5%. as we anticipate the opening bell from the senate banking committee you will hear from chairman powell volume one and volume two is tomorrow. running us now is michael mckee. you are there, what are you looking out for? mike: jay powell to do a greatest hits version of his oldies and not make a lot of news. that is going to be the goal. he is going to be talking to the

markets and passed the president and members of the senate and trying to make sure that the markets realize that nothing will happen very quickly. he does not want to move things around a lot. obviously he will be asked about the path of monetary policy and does not want to give a long-term forecast especially anything longer than tomorrow because i do not know the details of what the president will do, all of them together and the effect on the economy. his message will be simple, we are in good shape where we are with interest rates. we can go up if we need to or down, and right now the economy is in good shape but we do not need to. we can sit here and figure things out. one things i will point out in terms of market coverage is to watch the dollar and then inflation breakevens. we have seen the university of michigan inflation expectations number job over a one year --

jump over a one year period. one and five-year markets breakevens have jumped. they might be nervous at the mark -- that the fed will not hold out and they will have to raise rates and powell will try to talk them down. lisa: jay powell has been practiced out dodging questions on tariffs and his response to different policies coming out, less tested on what his view is on regulating the financial sector at a time where this administration has aggressively made moves to deregulate a lot of the banking oversight. do we have a sense of how jay powell could respond with how they are on board on that and doing similar moves on the fed side? mike: he will talk about the strength of the banking system and the fact they are in good shape and reviewing about what they should do. with michael bar's resignation the fed said that they would hold off until somebody is

appointed. probably means the end of the basel three endgame that would raise capital requirements, so he will try to take as neutral as stance given that it will be a flashpoint for both sides. watch elizabeth warren in the hearing. the other big one is going to be asked about is d.e.i.. the fed is -- jonathan: we might say softer touch but the bank say sensible regulation and that

is how they rate things. lisa: at a time where they think it went too far. some of the moves that we have seen have been far beyond what anybody expected including dismantling the consumer financial bureau of protection. a real question about whether the fed will lean into that five -- five. jonathan: lauren weighing in on the inflation data saying "much of the recent rise in price table -- levels have been driven by high shelter costs and sticky inflation on the service side. on mental factors include trends pointing to an uprising -- upcoming rise in inflation." what is that source? lauren: a number of factors, it is not just tariffs or trunk policies. we see the velocity of money increasing and the money supply that got attention when it was

contracting. we see gross treasury issuance and there is so much liquidity including the macro cycle demanding -- gaining steam. jonathan: in addition to interest rates cuts and is that contribute into the call at all? lauren: not directly. that is going to be stimulative and whenever we see the uptick in activity that is correlated with that heating up. a lot of these fundamental factors are deeper. it is things that we nerd out as economists and the leading indicators are in the books. i see tariffs and policies as upside risks but the fundamentals have been in a book -- in the books for a couple of years. lisa: where are you seeing evidence that consumers are expecting -- accepting higher prices when we pointed to coca-cola that pointed to more than 9% price increases. where else are you seeing consumers accepting needs? lauren: they do not want to.

right now is diverging. the interesting thing, the data says that wages are outpacing consumer price inflation. the consumer is having the ability and they are being much more value conscious whether they are looking for the lowest cost or brought -- bargain versus namebrand or buying in bulk where you can save. there is definitely a different mentality but retail sales are increasing on a deflated basis. we see that the consumer is spending more and broadly speaking we have the comfort that we can continue. lisa: what do you say to people who look back to the last trump administration when he came in and put tariffs on and we did not see rampant inflation and we saw slower snails and a hit to growth. why isn't that going to be the logical consequence of these different proposals? lauren: i do not expect to be

absolutely clear that we see the full price impact on imports. what we saw during 2018 we saw some front running and we see that these tariffs have been well signaled so importers are getting ahead of them. but, at the end of the day, they are giving domestic producers room to raise prices to take more margin. it is just a longer effect and it takes more time partially because of the front running and because those importers will absorb for a little while. they cannot do that indefinitely. annmarie: when it comes to tariffs if trump is always in a negotiating stance, will people just front run constantly? is that the theme for four years? lauren: it would be great to get some final information before the point. just for the intermediate term yes, until tariffs are imposed that is giving us that leeway or lead time. we are starting to see inventories recover and we had

an inventory cycle. we do see the momentum shifting back. in addition to foreign investment and reonshoring. jonathan: are you considering rate hikes? lauren: i would not be surprised if they were on the table by the end of this year. the fed let inflation get away from them once and they would not like to see that during the cycle. their ability to cut deep will be limited by the inflation picture. jonathan: how are they going to navigate that with everything that you've said in mind, that this could pick up by the end of the year? lauren: the fed does not always lead the cycle but they can respond. they will never jump on just one month or one quarter of data. jonathan: what do you think the wake-up call is? lauren: there is no threshold or panic. by mid year it will be several recorders of that kind of consistent grind and inflation

higher. jonathan: lauren of itr economics on the outlook. another first time we have heard the prospect of a rate hike being in-store. lisa: i am thinking about what is the trickle -- trigger points in the wake-up call and to put that back on the table which will be hugely disruptive according to positioning. it goes back to scott bessent and the 10-year treasury yield especially with the amount of that that the u.s. government has. if that gets away from the fed watch this space. i am guessing there will be some action. jonathan: the focus will be on tariffs, it will shift to taxes very quickly, in the year ahead. let us go to sarah who joins us with more on financial markets. join us -- i want to talk to you a little bit more about chairman powell later on. we could be talking about would -- rate hikes later this year. would you have that conversation? saira: we are expecting one to

two rate cuts. what markets are hoping is for the dust to settle on tech and tariffs. starting with technology, the concern over tech earnings is the amount of spending done on artificial intelligence and the impact from deepseek. and markets are year -- are nervous that u.s. tech companies are overspending and will be get the return on investment. on tariffs and questions are on negotiation tactics and will we have retaliation and who will bear the burden? i do not think it is just a negotiation tactic. we will see some retaliation and producers and consumers will see the cost. and the question is what does that mean for inflation? tariffs tend to cause a one time bump. whether or not the fed will look through that is for us to find out. lisa: we have gone over a lot of things whether it is the tech world, the tariffs and how that all goes together. what is your framework for how

you filter out some of the news that you get every day to understand how to prioritize the proposals from the white house, the earnings we are getting or the economic data? saira: we focus on fundamentals and looking at fourth-quarter fundamentals, they are going 12% year-over-year. then you have to look at valuations and here is an interesting tidbit that most and not expect, the european markets are outperforming u.s. markets. european markets are treat -- or cheaper because of the tech trade. tech has struggled this year and you are seeing the e.u. up from the u.s.. we need to be conscious of the fact that u.s. markets are trading at a 20% premium. you might say that is deservedly so, but going forward we have to think about sticky inflation and what does that mean. can the economy chug along with higher tariffs and also thinking about two other factors. taxes and the regulation which

are progrowth. areas that we are looking at that we like like small caps in the u.s.. they will perform better with tax cuts that are more positive and deregulation should open up the m&a markets. so looking at those areas of the world where there is valuation and fundamental support that will be increasingly important. lisa: that is controversial. a lot of people have said they do not like small caps because of the narrow pathway to be successful. how do you push back against that at a time when people think it is a real possibility that this federal reserve will not cut rates and you will not get the tax cuts and other progrowth policies weekly enough to give the boost to the sector? saira: oftentimes you make the most money when you go against consensus so i am pleased that other people do not like the call. it is important not just just focus on valuations because they can stay cheap born -- cheap or expensive. the small caps are cheap and

they have that catalyst. and that is some of the policies from trump that we expect. tax cuts help boost the u.s. economy and help the consumer continue to spend and creates operating leverage. we saw manufacturing data pick up which is also strong for operating leverage for small caps. do not forget about the strong dollar and negative for multinationals and positive for domestic companies and deregulation opens up and monai positive for small companies. those are the catalysts to help close that valuation gap between smaller and larger companies. annmarie: we have tariffs today and tax cuts will take months when especially when every congressman or congresswoman are king and queen of the hill and having tons of demands about what gets put in this package. saira: i agree. and we talk about tariffs today but there is still a lot of negotiation and we will have to

see what retaliation looks like. and who is going to bear the burden of those tariffs? i think they are the wildcard and it is what everybody is talking about. it could be a serious issue about how the fed reacts to that. the argument is that if it will get cpi and ppi down. i think the fed still has the room to cut one or two times as long inflation does not re-excel or light -- we accelerate. annmarie: we talked about how the tariffs are unjustified and will not go unanswered and will trigger firm and proportionate countermeasures. you talked about how the e.u. beat the united states. do you still think that is possible given this tit-for-tat between washington and brussels. saira: the offset for that of course will be going on with the technology sector with deepseek and lower-cost access to artificial intelligence and whether companies will monetize

their investments. if the tech negativity continues, i think it is positive for european markets and they do have that 40% discount versus the u.s. markets. they have valuation support and there are a couple of things that we have not talked about. first of all the return of the retail investor. last thursday was the third biggest trading volume for the past three years so i think that is good for small caps. that is important. that could be another ground for the markets and what everybody is talking about inflation but look at the 10 year settling down. the 10 year is telling you that bond markets are less concerned about inflation. jonathan: year 10 year bond yield, the nominal yield at 4.5393. we have seen inflation expectations just inched up a little bit over the past few weeks. lisa: it is the idea of 1, 2 or

five year out. inflation expectations are going up deutsche bank just put out this wonderful series of charts saying the u.s. has tolerated the erosion of manufacturing for exchange to access to cheap goods. but this game seems to be up and it goes back to the idea that if you excise cheap goods from china from the u.s. economy, you end up with a structurally higher inflationary environment and we have to think about it. jonathan: as for europe versus the united states, we have heard for a few voices and we have seen a squeeze. he said at the end of 2024 how far do you need to get a position squeeze to be more sustainable. we talked about this massive log position we have picked up over the last decade to rebalance that. you need to rebalance growth differentials. something needs to improve in europe and china and i am not sure we are seeing that.

lisa: that could be the shock and you raise the issue about a resolution to the ukraine and russia war. it is not just energy but a question of leadership and leadership changes especially on those heels. annmarie: that is a great point because there is literally paralysis and germany. they do not have leadership because they are facing down election at a time they are trying to go tit-for-tat the president of the united states. jonathan: and they are not in a position to respond. the euro is just about positive and pretty much unchanged. let us get you an update on stories elsewhere. dani: speaking of tariffs, president donald trump has ordered a 25% tariff on steel and aluminum imports. they go into effect on march 12 and will include finished metal products. trump insisted the move helps boost domestic production and bring jobs to the u.s.. meta has begun notifying staff

of job cuts, cutting 5% and terminating thousands of low performers. they are expected to expect 3600 people as part of the efficiency push and will create headcount for hiring new ai talent. elon musk's net worth dipped below $400 billion as tesla shares plummeted from their december record. his reinvention was a key driver for the stock postelection but it took a hit after dismal monthly sales. the tesla steak still makes up the largest portion of his net worth. and that is his brief. jonathan: we are counting you down to chairman powell on capitol hill in front of the senate banking committee and just about an hour from now. next we set you up for the day ahead. this is bloomberg. ♪

jonathan: the cleveland fed president with some rings to say. beth, you will know that name for the end of last year when she dissented to cut interest rates in december making a case to stay on hold for some time. "as long as a labor market remains healthy i am looking for broad-based evidence that inflation is sustainably returning to 2% before adjusting policy further." imagine if we heard that from chairman powell. lisa: that might cause a ramble -- a ripple. she gave some scenario analysis saying that the lingering risk comes from the strike of the consumer going back to coca-cola and what we saw. how much of this bolstering the hawkish view which is that they do not need to cut for the rest of the year? jonathan: chairman powell is the

one to watch in about an hour from now we will hear the fed chair kicking off his two day congressional testimony. the next up is cpi. thursday, ppi and another round of jobless claims on friday -- and another round of jobless claims. on friday, retail scale -- retails sales. joining us in washington is tyler kendall. we had a conversation with you about the prospect of additional tariffs and whether some countries and companies can secure a car. have we found one nation in lock? tyler: we might have, the white house confirming that president trump held a call with his australian counterpart. the white house said that the. discussed the idea of expanding defense industrial capacity and addressing "mutually beneficial trade" and concerns about competing with china especially since we know that a senior

administration official told us that part of these tariffs went in a place to bid -- to curb alleged efforts by china to circumvent some terrorists. it remains to be seen whether or not this will officially go into place as an exemption for australia. this all comes down to trade deficits which is why australia might be unlucky. president trump is looking to revitalize this domestic manufacturing but it remains to be seen if that could go against some of the campaign priorities as we watch for any inflationary impacts that could, head of the march 12 deadlines for the tariffs to go into place. jonathan: looking forward to your coverage. in the nation's capital, some countries will be able to negotiate this away and others in some continents. there might be a struggle. annmarie: if they had a trade deficit in the united states as a surplus like australia they potentially have a good bargaining hand when it comes to negotiating this away.

for others namely the european union which trump said that they have been an atrocity. it is not negotiated way easily and i think it will get worse when they talk about reciprocal tariffs. lisa: that is a reason why i think it will be interesting to how this way is on the view of policy. you are talking about the cleveland fed president. she talked about tariffs and said it is appropriate in light of tariffs to be patient with policy given the recent history with elevated inflation. the risks to the outlook appear askew to the outside and this is not a neutral stance but this does not speak to accommodation or easing. jonathan: we found one of those officials. i think we might have found one. lisa: this was back in december. jonathan: possibly. coming up congressman french hill of arkansas. anastasia of i capital and mohammed of queens college

cambridge, a stacked program as we count you down to cpi. this is bloomberg. ♪ where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management the way i approach work post fatherhood,

when has really trying toith understand the generation that we're building devices for. here in the comcast family, we're building an integrated in-home wifi solution for millions of families like my own. in the average household, there are dozens of connected devices. connectivity is a big part of my boys' lives. it brings people together in meaningful ways.

matt: anything can happen today and we are looking at futures down with 30 minutes to go. katie: bloomberg open interest starts right now. sonali: powell heads to capitol hill. the fed chair faces trust questions as trump policies push for caution. matt: sam oldman says openai is not for sale and blasts elon musk's tactics.