>> i would describe the data as somewhat concerning but not overly concerning. >> this is certainly not good news for the fed and the bond market and equity market is reacting accordingly. >> they should not overreact but there is nothing here that says inflation is cooling. >> the prospect for further rate cuts has diminished. >> markets low predictability. -- markets love predictably. we do not have that at the moment. >> this is "bloomberg surveillance" with jonathan

ferro, lisa abramowicz, and annmarie hordern. jonathan: bloomberg surveillance starts right now. your thursday scores looking like this. equity futures totally unchanged. on the nasdaq positive .1% after inflation came in hotter than expected yesterday. this morning you get another read on inflation. ppi together with jobless claims. jay powell says we want to keep policy restricted for now. economists are acting what it would take to hike. lisa: at a time you saw the fastest cpi growth back to november 2022. jay powell got comfort from one or does cope better readings, we can look past it. if you -- one or two bad readings, you can look past it. it comes at the most going back to 2022. it is little more than eh for a lot of people in the market. jonathan: the 10 year at 4.60 in

the middle of the range for 2025. this is the most fascinating market we have seen since the pandemic. yields were up off the back of cpi but the dollar was weaker and crude was lower. this headline crossed the bloomberg terminal at midday yesterday. president trump talks with president putin. annmarie: they had a call. the olive branch in opening up this relationship was the prisoner exchange and mark fogel coming back to the united states. trump said he had a lengthy call with them. they discussed energy, the middle east, the power of the dollar, and now he says talks will begin on ending this war any talk about individuals involved in that. secretary rubio, steven witkoff, other individuals and he said not just that putin would come to the united states, but their first meeting would be in the gulf in the kingdom. jonathan: i'm not sure the

european leaders feel this way but good news for the euro, stronger. energy lower. lisa: this was the potential tail risk for the euro region. this was the unknown question about how much this could single-handedly bolster the entire outlook for the european project. here is the question. bloomberg economic expects this plan could cost european governments $3 trillion to expand their nato presence at a time where they would have to do it in denmark with still elevated inflation. a huge question about how they would do this, whether they would be willing, and if they are really on board with the way the negotiations are going down. annmarie: there'll be a lot of criticism towards this administration especially when you have pete hegseth in europe saying data will not be a part of this which is a 180 from what we saw from the biden administration. officials are saying is a compromise. trump is just being realistic

about what can get done to end this war. jonathan: three days of euro strength. positive on the session by 131%. coming up we will catch up with julian emanuel of evercore. speak to nadia martin wygan. and steve ricchiuto who says the rate cutting cycle is over. julian emanuel of evercore writing "yesterday cpi reinforced the three steps forward, two steps back a volatile market environment that will be a part to the road to s&p 500 6800 at year end 2025. " jonathan: you wrote yesterday it is not the 1970's show. what is it? julian: it is 2025. every asset market has been in this volatile but range bound condition since the election.

we are trying to sort through the potential for stronger growth, the potential for geopolitical shift versus the potential for some of the policies being considered to be increased inflation and tracks on growth. the net out of it is we are in this waiting game for further developments. jonathan: can we talk about the potential for rate hikes? how high is that bar? julian: extremely high. first of all, expectations are still well anchored. there is a lot of volatility around the michigan survey, the new york fed survey is much more stable. the reality is when chairman powell thinks about his legacy, which he is likely to be in a different position next year, it is wrapped up in delivering the soft landing. a rate hike would be the thing

that disturbs the potential for a soft landing. again, history will say if inflation proves to be sticky into 2026 and we do not believe that is the case, we think this is much more like last spring where you had several months of sticky inflation than the path of travel continued lower. the policies of the current white house would be the cause of inflation if it were to remain sticky. lisa: which is the reason you wrote there is no plausible scenario where the fed hikes in 2025. i love that kind of conviction. can you put into some framework how much conviction you have in the three steps forward, two steps back that gives you the conviction to buy some of the two steps back because you have confidence in three steps forward? julian: look at the sentiment surveys.

there are a lot of bears. markets do not pop when there a lot of bears. people can say all they want about the positioning. there is still cash there. frankly, the way this market trades -- yesterday is a perfect example. it looked like the sky was falling at 8:35. and then basically people started reassessing and from our point of view, what was interesting is yesterday the things that stabilized the market were the things that actually should have been the worst performers. technology, long-duration, high multiple assets which should have been reacting badly against yields going up. they are secular earnings growers. lisa: i want to pick up on what you said that sentiment is so bearish. a lot of people disagree with you. some say positioning is bullish. scott at goldman sachs said

everyone is in the pool including retail traders, start of the year allocations, and corporate. everyone on the show says it will be volatile but buy buy buy. what makes you think there is any bearish sentiment? julian: the moment to moment reactions. people are very quick to sell. the market bounces back because of all of these reasons and the biggest reason we have not talked about is earnings will grow by 10% this year. when you have a condition where earnings will grow to that degree and a fed -- our base case is they still cut twice. they may not cut at all but they are not hiking. that is ok. all of that lends itself to the idea the bull market is not over. annmarie: you think they will cut twice. i have to ask about this being part of the 1970's that is

reminiscent of a fed chair getting under political pressure. julian: there is no question. i think chair powell was wondering whether we were replaying back to 2018 and that is a lot of the market action. from our perspective the fact is if you think about those numbers yesterday and you think about the fed as a two cited risk factor in terms of uncertainty, we don't one thing certain. the fed is likely not to be relevant until june. they will wait and they will ingest more data and that takes one thing off the table. from our point of view we do not think you will have what we have turned an uncooperative fed which would be a hike. jonathan: the fed does not want a hike. bank of america indicating if you do not want a hike to not cot. where are the cuts coming from?

julian: is this idea that the stickiness of inflation we have right now is not permanent the same way we saw it continuous travel lower after several months of stickiness last year. annmarie: how much more complicated is that picture get when you have tariffs coming down the pipeline, potentially today? julian: it gets a lot more complicated. the offset to that is i wonder if there is a bit of coincidence that the meeting between putin and trump likely to happen is happening in saudi arabia? grand central for setting the price of oil. we think about why donald trump was elected, it was because the u.s. population has been incredibly frustrated and stressed by inflation. he said it himself prior to the election. the easiest lever to pull is not the price of bacon and eggs or coffee, it is oil.

jonathan: the three biggest energy producers on the planet in the same place having talks coming very soon. annmarie: potentially very soon. the president put it out there. there is been for lamere discussions about this meeting in saudi arabia but the president put it out there. next week he is going to saudi arabia's sovereign wealth funds conference in miami. there is a lot of overtures and olive branches between saudi arabia and the united states and that could be the place between washington and moscow. jonathan: brent crude -1%. julian will be stiffing with us. for an update on stories elsewhere, here is dani burger. dani: starting with the details of that potential peace deal. donald trump and vladimir putin have agreed to begin negotiations for an end to the war in ukraine. trump added he had a conversation with ukraine's flow to ms. linsky and trump is open -- a conversation with you

keynes president zelenskyy. before that pizza -- before that pete hegseth said ukraine's membership in nato is unrealistic and ukraine would have to accept the loss of territory. honda and nissan have called off talks to merge. french automaker set the terms of the deal were unacceptable. private equity firm kkr is said to be investing in nissan to approve its financial position. fans of hit shows like severance and ted lasso, good news for you, if you do not have an iphone you no longer needed to watch on the go. apple has made his app available on the google play store. apple rarely offers services on its biggest competitors. this assignment wants to broaden its subscriber base. jonathan: for it is a sign they're worried about things to come where they are forced to do things like this. lisa: we have seen that from china but we have seen that from your. maybe weighted to the content.

jonathan: more from dani in about 30 minutes. up next, negotiating with putin. >> i will be dealing with president putin on the phone and we expect to meet. we will expect people come here and i will go there. we want to end that war. jonathan: team coverage up next with bloomberg's tyler kendall and oliver cook. 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: president trump this time yesterday morning, "interest rate should be lowered." inflation did not help. equity futures on the s&p 500 totally unchanged and totally unfazed at the index level by yesterday's data in the run-up in bond yields. we are down two basis points on

the session. it is a break of 4.60. under surveillance this morning, negotiating with putin. >> i will be dealing with president putin, largely on the phone and we ultimately expect to meet. we expect he will come here and i will go there and we will meet in saudi arabia. we'll meet in saudi arabia and see if we can get something done. we want to end that war. jonathan: president trump and russian president vladimir putin agreeing to negotiate an end to the war in ukraine. the comments coming after defense secretary pete hegseth told nato allies ukraine we need to accept the loss of some territory. our team coverage starts now with bloomberg's tyler kendall in washington and oliver crook in munich. i want to come to you first in the munich security conference. how are the europeans responding to the developing's of last what he for hours? oliver: i think they are still

scrambling to figure out how to respond. there is still a lot of shock and awe from the europeans. i don't understand why they are so surprised. it is fairly clear what the trump administration was going to do. what is becoming more and more explicit is donald trump i himself is setting the table, he is choosing who he is going to invite and at the end of the day he will want to send the bill to the europeans. to the europeans being with the trump administration, all of whom will be here over the next few days, for those europeans hoping to have a conversation to have input on what this plan looks like, i think they are darling back that expectation in realizing this is not the world of the former united states. this should not be a complete shock but they need to figure out what their points of leverage, otherwise this will be dictated by the president of the united states, the plan for ukraine. they keep saying no plan for ukraine without ukraine at the table. increasingly it is the europeans not at the table. this is a real concern for the leaders and that is who we will

talk to over the next few days. whether it is the foreign ministers or other participants. annmarie: it is not surprising giving the rhetoric we saw from donald trump on the campaign trail. walk us through what trump outlined when it comes to ending this conflict. julian: as you note -- tyler: this is considered to be a reversal in u.s. policy. under the prior administration that opted against a contact between u.s. and russia, opting for ukraine to take the lead. president trump said his conversation with putin was lengthy and productive and these negotiations would start immediately. you also heard secretary of state marco rubio hours after these comments by pete hegseth that is creating some concerns about if this could give away any negotiating power. president trump during his remarks yesterday dismissed those concerns, saying ultimately this needs to happen, needs to be brought to the table in order to make progress.

you are the one that broke the story that scott bessent traveled to ukraine to present this economic cooperation agreement we are getting more details about which could ultimately result in more critical minerals coming into the u.s. that could be something that is critically important to securing additional u.s. assistance for the country, something president trump has pledged. as you know this is an issue that has large divided the republican conference and could need extra support. one of the staunchest opponents to additional eight ukraine when he was in congress was vice president jd vance. lisa: there's also a question about the economic plan, how it would affect the u.s. and ukraine, who it leaves out, maybe europe. going forward, what it means in terms of the potential to join nato, the potential to join the whole region's economic system. you get the sense european leaders are on board with some

of what we have heard out of the u.s. and ministration leaders? oliver: this is what they need to reevaluate and come to a collective view upon. there are so many questions. the military buildup -- that will cost about $3 trillion if the europeans want to get serious about their military buildup. at a moment there is fiscal strain across all of europe, everybody is combating within governments. you want to up the spending on the military to 5% of gdp. that will be a very challenging thing to do. there is the other question about security guarantees. when the president of ukraine says that security guarantees without the united states do not mean anything, that is something the europeans need to reckon with. if there is a grain of truth to that they need to figure out how to sort that out. the real question is going to be peacekeeping troops in ukraine, if there is a cease-fire deal what will the story be there?

united states as they do not want any u.s. troops. they want to see european troops . i've spoken to senior lawmakers in germany, people who are very hawkish. they say them to -- they say them may be a shade too far to put german troops there. these are all the issues europeans will have to come to consensus. this is a situation in which europe has been waiting for the united states to act. right now it is sprinting ahead and the europeans need to figure out how to have a coalesced approach to deal with it. jonathan: latest from the bloomberg team. let's park the politics and focus on the market pricing in the distribution of risks. right now the euro is stronger. julian emanuel is still with us. i'm not sure it is in many people's baseline, the trade relations between europe and russia normalized but it is not zero and the chances went up. as you reprice that story does that contribute to lifting the

cloud over european stocks and assets? julian: absolutely. the market has gotten ahead of it. you've seen european shares outperform. there are takes around all of this. if you had had normalization and a workable truce, it has to be a positive for asset markets. lisa: there was an argument at the beginning of the year that the bar was so low for european assets to get some love that you might as well go there, especially how high prices were in the u.s.. does that story hold true? julian: it does but this is one of those be careful how you approach it. if you look at that line, the relative relationship between u.s. markets and european markets has been a steady downtrend for a decade. there has been some stabilization.

if you had some sort of major catalyst that changes mood. going back to the earlier catalyst, the abolishment of negative interest rate protocol was the last time. to have that definitely lifts the cloud and it is part of why as much disarray as there is politically in europe you are seeing asset markets -- lisa: there are so many potential unintended consequences of this policy. the $3 trillion of spending the eu might need to do to bolster its security apparatus is a big part of it. how much do expect that to be financed through debt and how does that change the picture through the ecb and the european debt market? julian: the first element is it likely improves the growth trajectory across the continent. will it be financed through

that? in all likelihood that would be a large part of it. will it cause the ecb to rethink its rate cut trajectory? absolutely. that is part of what is going on in all asset markets right now because policy is rolling out and consequences and decisions are happening in real time. annmarie: if you are an investor do you want to be exposed to europe at this moment? julian: we think you dip your tote in. most global asset allocators have been underweight europe for the better part of a decade. what happens very often is when the catalyst comes, the door to get in is far too small for everyone who wants it. we think it is time to start gently buying. annmarie: there been problems

with the german economy. to this open the door to a revitalization of german manufacturing? julian: that is more complex. europe is largely dependent on that neutral relationship. china is a very large question mark in terms of demand. jonathan: is always good to see you. so much going on. julian emanuel of evercore. it is amazing to see the complaints from european leaders. i'm not sure they are in position to complain. they've made poor -- you of incoming president offering a solution. offer your solution. this war is not popular and i sense a distinction between how european leaders feel about things now the people of europe and ukraine might feel. annmarie: i was in ukraine over the summer and in the polls and on the street you can tell people were frustrated.

they wanted this war to end. what i find fascinating about europe is how are they shocked. i was writing how the trump campaign lawyer going to force them to spend more on defense. if you want to be in the driver seat of negotiations you have to be the ones with the pocket, the deep pockets to drive those negotiations and actually have a defense sector. jonathan: the euro is stronger on the back of this news three third consecutive session. euro-dollar higher one third of 1%. lots to talk about in the energy market. in just a moment we'll catch up with nadia martin wiggen is energy markets react to the prospect of peace in ukraine. 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

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jonathan: fees, no drama at all. at the index levels things have been ok. we erase the post cpi losses. on the nasdaq 100 come up .2%. when we did see damage was in the bond market. two year, 10 year, 30 year. 10-year higher. 4.60, right back in the middle of the range for the year. low end 4.40. high end close to 4.80. i'm already thinking about march

19. the next federal reserve meeting in the middle of next month. they have to come out with new forecasts. risks have to be skewed to lower interest rates forecast to taking out some of those interest rate cuts to 2025. a higher interest rate forecast for the year ahead. i would also look at the long dollar as well. the neutral rate as chariman powell starts to question that in his testimony. lisa: there is a feeling this is a fed that is assessing how strong growth is and how much inflationary pressure there is. one of the big pressures that emerge from yesterday's hearing and the fed rhetoric, chicago fed president austin goolsby, atlanta fed president raphael bostic talking about one month of data, two months of data, they can dismiss that. we are getting three months of data that is significantly hotter. it represents something else that is more of a trend and have to address in the forecast. jonathan: the hottest month of

her month print going back to august 2023. it was a very different story elsewhere. after we got the headline that we had talks between putin and trump, the euro stronger, crude lower. you're a stronger 1%. brent crude down 74.32. lisa: it was kit jukes who said he could see the euro-dollar cross 1.15 if you did get an agreement between ukraine and russia. this has to do not only with cheaper oil prices for the or region, it also has to do with the supply chain of workers that came from ukraine as well as sentiment. if that happens, how does that bolster the idea europe is placed to invest at a time earlier this year everyone had left it for debt. jonathan: we are already at all-time highs. germany is rallying at double digits. you need more than just that? lisa: this is where it becomes incredibly complicated.

one part of that bet was the ecb would keep cutting rates. julian emanuel saying if you end up with an agreement that forces the european to borrow $3 trillion of debt you might not get those rate cuts that changes the investing paradigm. a lot of uncertainty and unintended consequences. jonathan: the euro stronger for third consecutive session. a judge clearing the way for the trump administration's federal worker buyout plan to move forward, saying "labor unions do not have legal standing to sue." about 3% of employees taking the offer, falling short of their goal of 5% to 10%. annmarie: a 3% cut to the federal workforce would only bring the numbers down to 2023. the workforce grew more than 6% under the biden administration fueled by pandemic spending. there is a detail i will be watching on capitol hill. the government is currently only funded until march. it raises concerns on whether or

not they can back these commitments to people that with a will get paid until september if right now the government only technically has the money to spend until march. lisa: we have talked a lot about doge and the effort to cut costs. the conversation will be how much does this offset what they are planning on the spending side of things? after a soft 10 year auction i am looking at the not simple -- blessed the nuts and bolts and more on what this means for the balance sheet. jonathan: the deficit grew by $199 billion in january. the deficit as a percentage of gdp come the treasury secretary would like a close to 3%. it was 6.5% in 2024. that is a problem. lisa: especially when you have projections that you could see a deficit of 7.5% if this deal goes through as it is currently scheduled. i understand this is emotional, it will be through the courts.

in the meantime there is a real question about whether it moves the needle when it comes to cost savings required. jonathan: that is a very real problem that needs addressing. speaking of things that are coming, president donald trump saying he would sign reciprocal tariffs as soon as this morning. the president set to sign executive orders at 1:00 p.m. eastern time ahead of his meeting with the indian prime minister. at the white house i wonder if india might be a target for some of these reciprocal tariffs? annmarie: they could be. india's rate for u.s. imports is 12%, the u.s. rate for indian import is 2.2%. but prime minister modi is coming prepared with additional tariff cuts ahead of the meeting. when it comes to reciprocal tariffs my question is how are they going to do this? it is very difficult in one sweeping executive order to go line by line, reciprocal tariffs for each individual country and industries. likely what this will mean is a lot of work for u.s. ambassador

jamieson greer once he is confirmed and using the 301 the administration used in trump 1.0 when it came to china. lisa: i wonder how many days we will get with donald trump looking at things to sign. jonathan: it kind of sounded like you said he was looking for things to sign. lisa: plastic straws. we are talking about these things that sound like pet peeves. you go to a restaurant and you hate the paper straws, executive order. at what point are these real versus it there and sign a lot of things? jonathan: i think he refocuses the mind when it comes to places like california. let's focus on making sure there's enough water when there's wildfire. lisa: i don't think the conversation in the popular mindset went from plastic straws to california. jonathan: he is very frustrated about what is taking place on the west coast, a lot of californians are very frustrated. lisa: i think you are right and

when you spit it forward there is a question of signaling and a sense of frustration versus actual policy. that is my point. there are proclamations to set a tone. at what point can we view them as what will be in effect in it or three months time? jonathan: agreed. let's focus on the big issue. donald trump and vladimir putin a great to start negotiating on the end to the war in ukraine. trump saying they had a lengthy and highly productive phone call yesterday. annmarie: obviously ukraine was the star of this conversation and the focal point but they discussed ai, the power of the dollar. trump is saying he has this team around him and they're ready to start these negotiations. president zelenskyy was speaking to economist and he said he had not had a ton of outreach from the trump administration but he did this week with secretary of the treasury scott bessent going to kyiv. trump was trying to pull all levers.

the big issue he is going to have is the europeans and oliver crook just walk us through some of the criticism from europe, especially when it comes to the likes of nato not being welcoming anymore according to the united states when it comes to ukraine. the issue is the europeans are the ones that want to be in the driver seat but they are not the ones willing to pay for everything that is been going on. jonathan: frank is down more than 1%. similar move on wti. $70.50. shorting us to discuss is nadia martin wiggen. let's talk about the developer and's of the last 44 hours. what is a change for this energy market? nadia: right now it has brought to the forefront that discussions are underway and the munich meeting from february 14 to february 16, the pressure is on europe to get its act together. what we see on the market side is equity markets already pricing in peace in ukraine.

when we look at the commodities markets they are not exhibiting that same type of pressure. oil is a bit under pressure but if we actually had the real semblance of peace we would be trading in the low 70's, at least the bottom of the range we been experiencing. we would have much lower natural gas prices. so far the market in terms of the commodity traders do not believe it. brent crude is still highly backward dated. annmarie: do they not believe there be a peace agreement or they did not believe russian energy will flow as it once did? nadia: the first part is whether there will be a peace agreement and how quickly. it is impossible for europe to agree on how they will handle this peace agreement before the german elections. that is in 10 days. then they can work together and try to figure out what the peace agreement would look like in terms of enforcement. this is part of what the munich

security council agree. in their own notes and preparatory detail they say they have to come up with an ironclad security guarantee that donald trump has said and pete hegseth has said does not include the u.s. on the front line. they have to agree together. in terms of the energy side, that is what the german election is considering as well. we have the political party, the afd, that is much more pro-putin than the other parties. they are willing to step away from nato and they would like to have that energy flowing again to make a industry more competitive. that on the flipside you have other parties that do not trust the russians and belief we have to build europe going forward. the 5% gdp spending that can really work on the industrial engine of europe, building these arms. germany creates things, norway creates things.

norway is not part of the eu. the u.k. is not part of the eu. they have to pull themselves together. when we see trump's tactics he is being very tough on his allies and asking them to step up versus his actual adversaries. he is consistent and putting the pressure on europe and going along listening to what prudent wants. he is being very rough on canada in terms of tariffs compared to how he is been on china when we know his ultimate goal is to be tougher on china and he does not like that relationship between russia and germany being close. he made that very clear in trump 1.0 that he did not like this energy dependency. scott bessent is in ukraine showing the u.s. is open for business. they will sell oil and gas to europe and they will take in exchange as a load rare-earth minerals from ukraine. he is a transactional president

and it makes sense. annmarie: one adversary trump has been tough on is the iranians and the crude they shipped to china. when you look at the oil market how are you starting to factor in maximum pressure under this ministration? nadia: this is where we have seen that playing out more on the shipping side. trump had success in trump 1.0 in being tough on the iranians. that is where the crude markets believe the most in the iranian maximum pressure scenario. russia is such a huge producer that russian oil has always tended to get out somehow, even though it is in a tougher way. on that side we are looking at a loss of one million barrels per day of production. trump also wants the salys to step in at -- the saudis to sep in and produce more oil. they have a memory of trump 1.0

where he granted a six month grace period for countries taking iranian oil. the russians and american companies brought back to .5 million barrels a day of oil in anticipation of this outage of iranian oil and crude prices collapsed. it is a much tougher negotiating tool this time to push the saudis. the saudis have been very protective of the russians. it is not by accident a meeting between trump and prudent will probably start in -- between trump and putin will start in saudi arabia. lisa: what is the chance we could get normalization of european union nations with russia to allow russian natural gas to flow through ukraine into the european union? nadia: right now a european perspective, what has been laid out in terms of peace sounds much more like surrender for ukraine.

there has to be an understanding there will be a ukraine and it will be -- jonathan: we will leave it there. i appreciate your time. i've heard a lot from the europeans. we should respect their position. this at their doorstep. the perspective of the ukrainian. not in this enough has been the american perspective. let's get into that. we talk about the deficit in america. 6.4% of gdp. the deficit in january pushing 130 billion u.s. dollars. defense is $800 billion plus per year. a lot of money going to defense. i was just speaking to someone about this. this is happening as the europeans have been underfunding defense for years and even over the last 12 months have been buying record amounts of russian lng. those numbers have been going up over the last few months. it is problematic.

we look at all of the numbers come you want the americans to provide you defense and continue contributing towards a war when they are a massive budget deficit and you are not following up and doing the same thing. you want the americans to stay out of this and give you a seat at the table at the same time you are buying record amounts of russian lng and funding this work with ukrainians and you want the americans to fill the gap. can you make sense of that for me? i mentioned vice president jd vance will go to munich and probably push that case. lisa: this'll be up -- annmarie: this'll be a very different munich security conference with trump officials then biden officials. trump has been hammering germany, he hammered angela merkel on nord stream 2 because of this fact. why are we spending so much money on nato which is supposed to defend the european union against russia when your entire economy is enslaved to cheap russian fossil fuels? that has been is argument for years. he wants this war to end and he

is giving putin an offramp. one criticism i did here is a lot of republicans bashed the biden administration showing their cards too much and they are saying is he showing the cards too much in terms about letting ukraine join nato. jonathan: let's get you update on stories elsewhere with your bloomberg brief. here is dani burger. dani: donald trump and india's prime minister are said to meet at the white house today. the leaders are expected to discuss trade, including trump's terror threats. modi made a series of moves to avoid those trade tensions. india/tariffs while agreeing to take undocumented migrants and boost purchases of u.s. energy. house republicans have loaded a plan to cut taxes over the next 10 years and raise the debt limit. the plan does require $1.5 trillion in spending cuts in programs like medicaid, obamacare, and food stamps.

the republican narrow majority likely makes passing the bill difficult. popular weight loss drug ozempic appears to have uses that go beyond limiting appetite. the medication reduced alcohol cravings and a small study of adults with alcohol use disorder. findings may be a step forward in the treatment of alcoholism which affects 20 million u.s. adults. that is were brief. jonathan: up next, chasing 2%. >> we are close but not there on inflation. we've have made progress towards 2%. we want to give policy restrictive for now. jonathan: conversation up next with steve ricchiuto. this is bloomberg. ♪

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jonathan: here's the post from

donald trump this morning. three great weeks, perhaps the best ever but today is the big one. reciprocal tariffs. make america great. lisa: we wait to see what this actually looks like. there are questions about what this means given we've already seen a lot of tariff announcements. annmarie: today is mag, i guess he missed again. i wonder if this will give more scope to the incoming ustr ambassador jamieson greer to go through line by line with the president is trying to get. i was looking get something he said on the campaign trail but he wants tariffs like for like and eye for eye. steve ricchiuto joining us around the table. it's talk about the headlines we've just seen from the president. this is reciprocal tariffs. it comes at a time when we have had hotter than expected cpi. what was concerning about that print for you?

steven: the extended period at which the core cpi numbers are running on the hotter side on a year-over-year basis. everyone is looking for a base effect rolloff and everyone looks for an excuse for the individual component to drive the report. the reality is this is an index for a reason. we look at the line item components they cannot be seasonally adjusted. we have to aggregate them to seasonally adjust. ignoring something because it is volatile is an inappropriate way to do with monetary policy. an inappropriate way to deal with economics. jonathan: you're excepting the data for what it is. let's incorporate something into the outlook. a change in policy. what is the contribution of these tariffs going to be? steven: this is a difficult component because the dollar is firm and the global economy is weak. you look at the response of china to the tariffs donald trump has imposed, the additional 10%.

it is a very muted response back it reflects the fact there is a global supply of tradable goods and as a result of covid we have diversified supply chains. we have a more excess supply of goods and we've ever had before. there is offsetting pressures. we cannot say we have bumped this component up therefore we will bump this up. the fact that margins are going to be squeezed. lisa: do you think the tariffs will be passed on to the consumer, at least a one-off hit? steven: it is possible. it is not definite and it depends on how tight the labor market is, whether the consumer matters or it bothers the consumer. what took joe biden down in my assessment is not inflation, it was the level of prices. it was level of price and the fact that real disposable income was squeezed under the biden administration. if you're in an environment where prices are going up in your income is going up in your purchasing power is expanding,

do you mind? the answer is probably not. that is the end game this administration is going for. steven: -- annmarie: bank of america came out and said the dollar may not like tariffs because of full retaliation. how vulnerable do you think the u.s. is to retaliation? steven: i think the global economy being as weak as it is reduces the ability of people to respond back. we are the buyer of last resort. therefore there is a certain amount of power imposed or implied by that. the administration is pushing that envelope. there is no doubt about that. how long can they push it and how far can they push it? they will find out. the federal reserve is pushing the envelope as well. the chairman continuously talks about the fact he believes monetary policy is restrictive yet he began cutting rates when the economy was running above trend, he began cutting rates when inflation was running well

above the fed target. now we're in a situation where policy is more accommodative. lisa: julian emanuel it was on the show about 15 minutes ago and he had written there is no plausible scenario where the fed hikes in 2025. do you agree? steven: there is a plausible scenario, there is not a statistically viable scenario. what i think you need to get the fed to hike rates in 2025 is the unemployment rate to move significantly below 4%. 3.8. once you get back to 3.8% you've taken off the uptick in the on employment rate they responded to and cutting rates out of the equation so they do not have that argument. then you take the 10-year note. if the 10-year note pushes about five than their argument inflation expectations are anchored goes away. then you have a reason. you have a sufficient condition, the 10-year note. you will not get the 10-year note unless you get the unemployment rate. that is the key thing to watch.

if your employment rate starts to move down the markets will jump the gun and price it in. jonathan: you know inflation bottomed in the last months? september when the fed started cutting interest rates. lisa: j how said the reason -- jay powell said the reason why is not due to increased expectations, but the increase in yields was due to other concerns. discounting the argument implicit in what you just said. jonathan: is he giving a nod to politics? were we thinking about that in the middle of september? lisa: he is saying it is not my fault. jonathan: adam posen joins us in about 60 minutes. steve ricchiuto, good to see you. in the next hour we will catch up with chuck lieberman of advisors capital management come and adam posen at the peterson institute. what will it take for the fed to raise rates? from new york city, the second

hour of "bloomberg surveillance" is next. ♪ 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

>> markets don't see too much permanence in the tariff impact yet and that is where we feel there may be. >> what extent the tariffs get passed on to the u.s. consumer. >> this is a new type of shock on the tariff side. >> we have to be thinking about the tariff environment as a retaliatory one.

>> you always expect the unexpected with this administration, and ultimately i think we will head in the right direction. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: this is shaping up to be a very interesting morning. the s&p 500, a total snooze. going absolutely nowhere. equity futures unchanged. the nasdaq posited by about 1%. your day ahead looks like this. in 90 minutes, we get economic data. ppi and jobless claims. at 1:00 p.m. eastern, the president signing executive orders. that gets interesting because of this. from the president of the united states on truth social posting, three great reeks, perhaps the best ever -- great weeks, perhaps the best ever, but today is perhaps the best, reciprocal tariffs. lisa: people are expecting an announcement of how there will be a tit-for-tat. mine item by line adam. -- line item. what i am the most curious about

is the market's response. now it is muted being treated as a signal not necessarily what will get through. to me, that is what i will be watching. annmarie: jonathan, you made the point clear earlier. it makes sense he is doing this today as potentially the signal you are talking about because the indian prime minister will be at the white house and there are already reports that he's coming in with a gift. he wants to cut the trade-weighted basis tariff on u.s. imports. this is potentially a signal to everyone else who wants to do deals with a transactional president of the united states that they need to come prepared. this is what he will be looking at. jonathan: always try to identify pockets of tension. the euro-dollar retracing some of the again this morning down to about 1.0399. up on the session but not as high as we work. on the good side of the euro, prospects of peace talks between the president of the united states and of the russian president that would hopefully include ukraine. part two, reciprocal tariffs hit

europe hard. lisa: what is fascinating is the tension that we expected to be between the u.s. and china, we expected that to be the focal point of the trade war. so far, we have heard better talk between xi jinping and president trump. it's europe that has been in the firing line consistently. whether it is tension around the ukraine-russia discussions or tariffs, and that tension you can feel playing into this currency pair. annmarie: the china tariffs are the only ones right now that have stuck. 10% additional tariffs on chinese imports coming to the united states are the only ones that have stuck. everyone says that this is an opening and at the same time trump is trying to use china for two big issues. one, the middle east and trying to clamp down on the iranian crew that is really only going to china. and put pressure on putin to go to the negotiating table when it goes to ukraine. jonathan: the equity market is

unchanged. down by 0.02% this thursday morning. coming up, we catch up with chuck lieberman of advisors capital management as markets confront hot inflation. and adam posen of the peterson institute on why the fed is priming itself to be behind the curve. don't miss that conversation. we begin with stocks little changed ahead of another round of economic data. chuck lieberman saying, interest rates are likely to rise further, likely breaking 5% for the 10-year this year. with such forces it is very doubtful stocks can repeat the large gains of the last two years. chuck joins us for more. welcome to the program. if we could take the last 24 hours as an example, bond yields rose close to double digits on the 10-year and the equity market that with it ok. what you think ultimately changes? chuck: i'm not sure it does change. the market understands what's going on with the economy.we see

. a lot of questions about why the fed lowered rates when it did in the late stages of 2024. and looking ahead, it is likely that inflation is not going to continue to moderate as the fed hoped and forecast. instead, the market sees what is going on, sees labor market -- you've had people talking about tariffs working against inflation. so, i think investors understand what's happening. as things play out, they will react to surprises. so far, there haven't been big surprises. jonathan: the 10 year is at 4.60. if we get a 5%, what do you think that means for equities? chuck: it also depends on how we get there. if we see some really big increases in inflation, that will be very disturbing. we will get there very quickly. that would be very damaging to stock

prices. we see a sharp downward movement in stock prices. if we do it gradually, and that seems to be the more likely course, we won't see a surge in inflation. that would be manageable. i think that is what the market is expecting. lisa: we heard yesterday from fed chair jerome powell who said that there's no evidence that long rates went up because of inflation. do you agree? chuck: why did they go up, then? the deficit is well known. it is huge. they continue to come to market. we see that and we know that. inflation is the potential for more surprise. the fed has been telling us that inflation is headed towards 2%, although they don't think that we will get there very quickly. there's no doubt that investors have no confidence that will happen. there's no reason i think that will happen with the unemployment ticking down and

job growth being solid. i don't see it. lisa: it seems as though talk about tariffs or the deficit and what is going on with fed policy, there is a lack of understanding around inflation, where we are, what causes it, how much we are going back to something of a low inflation-type of rate. how do you immunize what you invest in to all of those potential variables at a time when it's clear that we don't have a sense of where inflation is going to be but companies are still delivering earnings? chuck: because companies are delivering earnings, it is a solid foundation for the stock market. one of the things where we are looking to invest his companies that are, shall we say, leveraged to inflation or immunized from inflation. companies that own tangible, real assets we are higher inflation benefits them. a perfect example would be oil and gas pipelines. those are hard assets.

inflation enables them to raise tariffs on the transportation charges, and they become more profitable. they have financing costs that have been locked in place. those are fixed. their profitability improves. the same analysis applies to real estate investment trusts. they also own tangible assets and higher inflation pushes rents up. the biggest cost is the mortgage expense which is fixed. there are ways to play this to benefit from inflation. lisa: you talk about some of these areas that are often thought of as interest-rate sensitive. are they no longer interest-rate sensitive because of turning out their debt? or are you saying that this economy has a neutral rate far above what we see right now at a time when we are able to continue to grow 2.5% to 3% even where we are? chuck: i think that you have the nail on the head. we do have a higher real rate or equilibrium real rate.

it's incorrect to think that real interest rates are restrictive, which is the position the fed has taken. they look at the cost of overnight money relative to inflation. long rates are the key interest-rate, that is the one that determines capital investment decisions and affects mortgage rates. that's the one that drives the economy. it would be hard to make the case that real long-term interest rates are problem for the economy. the economy has been doing well even with prevailing interest rates. i don't see that. annmarie: we know this administration is targeting a lower 10 year yield. do their policies match what they would like to see? chuck: everyone engages in wishful thinking. the fed is engaging in wishful thinking that inflation can come down to 2% in the longer term. the administration would like long-term interest rates to go down.i would like to play quarterback for the new york giants.

none of that is going to necessarily happen. jonathan: the jets need a new quarterback. maybe you can make that happen. chuck: i think the giants dude, too. jonathan: we will have a conversation about what it takes to raise interest rates later when we catch up with adam posen. the team at deutsche bank put out a notice yesterday. what would it take? they say, downside risk to the labor market needs to be extinguished, core pce acceleration with the twig celebrate about 3% in year-over-year terms. lisa: and the unemployment rate going down to 3.8%. which isn't that far from where we are now. key question is, are policies we are tracking going to affect this? if tariffs are gradually put on it could be more inflationary, because people could gradually absorb the prices. jonathan: our tariffs are coming , apparently. in the equity market on the s&p we are totally unchanged. your bloomberg brief, here is dani burger.

dani: a look at the post from president trump who is expected to announce a round of reciprocal tariffs on truth social. saying that today is the big one after promising to approve measures sometime this week. according to the white house schedule, trump is set to sign executive orders at 1:00 eastern ahead of the meeting with india's prime minister modi. elsewhere, president trump's voluntary resignation program has officially closed with about 75,000 often in. that is short of the goal of 5% to 10% of the 2.4 million civilian federal workforce. it allows workers to leave in february but stay on the federal payroll through september. egg prices surged 50% in january as the bird flu killed millions of chickens. prices are up 55% compared to last year and broke a record in recent months with the cost of a dozen averaging to seven dollars 30 four cents nationally. the white house national economic council director said that the administration is working on a plan to address bird for. that is your brief. jonathan: more from dani and 30

minutes. the news flow of the last one he for hours is remarkable. the next 24 hours may be no different. reciprocal tariffs on the way. pres. trump: we will be signing reciprocal tariffs are the world has taken advantage of the united states for many years. they have charged as massive tariffs and we haven't charged them. jonathan: we will catch up with don schneider of piper sandler. this is bloomberg. ♪

jonathan: euro-dollar intraday getting whipsawed. right now of the session highs, 1.0390. reciprocal tariffs. pres. trump: we will be signing

reciprocal tariffs. the world has taken advantage of the united states for many years. they have charged as massive tariffs and we haven't charged them. as you know, i just did something with steel and aluminum, 25%. that will go up at some point, but 25%, which will level the playing field quite a bit. jonathan: president donald trump announcing reciprocal tariffs are coming, posting on truth social, "three great weeks, perhaps the best ever, but today is the big one. reciprocal tariffs." tyler, what can we expect and when can we expect it? tyler: president trump has said that this idea for him is simple. if they charge us we will charge and then. it doesn't appear off the bat there would be any exemptions, although they are trying to figure out if some countries or industries may be exempted. there are preliminary reporting that mike johnson has suggested that there have been some meetings that some industries,

including pharmaceuticals, may get an exemption. the big question is still there, but we know that the white house press secretary says that she expects the tariffs to go into place before prime minister modi comes to the white house later today. that welcome ceremony is scheduled for 4:00 p.m. eastern. we know from the official white house schedule that president trump is expected to sign executive orders at 1:00 p.m. eastern, so we will be watching the clock around that time if there will be further guidance to win that is when he ends up signing the tariffs. annmarie: india, a trade-weighted basis, india is 12% and the u.s. is 2.2%. what can we expect out of the trump-modi meeting? tyler: we are expecting tariffs to come up and what this could mean for the future of trade relations. we know that ahead of this, india was looking to start slashing some of its tariffs, including on everything from motorcycles to luxury cars come in a bid to try to appease president trump ahead of the

meeting. we know that they're looking to boost u.s. exports when it comes to lng and purchasing defense weapons from the u.s. is very clear that these negotiations were beginning before modi got here on the ground as he tries to make the bid to lessen the blow when it comes to these anticipated reciprocal tariffs. bloomberg economics is estimating that it is emerging economies that will likely face the brunt of them when they are implemented. jonathan: thank you, appreciate it. from the nation's capital in washington, d.c. to extend the conversation, don schneider. i'm sure you heard that today is the big one, reciprocal tariffs. who is the target? don: thank you for having me. india would be a primary target and i would expect brazil as well. the eu trump has issues with. there are range of countries. two approaches. one you threaten tariffs in order to get non-tariff or

non-trade concessions, like we saw with canada and mexico. then a broader effort towards an industrial policy, revenue collection, and on shoring. i see the reciprocal tariffs in between. a bit of both. if you threaten tariffs trump is more than happy to put them on. if other countries want to lower the terrace barriers, great. if not, i think that he sees these as corrective for the existing trade imbalance. there will be cases with reciprocal tariffs when they come on. some will lower trade barriers and others we will end up with structurally higher tariffs. annmarie: we still don't have a conversation from howard lutnick in jamieson greer is not in the job to lead the ustr. with this fall under 301 at ustr? don: it doesn't sound like that. eventually in some cases, but if trump is saying these tariffs will come on right now, you need a more urgent or expedited

process. in the same way that he used i.e.pa to leverage tariffs on china, the three of one you have to launch an investigation and that takes time. based on the way that they are discussing it, he may be using authority to enact them quickly such as section 308 of the tariff act. it is unclear. the first round, they may be leveraged in a manner that is quick and in subsequent rounds they will launch the investigations and proceed that way. annmarie: what to expect from india, brazil, or the eu? don: the pattern has been the target quintessentially american production on things like cranberries or u.s. cars. i presume that you would do something like that, trying to pick targeted goods double up the pressure on republican members to feel it in their

districts or things that are economically consequential.things that we rely on . china may respond by targeting or prohibiting the export of rare earth minerals. you would want to pick an asymmetric target that is relatively high-paying for the u.s. without as much consequence for the country being tariff. lisa: how long could these negotiations take. i was looking at india's list of tariffs on hundreds of goods. there are different rates that change from year to year. it is a legacy of british colonization when they used trade practices to exploit different natural resources. how long could it take to negotiate all of this? don: i think over the course of several months would be plenty of time to negotiate some sort of resolution, which we end up with lower tariffs. lisa: a big question has been how much of this is to raise money to offset tax cuts that are expected to be passed? how much do you expect tariffs to be used as a revenue

generator in addition to all of these other goals? the question being, is the goal structurally higher tariffs in and of itself? don: i think the latter. i don't think tariffs will be a meaningful contributor to the budget reconciliation process. as a matter of scoring, if you don't legislate the tariffs in the legislation they don't count for what ultimately matters, budget enforcement purposes. what may happen is the legislators will take what trump does with tariffs or have some hypothetical scenario. they will ask the congressional budget office to reduce an estimate of the tariff revenues, but they won't count towards the score. the members who are sufficiently concerned about deficits are not necessarily placated by tariff revenue. i think that the freedom caucus members are most concerned about deficits. they say substituting tariffs for spending cuts doesn't fix their problem.

they want to lower spending. i think tariffs will be more important after the fact, or from president trump's perspective to say that i didn't add to the debt. we had spending cuts, tariffs, and faster growth. i don't think they will be important in the budget reconciliation process. annmarie: we do have a budget, thank you to speaker johnson yesterday, but could it get out of committee? don: i think so. the way that i would think about this exercise, they are looking at extending the tax cuts for around 10 years. on the flipside, they are pursuing 1.5 trillion minimum deficit reduction. trump has taken social security and medicare off the table. there will not be any cuts to veterans benefits. there are about 16 trillion in mandatory spending as opposed to discretionary or interest costs. a pool of 16 trillion dollars in savings over the next decade. they are trying to cut 1.5 trillion.

that is 10% of what is left in government. those are substantial savings. there will not be a better opportunity for freedom caucus members or others to do this. comprehensively look at what they could sign. they could sign into law a generational investment in border security of 200 billion dollars. another $100 billion for national security procurement. that would be a substantial investment. they would extend the tax cuts and add more cuts on top, because there is substantial room to do that. and get the first changes to entitlement spending, such as medicaid, in a long time. in the end, i think they will come around. annmarie: adding more on top of that, do you mean no tax on tips? don: that is one of the more likely options. the ways and means committee has been given instruction to cut taxes by no more than 4.5 trillion, extending the existing tax cuts over the nine years that they will count in this

budget window is 4.1 trillion or that leaves 400 billion left to cut taxes. in addition, if the ways and means committee finds offsets in its jurisdiction like rolling back renewable subsidies in the ira, that could add hundreds of billions and more room to cut taxes. i would expect no tax on tips. it would be a high priority for the trump administration. you would expect some pro-manufacturing, whether that is a 15% rate for domestic manufacturing or expense infrastructure on some manufacturing structures. things like that i think would be the net new tax cuts on top of the existing extensions. jonathan: we have to leave it there. don schneider of piper sandler. that tax will complement in some way the tariff efforts. this just dropped from capital economics echoing some of the words don used.

if the trump administration pursuits a reciprocal tariff strategy rather than a 10% universal tariff it could result in a small arise in the overall effective tariff rate than we have assumed. one, who is exposed? india, brazil, turkey. they go on to say that it's probable that their governments among others would provide concessions to president trump in an attempt to prevent a reciprocal tariffs. india keeps coming up. the fact that modi is meeting with the president today and we could see this announced hours before they talk is kind of amazing. lisa: it shows that this might be the template. this is how you can appease us. please, cut your tariffs. going forward, we won't threaten you and we could work together. annmarie: it's almost like he is producing a show. come out with all of the threats. modi walks into the west wing, they have a meeting, everyone talks tough. modi according to reporting is ready to come with concessions. i will cut tariffs and maybe buy more u.s. aircrafts. guess what, they are not on the other end of reciprocal tariffs anymore.

now he is focused on brazil or the european union or turkey. jonathan: i won't pretend i know what will happen later this afternoon because i have no idea. annmarie: i'm speculating. lisa: when will the focus go to come can the u.s. produce the goods that we would potentially be exporting and would need to produce ourselves if we are not importing? jonathan: that is the supply-side response that they want. it could go beyond a second term for president trump. lisa: that needs to be more of a focus. it could be a stimulus, something. jonathan: if you want to the grand realignment, it won't happen overnight for sure. next, growing confidence among global ceos. that conversation is up next. ♪ only servicenow connects every corner of your business, putting ai to work for people. pfft ... every corner? every corner, nick. ow! so kate in hr ... hey kate! ... can focus on people, not process. patty in it is using ai agents to deal with the small stuff,

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jonathan: 60 minutes from now we get ppi data and jobless claims. we are waiting for the same thing. a new tariff announcement from the president of the united states. equity futures are doing ok, just about unchanged on the s&p 500, just about positive on the nasdaq. two hours until the cash open with your morning open. >> cisco delivers despite the prospect of terror sitting margins are they've upped the guidance to $56 billion. you can hear the wheels of ai

turning. this is about monetization. ai is becoming more pervasive and we will pass $1 billion infrastructure spend. strong bookings, strong growth. china, record year for them on the macau. i love this story. stock was up 700% last year. this is the personification of the monetization of ai within advertising. you advertise directly to customers come you need a smart app to target tv advertising. this company is delivering. add sales are up 73% year on year, and it is looking pretty rosy for them on forward guidance. jonathan: that stock is flying in the premarket up by 27% in early trade. president donald trump announcing today is the big one. he posted to truth social, reciprocal tariffs are coming

after promising action sometime this week.the president is expected to sign executive orders at 1:00 p.m. eastern annmarie: you can almost immediately expect concessions from one of the countries that will be talked about when it comes to reciprocal tariffs, india with prime minister modi is set to visit the white house today. minister from india, the energy minister, qatar, have offered more lng. they have been making concessions leading up to this moment, and i'm sure today they will come lisa: with more gifts. is the goal to reduce tariffs across the board or increase tariffs across the board and increase u.s. domestic manufacturing and production? is it to actually increase free trade in a pretty democratic way, or raise revenue and potentially re-ignite some of the domestic manufacturing base? yes, i guess. i'm not sure. annmarie: do you remember the

oprah winfrey election when it was spaghetti at the wall with taxes? this has more teeth. say it is cannonballs. some will land, some will not. lisa: i keep going back to the ultimate goal. are we reframing the economy to more national dependence, or is this let's get rid of all tariffs and foster free-trade? jonathan: i thought you were going to say you get a tariff come you get a tariff come you get a tariff. annmarie: reciprocity, hear that all the time. reciprocity is what we are after. jonathan: let's turn to this story. president trump and russian president putin agreeing to start negotiating on an end to the war in ukraine. trump sang on truth social he had a productive phone call with putin. annmarie: he said he wanted to end the war. a lot of criticism out of europe after pete hegseth is in europe saying that nato is not going to be part of this. for me, this feels like trump is

giving some olive branch to putin. he said a lot about that call. not just that they would likely meet in saudi arabia, which seems a neutral ground for both of them, but maybe trump would go to russia and putin would come to the u.s. at some point. weare in a completely different era of u.s. foreign policy than we were two months ago. lisa: it is leaving people in the european union concerned that they don't have an understanding of how this will play out and if they have a seat at the table. this goes back to the lack of leadership, a lack of a clear view of how this regresses, a lack of a plan, and are they willing to put in peacekeeping troops, are they willing to pay 3.5% of their overall gdp on defense spending these are questions in that region. jonathan: i will try to save my opinion on this occasion. on this occasion. maybe an hour ago, but on this occasion i'm focused on the markets. the euro is stronger in crude is lower.

isn't that ultimately an endorsement of the deal from a market perspective on what europe would need? lisa: from a market perspective, it's ironic that this is essentially foisting the need to borrow $3 trillion on the euro region that could potentially spur growth that could potentially be with the region needs to get out of its slow growth, slow evolution. jonathan: we've said before that perhaps these moves by this president forces europeans to do things that are actually good for them. lisa: it is the reason why it's a difficult moment to invest. at the same time you wonder, if you get growth, what does that mean for what the ecb can do? you start pushing this down. it's premature. let's see if they get a deal done. jonathan: chair powell wrapping up his testimony telling the house financial services committee that the cpi print means there is more work to do. we have ppi and jobless claims and 55 minutes. i have to say, listening to the fed chair he didn't sound

vigilant when it came to inflation with words like, i would say were close but not there yet on inflation. lisa: when he talked about, we don't get excited about one or two good readings or one or two bad readings. dismissing the january data is almost an aberration. there was plenty of discussion about whether it is distorted. there have been three months of annualized inflation of 4.5%, which is the fastest pace of inflation for three months going back to november of 2022. feel sick something more than a blip at a time when he is saying that inflation expectations aren't responsible for the 10 year yield going up. we are still on the steady disinflationary path. jonathan: what you said earlier, playing down his contribution, the committee's contribution to the pickup and yields on the long end when inflation expectations bottomed in the last 12 months around last september shortly after we had the aggressive speech in jackson hole and before we got a 50 basis point rate cut from the

committee, which was followed by another 25% and another 25%. the yield curve steepened through last year not just because of the tariff story and a trump win and his progrowth effort that everyone was expecting that could reignite inflation. it was looser policy expected from this committee. lisa: what people were talking about was the likelihood that we could see real inflation coming down the pike from these policies in a way that would test the fed's hand. the quote come he said no evidence long rates went up because of inflation. either way, he said a real way to be political without being political by saying, be meets not -- maybe it's not come i don't know, look yourselves. jonathan: that is what frustrates me about all those hearings. confidence levels are still skyhigh. growing confidence among corporate leaders in the latest ceo survey. sentiment around m&a at an

all-time high. writing that there are indications that 2025 could see an uptick in mega deals with 60% of global ceo respondents expecting to see an increase in deal of more than $10 billion. let's talk about the kinds of deals that you and the team are looking for. vertical deals or horizontal deals that were difficult to make happen over the past few years? >> i have to say that it's difficult to say. there is a bit of uncertainty in the last couple of weeks. since we launched the survey there has been quite a change in the landscape, but it's true. if you look at our confidence index, 74 percent of our ceos are more confident that they will be able to navigate this uncertainty. those who are more confident have more of an appetite for deals, including mega deals. that's the outcome of this survey. we expected that in certain

sectors there would be a search for new technologies and opportunities to scale up. quite bullish, actually, despite the month of january that hasn't been great in terms of new activity. jonathan: let's unpack that and build it out. what do you think could possibly be holding activity back at the moment? is it policy? is it interest rates? andrea: it is all of this. if you look at the different forces shaping m&a activity, we have quite a colorful patchwork of forces pushing for more m &a. there is a huge amount of dry powder in equity hands that needs to be invested. overall the situation remains concerning. it actually shows signs of improving. if you look at the state of the u.s. economy, which is where the vast majority of m&a activity happens, it looks bright.

the other side of the coin, you see that during the last 30 days the amount of uncertainty regarding tariffs, taxes, higher trading flows and capital flows. interest rate is another fundamental driver to boost investment. interest rates are related, as you know, to inflation. inflation is still in certain after the u.s. pointed to an increase rather than a decrease. this regards the cost of capital which may slow down m&a activity. it's a mixed picture. lisa: one aspect that you said is the u.s. is where the bulk of the m&a activity is happening. is that more than in the past? is it the sucking sound of the u.s. and the growth story taking a lot of energy from the mna

story? or is it pretty much the way that it's always been? andrea: pretty much the way that it has always been. it's growing. if you look at the numbers, in january the deal activity marked 240 billion dollars of value and 61% of this was generated in the u.s.. the sheer size of the economy. the effect that the gdp is growing. -- the fact that the gdp is growing. if you look at the rest of the world, the u.k. and continental europe, the economies of france and germany, the situation in china, you see why this proportion is increasing. annmarie: is this a response to some policies out of the trump administration? almost as an insurance policy that if you have some footprint in the u.s. that that will protect you from some sort of tariffs?

or is this purely on the progrowth story that were seeing out of the united states? andrea: i think that the overall sentiment is that this administration is pro-business, which helps the stability of the overall u.s. environment. they think one of the most important angles for dealmaking, which is a trend that is growing and can go only go up, is the tech angle. the possibility that through technology and through ai you can increase productivity and accelerate value creation. the action is in the u.s. no wonder there's a lot of investment activity, m&a activity in the u.s. that is where the vast majority of tech assets is resigning. annmarie: how much do the ceos need to incorporate political risk? today we are getting reciprocal tariffs. no idea what they're going to

mean, but there is a tremendous amount of uncertainty we are hearing even from ceos like ford. andrea: this is obviously a significant headwind for whoever wants to invest. not having a stable picture regarding the tariffs is an issue. all of the ceos that we meet and speak with, they are working very hard. they cannot really wait. they need to make assumptions as to what the endgame is. the longer this uncertainty lasts and the more difficult to execute deals. i can tell you that when we ran our survey in the last month, there was a huge amount of optimism regarding the fact that after an initial period of adjustment to administration policies the situation with

stabilize and of the pro-business philosophy would prevail. jonathan: i want to double check. are you an ac milan fan? andrea: definitely. we are struggling a bit. the last couple of players joining us, we are looking up. jonathan: last night was tough. i could tell that we had a connection. we have a lot to say. we could follow-up. last night wasn't good. annmarie: you lost to a team that no one has heard of. jonathan: i'm sure that the dutch have heard of them and they are unhappy with that comment. lisa: we had that interview just for you to have that one moment. jonathan: i just wanted to check. i didn't know for sure. but you could tell. lisa: what was the tale? jonathan: the connection between the two of us. yahaira: elon musk called to

delete entire agencies during a video call to the world government summit today. since leaving doge musk has been vocal about improving government efficiency. recently furloughing the majority of usaid staff and freezing its funding. blue origin plans to potentially cut more than 1000 employees. sources tell us that the jeff bezos-backed company is looking to cut costs and focus on ramping up rocket launches after years of research and development. the company ceo plans to talk about the cuts in an all hands meeting. everton scored the final tying goal in the 90th minute, setting the premier league favorites liverpool. april ensued with four red cards including one to the liverpool manager. the lead over second-place arsenal is now seven points. that is your brief. jonathan: the best game on the planet. if you haven't seen it, watch the end of the game. did you watch the clip last

night? lisa: i thought that the stadium would collapse. jonathan: liverpool fans at bramos place, just in case anyone was wondering. >> at face value this isn't good news for the fed. look for the fed policy to not act as an anchor for the economy but fuel volatility further. the pause button will be on longer than the markets were expecting. jonathan: we will be catching up with adam posen. he joins us next on the prospect of rate hikes in 2025. ♪

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jonathan: equity futures on the s&p, up by .1%. in 40 minutes we will get data for you, ppi and jobless claims.

bond yields are lower by two basis points. under surveillance this morning, the fed's long pause. >> at face value this isn't good news for the fed. we could talk about the inflation target for an economy going through massive structural change. it would not be so obsessed with 2%. it would be flexible. there is no meaningful forward policy guidance coming from this fed and that's the mistake. look for the fed policy not to act as an anchor for this economy, but fuel volatility further. the pause button will be on longer than what the markets have been expecting. jonathan: the markets are bracing for president trumps reciprocal tariff plans and its inflation impact after a hotter than expected cpi report yesterday. adam posen writes, he is convinced and worried that they will put across-the-board 15% tariffs and allow trump to go up from there. notwithstanding powell's wait-and-see attitude, this will be inflationary unless it

provokes a recession. welcome to the program. i want to unpack that quote. can we start with the powell piece, the wait and see attitude? do you think that is contributing to higher inflation expectations? adam: yes. i think it's clear that we have been talking about this for months. i agree with one piece of what mohammed said, there is no forward guidance in a meaningful sense from the fed. forward guidance can be cheap talk, but the short-term misleading things -- i mean, the idea that they were so convinced that the unemployment rate was the be all and all measurement of the state of the economy -- be-all end-all measurement of the state of the economy. is there a huge erosion in expectations compared to the past? no, but as we remember over 40

years ago when we didn't kill it in 1982 and you let it get back in 1985, it was harder to kill the second time, and that's what we have to worry about. lisa: a lot of people have made the argument that the tariffs are one time price adjustment but are disinflationary over time as they reduce demand on the margins. what is your evidence? why do you think that this time is different? the tariffs that donald trump is imposing to implement will actually have a significant inflationary impulse? adam: i think that there is a chance that it is more recessionary that inflationary because it's a tax hike and in particular on consumers and high-end businesses at the end of the supply chain. it could also potentially cause trouble, recessionary-type trouble, by creating shortages or unavailability of goods between retaliation and tariffs

and other disruptions. in theory it is a relative price hike, but in practice, in country after country and in the u.s. in the past, is that countries have a certain amount of pricing power. it is not greedflation, but they won't sit there and let the price hikes go unanswered. additionally, we know that there is multiplier effects. you start off putting taxes on and suddenly it's a basic input like steel or aluminum or chips, and then it cascades off the value chain to the goods being sold. in theory, you could always have it be just relative price shift. in practice, it's very unlikely. what you've just said is if inflation expectations are flexible or uncertain, that makes it more likely that when you get a price shock that the

fed cannot just look through it. lisa: if today is a template, the threat of retaliatory tariffs could prompt a lot of trading partners to come to the table by reducing their tariffs. how much do you look at this as being a rearranging of trading partners rather than an increase in tariffs if it leads to lower tariffs in certain locations? adam: that would be fine, obviously. the piece of this that is difficult is that would mean that the u.s. would eventually take off its tariffs to match and incentivize and lock in where others take down their tariffs. it wouldn't be the nicest way, but it would be a way to get further trade liberalization. that would be fine. there is very little evidence that is the intent. annmarie: it might be, though. one thing that i hear from the trump administration is reciprocity. march 12 is when the tariffs

will come on for aluminum and steel. march 4, we don't know what's going on with canada and mexico. april 1 is the memorandum looking at trading partners. at the moment, besides china, isn't this still in the negotiating phase? adam: it is in the threatening phase. we will see if it is negotiating or threat. either way, again, one is always glad when someone does a bad policy. if the trump administration, despite the president's statements and peter navarro's statements, everything that they've been saying, this is ultimately just a gambit to get tariffs reduced abroad. as lisa said, it just reshuffles who your training with. fine. it's not great. it's uncertainty, government intervention in pricing that we don't really need, but fine.

i will be happy if that's the outcome. jonathan: we will see what the outcome is. adam posen, who has been phenomenal on the federal reserve to august of last year. those who aren't familiar with the way that he has been thinking about things, in august of last year he said did chairman powell think about what you are about to say and prepare this market for two-way risk? there couldbe real two-way risk . let's say that chairman powell focused on downside risk to unemployment. lisa: and then had to walk that back. we are looking at the fastest three-month average inflation going back to november of 2022. adam posen was the one that said the next move could be an hike. you hear an increasing number of analysts saying the same. jonathan: bob diamond of atlas merchant capital, brian weinstein of morgan stanley. a lot of data 30 four minutes

away. ppi and jobless claims. ♪

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>> right now, i would describe the data as somewhat concerning

but not overly concerning. >> this is certainly not good news for the fed. the bond market and equity market are reacting accordingly. >> they shouldn't overreact to this. there's nothing that says inflation is cooling. >> the prospect for further rate cuts has diminished considerably. >> markets love certainty and unpredictability. we don't have that at the moment . >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: equity futures, good morning. slightly negative by not even 1/10 of 1%. no drama on the s&p 500. no drama yesterday either. on the nasdaq 100, posited by 0.06%. -- positive by 0.06%. later, executive orders from the president of the u.s. at 1:00 p.m. eastern at that time or shortly before, we make it the big one come in the words of the president of

the united states, reciprocal tariffs. lisa: which people have been waiting for to expand the parameters of where tears will go and how specific they are going to get for specific line items before his meeting with modi of india. a bigger question from the market perspective is are people going to look past this because the details are difficult to wrap your head around? annmarie: what adam posen said is that we are in the "threatening phase." that is what he called it as part of these negotiations or warnings to other countries where the president feels there is not a fair balance of trade. given all of these tariff headlines, the only one that has actually stuck and went into effect was china, 10%. everything else is paused. what the president is doing at this moment is getting concessions already from potentially one country he will put reciprocal tariffs on. india. jonathan: check out the euro-dollar, the round trip on

the session, totally unchanged on the day. on the left side, the ramp up in the euro, hopes that there will be talks between putin and trump and that maybe we can address the war in ukraine. on the right side, you have the ramp lower, the prospect of reciprocal tariffs on europe, the tension in foreign exchange this morning. lisa: the tug-of-war if your region will face a growth shock to the positive or negative. the positive being a resolution to the conflict in the region that has really tightened supply chains, versus seeing tariffs. is there enough cohesion in europe to respond to any of these threats? annmarie: they say they are going to what it comes to tariffs, but the peace agreement, europeans will feel left behind and they are already starting to throw daggers at the trump administration behind the scenes. i think this weekend is actually really critical when it comes to both of these prospects. a peace agreement intentionally and tariffs.all of these

we'll be meeting at the euro conference. jonathan: just about positive by not even .1%. bob diamond on the outlook for financials. tom of rbc. andrew from citi on what he is looking for the fed to cut interest rates. stocks on hold. as markets adjust to higher for longer for just a little bit longer. joining us is bob diamond of atlas merchant capital. it is always good to catch up. outperformance from the financials already in 2025. i want to start with your big call. we have about 4500 banks pure you think that that could drop to 1000 or 2000. how does that happen? bob: we think over the next two to three years we will see a construct for consolidation. we know that in march of 2023 when svb failed followed quickly

by first republic, part of that was from 0% to 5.5% on interest rates impacted every bank's interest rate portfolio and loan portfolio. the stock in commercial real estate hit that sector. now, it is very strategic. i think because it is strategic it is definitely going to happen. you have many of the smaller -- they have been there. the smaller, more private community banks that have been such a pillar of the community, and so important to the economy in terms of serving small businesses. today they are too small to succeed the impact of technology costs and importantly the cost of the regulatory reaction to svb and first republic. our view is that we will see the successful, the more successful,

the more well-capitalized regional banks have an opportunity to do business with the smaller, private institutions. jonathan: is this true of the whole country or his activity concentrated in certain regions of the united states? bob: you bring up a good point. much of this is about reducing costs. if it is reducing costs, you will see many in-state or close-state accommodations. that's a good question. lisa: one obstacle has been the regulatory environment and the other has been valuation. people don't want to sell if it is less than they think they are worth. you are involved in some of these conversations currently ongoing and financing them and being part of them. are people more willing to compromise on the valuation side now? bob: people are more willing to look at the future. whether it is a compromise -- i probably wouldn't use that word. it teases out the issue, lisa. it is in the best interest of

these institutions if they are going to continue to compete for their middle-market small business clients, family office clients, that the ability to combine and takeout costs, particularly technology costs, which are duplicated, the regulatory relations, totally duplicated. anyone involved in consolidation, if the synergies are cost and you can identify them quickly, it goes right to the bottom line. too many of the smaller banks are struggling to get their roe above zero, never mind 10%. devaluation of banks is driven by their return on equity. we are in a situation where it's good for the banks to begin discussing consolidation. lisa: we've talked about the deregulatory push of donald trump and how this could spur a host of growth. the point that it raised around

this table that we've talked about is, how much of the activity in lending has gone to private asset managers? if some of these banks have more strength, will they be able to win that business back? or is it a permanently cannibalized backdrop that is not going to revert back to the way that it was? bob: in terms of regulation, we believed in this strongly under the biden administration, but the shift from the biden administration to a much more positive sec. the sec under gary gensler was not approving anything in terms of the accommodation -- in terms of consolidation. that is going to change. i don't think that that is a cause of this, but it will be an accelerator. we are in an environment where the government is going to be and of the regulators are going to be more positive to constructive consolidation. think about this.

from a regulatory point of view, do they want more capital and the banking system? of course. you have atlas merchant capital willing to put more capital for these accommodations so it is a win-win all the way around. lisa: you expect to see 4000 go to 1000 or 2000 banks. could that be in the next year, two years, or a multi-decade process? bob: i think two to three years. now is the time that many discussions are happening, and i think that we will see three years from today between 1000 and 2000 banks in the u.s. the u.s. does not need 4500 banks. come on. [laughter] the service that these institutions give to small businesses is incredible. it is an important sector of our economy, an important sector of

the financial services industry, and those two things together is why the u.s. economy is so strong relative to their peers. so this will be very constructive. annmarie: you think it can get done in two to three years because of the changing of the guard in washington? bob: i think that will be an accelerator for sure. the regulatory approval process will be positive behind this initiative as opposed to a blockage. as i said, strategically, we felt strongly that this is going to happen over a little longer time because it's necessary. these are strong banks, important to the economy, they need to boost their roe, costs ready to come out, this makes perfect sense. the attitude towards combinations mergers and business, the attitude towards bringing more capital into the market, is much more positive under this administration.

jonathan: do you see them as competitors to the big players on wall street or a different part of the financial sector? bob: they are in a different part but competition is a wonderful thing. private lending or competing with the banks, does that improve lending for customers? absolutely. if you have stronger regional banks will the super regionals be stronger and have opportunities? competition is a wonderful thing. it can sound like with 4005 hundred banks there is a lot of competition but if you had 1000 to 1500 stronger banks that are better capitalized, the competition would be better. jonathan: it is good to see you. bob diamond of atlas merchant capital. with stories elsewhere, here is your bloomberg brief. dani: serious injuries in munich after a car drove into a labor demonstration. at least 20 people have been hurt. the local police say that the driver, 24-year-old afghan male, has been taken into custody. the attack comes after a string

of incidents in recent months with pressure the link on german chancellor omar schultz to increase security head of the election. president trump is expected to announce around reciprocal tariffs today posting on truth social that today's the big one after promising to approve the measure sometime this week. according to the white house schedule, trump is set to sign executive orders at 1:00 p.m. eastern ahead of his meeting with prime minister modi. the state department's procurement forecast remove the plan to spend $4.5 million on tesla's. the december version included a armored tesla budget item that would span five years starting this year. a newer version generically says armored electric vehicles. on x, muska said i'm pretty sure that tesla is not getting $400 and no one mentioned the deal to him. jonathan: more in 30 minutes from dani. next, the morning calls and the oil makers brace for additional

tariffs from the president of the united states. it is apparently the big one. coming up later, from new york city this morning, good morning. ♪ (♪♪) (♪♪) 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 your clients' road to retirement starts with confidence...

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jonathan: the opening bell is one hour 15 minutes away and the data is 15 minutes away. equity market, negative by not even .1% on the s&p. it's now time for morning calls. bank of america double down grading kraft heinz to underperform saying that it struggles to see a path to meaningful sales growth this year. your second call from wells

fargo raising its price target on home depot to 450 expecting it to enter upward revision territory as stock is just about unchanged. finally, outperform on teslas saying that the regulatory environment will fuel the autonomous driving story. stock is up by 2.3%. that stock has struggled over the past few weeks. the auto industry bracing for president trump's across-the-board tariff on steel and aluminum imports and possibly retaliatory tariffs going on as soon as today. these tariffs appear to have a better chance of being implemented than last week's on canada and mexico. most investors that we spoke with don't believe that such tariffs will be permanent. tom, good morning. steel then mexico and canada and the european players and what they might face. how are you and the team thinking about so-called reciprocal tariffs and what may mean for european

autos? tom: we saw this play out when no tariffs were implemented. steel and aluminum happened for about a year. the automakers handled it well. most investors that i speak with don't actually think we will have permanent tariffs, reciprocal tariffs, etc. there is a lot of devil in the details, but that is where i think the consensus is. jonathan: why? when we talk about this and we acknowledge that europe has higher tariffs than the united states, 10 versus 2.5, kind of makes sense that u.s. tariffs,. why does no one believe that? tom: we had evidence where it hasn't happened and it's not clear that putting tariffs on imports would help the auto industry. the person buying a silverado isn't the person buying an s-class. the u.s. auto lobby isn't necessarily calling for it. annmarie: the fort ceo is making

a lot of trips to capitol hill and was there yesterday. he said that the tariffs would be devastating and blow a hole in the u.s. auto industry. how concerned are they about the pause at the moment that could potentially hit after march when it comes to canada and mexico? tom: he is obviously going for a reason. he saying that would blow a hole for a reason. if there are permanent mexico-canada tariffs that would be a disaster. i think what he is eliminating is the fact -- i lluminating is the fact how thought-out are these tariffs so far? what about japanese and korean tariffs? they are not there. you are allowing the japanese and koreans, right? that is something that he noted. what happens if you produce a battery in the u.s. and ship it to mexico to assemble a car? is that included?

he's highlighting the fact that permanent tariffs on mexico would be disastrous, but i think that that fact alone is why investors think that they probably may not happen at all. because there are a lot of questions. annmarie: something else the ceo is talking about is the inflation reduction act. the u.s. automakers sunk a ton of capital into ev because of the subsidies they were getting from the biden administration. he is making the point politically that a lot of the money went to red states. what is your base case? the some of the money stick? tom: there are two parts of the ira. the consumer credit, $7,500 credit. that is looking like it will go away. the biden administration was looking to take away the lease component, so that was already on thin ice. the other piece is the 45x making batteries in the u.s. and in the red and purple states.

that is probably here to stay. it is a mixed bag and it will have an impact to remove the consumer credit, no doubt, but keeping the battery credit i think remains. that still helps notably gm building batteries domestically. lisa: we've been talking about the framework for some of these tariffs, the goal. one goal is to increase the amount of manufacturing in the u.s. for some of these auto manufacturers, especially with the increase in automation, that you can do things more efficiently, is it feasible in a way that it hasn't been over the past 10 years to increase some of the production domestically in a way that is not necessarily cost prohibitive? tom: it's a great point. i tour auto factories all the time. you notice a lot of robots, right? there is an impact. gm said this week that in the near term they could mitigate

the tariffs on mexico by as much as 50% to 60% by moving production to the u.s.. that is a temporary fix. what happens to the plants in mexico? that is a stranded cost and you are overcapacity rising u.s. production. if there are permanent tariffs on mexico, they would have to reshore and it would be very costly to do so. lisa: this question goes to the european automakers as well that portia was planning to lay off 2000 in germany on top of the layoffs last year in europe. at what point are we talking about either an industry that has overcapacity globally or about an industry that isn't as people-intensive as it has been traditionally at a time of technological advance? tom: probably a combination. vw had all of those discussions

to shut down plants for a reason. it is overcapacitized. they have chinese companies coming in. they will have to share profit. that probably means that you need less labor. it is also the automation point which is true. automakers compared to europe you will notice a difference, not only in autos, by the way. jonathan: pop quiz. the biggest automotive exporter in the united states of america? bmw. it has been for a number of years. that plant that they have been south carolina is one of their biggest plants, in spartanburg. we should talk about this all the time. how did that happen? how did we end up with one of bmw's biggest plants, perhaps the biggest plant, being in south carolina? tom: the u.s. is an important market and it's cheaper to localize.

they make large suvs. mercedes has one in tuscaloosa. that is where the large suv market is, the u.s. producing locally cuts costs. jonathan: shouldn't we see more of this? shouldn't that be the model? shouldn't we go to bmw and figure out what we need to do to see more of it? tom: probably, yeah. that is what i think jim farley of ford was saying. this hasn't potentially been well thought out. the details. that could be a solution, absolutely. annmarie: is another solution vice versa, trying to get ford and gm to sell more cars in europe? that's a big grievance of the president. tom: that could be what happens, but jim is not really in europe. ford does produce there, but maybe that ends up happening. you produce more locally in the region that you want to sell to. lisa: in the meantime, jon talks about this every time that we

get a stock investor. how can you say that the industry is investable if you don't have a clear policy and how much you will have to rearrange? what do you tell them? tom: this is a question i get all the time. it is the method you have to do to say there is a 1% chance of negative infinity and 1% chance of everything is fine. a blended average is negative infinity. how useful is that map? you have to as an investor look at that probability and say, this is kind of like garbage-in, garbage-out math. you have to potentially hedge. you have to potentially come up with your own call of what you think will happen. it appears that the investors i talked to don't think that we will get the negative infinity scenario. there seems to be a lot of panicking, but maybe we need to be more rational like some of these investors that we speak with and think about it from a

more pragmatic standpoint. jonathan: a final question. if we get reciprocal tariffs on autos and the stocks gap lower, are you nearby? tom: i think so, based on what i speak with investors. they don't think that it's going to be permanent. we have evidence to suggest that they haven't been in the past. jonathan: we will see what we get later and we will see if it sticks. looking out for cervical tariffs later today. lisa: to me, that was a clinic on why the market isn't responding to a lot of the tariff threats. if you can't price in negative infinity, which my father is upset about because it's not a true mathematical concept, but carry-on -- now, he's not watching. sorry, dad. it sort of highlights why people discount the concept of a great deal of uncertainty. annmarie: the only thing that i would push back on is that we

are in a different political environment this time around.d'r president again. maybe he wanthe global realignment on t. jonathan: we are living this in real time. time will tell. equity futures on the s&p 500 are negative by close to him .1%. -- close to -.1%. live from new york city, to lease's point, this market is staring down the barrel of more tariffs and not doing much in response. the equity market is unchanged. ♪ so, what are you thin? 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...

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jonathan: real-time update, got time for this, haven't we? >> evidently there is something that can approach negative infinity as the sequence gets smaller and smaller. we are 15 seconds away from key data. jonathan: that's perfect. in just a moment, p.p.i. and jobless claims. breaking down that economic data. let's get to mike. good morning. >> good morning, everybody. we have the p.p.i. numbers coming in hotter than anticipated. much the same as we saw with c.p.i. yesterday.

final demand headline number up .4 on the month. we are at year over year 3.5%. export energy, the forecast was for .3. that one is online. but remember last month it was zero. no change. on a year over year basis there, we are looking at 3.6%, up from 3.5%. the trade numbers up .3, more than anticipated. that puts us at 3.4%, up from 3.3%. so we are seeing some pipeline inflation pressures, we will have to take a look at what those came from. jobless claims though better news, 213,000 last week's 219,000. it's a drop of 7,000 overall. over one million on continuing claims down from 1.886 nowrks. so the jobless claims side doing ok. the inflation side still a bit of a problem.

jonathan: thank you, sir. stay close. that's the right kind of downside surprise on jobless claims and wrong side on p.p.i. yields down by a few basis points. now down by just one. on the long end. front end just about unchanged on the session. off the back of that, the euro a bit more. totally unchanged on the session. looking at s&p 500 futures holding on to losses down .1%. the nasdaq just about unchanged. that's an upside surprise on c.p.i. followed by an upside surprise on p.p.i. lisa: this really feeds into the figure jay powell was talking about yesterday. they tend to look at to determine whether or not to adjust policy. i am surprised there isn't more of a reaction in the bond market. if you take a look, across the board, not only is it above

expectations with inflation p.p.i., but the revisions also are to the upside across the board, which speaks to this question of why aren't we getting more of a pop in the two-year yield? jonathan: if you are tuning in, welcome to the program. we get hotter than expected p.p.i., a surprise across the board following an upside surprise on c.p.i. just yesterday. mike mckee is still with us. what jumps out? mike: it's interesting, demand trade services pushed things up according to the fed. remember, those are derived from margins that wholesalers and retailers, over 1/3 of the january increase for final demand services, which were up by .3, came from that category that included trade automobile retailing, truck transportation, those were some contributors to it. we did see a bit of a decline in fuels, though. goods were up .6 in january, the

fourth consecutive increase. it's another month where goods have moved up in price more than services, reversing what we had seen before. jonathan: mike, thank you. to extend the conversation joining us now, andrew hollenhorst of citi. you have had in the books a while that you expect the federal reserve will reduce interest rates this year. i believe you think it's going to happen sometime later on in the spring, around may. how does the c.p.i. number of yesterday and p.p.i. this morning help your case? andrew: this definitely still is all in the column of the fed is not in a hurry to reduce interest rates. that's what we have heard from chair powell and in congressional testimony. they're going to need to see more evidence that inflation is cooling. i think they will get some of that in the p.c.e. reading. you want to be careful here. we have c.p.i., p.c.e., year on year, three month. you can look at these different metrics on inflation. when you dig into the details, the fact that shelter inflation is slowing down i think that

will give fed officials confidence that we are getting some slowing. in terms of what the p.p.i. number means, i think part of the reason the market is reluctant to react is you have to look at the detailed categories and how they're going to play into the p.c.e. reading. jonathan: andrew, let's stay on the details then of the when you think about the sources of inflation, energy, goods, services, what do you think the source of disinflation will be through the next year or so? andrew: i think the single biggest factor that is causing me to be confident and i think will cause fed officials to be confident that inflation is slowing is a slowdown in shelter prices even though we saw stronger overall reading for c.p.i. inflation we saw shelter prices that were slower yesterday. it was things like motor vehicle insurance, used car prices. these are more volatile categories, and categories that don't get in some cases as high a weight in the p.c.e. readings

so i think we will see volatility in c.p.i. but that through line as the chicago fed president would say is still lower in inflation. lisa: what would you have to see to change your view that maybe this is something a bit stickier? andrew: what would be concerning is if you saw residual strength in wages and in services prices. we still have somewhat elevated wage growth. but it looks to be cooling. we know the labor market has softened. maybe it's stabilized more recently, but soften before stabilizing. that should all mean that we get a glide down in wages. we get a glide down in services price pressure. if we are wrong about that, and you were to see wage growth that was picking up again, that's where i would get concerned. lisa: it's the reason why that was the number that people looked at in the jobs report, the payrolls report that we got last friday although it was explained by the hours worked going down. i am curious about which aspects people are honing in on that are

not necessarily inflationary. when you have fairly broad based inflationary pressure, people had theorized you would get this disinflation in services that was enough to offset a reinflation in goods. it doesn't seem like that's happening to the same degree that people previously expected. why do you dismiss that? andrew: i think shelter services are on track. the nonshelter services, that is where we should be concerned, and again it's this whole issue of wage pressure, labor markets and it bubbles into service prices. we saw that again in the january reading, this what we call residual seasonality where people increase prices at the beginning of the year. they increase prices by more at the beginning of the year and we get these really strong january readings. so i am really looking to see not just in the january inflation number but what we see in february, what do we see in march? i think the services prices will cool again in february and march. they were cooler in november and

december. so if you put together five out of six months that's cooler there and you have wages that are slowing, that's a good picture for the fed. we have to watch the next couple reports. jonathan: andrew, today is the big one, reciprocal tariffs. andrew, you've got as a baseline interest rate reductions for 2025. how do you think about tariffs and the potential feed-through into higher prices? we have 10% on china. we could have more still to come. andrew: yes, so the details are what are really going to matter here. we don't know the the details. i do expect we will get a broad based tariff that's been per their economic messaging and policy. they need that for incentives to produce in the u.s. as well as to raise revenue. the question is, are there any carve-outs to those tariffs? are we including canada and mexico that's almost 30% of

trade? that makes a big difference. are there carve-outs for certain products? that can make a big difference because some products you would expect those tariffs would be almost fully passed through to consumer prices. most products you would expect those tariffs would not be fully passed through. so the inflationary effects would be less the more you get carve-outs and focus on products where you get less pass through. if the inflationary impetus is not too great, fed officials can say, it's a one-time price level increase. it's not an inflationary pressure issue. the challenge for the fed is going to be if inflation is not otherwise slowing, can you say that? you need inflation to be slowing down by basic dynamics. you need the tariffs to not be too great in extent. jonathan: that sounds a lot like the argument, that's not a good one. you saw back in the middle of september the inflation

expectations bottomed, market perception of inflation expectations. andrew, the fed chair, as lisa pointed out, chairman powell pushed back at the idea that they contributed to higher inflation expectations with 100 basis points of rate reductions. can i get your thoughts on that? do you think they did contribute to higher inflation expectations? andrew: i think it wasn't so much the federate cuts. i think it's more the expectation of tariffs. we see that in consumer surveys. people are wore ood -- worried prices on durable goods will go up. the short term expectations, one year expectations, not the long term expectations that fed officials worry about more. jonathan: andrew, thank you, sir. andrew hollenhorst of citi. that's the feasd problem. i think you've nailed it of the when you think about the distinction here the federal reserve might sit there and say this is a one-off price increase to the price level. consumers aren't doing the same thing. maybe that changes but at the moment they're not doing the same thing. consumer expectations is

something that spooked the fed last time around. does it spook them this time around? lisa: at the same time you are seeing companies actually successfully raise their prices, that's what we have to keep going back to. not only are consumers maybe not looking past this, the companies are trying to get ahead of this and might be jacking up prices in anticipation of those tariffs to get a bigger cash pile. unclear if this is going to be a mirror image of what happened in 2017. jonathan: in the bond market right now, brian, yields are dropping. we are down five basis points on the 10-year. why is the first question and the second question is, would you do the same thing? >> why? who knows? markets are choppy. they move around. i think what is happening is we have done a good job of pricing the inflation risk. yields are higher. i think what the market is going to switch to is worrying about the growth side of this

equation. so you can't raise prices and raise uncertainty and continue to raise growth expectations. i have been bearish on interest rates. i think eventually we will get to 5.25%. i think rates could fall a bit. i think we are overextended on growth. risk assets have done well but they've started to peter out. i think what the market is anticipating is that we will shift this conversation to the growth impact of all this uncertainty in the tariffs. lisa: brian, are we seeing that in anything tangible that there is a growth impact that is starting to feed its way into markets but also the companies that everyone is looking at? >> i think you've seen some earnings, you've seen on the lower end, consumer, a bit in the yield curve. the long-term trend is steeper. we are go steeper given deficit. but we have stalled. so you don't see that fear. i think taking the fed out of the equation, the idea that we know they want to ease, they always want to ease but they can't do it here.

they contributed to higher inflation expectations. they eased it at a time that was inexplicable and they're stuck as tar tariffs come in because it's not going to look good. you see weakness in some low end consumer, so i don't think it's today, not in the next hour, this is coming up in the next couple of months we shift in the growth fear. this is just the early edge of it. lisa: a lot of people were saying you would see that in the initial jobless claims and that really is going to be the data point to watch. we just got it. 213,000. below expectations, pretty much in line when it looked at the revisions of last week. we are not seeing it affect the labor market. real wages are actually increasing to some degree. at what point do you need to see confirmation in some of this labor market metric in order to continue believing that the growth shock is going to become the preeminent concern that plays out in markets? >> right, i think you will see it eventually. i think companies are doing a

better job of not overreacting. this is not a call for a massive down trade. this is saying you can go off 10% and jobless claims will trickle higher. i don't think you'll see massive layoffs. i think you will see it more in earnings and consumer behavior. that will trickle through to jobs, but jobless claims has been amazingly stable. we have dynamics going on with immigration and things we don't truly understand how they're playing through. so i am not looking at every thursday being like today is the day. i am not a big risk off guy. i think this is the stage in which we have moved real rates really high. growth expectations are high. i don't see -- listening to andrew, i think the pieces are there to say we have pushed this as far as we can push it in terms of inflation expectations and interest rates. lisa: how are they able to ease this year when there is so much policy uncertainty? we are waiting on this potential reciprocal tariffs from the

white house. how is the fed able to do anything until there is real clarity? >> you know my view. i don't think the fed is in play. i don't think they can ease even if you start to get some weaker growth. we not talking about really weak growth. we not talking about a recession. if inflation expectations are sticky which they are, even if inflation comes down towards two, i don't think anyone expects it to go below two. we are talking about inflation of two to three or two to four. the fed has a problem unless you get a real growth shock. the fed can ease this year. i would put it september, october, november because i think between now and then unless i am wrong and you get a huge downside surprise, they're stuck trying to prove to people they're fighting inflation and that is going to take time to prove. the growth side even if we come down a bit from these valuations i still think we are ok. jonathan: spent a lot of time on rates. i want to finish on what you do with risk assets. credit spreads struggling to

make new highs. what do you take from that? >> i think people will still gravitate toward quality in income. but on the equity side and on the high yield side some of these assets where cash flow is not as strong or credit quality is not as good, you will get a correction in the riskier part of the equity market and in the high-yield side of the fixed income market. as someone who still thinks if we get to high in six months and get to tighter credit spreads i don't think i would play that now. i like quality but i am a little more bearish on credit spreads for the next couple of months. jonathan: interesting. appreciate the update. thank you, sir, brian weinstein. yields are down across the curve. on a two-year down by three. with your bloomberg brief, here is durg durg. dani burger.

dani: p.p.i. for final demand rose 4% from the month earlier. higher than the median forecast of .3. the figure increased 3.5% from a year ago. that data comes after yesterday's hotter than expected results. elsewhere hamas said it will free hoss hostages on saturday as expected. three israelis are said to be released in the next round. ha-has mass had -- hamas had previously clieted a delay citing truce violations. the leaders of canada's provinces and territories have met with u.s. lawmakers in washington to lobby against president trump's proposed import taxes and tariffs. the premier emphasized the importance of a good relationship between two countries to keep prices low for america and urged the u.s. to reconsider its tariff plans. that's your brief. jonathan: dani, thank you. appreciate it. up next, we will set you up for the day ahead. it's the big day, reciprocal

tariffs coming from washington, d.c. we will get you an update in just a moment. ♪

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jonathan: so this is the setup going into the opening bell. equity futures positive. likewise on the nasdaq. check out the bond market. a rally. we just got hotter than expected p.p.i. following hotter han expected c.p.i. details matter here. big thanks to the bloomberg team for flagging this one. the categories in the p.p.i. that feed into the fed's preferred inflation gauge were more favorable for the month of january. so we are trading on the details befleet the surface -- beneath the surface of p.p.i.

lisa: they're looking at things like declines in most health care items and airfares and tangible components that go into that core p.c.e. metric that jay powell pulled out yesterday in the hearings and said was 2.6% as evidence it still is on a progression of downward moves. jonathan: that's the economic data. check this out. #-bg p.m. eastern, news conference on reciprocal tariffs today in the oval office. this is coming from the president of the united states, make america great again. lisa: supposed to be meeting with the prime minister of india who potentially will be on the list for reeb tariffs. trump earlier this morning said they're coming today. yesterday he said maybe today, maybe tomorrow. the question is what are the scope of these? is thering go -- is there going to be a long time line and is the president willing to use this as a negotiating tool and is there going to be enough concessions interest these countries or the european union from the continent in order to assuage his concerns? jonathan: we said it this

morning. this is the most fascinating time in financial markets worldwide since the pandemic. let's get you some morning movers. good morning. >> that confidence carries through for cisco, they're raising guidance up to $56 billion. a.i. is boom time. we are firmly on track to deliver over $1 billion of revenue in a.i. the personification of a slowdown in deere, down 4.5%. north american sales will drop by 30%. think of the head wind if those 25% on steel and aluminum. wrap it up with this, stock up 100% last year. helping direct the consumer funnel and target their clients on tv. if you are in to direct consumer this is the advertising system you want. jonathan: thanks for the update. a few names to watch at the opening bell. 1:00 p.m. eastern the president of the united states holding a news conference on tariffs.

tomorrow more economic data will get retail sales, plus the munich security conference begins before we get a long weekend stateside. before we get to that long weekend, we have a big news conference coming up a little later. joining us now, tyler kendall. what are you looking for from the president at 1:00 p.m. eastern time? tyler: one of the biggest questions is what the timeline for these reciprocal tariffs would be. as we have seen in the past with those steel tariffs that we have been discussing, he left a long timeline, four weeks for these negotiations to start to take effect before they go into place on march 12. so how long will those negotiations be? what sort of exemptions we could be expecting. there was preliminary reporting that maybe countries wouldn't necessarily be exempted that we will be watching key industries including pharmaceuticals and whether or not there will be expectations -- expectations. prime minister the india will

touch down at the white house. we are expecting a joint president conference between him and president trump later on in the 5:00 hour. so big questions there particularly if perhaps india can get ahead of this and make any concessions to president trump as we have already seen them starting to put out there that they are slashing their own tariffs in a bid to prevent against incoming reciprocal tariffs. >> buying more lick liquefied natural gas. we are seeing a number of gifts seep through, tyler. paint the scene of how this might actually happen? we are going to have tariffs on india, and modi comes in at four. what is the president after? >> we know that they're immediately going to go into this closed door bilateral between the two leaders. but as we have been reporting, they have been in negotiations ahead of this. we know that administration official in modei's administration have looked at upping imports of weapons from the united states.

this is likely making good on a campaign promise from president trump that he wanted to impose universal tariffs. while this might no -- might not be universal in the sense, there is a sense in washington that reciprocal tariffs will accomplish that goal to have a widespread tariffs to hold these nations, as president trump says, accountable. we are going to have to see whether or not this is a negotiating tool or if it will accomplish the rebalancing trade priority we have heard president trump speak of. jonathan: tyler, thank you. tyler kendall. we will give you that coverage a little later on at 1 p.m. when we expect the news conference. here is the deal for markets. what are you looking for? how big are the tariffs and on who? point two do you think they're going to stick or not? lisa: at what point are they not just negative infinity? i think that is the key point i took away from this morning. jonathan: well said, that and lot more of course. tomorrow the lineup looks like

this. from new york, thank you for choosing bloomberg tv. this was "bloomberg surveillance." surveillance." ♪ 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

matt: today is the day. reciprocal tariffs coming on the market does not care. futures higher. 30 minutes until the start of trading. katie: "bloomberg open interest" starts right now. ♪ sonali: producer prices picked up on higher food and energy costs, highlighting limited progress on inflation. matt: