>> medium-term it is hard to make an argument that does not favor the u.s.. >> we need to be cautious of the fact they are trading at 20% premium. >> retail investors are more bullish. >> if you are stock indexes exposed to globalization than the needs to be a higher premium. >> you may not see as much excitement this year. but at the individual stock level you could see more excitement. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: good morning good morning from our audience worldwide, bloomberg surveillance starts right now. transatlantic all-time highs,

shaping up as follows, equity futures a touch softer down by 1/10 of 1%. over in europe once again the equity benchmark in frankfurt, germany had a brand-new record. that stock benchmark is absolutely flying. in the face of this president trump announcing he would impose 25% import tariffs on autos, semi's and pharma. lisa: listen to what he says but don't take it seriously is the market response it seems pretty people are listening for the potential of the potential of coalescing of european leaders to get together and take action. there is a feeling the dynamism of the u.s. economy will only rebound well upon people saying you're at all-time lows when it comes to optimism. this will be the ninth straight week of gains for the stoxx 600. it's up some ash up almost 10% so far this year. >> hitting another record high, european all times are uppermost

8% on the previous seven days. leaving behind the worst of it or just whistling past the graveyard pretty -- graveyard. annmarie: europe's top trade official will be in washington this week. trump was talking about the fact europe didn't make a deal paid it seems the market at the moment is stressing out about all those trade threats and warnings he's putting out there. and they are just moving higher. when does the market potentially beat that check on some of these tariffs. april 2 another day in the diary to watch. march 12, march 4 and april 2. jonathan: do not miss this tomorrow. coming up tomorrow morning, at 7:00 a.m. eastern time. live in the studio for 25 minutes to break down what is a negotiating tactic, what is the objective of trade and then we can get to the bond market a little bit more as well. >> this was in scott's hearing, he talks about three pillars,

revenue raising, reciprocity and warnings and terror threats. with the market is doing as they are having to digest every single sector and country depending on what they think trump is after with that terror threat. is this reciprocity of trade. or is this this negotiating tool like he did with columbia. >> i'm really glad you brought this up. to me there are these three pillars, reciprocity, negotiating tactic and bringing manufacturing back to the united states. it is unclear which is which. it's unclear which is negotiable to be taken off versus a doubling down. that is why this market is not taking it seriously until otherwise told except for maybe china which is a different story. >> equity futures down by a 10th of 1%. later this hour we will be catching up with keith lerner of truest as stocks hit a fresh all-time high. president trump floats 25%

tariffs on autos as secretary besson pushes spending cuts. we begin with stocks inching a little bit lower. traders shrug off tariff risks. keith writing the primary market uptrend remains intact. we maintain our u.s. equity bias relative to international markets given stronger economic and earnings trends. welcome to the program. we started talking about the transatlantic all-time highs print the stoxx 600 so far this year the banks are up by more than 18%. energy over in europe is up by more than 10. the autos is up by double digits so far in 2025. what is going on in europe. we were discussing around the table are we leaving behind the rest of his or whistling past the graveyard. >> great to be with you all. we've been teen usa for several years but one thing we noted this year is coming into this year this international markets

have the worst relative performance to the u.s. since 1997. a lot of that happened in the fourth quarter on concerns around trump trade and the index last year was unrest at 5%. we look back to 2016, what we were seeing was very similar. markets in europe and overseas about a month later had a shorter-term rally. i think it's all about expectations. expectations were very low and on a relative basis you are seeing the ecb cut rates at a faster pace than here in the u.s. and investors are looking at other places to invest. i think this trade likely has occurred to trudell. the fundamental is still with the u.s. but it became a bit overcrowded on the short-term basis. jonathan: the big difference between now and 2017. in 2017 the u.s. and donald trump than the president in his first term pushed tax cuts first and then the trade story came about a year or so later.

this time the sequencing has flipped. do we have to put more weight on the sequencing here and reconsider what could happen. >> after the election we said the market was focused on good things or perceived good things about the trump presidency and they would have to deal with the tariffs and other factors the sequencing is important. i do think knowing that tax extension is out there in d regulation out there, i think also zooming out if we look at the last 10, 15 years or so, this market has been battle tested. it's gone through a once in a generation pandemic, the highest inflation in decades. the fastest rate hiking cycle by the fed since the 1980's and what has it done, it's been resilient. seeing that corporate profits in the first quarter here of double digits. part of the resilience is some of these other factors in the

fatigue of what we call the carousel of concerns in the last couple of years with the market has been able to move past it. lisa: is the market just numb to some of the headlines we've been getting the could potentially have real ramifications going back to john's initial point. is this market pricing and the idea of blanket tariffs on things like autos and drugs and chips or is it looking past it and saying probably negotiating tool. keith: at this point it's the latter paid the market is making an assumption right or wrong everyone is guessing right now that these tariffs will not go into play or if they go into play they won't be long lasting and the look in mexico and canada as a playbook. you look at canada and mexico since these announcements paid all they've been doing is moving up. our main thesis is able in a china shop. i think there will be disruptions along the way. market is factoring in a lot of negative news so i think that

sets us up for potential disappointment next month but we have time between now and then and also market indicators of the 10 year treasury pretty benign. oil prices pretty benign. and employment still pretty steady along with earnings. so the market is overlooking some of these things but i do believe this year we will see some disruptions along the way. we are sticking with that primary uptrend that is still in place as of now. >> what do you u.s. tariffs that could be revenue raisers to jonathan's point to make sure they can get those tax cuts through. keith: i think there's going to be a lot of gamesmanship on that. i don't know what the number is. i think going towards the reciprocal side we had this discussion at the strategy meeting yesterday, it is pretty complicated the logistics are pretty complicated so we would not be surprised if we do move toward some kind of more flat tariff rate but it's not going to between 5% and likely to be in the go -- in the negotiation.

i don't want to lose sight that the economy is still in dutch corporate earnings have adjusted and move higher in the 10 year treasury which looks at all of this stuff is still relatively stable. i think those are the key factors that might be overwriting some of the tariff talk spread -- talks. lisa: at a time you've seen inflation, core pce up above that 2% target for the longest stretch going back to the 90 90's, at what point does this market start to take note of that impulse at a time where you have a bowl and china shop, gentle structural changes and there are areas of the economy that are responding particularly in the smaller company space. >> i think there is this tension on one side, the potential tariffs may have a one time hit to inflation. on the other side the analysts we really haven't heard that term this much.

there's a lot of uncertainty for businesses as far as spending and the one-time inflation hit versus may be a little bit of a slower economy offset because companies are likely to hold out so they have more clearing out. the good news is if they get more clarity later in the year on tax extensions, on the d regulation we could see a populated market. it would likely lead to a bit of softer data. met ongoing tension we expect to continue. >> one thing we've seen so far this year is the opposite of what a lot of people thought last year which is a weaker dollar not a stronger per one -- stronger. >> historically there has been a strong correlation between the dollar and u.s. outperformance. if you are in a belief the u.s. dollar is weaker you want the investment more heavily overseas. the fundamental trends are so

strong in the u.s. that it is likely somewhat range bound. whether it is u.s. or international, the s&p market cap or the equal weight. you are having a global rally and a much more balanced rally so it does not have to be either/or. within the s&p, all the sectors are up this year and 75% of global markets are in uptrend. where would've been a few years ago where everyone was team usa i think the global opportunities are certainly wider and think that's the same in the u.s. as well. jonathan: prices certainly reshape the narrative quickly when it comes to europe. you have to respect a market that responds to negative headlines. i want to say there's a more nuanced story as well that makes a lot of sense. two defense stops. lockheed martin big u.s. defense player is down by double digits.

rheinmetall over in germany is up by more than 50. i think that speaks to a big realignment we could be seeing. >> that comes from the u.s. cutting costs including the potential defense department announcement i believe ongoing right now at the same time you have a recommitment in europe to invest in defense. it shows why people are falling -- following the fiscal which has more promise right now in europe. >> the ceo was on this program a month ago and said trump is good for europe because he is forcing the hands of the european leaders to spend more on defense. you can see directly correlating to his stock price. >> certainly good for his stock. that name is up here today. let's get you stories elsewhere with your bloomberg brief. >> president trump said he will likely impose tariffs of 25% on automobile semiconductor and

important spread an official announcement is expected as soon as april 2. trump said he wants to give companies time to come in before announcing import taxes and said when they have their factory here there is no tariff. the u.s. senate confirmed howard lutnick as trumps commerce secretary. he was approved by a vote of 5145. he will now lead the tariff and trade agenda. cantor fitzgerald said three company deputies and his two eldest sons in their 20's will run the business in his absence. the vatican says pope francis is being treated for double pneumonia after scans revealed in both lungs. he has been in the hospital in rome since last friday. church officials described his situation as a complex picture. the vatican is asked for prayers for the leader who has been at the head of the church since 2013. that's your brief. >> more from danny about 30 minutes time.

up next on the program trumps trade escalation. >> have you decided with the auto tariff range should be. >> probably we will tell you that on april 2. but it will be in the neighborhood of 25%. >> live from new york city this morning, good morning. ♪

>> pulling back about a 10th of 1% on the s&p 500 in the bond market yields just a touch higher by single basis point. under surveillance this morning trumps trade escalation. >> some of the biggest companies in the world and because of what we are doing economically and through tariffs and taxes and

incentives and they come back into the united states. >> have you decided what the auto tariff range should be? >> i will probably tell you that on april 2. but it will be in the neighborhood of 25%. we want to give them time to come in. when they come into the united states and they have to factory or plant here there is no tariffs. we want to give them a little bit of chance. jonathan: president trump announcing a 25% tariff on autos, chips and pharmaceuticals as soon as april. joining us from miami where the president will be later, joining us now for more. what is the latest year. , house list of threats going into april. >> it is pretty long. we heard and point out this april 2 eight notably that is one day after commerce and u.s. are expected to release their studies when it comes to reciprocal tariffs. president trump said he picked

to states down the road so he could give our trading partners "a little bit of a chance to move their manufacturing stateside. this was one of the first times we heard a more concrete policy benchmark that president trump is looking for beyond what he spoke about on the campaign trail and asking for our trading partners to start to lower their tariff barriers so something to look forward to if we do see an increase in moving to domestic manufacturing. trade and investment in the u.s. is going to be a big focus for the white house today. after future event -- where president trump is slated to take the stage tonight at 5:00 p.m. eastern. we know he is asked saudi arabia to invest more than $1 trillion over the next four years in the u.s.. experts say that is highly unlikely let us help business leaders. jonathan: we will touch base with you later on that.

saudi arabia a percentage of everything at the moment. annmarie: i think trump sees them as a place they can do business whether ai investment or potentially hosting a summit between him and the russian president. this is a country he is willing to work with. jonathan: ed, good morning. good to see you once again but let's get back to those tariffs. tony 5% on autos, chips and pharmaceuticals. might be as soon as early april. or you taking the president seriously and literally? ed: it is unlikely to be 25% off the bat. what we see with canada, mexico and china. whatever the market is focused on is probably not what's going to be implemented. is there something, a 10% on semiconductors, nothing that goes on pharmaceuticals. that would be probably my base case here. he likes to throw really large

numbers. something that forces trading partners to react and ultimately re-sets the bar so if he comes in lower on any one of those three or exclude any one of those, the market will take it as a win and victory as well. >> we also have the european union top trade official this week trump once again said there seems to be a deal on the table when it comes to europe and their auto tariffs. do you see this going like for like tariff or tariff between brussels and washington. ed: i would expand the european auto conversation beyond just tariffs. when i've had conversations with the experts in d.c. related to europe they say one of the big things about europe is choosing a side. is it going to be partnerships with the united states or partnerships with china. with the auto space more joint ventures with u.s. carmakers rather than joint ventures with chinese carmakers. the german carmakers have a deal

with carmakers as a national security concern of epic proportions. so part of that deal in my mind would be a re-centering towards partnerships with the united states, investment in the united states that that's an to back off the car tariffs on the european counterparts. annmarie: it felt like when trump was speaking it was loosey-goosey. i have a list. march 4 the pause on canada and mexico, that deadline is up. march 12 the imports of aluminum steel getting 25% hit and then april 2 these auto tariffs. how much does trump need to potentially hunt to align the tariffs with the tax cuts he is hoping his congress can get in place. ed: what i hear there is we will have weekly if not daily at times announcements on terrace brady will keep us guessing, keep us informed and part of this is a two-pronged attack as well put move the goalpost,

forced policy changes that he wants and once he gets those achievements he will celebrate that. by moving this dollar amounts in the percentages so high, if we don't get 25% say we are at five or 10%, that is the foundation for universal tariff that he actually wants and he will say he is using that money to give republicans the opportunity to pass tax cuts and do spending on key priorities. he is doing a both and strategy as it relates to what he's doing here. because he's moving the goalpost resetting expectations and get some policy wins out of it and he will celebrate them each step of the way. >> it sounds at full on negotiating mode. what will act as the revenue raisers? >> the ultimate revenue raiser is going to be smaller than expected but more permanent tariff that goes into effect. when we look back to the canada

mexico china experiment, we are all focused on the 25% but what was actually implemented was 10% which looked like a better deal vis-a-vis everyone else but that being said as a baseline for everything that's coming from china i think is the base case as we set a baseline for the rest of the world. if he just said that outright we would all be freaked out but if we start at 25% he says he will go higher but only sales up 10% or maybe even less maybe settling for five percent. that's the political cover for additional spending on capitol hill. >> from our conversations who cover trade, is there any consistent methodology to how these tariffs are being threatened or discussed or is it just to flood the zone approach? ed: it is a flood the zone approach. having very senior conversations with folks in the administration and they have said a lot of this is do something so big and so

bold that forces a policy response. so last week when we got the reaction on reciprocal tariffs, the fact we are including the value added tax any regulation or anything that they want to include here shows me just how much they are going to use the force of the united states government, of the military the united states, the economy of the united states to threaten something so large that other countries have no choice but to respond in a way that donald trump wants you to respond. but then also having the ability to come in after that and lay down a universal tariff it is interesting to watch and i think it is going to very dutch is very transparent of what they are trying to do. >> on a domestic level is there any methodology you can glean from the cuts being made from broadly across the government stemming from the effort how are live by a lot of people. ed: the greater the cuts are,

the more fanfare that's also providing political cover on the budget reconciliation. the more, if you're going to spend 4.5 trillion dollars plus on extending out the 2017 tax cuts if you want to spend an additional $300 billion on the military and immigration, on energy which is exactly what the republicans want to do, they need something really big out there like doge or tariffs to give the political covered to say it is ok to do this because we are getting savings elsewhere. again resetting the bar, the conversation. so what ultimately gets done seems like a compromise where in normal d.c. terms that would be the main fight. >> appreciate the framing sir. an additional 10% tariff on china four years ago would have been big news. intended or otherwise this is masterful expectations

management. 25% tariff, steel and aluminum mexico and canada. more to come from autos and china. we have 10% on china. >> part of that is there is bipartisan agreement that there should be some greater distance between china and the u.s.. unclear how that translates to canada and mexico. >> that means he is in full on negotiating mode. >> coming up on this program injure bishop of senior global advisors on president trump's push to end the war in ukraine. from new york this is bloomberg. ♪

jonathan: a small advance to kickoff the trading week. all-time highs for the second time this year. in the bond market, things get more interesting later on in the afternoon with fed minutes. the yield higher by a single basis point. mary daly saying yesterday policy needs to remain restrictive until i see we are making progress on inflation. lisa: this has been the more hawkish tone from members. mary daly is not a voting member. dallas fed president lori logan also a non-voter, saying it is

nonnegotiable. a real question of what the meeting of how long inflation remained above the 2% target reflects upon how flexible they will be in the x axis of reaching that. jonathan: this bond market is cheapening. it is not cheap. our vertical be out for the first half of the year -- verdict will be up for the first half of the year. lisa: every week, every day feels like a long time. president trump talks about how this is jill biden's inflation -- still buying's inflation -- biden's inflation. jonathan: the start of second quarter is early april. the list is getting longer. lisa: to what end? are they a negotiating tool? structurally domestic sized production? that will have more of an

inflationary affect. simply something to raise revenue? jonathan: foreign-exchange is replete. -- briefly. the dollar is a bit weaker. euro is a bit stronger relative to expectations. negative on the session by .2%. are we whistling past the graveyard? after two quarters of no growth in the euro zone, employment is getting signs of weakening. the case that things are not getting better. lisa: that raises the questions about the ecb response. they say it's important to be restrictive when inflation is still a concern. at what point is there some consensus in europe? wait a second. maybe the ecb these to become accommodative at a time when germany -- even germany with the 0% debt levels is talking about raising money to invest in their

country. jonathan: on the radar, president trump floating 25% tariffs on auto, chips, and pharmaceutical imports, saying he will likely announce the levees as soon as april 2. annmarie: what happens on april 1? we will get the report on what they think should be done when it comes to these tariffs. this is another addition to the long list we have waiting in the wings on these potential tariffs . if trump is in negotiating mode, it might not be 25%. it could be 10%, 5%. april 2, another one for the diary. lisa: the market is looking past this, whistling past the graveyard. howard lutnick got confirmed last night to take the role that will be into mental negotiating these tariffs. to get some of the effects president trump once the is time -- wants, there is some time

that needs to pass. jonathan: i suggest it started a long time ago. president trump wanted to do this back in 2020 but the pandemic hit. he didn't punish the europeans. they were intending to do this for quite a while. annmarie: peter navarro, probably the most hawkish when it comes to trade, he's out there working on pebble beach. he will be in all the meetings right now. he's not going to senate confirmation. a lot of people said look at the language trump puts out. it's almost copied and paste from 2016 when it comes to china. a lot of that is being led by peter navarro. what i see is a big fight taking place april on. you will have the entire team of rivals in place. jonathan: we can talk with secretary bessent up of this tomorrow. defending the doge overhaul.

they can slice $1 trillion in the federal budget. lisa: talking about the $55 billion already saved. a couple of line items thrown into question. if it is that much remains to be seen. i want to understand the overall idea behind this. is it to cut the people you can? the probationary workers. is it to just cut wholesale departments? how much of a study what the ramifications are in which departments of instrumental roles in specific and esoteric functions of the government? annmarie: i'm hoping by would hundred days of trump we have actual documentation on what was cut and what was saved. the new york times talks about the fact that they are putting so many savings into the $8 billion line item when it was just $8 million. ed mills made a great point. whether it is doge or tariffs,

it is political cover on capitol hill for republicans to go deep in the tax cuts. jonathan: it's only been a month. they are moving so quickly. it's been stunning. some top stories. president trump saying he will likely meet with lighter prudent before the end of the -- vladimir putin before the end the month. "russia wants to do something." trump added he was disappointed to hear ukrainian officials complain about being left out of talks. andrew bishop writing, "a meeting will likely not take place next week as had been floated. a reminder that the pace of talks will likely continue to be slower than donald has insisted they will." andrew, welcome to the program. i want to pick up on the comments president trump issued yesterday about zelenskyy. it feels like he's being left out in the cold. the president suggested yesterday he helped cause this war. how are those individuals going to work together, if at all?

andrew: they are not. for background, there will be no quick cease fire, no quick peace deal. the reason is not because we expected trump to be from the with zelenskyy or supportive of ukraine. we think that once president trump starts realizing the war is intractable and neither zelenskyy nor putin what a short-term deal, he will walk away. trump had two goals going in. international recognition, the nobel peace prize aspiration. he's going to realize that won't happen quickly. the other goal was to deliver to his voters a promise to get out of the war in ukraine. pierce the kicker. he can get out without forcing ukraine into a bad deal. annmarie: what kind of timeline d.c. for this? we are up -- do you see for this? trump talked about he would probably seat putin by the end of the month. many think that is not realistic. what does the time i look like

for a potential summit and a cease fire? andrew: for background, the reason they have been floating next week was because on for every 27 it's expected that trump would be in the region related to gaza and the plan on reconstruction. they wanted to avoid ramadan, or have it held before ramadan. those are out of the window now. our view has been phone call in february, meeting in march, talks in april. that remains our view. if you follow that timeline, the talks will start running aground or looking like they are going nowhere by late spring, early summer. that which states trump has to make a decision. force ukraine to the bad it doesn't want, which we don't think is likely because of his u.s. constituency being supportive of ukraine. force putin to cave through big oil sanctions which we don't think trump will go down that route because the risk of high

gasoline prices. or just walk away. our base case is he will walk away. annmarie: is there anything on the negotiating table all three can agree on? andrew: yes. they can agree on most of the issues. i don't want to use ukraine -- the phrase "ukraine would be fine with this" because it would be painful. everyone understands ukraine is going to have to forgo the five territories they lost, pull out of kursk, no nato, etc. the poison pill is one item, security guarantees. here is what we see no overlap between the ukrainian position and russian position. the minimal security guarantees ukraine would accept are probably too much for p utin to stomach. annmarie: when it comes to this potential mineral deal, we will

have scott bessent tomorrow. zelenskyy did not want to sign this deal. do you think there is potential for the security agreement via raw minerals between washington and kyiv? andrew: i think there is but only for the continuation of the work, not the postwar period. the reason it was not signed as quickly as he was expected was because it had not been clearly defined what the deal was about. was it about paying back the u.s. for previously delivered weapons? in which case, the u.s. does not have leverage. it has given the money. was it about paying for continued delivery of u.s. weapons? that is what we think it will end of being. is it about making sure the u.s. has a vested interest in ukraine's future the way it does taiwan? that acts as a security guarantee. that is not realistic because these minerals and u.s. companies are not present in these areas.

ukraine is not going to take this pie-in-the-sky promise of security guarantees. jonathan: can we talk about europe? we have seen divergence between defense stocks in the u.s. to defend stocks over in europe. european defense stocks are ripping. u.s. defense stocks are selling off. the market is beginning to understand the idea that maybe the u.s. full spec on defense spending possibly and europe will be able to boost it. do you see it playing out that easily? andrew: i don't for a couple of reasons. the u.s. will -- defense cavities will continue to support ukraine. -- defense companies will continue to support ukraine. they allow the europeans to buy american weapons, which i think he will. we do think european defense sector will keep going up and defense stocks have support. probably not as fast as people expect. this is why we are telling clients to --

jonathan: appreciate it. looking forward for the recap when that trip is complete. andrew bishop on the latest. that is where the thinking in european markets is right now. lisa: defense is a bright spot. there was coalescing around borrowing money to support that. how far are they willing to do this? we see these meetings with europeans and they never come to an agreement. some don't even show up. there's a challenge of it sounds good but it is europe. annmarie: there is a crisis, immediately last-minute summit. then not much consummate besides a long list of grievances and things they want to do but they have to have another meeting for it. they get stuck in the process. one thing andrew said, trump is not going to say you can't buy more american-made weaponry. that is something the europeans can maybe use as a levy to their advantage. jonathan: i say this with the

greatest of respect for mario draghi. he looks utterly depressed and fed up with the europeans and officials. that tells you everything you need to know about where they are in doing the things that would be good for them. i'm not talking about foreign policy. i'm talking about the economy. lisa: when mario draghi piles on to what jd vance says instead of disputed, you know where he's at in terms of his patients with the region. -- patience with the region. jonathan: an update on stories elsewhere with your bloomberg brief with dani burger. dani: a federal judge denied a request to temporarily bar elon musk and his doge team from accessing internal systems at u.s. agencies. state attorneys general contended mosque is actors -- musk is exercising power only for senate officials. hsbc reported a fourth-quarter pretax profit that beat

estimates and will incur $1.8 billion in cost for the next two years as it embarks on a global restructuring program. hsbc shares are flat this morning but surged about 40% in the past year. bloomberg learned bp is weighing a potential sale of its lubricants business. the unit, which operates under the castrol brand could be worth $10 billion. it's an option to win back investor confidence and activist investor elliott investment management is pressuring the company. that is your brief. jonathan: some wonderful one-liners on wall street. you can start buying when policymakers start panicking. our europeans panicking? lisa: it is unclear if the ecb policy makers are panicking and that is when people want to start buying. the others -- eh. it's whenever but actually shows up. annmarie: we are in deep explicit if from the bells and

defense minister. jonathan: government efficiencies in action. >> i saw an estimate today of about $50 billion. that's a good start. for the first time in my lifetime we will see a proper accounting. as the leading bond salesman for the united states, i have a pretty good story to tell. jonathan: that conversation is up next with subadra rajappa. good morning. ♪

jonathan: coming up tomorrow, head of sales for u.s. treasury. i love that line, scott bessent's line.

leading bond salesman of the united states. he joins us tomorrow at 7:00 a.m. eastern time. 25 minutes in the studio. annmarie: he has a good story to sell. he's a leading bond salesman. lisa wants to ask him why he threw a lot of shaded janet yellen about not selling on the long end and bond issuance. he is doing almost exactly what she did. lisa: i want to find it what is technical parameters are. when he sells 10-year debt. what a margin of error is to up the sales. jonathan: do you think he has a yield target? lisa: or a range. short-term rates are not it. jonathan: secretary bessent my morning. government efficiency in action. >> i saw an estimate of about

$50 billion. that's a good start. i don't think it is unreasonable to think we could have several percent of gdp we are saving. for the first time in my lifetime we will see proper accounting. as a leading bond salesman to the united states, i have a good story to tell. jonathan: treasury secretary scott bessent heading be -- tailing the success of doge on the push to lower bond yields. subadra rajappa writing, "the focus on the 10-year yield should cap the rising yields. they can reduce deficits, which they seem committed to doing through doge." good morning. is this the real deal? subadra: we will find out over time. what we heard from bessent's they have found $50 billion in deficit savings from all the work they have been been putting into it.

that is far from the $2 trillion they are targeting and cutting spending from the federal government. they have a long way to go to get to that target. it will be interesting to see what they do, how they approach the savings on cuts in spending and ways to change the way the issue so they have control over where yields are so borrowing costs in general remain low for the investors. lisa: there is an idea embedded in what you are saying. the deficit has been driving the back up and yields. with the rally this year it's the acceptance that may be that deficit will not be as steep as people previously believed. is that true? is that the base case of what is being baked into the treasury market? subadra: the 10-year treasury

yields are between a rock and a hard place. you have inflationary data pushing yields higher. you have a global environment where deficits, not just in the u.s. but europe is expected to rise. germany has to spend more on defense. that will push yields higher. global bond yield should be moving higher. you have this commitment from treasury secretary bessent and president trump they will try to keep a lid on 10-year treasury yields specifically. that keeps yields around the 4.5% level. it is a very interesting back-and-forth in the bond market. you see it rise to 475. lisa: how will they cap those yields? with the deficits or not selling 10-year treasuries? what is the mechanism other than we care about that, don't let

them go higher? subadra: a combination of things. they have to try to rein in deficits, rein in spending. maybe that puts of lid on 10-year treasury yields. a lot of the rise is because of higher term premiums. if there is less treasury debt issuance, that should cap the rising yields. there are other mechanisms they can cap. one is they are committed to producing energy. that reduces headline inflation. inflation executions could come under pressure. that is not the way they are thinking about putting a lid on how high yields are. annmarie: did they edit the issuance? subadra: we have to see how that works out. as you were discussing, be ssent was calling yellen's

issuance as activist treasury issuance. the question is whether they stick to the same type of plan where the issue more in treasury bills and not coupon issuance. initial indication is that is where they are headed that is what the market was focused on and the last meeting. no change in the forward guidance, which leads us to believe they might keep coupon issuance unchanged for the year. jonathan: a paper last year. there is now in the administration no change. i want to understand when we start thinking about taxes more and less about tariffs and doge. when do taxes hit the market? subadra: the tax cuts they will try to pass first, whether it is one bill or two is yet to be seen. that's an extension.

it will add four chilean dollars to the deficits. they have to -- $4 trillion to the deficits. that is where i think you will see a lot of pushback. even among republicans in congress, you will see pushback to spending cuts. it will hit their own district and they have to think hard before the agreed to the tax deal. jonathan: bessent will send expanding tcja. are the fed minutes worth looking at? lisa: they might be. people are hoping perhaps they will shed light on how the new policies and policy uncertainty is factoring into fed officials views on inflation, etc. i said maybe not. maybe they won't say anything. we have to wait and see. jonathan: should lisa reschedule

that? subadra: she should. you could get some nuggets of information on what they are thinking about, how long they want to stay on pause, and qt. lisa: there is a possibility it is going to be pretty opaque and not say anything. i will be there. i will be reading it. jonathan: to and in this afternoon on bloomberg tv. always good to see you. subadra rajappa. up next, alicia levine, jennifer flitton, norman roule and everett eissenstat. the second hour of "bloomberg surveillance" is up next. ♪ ♪

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

>> we are in a bifurcated economy. >> we continue to see spending. >> you are seeing solid overall growth. >> there's no reason for the fed to move quickly given all the policy uncertainty. >> there is so much uncertainty and so much being cranked into the market from a policy standpoint from the administration that you almost have to sit on your hands and say we need to wait and see. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern.

jonathan: the second hour starts now with equity futures pulling back a little bit. nasdaq 100 looks like this. down about .1%. the russell negative by .6%. later this afternoon, 2:00 p.m., do you need to reschedule that nap? the federal reserve minutes. comfortably numb, that is the federal reserve at the moment. lisa: not being forced to move it any real capacity. the economy and the federal policy, the fiscal policy is in the driver seat. i key question i have. how high is the bar for them to make mistakes? potentially you have a re-acceleration of inflation that has remained above that 2% target the fed has for 46 straight months, the longest

streak going back to the early 1990's. jonathan: and tariffs making things worse and not better? we could get 25% import tariffs on autos, semiconductors, and pharmaceuticals by early april according to the president. annmarie: it will be the neighborhood of 25%. that could come as soon as april 2. april 1 is when his team is supposed to submit their work, the trade imbalances the u.s. sees with partners. you can add april 2 two the calendar. march 4, the pause for canada and mexico. march 12, the deadline for aluminum and steel. the market is shrugging all of this all. lisa: i feel like pink floyd should be the running theme today. comfortably numb. we can talk about that with fed officials and about the market when it comes to tariffs. no one is taking this seriously. they don't see this as the

endpoint, just the starting point. jonathan: european stocks are not taking it seriously either. the banks of 18% year-to-date. autos up by 10% year-to-date. basic resources up by 7%. every single industry group on the stoxx 600 is positive for the year with the exception of utilities, which is down by about point 1%. lisa: maybe they will be arrested -- reinvestment when they are benefiting from the dynamism of the u.s. economy. are people going to have a wake-up call with these tariffs or are they noise and a negotiating tool? annmarie: the rhetoric among european leaders is not playing out to the market. when you look at the markets, it is like donald trump is trying to make european stocks great again. there is a mismatch between the concern there is in brussels and what is actually playing out in the market. jonathan: a defense talk and europe is up by more than 50% year-to-date. you look at the autos. defense stocks are taking the

seriously. the autos don't seem to be at all. over the previous seven days before today up by around 8%. lisa: a lot of auto manufacturers in europe manufacturer in the u.s. if you have job cuts which were not allowed for so long, that will bolster the valuations in places that had reached rock bottom according to a lot of valuation models. people are looking at this as a valuation story. i will say this statistics that german trains were less on time than the u.k. train system, which gives you a sense of how far things have fallen given that germany was known for the efficacy. jonathan: you are really kicking them when they are down. lisa: i personally experienced this. one of the trains was missing. we had a bus instead. i was shocked. it was the epicenter of the train world. jonathan: you can start buying when policymakers start

panicking. is that another reason for them to panic and europe? -- in europe? lisa: there is motion and discussion and you are seeing that in the bond market. maybe it is time to stop thinking about raising rates. if that is panicking, maybe so. jonathan: equity futures a little softer on the s&p. coming up, alicia levine with stocks near record highs. jennnifer flitton of invesco and former nec deputy director everett eissenstat on the trade uncertainty. we begin with stocks fairly steady as traders look past the president's latest terror threats. alicia levine expecting volatility had. "the direction is up but tails are fat. the market has begun to price inflation risk from tariffs an extension of tax cuts." alicia, good morning. where do you see the inflation risk priced at the moment? alicia: it is this relentlessly flat market.

this unsatisfying market where it is clear the market is focused almost entirely on inflation risk. almost to the absence of anything else here. whether that comes as part of the tariff conversation or other pricing, the market has not been able to really get going this year. we did not inspect a have a huge year in equities in the u.s. simply because we are coming off almost 50% over the last two years. there is some digestion. we think it is earnings that will drive the market this year. it is this relentlessly flat experience where it is unsatisfying. yes, we had a new high yesterday. just over the goal line at the last minute but at this point last year we had 11 new highs. we are struggling along waiting for direction. it is unsatisfying. it is an unsatisfying market with a lot of activity underneath the surface. financials are flying. tech is lying down, sitting of

the quarter for now. that's unusual for the market. you have activity in other areas. on the index level it feels unsatisfying. lisa: let's unpack some of that. morgan stanley would agree. yields are not a driver of valuation. it is the earnings picture. from the earnings side, is that were you expect tariffs to be most punitive that it could affect margins anymore material way going forward in the longer term and also the short-term as companies prepare? alicia: let's go back to the conversation about europe. policymakers are unhappy. the market is doing quite well. we have to separate the conversations on policy for will what is going on with the market. the earnings hit from tariffs, if it is a 10% tariff, it is not that high. that is why the market is hanging in there. both in the u.s. and europe not taking these conversations at 25% tariffs all that seriously. the truth is the u.s. has a

massive trade deficit with europe. the pain will not be felt in the u.s. it will be felt in europe. that is why the trade is interesting. nobody thinks they are actually going to happen in are simply a negotiating tactic. both markets are telling you that. the market that is most susceptible in terms of an earnings hit is in europe, not the u.s. lisa: you point to the earnings and where you have seen robust deliveries, the financial sector, and some of the others. how much of the hopes and dreams of dealmaking coming to fruition versus the promise that as far off? alicia: i think it is still a promise. we heard conversations yesterday the ftc will take it slowly as it things about where it wants to be in this administration and accepting m&a. it is simply a better environment for smaller companies are m&a. if you have a better head of the ftc and a friendlier environment towards you making, you go lower

cap and mid-cap. that tends to do well. that is where you get the animal spirits issue and the dealmaking and earnings coming in strong. you can still have a fine year. almost more like the textbook equities up 7% to 10% a year. we think it is that kind of year. you need the earnings to move the market from here at 22 times forward earnings. annmarie: you say it's about inflation risk versus growth upside. at what point does the market need to see that growth upside? you think tcja extension will be drawn out and noisy. it could be a next year story. alicia: that is why it's a frustrating market. the relief come on the fiscal side and finding the pay fors to drive this forward. we have the conversations about the tariffs at the other policies. the conversation is about

inflation risk versus growth upside. that's it. depending on what is happening, that is where the market is trading. you will see overreactions in either direction. the extention of the tax cut will be difficult with a one seat majority in the house. they will be a lot of noise. there will be negotiating in the press. annmarie: trump was talking about all these companies announcing they are coming back to the u.s. production. do you start baking and a lower corporate tax rate? -- bake in a lower corporate tax rate? alicia: our estimates do not include that. if the basic point is just to extend the tax cuts, that is $4.5 trillion. then you're adding no tax on tips, no tax on social security. forget the 15% corporate tax rate on manufacturing in the u.s. that will be a hard one to get. you have to pay for it in some

way. the treasury secretary is saying there will be pay fors. jonathan: the banks are up by 12%. europe, 18%. could this be sustainable leadership for the financials? alicia: it depends on the regulatory picture. for a long time after the global financial crisis the regulatory structure turned the banks into utilities. regular earnings. no real upside. no leverage and how you can run the business. -- in how you can run the business. the promise of deregulation is both increasing earnings and therefore the multiples. the sector stops becoming something of a utility. too big to fail. we need them but -- jonathan: it sounds like you have your doubts on the sector. alicia: i'm actually positive on it. you are seeing multiples move higher and the performance of

financials. you definitely stick with financials. we like industrials also. we like cyclicals. that is growth here. we're looking for 12% to 14% earnings growth this year. the market will end around 6600. hard to get multiple extension from the topline s&p coming at 22 times forward earnings with tech looking to take a breather. jonathan: good to see you as always. alicia levine. equity futures recovering this morning. just about negative on the s&p 500. here is your bloomberg brief with dani burger. dani: president trump's antitrust chiefs said they will follow the tougher u.s. merger rules adopted under president biden. it surprised critics who had been open for a rollback. agency staffers received memos saying they will be keeping the rules, signaling continuity with the previous administration's competition efforts. ford has a stock bonuses for

many middle managers in an attempt to boost performance amid declining profits and high costs. ford is forecasting year when interest will fall by $2 billion. it's also overhauling the ev unit after projecting losses of $5.5 billion this year. citigroup has lifted ceo jane fraser's compensation to $34.5 million for 2024, pop a third from the previous year as she continues to drive a plan for higher returns at the wall street bank. that makes her race among the biggest -- raise among the biggest of ceos of large banks. jonathan: thank you. up next, cutting waste. >> the goal is to try to get $1 trillion out of the deficit. if the deficit is not under control, america will go bankrupt. jonathan: that conversation is just around the quarter with -- corner with jennnifer flitton. good morning. ♪

jonathan: set the alarms around this time tomorrow. scott bessent of the treasury, 7:00 a.m. eastern time, live in the studio in new york city for 25 minutes on the state of the economy, the outlook for tariffs , for taxes and regulation and a lot more. that's tomorrow morning at 7:00 a.m. eastern time live on bloomberg surveillance. cutting waste. >> the overall goal is to try to get $1 trillion out of the deficit. if the deficit is not under control, america will go bankrupt. this is important to understand. if an individual overspend, they can go bankrupt, and so can a country. the massive waste and abuse

going on, which is leading to a $2 trillion a your deficit, that is with the president was handed. jonathan: elon musk and president trump defending doge and cost-cutting initiatives the president is said to deliver a keynote speech at the saudi-backed future investment initiative summit in miami today. tyler kendall joins us now from miami. walk us through what we can expect and ultimately from the president of the united states? tyler: the week that president trump took office the saudi crown prince said saudi arabia would increase investment in trade in the u.s. by $600 billion. that was a pretty big pledge over four years considering it makes up about 55% of the country's gdp. president trump said that was not enough and he wanted to see that increased to $1 trillion over that same time period. experts say that is unrealistic

but still drawing many u.s. business interests to miami that could benefit from the increased flow of capital between the nations. there's a sense on the ground that the saudi's would like to focus on areas of agreement between the two countries, including investment when it comes to artificial intelligence and advanced manufacturing, instead of disagreements hanging over president trump's plans when it comes to gaza, something many arab leaders have disagreed with. i had a chance to catch up with a foreign policy official who is here at fii. they told me the general sense is that the saudi's feel like they now have a more direct line of contact when it comes to president trump compared to what was often an interagency approach under the biden administration. it is clear we will hear about strengthening ties. we are going to be looking out for point of contention as well. jonathan: we will hear from the president this afternoon. tyler kendall, thank you. the saudi's are the epicenter of

everything at the moment. the talks in riyadh between top u.s. and russian officials. in davos, how many panels did you see with a prominent saudi official on the panel? lisa: my question in davos and now was how much is it because they have the money and they want the international cloud and are leading into this -- clout and they are leaning into this and they have access to a lot of the relevant parties as an oil major and a tech investor across the world? how much of they trying to use this moment to have more of a world power type status than they had traditionally? annmarie: absolutely. it is a 180 at the start of trump 2.0 as opposed to biden. biden called mohammad bin salman a pariah. my reporting was that it took a number of individuals around biden to finally say you need to deal with this individual. we need to deal with the

kingdom, especially since russia's invasion of ukraine. trump on day one wanted that bilateral relationship back and focus. you know he needs to really lean on bahama bin salman -- mohammad bin salman for gaza, for russia, for infrastructure spending. jonathan: p got a reality check from the energy market. annmarie: that led to me traveling to jedda in the scorching heat this summer. jonathan: they have to consider the temperature for you. that is what this is all about. jennnifer flitton joins us for more. elon musk. the overall goal is to try to get $1 trillion out of the deficit. where does that money come from? jennifer: that's a great question. we may learn more when he puts out his budget in april. typically the president gives his state of the union address in march. in the first year of a new administration april is the

deadline. it might be kicked later into april, possibly may. those would be the first indications of where the president wants to go with the budget into the next fiscal year. annmarie: when it comes to doge, scott bessent was asked on fox news about where the spending savings or coming on. he saw a draft $50 billion. do you think that is accurate? jennifer: i think it is more than one month in. a lot of this has been prepared during the transition, even for the last year. it is important to note the president's former omb director is back in his office. he has been very busy over the past several years. a lot of this is known to that going in. there's a reason why he's targeting the places elon musk is targeting. annmarie: when it comes to

government spending we are two weeks from running out. will we see a shutdown on march 14? jennifer: we are 10, 11 legislative days until this march 14 deadline. we are so focused now on this house budget resolution and the reconciliation instructions that have to be included in that resolution to go forward on tax reform, energy, defense, immigration. we are not focused now on appropriations. is it possible to just kick the can for the rest of the fiscal year because they cannot come to some agreement with the democrats? that is very possible. lisa: how much control does donald trump have over the republican party at a time when all of his nominees pretty much have gotten through? jennifer: i think it is pretty clear he has a strong grip on this party. i think the reconciliation and the house budget and senate

budget coming together on some joint budget resolution that has to be passed to move forward on reconciliation is going to be a real first test of where his legislative hold is with a tight margin and especially in the house. lisa: how much is this really up to donald trump to come up with some sort of budget agreement the republicans will then push through versus what ed mills was saying, the doge efforts are to cover the fact that probably they are not going to build the cut enough costs in the budget to offset some of the expenditures in tax cuts, etc.? jennifer: ed made a good point. there is a vibe that has to exist. last night that interview on hannity between musk and trump was a messaging tactic. that was intended to go out to the american people in the audience.

not just the maga base, the republican party come up with the new voters who came in and supported trump. it is why some of his numbers as far as trust and faith in with the president is going in certain policy areas is so strong right now. i think he is looking to bolster that. going into this reconciliation debate, going into this final joint house budget resolution debate where the white house has to weigh in, it will be important he has a strong support of the american people. annmarie: was the message to capitol hill republicans go for the big one beautiful bill because i have cover when it comes to spending cuts? jennifer: yeah, go for whatever resolution you can ashley get passed -- you can actually get passed. it looks like thune will put this on the floor this week.

that will require real vote-a-ra ma and democrats will bring in a lot of amendments into that debate and they could make republicans take tough votes. with a joint budget resolution they will have to do that again. the house will come back next week. we will see if they are able to get a budget resolution across the floor or if the senate will have to feed them what they have been able to pass. jonathan: look forward to covering this with you. you know how the conversation goes. the deficit is too big. what can we do about it? we won't touch entitlement or defense spending north of $800 billion. i wonder where th -- whether we can say that on the ladder. on defense spending, whether that is actually this administration is willing to cut back. annmarie: they will try to doge

ify the dod. trump cannot really go after medicare and social security. it was a campaign promise. this will put republicans on capitol hill and a really hard place, especially the fiscal hawks who say we will add more to tcja, no tax on tips, no tax on social security, where the offsets going to come from? jonathan: defense stocks slowly picking up on the story. we will catch up with norman roule on president trump's push to end the war in ukraine. that is next. this is bloomberg. ♪ ♪

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

jonathan: equity futures little changed. it is tariff fatigue. that is what it looks like. when we look past the reality in early april if this is what we get. nasdaq positive by about .1%. let's get some wording movers with manus cranny. manus: a little bit of fatigue for bumble, down 18.8%. here is the kicker. the average revenue, the average spend dropped to $20.58 versus $22.64. some would say that is cheap. gen z users are becoming tired of dating apps. it is more of a community and

gathering. oxi drops. $6.8 billion. that is lighter than last year's $7.17 billion. production will drop by 4%. they took a special charge in the fourth quarter. when it comes to networks, down 4.2%. the guidance was fine. it's about their dependence on meta and the level that business has dropped. that is a concerning point. morgan stanley saying it is a buy. $118 on the target. bi says you will look for the dependence on meta. it is not that momentum has stalled. it is temporarily paused. jonathan: appreciate it. if that is true, accredited gen z. our generation commoditized people on those apps. lisa: you think they are going

back to bars to strike up conversations? annmarie: maybe the opposite. staring into their phones and creating tiktok videos. jonathan: have you seen those running clubs? lisa: that is basically the new dating app. jonathan: you have to wear a black t-shirt if you are single. it is true. lisa: this is really helpful. jonathan: everyone is in shape. high status people that week of early the morning on saturdays and sundays. usually means they have not been on a night out before and that is someone you might want to date. lisa: and they are all wearing -- not nike. jonathan: my channel checks. lisa: not as much for dating apps. jonathan: features on the s&p negative by about 1/10 of 1%. u.s. treasury secretary scott bessent saying the doge team has saved an estimated $50 billion

so far and taxpayers don't need to worry about the security of their private data. we will catch up with the secretary treasury tomorrow morning. annmarie: jennifer was talking about how they came in looking at where they were going to cut. this $50 billion potential draft, even if it is off by a few billion, is accurate. he said the irs is looking at an outdated i.t. system. that is all they are doing. there was lots of concern over the weekend that doge was getting access to people's tax files. when it comes to the treasury department, potentially doge is getting access to, treasury maintains it is read-only access. a lot of hype about this. potentially they are not getting into some of the nefarious things that critics have thrown at the administration. lisa: it was a fascinating interview with scott bessent. he was talking about the accounting of the treasury department as chief bonds salesman. he was not just talking about

cost-cutting. he was talking about growth and cbo. he said that is a crap measurement -- my words -- you will not get stronger growth. he will be a fascinating pr pitch for the chief bonds salesman of the united states of america to explain why the budget should not be a concern for people who are buying long-term bonds. annmarie: and he pitched to former friends in the hedge fund world. he said i used to read all the cpu scores -- cbo scores and that would worry me but he does not like the way they do math because they don't take into account other offsets that are happening within the government. jonathan: 120% gdp growth in gdp is around 3%. -- 1.2% gdp growth. where does that come from? lisa: how does that affect potential inflation? how do you factor in some changes down the pike. we will get into the changes in how the -- the information is

probably the most important information for the market with that 10-year yield. jonathan: a really important conversation tomorrow at 7:00 a.m. eastern time live in new york city. the justice department and federal trade commission saying they will keep the tougher merger reveal rules adopted under president biden back in 2023. disappointing dealmakers who had been anticipating an easier time with regulators under president trump. that is why people are buying the financials. the banks are up by more than double digits so far year-to-date. annmarie: we have seen part of the republican party, the likes of jd vance say there needs to be tougher scrutiny when it comes to these mega tech tieups. i think the tone is changing now. this is a weird alignment you see between democrats and republicans in washington. lisa: alicia levine said this is

a big large-cap merger not getting through and that is what people were talking about. small caps might get the boost and that's an interesting area to look at. jonathan: bob diamond saying the financials would come down from 4.5 thousand -- 4500 to 1000 to 2000 in the next two years. lisa: you can get the kind of mergers and acquisitions. we have seen the deregulation of banks. there is a question. will they allow some mergers and not others? where is the consistency going to come from so they can have security of making longer-term plans? jonathan: let's get the latest on foreign policy. marco rubio sang the u.s. will keep sanctions on russia in place for now. rubio told a group of european counterparts sanctions will not be lifted before a deal is reached to in the war in ukraine.

president trump planning to meet with the russian president to discuss a were settlement by the end of the month. norman roule joins us now for more. welcome back. always great to catch up with you. we talked about who was in the room. we talked this week about who was not in the room. we have not talked about where the meeting between top u.s. and russian officials actually took place. what is the significance of being in rear, saudi arabia -- riyadh, saudi arabia? norman: summits between u.s. and russian leaders take place in europe. generally such as geneva. this meeting in saudi arabia cements the kingdom's role as a global node of political influence, and it says something about the administration's view of europe. riyadh has kept a good relations with russia and

washington and east-west relations. this is now paying off. you are looking at a country, saudi arabia, that routinely sees meetings of caribbean leaders, central asian leaders, arab leaders. and have made themselves a global node of political influence. annmarie: when you heard the commentary coming out, what would you describe this meeting as? was it a pretense to get these two leaders in a room or a reset of bilateral relations? norman: i think it is both. the rhetoric coming from the meeting is important but not unexpected. if you are russia, you want to claim the meeting is a success, your relations with the u.s. are on an upturn, to cuts isolation on the international stage. if you are the united states, you need to establish a

communications channel with some degree of trust with the russians. you need to set up a framework so negotiations can move forward. there is much being made of ukraine being left out of the room or europe, and that is true and understandable they would feel this way. at the same time, you need to have the two largest players to have some sort of rules of engagement and sense of the other moving forward. annmarie: trump is saying he will probably meet putin by the end of the month as of yesterday. the end of the month is next week. he is clearly on a very fast timeline to sit down with the russian leader. does the administration potentially might walk into an error like they did with kim jong-un where they met but there wasn't a deal to actually sign on the table? norman: possibly. we need to keep in mind american-russian relations, the strategy for central asia, did not develop in the last few days. the trump administration

apparently put a lot of time and effort into this following the election and developed a general sense of where they wanted to go. president trump's approach to foreign policy is to say the least unconventional. he seeks rapid movements and decisive decisions. that is unnerving to some partners. he will continue that approach. moving forward with the talks, i'm not sure if a summit could take place next week. that will depend upon what he hears from secretary of state rubio and developments regarding the israelis in gaza. lisa: next week might be unrealistic but from what you have heard from your contacts do you think we are closing in on some sort of resolution, some sort of cease fire with respect to ukraine and russia and with gaza and israel? norman: the gaza-israel cease fire remains in place. it is fragile. talks for the second stage are

moving slowly, not unexpectedly given the complexity of the issues. regarding gaza, there is a fundamental discussion on israel. do you allow hamas to stay in power? united states and israel say no. hamas is pushing to do so and exert control over gaza once a cease fire takes place. that has yet to be resolved. i think the hostage prisoner exchanges will continue. regarding the ukraine and russia, last night minor standing as the russians conducted a rather significant multicity attack against ukraine using missiles and iranian drones. this conflict continues. i think we need to be careful about seeing an end to the conflict in terms of a cease fire in the near term. lisa: given your experience through administrations, when you zoom out, how much have negotiating tactics deployed so far jeopardized some of the

intelligence contacts people traditionally have had with allies at a time when there are increasing fissures between the u.s. and europe and canada and mexico? norman: there's an interesting element of intelligence relationships. they are generally intensely nonpolitical. intelligence professionals pride themselves that no matter what takes place on the political level, the engagement and passage of information will continue. when you get to the seniormost levels of intelligence services, sometimes there's a political overtone to their approach. in terms of the engagement between friendly services, i think that will continue. there are professionals on both sides. jonathan: appreciate your time as always and your insights. norman roule. welcome to the program. equity futures a little softer. later this afternoon, some fed

minutes and you will hear from the president from miami at 5:00 p.m. eastern time. let's get an update on stories elsewhere with your bloomberg brief. dani: bloomberg has learned the trump administration is planning to lay off at least 40% of the workers at the federal housing and administration which provide mortgage insurance. bloomberg reported the u.s. department of housing and urban development, the parent agency for the fha, plans to discharge 50% of the workforce. baidu reported a smaller than effective revenue drop for the last quarter. it resulted in a 26% quarterly jump in cloud revenue, more than double the pace of growth during the september quarter. it was overshadowed by signs of weakness in its core search business. the french family behind meza set to receive $5 billion in dividends after a record-breaking four years. -- hermes.

100 heirs benefited from rapidly rising payouts. their wealth is estimated at $214 billion. that is your brief. jonathan: that is some real money but it has to be shared. the stock was up by about 20% last year. up 18% already this year. lisa: it is going to be shared. these get a couple billion and hermes bags. annmarie: that is what separates the family from bernard, the richest man in europe. lisa: can't find it. jonathan: up next, more tariffs. >> have you decided what the auto tariff rate should be? >> i will probably tell you that on april 2. he will be in the neighborhood of 25% -- it will be in the

neighborhood of 25%. jonathan: up next, everett eissenstat joins us next. from new york, this is bloomberg. ♪

jonathan: equity futures just about unchanged on the s&p 500. yields a little higher. up a single basis point. under surveillance, more tariffs. >> some of the biggest companies in the world. because of what we are doing economically and through tariffs and taxes and incentives, they want to come back into the united states. >> have you decided what the auto tariff rate should be? >> i will probably tell you that on april 2. it will be in the neighborhood of 25%. i want to give them time to come in. when they come into the united

states, they have a plant or factory here, there is no tariffs. we want to give them a chance. jonathan: president trump adding 25% tariffs on auto, semis, and pharmaceutical imports before a national --everett eissenstat writing, "this is a fundamental shift and u.s. trade policy and has many leaders on edge." everett, welcome back to the program. a reminder, he served for the current president and his first term as the representative to the g7 and g20. if you had to expend of them now how this was different to 2018, what is different about this approach? everett: there's a lot more tools on the table. the first administration there were a number of tariff items would only three major actions, two which are still in force. tariffs on steel and aluminum,

which the president broadened and covered more products. in more countries andy 301 tariff -- and the 301 tariffs on china. we now have universal reciprocal tariff to what he discussed yesterday, additional tariffs on drugs, pharmaceuticals, autos, and other items. it is a different playing field. it is more complex than it was the first term. he's getting people's attention and it is time to start thinking about how to work with this administration to achieve the objectives they are trying to achieve. annmarie: if we see tariffs, what is he going to use on the ones that are new to the trump 2.0? everett: that is a very good question an open question. some of them are better suited

towards particular outcomes. on autos, he initiated a 232, which the national security finding ran through the department commerce on autos during his first administration. it is not inconceivable he could civilly resurrect -- simply resurrect that under that authority. there is also 301 authority which he used on china which is country specific. he could use that for pharmaceuticals and semiconductors. he can do it in that way. there's also the iu bill authority -- iipa authority. 25% tariffs on mexico and canada. these are open. there are other authorities that have not been used in a long time but this goes back to that point that there is a lot on the table here. a lot of authorities being used in different ways that really

are restructuring the global trading environment. annmarie: there are reasons why he may be using tariffs. scott bessent talks about revenue raising, reciprocity with unfair trading partners, as well as a pure negotiating tool. what do you think the president is doing now? what is he after? everett: i see it two ways. one, and i thought about this deeply. it's almost two find my -- underlying fundamental elements of trump. i think is going to impose tariffs. at the same time, he's a very good negotiator. he's a master negotiator. he's already gotten concessions from other governments that have come in and wanted to talk about how we can rebalance the trading relationship. that is a dynamism we have not had in a long time. if you bring this together, and there are many different reasons for tariffs including potential

revenue raisers, if you bring the threads together he's increasing his leverage for negotiation to try to get a more balanced outcome. however, i believe at the end of the day there will be tariffs. i don't know what rate. we will have to see how the negotiations go. until that occurs it will be a fluid and volatile environment and one that merits a lot of watching by both business and government leaders. lisa: since he spent time being deeply involved in a lot of this, can we take it further? negotiating for what? the idea fairer trade. is it to bring manufacturing back? does it to reduce tariffs more broadly to have freer trade and rearrange the trade partners that we do business with? everett: i think it is both. this was driven to president biden as well and even under the first trump administration. there's a belief now that economic policy and national security cannot be separated.

it used to be that trade ran in its own lane and it really touched on the labor environment and national security. now national security and economic policy are fundamentally fused. the idea of bringing critical industries back to the u.s., that's an underlying thread. not just of this administration but the prior administration. there is a sense of unfairness. a lot of economies, and i think this comes back to the wto, a lot of countries enter the organization with terms that are different than what the united states has. we have a relatively low tariff rate. the presidencies that is on the mentally unfair and would like -- sees that as fundamentally unfair and would like to see reciprocity. i believe on the national security side that will drive a lot of this.

i believe he really does feel the industries should be investing in the united states and creating jobs in the united states. jonathan: everett, appreciate your perspective on things. everett eissenstat, former nec deputy director under president trump in his first term. that little piece of a clip we played of the president moms ago when he said i want to give them a chance. do they have their plant or factory here and there is no tariff? we want to give them a chance. it takes a while for supply-side response. it happens over a period of years. i much of a chance is he willing to give them? lisa: will he push back the deadline if enough companies come to the bargaining table and start to build plants? is this a blanket threat that will be fine-tuned to pending on the industry? i thought this was a compelling point. there are different criteria for different industries depending on how interlinked they are to

national security and how important it is to bring the manufacturing back to domestic production. annmarie: you made a point about south carolina. how already for europe it is a huge manufacturing base for bmw, mercedes, scout, volvo. this is massive and may be potentially they just add more to the manufacturing bases. we don't know. the european head of traders in washington this week. he will meet with his newly confirmed counterpart, howard lutnick. trump seems to be hinting at a deal every time he speaks about reciprocity when it comes to auto tariffs between your opinion essay so step jonathan: the europeans offered to drop tariffs on autos. can we get that confirmed? that conversation tomorrow was scott bessent. it is 7:00 a.m. eastern time. in the next hour, we catch up with liz young thomas, oliver chen, matthrew luzzetii, and thierry wizman. from new york, this is bloomberg. ♪

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>> medium term, it is hard to make an argument that is in favor the u.s. >> conscious of the fact that markets are trading at a 20% premium and you the u.s. >> if you are a stock index that

it is supposed, it has to be a higher premium. >> you may not see as much excitement this year but that the individual stock level you can see more excitement. jonathan: in the last 24 hours, transatlantic all-time highs, record highs on the s&p 500 stateside and record highs on the dax in germany. equity futures negative by .1% on the s&p. staring down the barrel of more tariffs. these are the proposals. early march, 25 tariffs on canada and mexico. into april, 25 tariffs on ships and pharma. as each week passes, expected to get longer. lisa: we keep coming back to

this and anne-marie made a great point, there are three prongs to the goals of the tariffs, seeking reciprocity, negotiating some sort of lower tariff for fairer or bringing manufacturing back to the united states. those three prongs are going to be really important to figure out how realistic the tariffs are. annmarie: when you hear them talking about it, they will throw out a sector or material and he will say i am thinking about that. it feels like everything is on the table when it comes to this administration because they are going back to these three prongs, when being reciprocity. everyone you talk to says it needs to be fair trading. and ed mills made a great point, how much of this is cover so they can go into expanding t cja and adding on more tax cuts. jonathan: and they have a tax plan to put together and that will be hard with narrow margins. lisa: and that is why scott

bessent speaking tomorrow will be key in giving the message that people can invest in the bond market because it is less interested in the tip on the tariff side and more interested in the deficit and with the payments will be and what the offsets are. i think this is the person and he is targeting what range. annmarie: and calling for a permit expansion of t cja and depending how you score it, the math, that could mean a lot more trains added to the deficit. jonathan: the treasury secretary tomorrow morning. equity futures ledger, down .1%. coming up, we will catch up with lizzie young and thomas from sophia -- sofi.

investors shaking off the latest terror threats. lizzie young thomas e's broader opportunities writing, the u.s. is not the only game in tech is not the only game. don't miss opportunities because you are stuck staring at the same troops that had your portfolio up until this point. liz joins us now. we are looking at europe, massive outperformance. the stoxx 600 up 18%. what is your advice for people watching this program that might have missed it. what should they do now? liz: i don't think you have missed it in a sense that we have been waiting for europe to come back for the better part of 15 years now and the debate has really been, is your cheaper than the u.s. for a reason and i think the answer to that for a long time was yes. the thing i have been focusing on more than europe is china and if you look at the opportunities

in china and the larger etf side of china, the internet etf and large-cap etf, doing much better than the s&p and the internet etf outperforming the european etf. the point being that we had this era where everybody is focused so much on the u.s. and rightfully so. we have had two years of 20% returns. and now we are getting to a point where we have central banks moving in some different directions. we have a steady fundamentals in the u.s. economically and on and earnings perspective but now we have other regions perking up and china in particular showing commitments are really stimulating their economy until they get what they want, which is to meet the growth numbers. jonathan: on china, home prices not as bad as some people might thought, sense of the stabilization.

we heard from a hotel group in the last 24 hours i hg talking about maybe china bottoming out as well. with all of that in mind, how do you think people should play the china story when maybe they tried to get in before and been burned several times? liz: that is happened to people in china and europe and i understand the feeling and it happened to me in europe. i tried to get in a few years ago and got burned and it went nowhere. china still has progress to make. they still have problems over there and the stimulus they have announced so far has not been entirely successful at stimulating what they need to come up which is the consumer portion of their economy and to save the real estate portion of their economy. i still think more needs to be done but we need to hear from them. as we start to get news of perhaps stimulus that targets the consumer directly or real estate sector directly, that is

where you see things perk up in a durable fashion. we have already seen volatility in the chinese markets stimulus last fall. we saw a big surge in the stocks and then a follow-up afterwards. i believe china bottomed before that so bottoming is a process, not just a moment in time in china had been going through what i believed to be a bottoming process before that first round of the stimulus was announced. the first round of stimulus was not entirely effective it. they had to announce more and i believe they will have more to come but i think we are on the way to finding out that things are getting better there and if not they will get the support they need from the government. lisa, a lot of what people said is an investable in china is less clear in terms of how they champion business and a deliberate effort by the united states to isolate china in interrupt some supply chains.

how do you discount those types of structural arguments against investing in china right now? liz: when we issued our outlook, we had china listed as a contrarian play for obvious reasons. we knew the new administration would go after china and increased tariffs that were already in place. this is not something where i am saying we are investing in china and bullish on china for a 10 or 15 year period. if you're looking at your investment portfolio and like many investors, overweight u.s. technology come overweight all the stuff that got us to this point, it is time to start looking outside of those baskets and some of that might still be in the u.s. in other sectors that are not kept pace, things like health care, financials, industrials, think showing their earnings growth, and even communication names not so much in the headlines as usual. but also looking outside the

year it -- the u.s. because another contrarian point into the year it was that the u.s. would under perform international and that includes things like china and if you are getting it at a nice discount, getting it cheap compared to u.s. stocks and things like you're getting cheap compared to u.s. stocks. valuations are important in an environment where yields have remained high and are expected to stay high because of the sticky inflation for the foreseeable future. lisa: a lot of people were talking about tech would under perform and everything else would catch up. it seems like people are reviving that now because of some similar in some different arguments. why isn't this year that people are going to step away from tech giants that have been. hit or miss more generally butter at the epicenter of a transition that people have faith in? liz: first of all, you think about and the timeline of events. i mentioned we have had two full years of above 20% returns in

the s&p. if you just look at that over here historical context, usually when you have that strong of performance two years in a row, the third year is still positive on average but not nearly as positive. we would expect something more like normal returns this year, high single digits, low double digits. as part of it. it can continue forever. the other part is a lot of what drove tech to this point was the semiconductor play in the theme of ai coming to life. we are very much in the infancy of that theme but are transitioning into one of the next phases and that next phase is going to take us towards other types of companies. in the u.s., just looking at technology in the u.s., i am more bullish on software and things like cybersecurity than on semiconductors because i do think we are making that transition. the other part of that transition is the competition rises. if we look at other types of

companies and obviously we know about the news that came out of china a few weeks ago on deepseek, if we are looking at other types of companies, there is bound to be heightened competition around the globe, other companies and regions will get in on this game and we will have to watch for opportunities outside of the ones that we have been focusing on up until this point. jonathan: we appreciate your time. this young thomas on this equity market not just stateside but worldwide. -- liz young thomas on the equity market not just stateside but worldwide. we have been saying europe would be outperforming and underperforming the united states. lisa: so we will have to look at people trying to up and crowded position or whether it is a traders market or the beginning of a new phase we get the true broadening out and outperformance outside of the united states. jonathan: equity futures on the

s&p's to touch negative. let's get some stories elsewhere. dani: president trump said he will likely impose tariffs on power, chip and pharma imports of around 25%. expect an official announcement around april 2. he wants to give companies time to come in before announcing new import tariffs adding when they have their plant or factory here, there is no tariff. ford eliminated stock awards for managers. they have had a challenging year with earnings to follow estimated at $2 billion. they are overhauling the ev unit after projecting losses is up to $5.5 billion this year. elon musk told fox news he is aiming to bring back to u.s. astronauts stranded on the international space station in four weeks. he said his company is accelerating the return of the

astronauts per the president's instructions. trump accused biden administration of leaving them on the space station for political reasons. jonathan: how many times have we said this? i can't believe that is that one of the top stories and hasn't been for the last six months plus. lisa: there are two astronauts stranded for months in space. what are they doing all of that time? are they watching tv? annmarie: they are working on the space station. lisa: all of a sudden and come eight months later we have to look at each other again? jonathan: incredible. of next, the morning calls and looking ahead it to walmart earnings with oliver chen. and why bramo will offer some therapy for the astronauts. lisa: come on, let's move on.

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jonathan: equity futures on the s&p 500 negative by .1%. the opening bell about one hour and 15 minutes away. wells fargo analyst raising price target on goldman expecting improved margins across the three business lines. the stock is just about unchanged in the premarket. the second call is upgrading airbnb citing long-term growth potential, stock higher by .4%. bank of america on this price -- lowest price target on general mills citing them not updating their fiscal outcome. walmart kicking off big box earnings tomorrow. oliver chen raising his target seeing more potential upside thanks to holiday sales, general

merchandise strength and e-commerce growth. the stock is higher by .5%. oliver chen joins us. good to see you. oliver: good to see you. jonathan: this is favorite question, we are used to seeing trading down and a full mark -- walmart is doing well maybe the country isn't. is that the case? oliver: we are happy with walmart. all of america is looking for value and that is working with traffic at walmart and we are in a very volatile time where they have a lot of negotiation power relative to suppliers. the bottom line is the discounts they offer and pricing they offer is compelling. plus you layer on technology in the marketplace model. lisa: people talk about value and i try to understand what it means because it doesn't mean cheap prices anymore.

i am curious if walmart is still a broad lower income americans or to jonathan's point of how much you can do market share. oliver: you have combination retell it the marketplace model plus court retail. at walmart is america, four thousand stores, 90% of america within 10 miles of a walmart. the consumer has been strong, low unemployment and cash on the sidelines. they have been executing well in the consumer has been very selective and looking for deals and bargains. you get a grocery leader at low prices plus you can get that bag from hermes if you go on the website. and there is walmart plus and curbside pickup. it's a combination retail is a theme and then you combine it needs of wants and that is a

thing we like. we also like costco and bj's. lisa: i am just curious how much walmart is taking market share away from other retailers. walmart shares up 15% this year's, target one the biggest losers down 3% year to date. oliver: target is mostly discretionary. and a big chunk of target's home and apparel. this consumer has been a lot more cautious. what target needs to do is increase the speed at which their supply chain operates to adjust to this new normal of a very rapidly changing consumer. jonathan: they screwed of their inventory management and we have seen that a number of times net company which raises an important questions in the next couple of quarters, tariffs are on the radar for everyone. how do companies managing

inventory with that in mind? oliver: target has some of the biggest exposure to imports at 50%. walmart less so at 30 and costco at 30 -- 20. walmart has been good at negotiating with suppliers and good supply-chain management. annmarie: is it a lot of their supply chain within mexico and canada which will potentially get hit with 25%? oliver: when it rains it pours on everyone. we think walmart will be best positioned in the ability to have the lowest prices in domestic needs and they have been fast and agile. over half of walmart's food and grocery and that will be very helpful. annmarie: this a mentioned the bags. what we could talk about luxury, when it comes to tariffs, and trump 1.0 it was the luxury sector hit from europe for a short period of time, luxury handbags and leather goods. will they be on the chopping block when he talks about

reciprocity? oliver: what happened with the election was wealth effect and more confidence in consumer. the bifurcation theme being luxury with the highest echelon as well as walmart is a key thing we are following. will have to watch and see what happens. anything is possible in this environment. annmarie: and luxury, everything -- everyone is scratching their head. oliver: gucci i really like but it needs more pizzazz with a lot of changes happening in that luxury. lots of designers switching. so the look for the spring in june will be exciting with change in excitement. there is a luxury move for conservativism but people are wanting more expression but we will see with the expressions.

but gucci needs more pizzazz and sparkle. jonathan: are you saying good you got quite at the wrong time? oliver: a little late. it is the little lagging. jonathan: who is in the right spot at the moment? oliver: that is to be determined. i am looking forward to tom brown. the new shows are in the spring. i still like some of the classics like prada and i am wearing brooks brothers. the mood is classics with a twist. and getting the right jewelry. that is a great value. because the bag prices and shoes have been inflated too much. annmarie: are you saying that companies should stay to their core? and if you are gucci and you have done really well, you

should stay in your lane? oliver: authenticity to the brand is important. and when you think about those, it is about craftsmanship and heritage and when you think about gucci, you have to add that seductive appeal as well, so thinking about it. that being said, on consumer discretion, nobody needs anything so you have to create desire and how do maintain cultural -- cultural relevance. act walmart, it is about the need less the one and the wants world is tougher where consumers are looking for timelessness right now. annmarie: when it comes to all the shoppers in the luxury's face, how is the chinese consumer keeping up? oliver: that has been cautious and that is part of the selected stance. there are a lot of china issues which we all discussed, particularly the property market

which is overhang and consumer confidence. so the big question, and we are all watching, if there could be better consumer stimulus because the past has been stimulated at the industrial side. the demand profile is sluggish and cautious optimism. more cautious on china. the u.s. has been better than expected in part due to that fact. lisa: wen yu put together walmart and -- when you put together walmart and hermes. lower income has been constrained and looking for deals and the strength of the consumer lies in the upper earners or is it broadening out and is there more of a willingness in lower and medium income families to spend and look past price increases? oliver: we will continue to see

the theme of bifurcation and more pressure on the lower and middle and at the same time, we will see real exuberance in the wealth effect with the high end but seeing trading down where consumers are gravitating towards costco and walmart. so some beneficiaries in the value segment and also in the upper echelons where that consumer is strong. the wealthy consumer is about confidence and feeling good. this is a moment when that is working. it is bifurcated pressure at the low end and middle as well. jonathan: in north america the wealthy tourists was from china and brazil and that has changed a lot in the decade. lisa: an increasing number of domestic consumers of luxury. i wonder how much the leadership in the white house and the style set also gives people the desire to spend. jonathan: that tourism from china is not coming back. annmarie: the treasury secretary

will be here tomorrow and he says he feels they are in a recession in china at the moment. jonathan: calibration, good to see you. up next -- oliver chen, good to see you. up next, we will come you don't to the federal reserve release. and expect more tariffs there in march and april will be busy on the trade up front. from new york city, this is bloomberg. ♪ so, what are you thinki i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools,

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jonathan: the opening bell 16 minutes away. negative by .25% on the nasdaq. the russell is down by zero point 6%. we closed yesterday at all-time highs on the s&p 500. we have record highs on the other side of the atlantic as well on the equity benchmark in frankfurt, germany even with the prospect of tariffs. economic data stateside. let's get to mike mckee. michael: we have housing and bernie -- building permits for january, an unusual month, a

decline in housing starts of 10%. negative .98%. building permits are up by just 1/10 of a percent. we can get you the regional breakdown but this month it doesn't matter as much because the fires in california were in january it so it will be february or march before we see replacement building permits really get started and then it will be an issue of can they find the construction workers and how much is the lumber going to cost. a lot going on for builders. the national association of homebuilders say the populist -- populism fell. it isn't reflecting where we are at the moment. jonathan: we will catch up in just a moment to talk about the federal reserve talk we have heard over the last couple of

days including the five minutes you will see later on and hope this gives you a cleaner read for the home builders who missed expectations. height mortgage rates, housing costs, the affordability squeeze taking place. lisa: you are seeing that down almost 6%. and also one of the worst performers over the past three months, another homebuilder in the you -- united states. you wonder if that is a towel when they are providing the bulk in an otherwise frozen market. jonathan: it has been tough in the housing market to start. lisa: especially if you don't have rates coming down and elevated prices where people are much more sensitive to that type of price inflation at elevated levels. jonathan: investors awaiting fed speak, minutes away from the latest meeting. one person wrote, while we continue to think it is a cat --

cut rather than hike, recent events have raised the possibility that the fed it needs to hike rates. let's talk about why and how high the bar is for the hike. matthew: i think the bar is high. the fed next move is likely to be a cut. to get there, you need the labor market to become a source of inflationary pressures again. the latest we have gotten on the labor market see is it going down and wage growth hire and payroll gains speaking up so the labor market is not as much of a downside as it once was. inflationary pressures picking up and accelerating. the latest data was mixed. cpi was higher but didn't come through to the pce data. we have tariff threats that are more than we were anticipating. so the inflation threat is greater than we were anticipating. the fed is always highly focused

on those and the latest university of michigan data has inflation expectations with the latest survey has moved higher. just at the margin, we have seen the risk of a rate hike increase for the second half of the year. lisa: i wonder if we're not talking about height, are we talking about the federal reserve that has excepted inflation at about 3% or 2.8% given the fact that it has been 46 months since inflation has been below that 2% target the fed has. matthew: if you go back to the december, they don't expect it to get to 2% until 2027. that is an extraordinary long period of time. they are telling you they are not accepting the trade-offs to get there quicker appeared to have a 2.5% core pce and we think they will hold steady with the policy rate to help bring it down over time. to some extent they are accepting of inflation that is

above their target because they would not want to trigger an unemployment rate rising to get it down quicker. lisa: is it enough for them to remain on hold to get inflation on the gradual path back to 2% or did they have any control over this given that a lot of it has to do with variables well outside of their parameters? matthew: if it were for the policy risks about immigration and fiscal policy and tariffs, which is a lot of risk that is important to them, i think there was a disinflationary trend in place. i would have confidence we would get within a quarter percentage point in their target this year. the risks are meaningful. they are certainly looking inflation this year in potentially next year and will require them having to remain on hold for a period of time. i think it will be an interesting question about how restrictive policy is at the

general just january meeting he said they were minimally restrictive. you have heard a lot of uncertainty from government and other officials. the number of officials think they are near neutral which we agree with. there is an area where there is a lot of disagreement on the committee. annmarie: what would it take to raise rates? we talk about potentially stickier inflation and what would it take for them to say now is the time for a hike? matthew: the first thing is that the labor market needs to tighten and the unemployment rate needs to fall below 4%, wage growth three accelerating. so that it is not downside risk but a new source of inflationary pressures. inflation itself has to accelerate. core pce has to go up and they would meet that with cuban policy on hold. there will always be inflation expectations. .

how balance are the risks? is there a real risk things could get worse. i think we have an economy that is entering this period with momentum. consumer growth last year it was strong in consumer spending was 3%. the labor market was accelerating in many ways. gains on a three month moving average. credit conditions, financial conditions, other surveys hitting several year highs. so meaningful forward-looking momentum. i think they should be somewhat concerned that the tariff threats and what we hear can

turn sentiment relatively quickly. it is not counter active with positive news on the economy, deregulation, fiscal policy, tax cuts. they should probably balance it out. jonathan: how quickly can we see the cuts from washington showing up? matthew: if you look at jobless claims, it is already showing up and we expect that accelerates. many of the cuts look like they might be coming after the survey week for the federal -- february jobs report. we had this whole batch that took buyouts which probably does not show up until the september or october data because they were kept on the payrolls until then. annmarie: do you know what it could go at? what kind of number could we see every month going forward? matthew: they have had a target of about 2% of the workforce.

we think about having 2.4 million in federal workers. so that is a meaningful hit payroll gains if and when it happens. 60 or 70,000 individuals. it is a meaningful amount to payroll gains when it happens and if it is as big as is being focused on. i will also focus on them lifting payrolls. there is a seasonality here were people would typically be retiring because they won't because they are kept on payrolls. so the next six or eight months you could have counteracting forces. jonathan: appreciate your time. look out for jobless claims tomorrow morning at 8:30 eastern time. the federal reserve minutes later this afternoon let's bring in michael mckee for the conversation again.

looking ahead to 2:00, we heard some fed speak. what are you looking for in these minutes? michael: because we have heard from the speakers, you will not find guidance on what is happening but maybe around the edges is what we will see. in terms of what they were saying about what they thought, there has been a lot of developments since then. where there any kind of general outlooks for what they might see and how they might react. and look on the balance sheet side. will the fed have talked about anything to do with the supplementary leverage ratio. that has been a topic that has come up since then significantly and it is possibly talked about because jay powell said it is something they are considering changing. the balance sheet also in terms

of is there any clue to when they might stop her when they think the repo facility would zero and that would give wall street time for some math. jonathan: look out for michael mckee's coverage on the fed meeting minutes at 2:00 p.m. eastern time. on the trade front, governor waller put this out on a speech, my baseline view is that the terrace will only modestly increase prices and in a nonpersistent manner so i favor looking through these affects goodwill that show up in the minutes later this afternoon? the trade chief heading to washington today to hopefully avoid a tariff dispute. terry wiseman writes in the uncertainty for the euro may last longer and will conclude it is too early to say. the euro-dollar has entered an appreciating path. he joins us now. foreign change and commodities, mention the phenomenal

performance we are seeing in european equities. do you think the european story has seen the worst of it already and is all behind us or are we whistling past the graveyard? thierry: i think we are whistling past the graveyard to some extent. the reason why we had outperformance in european equity since the beginning of the year has much more to do with rotation and having seen how well the u.s. stock market has done over the past three years and the imbalances it has caused any allocations of allocations. it stands to reason and building the european exposure and when that happens across the board, that will be a crisis. i see very little fundamental reason to the run-up in european equities except for the pockets that have been energized to some extent by policy statements, the defense sector in europe. there is a fundamental reason for why that is going up. it is few and far between but the broad sweep of the price is about reallocation and not

fundamentals. jonathan: defense stocks up 50% year to date. should we question here about how they fund defense spending and that is rates and bonds and could influence foreign exchange. thierry: it is very likely that this is going to be a joint issue to bonds and finance and the expenditures that need to be done, assuming and a big assume that your wants to move towards a 3% gdp expenditure baseline. i don't think at the level of each individual country this is going to impair the sovereign risk perceptions but at the same time we will see more bond issuance and that might put upward pressure on bond markets without receiving sovereign spreads. i should say there are a lot of hurdles in the way of this happening. we would like to see the germans take the lead because they have

been the country with the most economic wherewithal to do that. before they do that, they need to change the laws. it is the so-called german debt break. we will have an election next week in germany and the cdu has been against historically loosening the break. the greens and socialists have been more inclined to do so. it would be nice to see them if they take power to loosen the fiscal restraints to some extent, and maybe they will and we will get more driven country specific participation in the defense bill out. if they do happen, it could be positive for the euro but we will have to wait which was the essence of the note we wrote. lisa: i am wondering, do you think that the euro strength is over, that we will revert back to flows into the united states the way that it was, even though you have the long dollar and experiencing last year?

thierry: if we get a global slowdown, the u.s. dollar can catch another wind and could appreciate again but that is not in the baseline. when we came out with our global outlook in december, what we had that is the euro is likely to bomb at the end of q1. we did see positive events coming out for the euro prospectively in q2 and q3 than in q1. if they happen to pass, the events are peace and russia and ukraine, the prospect of progrowth policies coming out of europe by way of the german election, and of course some clarity on tariffs. if those three things come together, it will be very unlikely that the dollar strengthens further post q2. it could strengthen in q1 between now and the end of the quarter but tariff noise can do that but not a global slowdown. lisa: there is larger issue whether europe was beaten up at the end of last year because

people assumed they would be the biggest loser from tariff policy and the slowdown down ongoing in china. the story has flipped on its head. people are starting to invest once again at the same time the potential of the tariffs and negotiating tactics the way it is being perceived. which is it? which narrative would you lean into? thierry: it depends on if you are looking at the short or medium term or long term or long-term for that matter. medium or long, china will rebound from the doldrums and the signals in the past week have been positive. ultimately there will be peace in russia and ukraine. it has already been three years and most don't last that long. we will get some clarity on the tariff lent eventually and very likely a policy reorientation. i am leaning towards the view in the medium-term that most of the factors that have held your down politically are going to be unwound and that is going to be the basis for recovery in the

euro. i don't want to make that call and that was the essence of the note and there is still quite a lot of noise out there, including as we saw last night with the announcement or proclamation of more terrace coming. there is a lot of incoherence in u.s. tariff policy right now but i hope that by the time we roll around for three months there will be more coherence. jonathan: we can come back to the tariff proposals and there have been many. march 4, 25% on canada and mexico, march 12, 25% on steel and aluminum, april, 25% auto, chips, and drugs. annmarie: in the neighborhood of 25%. it could be more or less good that means that trump is likely in negotiating mode and i wonder if one of those negotiating tactics is potentially concessions from europe to increase defense spending and could that mean less tariffs. jonathan: of the dates on the

screen march into april, what is your baseline of what happens with some of those proposals? thierry: noise and uncertainty. we can't run them down one by one and the easiest one is the march 4 deadline, if you will, for the canada and mexico. canada is not an enemy. mexico should be a friend. i think there is a precedent here and what happened in 2018 and 2019 when president trump at the time did almost the same thing and how did those concessions come about and they came about because canada and mexico came back and said we will reopen and revisit and renegotiate. as soon as that announcement was made, we will put to bed those tariffs. i don't want to go through all of them but this is a good example of how things can progress going forward, even in the case of the reciprocal tariff announcement that came out from the white house the

other day. there was a section that said the arts of the international deal. when i read that, it tells me one thing, we are headed towards dealmaking and not primitive punitive tariffs on these countries, and that deal just as in canada and mexico can take a form we don't necessarily expect at this moment. at the time of those mexico and canada tariffs back in 2018, no one really understood this would lead to a complete reopening and recasting of the economic relationship, which is why at the end of all of this, we may actually see a much more tighter and more cohesive and wider in scope economic relationship between the u.s. canada and mexico than we have now. that would be the good case outcome. and if tariffs are needed to propel those negotiations, that is great as i see it. it could be a good outcome and to some extent the market isn't panicking as much as it should because it sees the prospect of

good outcomes on the other side. jonathan: it is good to see you. thierry: my pleasure. jonathan: let's get the bloomberg brief. dani: federal judge denied a request to temporarily bar elon musk and his team at multiple u.s. agencies. state attorneys general for democrat said he is exercising power that is supposed to be reserved only for high-level level senate confirmed officials. elsewhere, bloomberg has learned that elon musk and his company x is in talks to raise money at a 404 -- at $844 billion valuation. the funding round would be a remarkable turn of fortune after the takeover in overhaul because many users and advertisers to flee. the vatican because pope francis is being treated for double pneumonia after scans revealed the condition in both of his lungs for the 88-year-old has

been in the hospital in rome since last friday. officials describe the medical condition as a complex picture. the vatican asked for prayers for the leader who has been the head of of the church since 2013. jonathan: up next, setting you up for the day ahead and get the latest from miami. from new york city, this is bloomberg. ♪

jonathan: the opening bell is about 36 minutes away. equity futures on the s&p down .2%. trading diary, later on today, fed minutes. president trump signed another round of executive orders tomorrow. walmart earnings tomorrow and jobless claims on friday.

pmi's and university of michigan sentiment. in germany's elections. president trump set to deliver a keynote speech to global leaders at the saudi backed future initiative summit. that is later this afternoon. what with the address be about? tyler: they are expecting president trump to focus on the ide of increased investment into the u.s.. i spoke to a foreign policy officials who said this -- that the pledge for increased investment in the u.s. goes against their own goals inside the united kingdom instead of exporting but the latter helps with the new administration. it is clear they are trying to focus on areas of agreement whether that is investment in artificial intelligence or manufacturing and bingo stuff potential landmark u.s.-russia talks in seven areas of disagreement like the plan when it comes to the future of gods or complaints about oil prices. it remains to be seen which path

he will take when he does take the stage at 5:00 p.m. eastern. we tried to reach out and get a preview and they told us we should stay tuned. jonathan: thank you very much. coming up tomorrow, we will bring you highlights from the address from the president and we will catch up with the u.s. treasury secretary, scott bessent. we will get some follow-up from our guests. annmarie: there is a lot to discuss with scott bessent, not only what is going on with the 10 year they are focusing on and he just got back from kyiv and presented them with an mineral deal. fascinating moment. 25 minutes for the secretary of

treasury, scott bessent. this is bloomberg. ♪ ere ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management the way i approach work post fatherhood, when has really trying toith understand the generation that we're building devices for.

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matt: after a new all-time high yesterday futures are down. 30 minutes until the start of trading. annmarie: bloomberg open interest starts right now. sonali: cars, chips, drugs, president trump eying more sectors facing 25% levees. matt: and we will talk about pay raises. annmarie: disappointing debuts, the market up to