binky: the market hasn't changed yet. keith: the key pillar is corporate earnings. chris: we struggled domestically to meet the bar. jared: the bardening out of the s&p is an important level to watch. ted: the level is something to watch. look back in history and it's ended badly. announcer: this is "bloomberg surveilance" with jonathan, lisa, and annmarie. jonathan: let's get you ready for the weekend.

good morning to those worldwide. "bloomberg surveilance," headed to the worst week of 2025 on the market of the s&p 500. your scores look like this, struggling to bounce .30%. on the nasdaq 100, up a .25%. and canada and mexico with tariffs next week. an additional 10% on china. lisa: is that why you see the sell-off and could this escalate in a tit for tat trade war, the rhetoric out of china and this to me raises the question michael hartnett raised at bank of america. does it mean we're testing the trump put, if he doesn't walk back with some of his rhetoric we could end up with a bigger sell-off as america prepares for

tariffs. jonathan: america has gone in hard after the close. they didn't talk about the stock market and economy in the news conference and it's rarely on the radar and where is the trump put. 5783. why 5783? that was the close on election day and if we break below that level you start to write the headline stocks down under trump and all of a sudden maybe they start to take an interest. lisa: if they care about the stock market that's the strike price which they ought to come out and be verbal about it. to me it goes back to the question of does this trump administration care about stocks or is it fully trained on bonds and 10-year treasury yields when they're trying to create more efficiency in the government with federal debt. jonathan: at 8:30 eastern time you'll get p.c.e.'s preferred rate in america and after that you get fed speak and yesterday

the fed speak was absolutely fascinating. the president said the following, the fed might have to balance inflation risk against growth concerns. the first acknowledgement from a fed official about the stock effect of stagflation. lisa: we heard it creep into the rhetoric of fed officials, what is the biggest problem, is it inflation or the potential for slowing growth? we might get a reprieve if p.c.e. comes below inflation and this is creeping in the market more than credit threats. jonathan: emery has a lot to cover in d.c. and we'll catch up with her. equity futures .30%. a gain of 0.0, 1% on the s&p 500. joining us through the next 60 minutes, cameron dawson of new edge wealth on increasing downside risk and former trump trade adviser kellyanne shaw on

the tariffs and greg daco with a read on inflation. markets head to a second week of losses and cameron writing up is possible but downside is likely. over the course of the year due to the increasingly high potential for detrimental policy and high starting valuations and stretched starting positioning. cameron with us now. let's talk about next week, tariffs, are you expecting those to go on, the 25% on mexico and canada, the 10% additional tariff on chinese imports. cameron: we shouldn't rule it out and seems like a key priority for this administration and is seeming increasingly it's a key pay-for for the tax cuts they want to deliver. the problem is you get tariffs immediately and taxes happen later in the year which means you don't get the offset immediately from the lower taxes in order to make the tariffs more palatable.

jonathan: we've had a bit of scare, consumer is down and 10-year yields are down by 25 basis points. is it time to lead the other way or too soon? cameron: we don't think the market is oversold but we've seen this brewing for some time. the last six months we've been cutting e.p.s. estimates for the s&p 500, the market was rallying but based on valuation. we've seen economic prices roll over and not surprised to see the 10-year treasury because economic data has been weakening the last couple months. we're not at the point we're seeing markets be deeply oversold and getting closer after yesterday's move and so we do thinking that eventually that's a buying opportunity simply because you're not seeing a big increase in recession risks but certainly you're at the point volatility is likely to remain.

lisa: i looked at the biggest losers and auto was down after nvidia reported better than expected earnings. there's the growth fierce but we're not seeing it represented in some sort of massive way. it's been the big tech story. how much is that really what's underpinning some of the mood shift the idea this is a boom and bust cycle in technology like it always is and we might be on the other side. cameron: take it a step further and expand it to the broader momentum trade rewinding. we think it all started when wal-mart reported back last week which is one of the largest of momentum e.t.f.'s. that name trading down caused the spreading of goldman sachs to trade down and nvidia and broadcom and high momentum stocks have pulled back significantly and think it's an unwind of that crowded positioning and crowded valuations and because the valuations got so high, huh no room for error and the unwinding of it has a higher magnitude. lisa: why unwinding down?

people have been talking about high valuations a long time and blamed it on everything under the sun from high rates to the idea you'll get an unwind from a surge in inflation and we haven't gotten either of that. rates have fallen and inflation seems to be slowly coming out of the system. what is it about this moment causing this unwind? cameron: it's a great question because we always know valuation is not a catalyst but you're seeing it work to the opposite direction within international markets. look at the german dax going pair policyic year to date and not based on fundamentals but this big repositioning out of u.s. hyper dominance into a more global kind of leadership. but the reality is when you're starting from low valuations and just moving a little higher you get the big moves to the upside and the opposite is true, you start from high valuations, no room for errors and get bigger moves to the downside. jonathan: we've seen the shift in the bond markets and seven

consecutive weeks of yields falling and not climbing and this happened without a real deceleration in the hard economic data. lisa raised the question, soft data started to soften up and do you see it leading into the hard data any time soon? lisa: we saw soft data spike after the election and saw a big improvement in sentiment and almost completely reversed and did not result in better hard data following the election when we saw the soft data come up. i think it will be really interesting today we get the p.c.e. and personal consumption which is interesting to us as the inflation. will you see personal consumption take a big dive? sentiment has estimates .2% versus .7% in december. could that surprise to the downside and could be a key test will hard data follow soft data down? lisa: there's been a sense maybe we're not shifting to a slow growth and maybe we're not shifting to rapid disinflation or rapid spike up in inflation

but the s word john started with stagflation, do you think that will dominate the next few months or people flipping and flopping and trying to create a narrative to fit the moment? cameron: you hear stagflation, you think of the 1970's, a stagnant in employment and upper in inflation. it's a tastes great less filling stagflation which means stickier inflation and slowing growth, something the equity market doesn't like and certainly something the fed doesn't like. the question is we think tariffs could be initially inflationary and then after deflationary, and how does the fed navigate that because if they ease policy in anticipation of that eventual deflationary episode from tariffs, the question would be is do they run the risk of causing inflation to metastasize through the economy by easing policy too much with that downward pressure on growth?

we think their back is against the wall which is why we think they're in this hold position until we see an uptick in unemployment. lisa: have you ever felt this exhausted the end of the week? cameron: nope. lisa: i'm looking at the mental gymnastics people understanding every angle, how do you invest with any conviction? cameron: we have to see volatility as a friend and as opportunity. we do know narratives will take hold and we'll see overcorrections to the downside and why we think at the end of the day, it's far less important where the s&p 500 ends at the end of this year, far more important what you do with the volatility. we think we can very easily retest the 200 day moving average, interesting about the 5783 level, that's effectively the 200 day and get to the point we'd want to step into markets into that volatility but we think that you keep your head down and focus on quality and focus on great companies with

the ability to navigate this uncertainty and use volatility to add to your best positions. jonathan: tuesday, 25% additional tariffs on canadian and mexican imports and throw canada into the mix as well. this month in february, another day to go, the peso and looney stronger on the month marginally against the u.s. dollar. lisa: there is a feeling this is a threat and when donald trump came out with his truth social post he seemed to indicate it had to do with migration and fentanyl more than it did about reciprocity which made people think there was some sort of negotiation. you saw the leaders of both countries come out and said we are working with him. people seem to be dismissing that and the china story is different and we're starting to see it in earnings. jonathan: good to catch up with cameron dawson of new edge week. this week is never-ending, the s&p 500 down on a week and up on a month with an update on stories elsewhere.

here's your "bloomberg brief" with dani burger. dani: volodymyr zelenskyy will meet with president donald trump in washington and the two leaders are expected to sign a mineral deal after president trump called putin to discuss a peace plan and it is expected to include security agreements. and a judge ordered music to answer questions about the music led government efficiency. the lawsuit was brought by labor unions and nonprofit groups and seeks to block doge's access to systems at three federal agencies. a check on dow shares in the premarket down by nearly 2.5%. dell expects to ship more a.i. servers, a 50% jump from last year but despite that strong sales outlook dell expects gross margins to decline 1% due to high hardware costs. that's your "brief."

jonathan: up next on the program, tariffs incoming. president trump: the drugs come in through mexico and a lot of them, not all of them, a lot of them come from china and why we did that. it's 10 plus 10 so that goes on march 4 and then on april 2 we have reciprocal tariffs. jonathan: a busy month coming up and a federal reserve decision coming up in between. former trump adviser, kellyanne shaw joining ann marie. good morning from new york city. ♪

jonathan: the russell t down more than 6%age points. the last session coming up, equity features up .30% on the s&p. tariffs are incoming. president trump: the drugs continue to pour into our country killing hundreds of thousands of people. we're losing substantially more than 100,000 people, dead. the drugs come through mexico and a lot of them, not all of them, a lot of them come from china and that's why we did that. it's 10 plus 10 so that goes on on march 4. and then on april 2 we have reciprocal tariffs. jonathan: the latest this morning, this is the state of play, president donald trump giving more clarity on tariff plans, including 25% tariffs on canada and mexico next week and the president adding an additional 10% tax on chinese imports and we're joined from washington with more. ann marie, good morning.

ann marie: good morning. more clarity and more tariffs is the message. when it comes to the deadline on tuesday, the pause for 25% on canada and mexico unless they show they're doing enough to stop the flow of migrants and also really fentanyl then those tariffs go into play and then the president added an additional 10% when it comes to china and let's break it down because the calendar is getting busy on the trade front. kelly ann shaw joins us, a former trade adviser on trump 1.0. let's start with the calendar, march 4 we have a pause but the directive is already there. unless they come out with another executive order, those tariffs on mexico and canada, 25% go into place and then donald trump added an additional 10% on china march 12, 25% on steel and aluminum. april 1 we get the whole report where trade is now in terms of reciprocity with american partners and april 2 auto tariffs and reciprocal tariffs across the board.

what are you focused on? kelly ann: can i say all the above? it's been a busy week from trade and on top of that we got the confirmation of u.s. trade representative jameson grier as well as the announcement after donald trump and starmer bilateral of a u.s.-u.k. f.t.a. which will be negotiated soon and one of these would be enough to derail a lawyer. and i think the calendar will be more full as we get to the april deadline when reports are due and i fully expect him to continue this trade train the next couple years. ann marie: how do you read the tea leaves. we have the mexican economy official minister in washington, d.c. met with jameson grier and will meet with howard lutnick

and the canada fentanyl czar meeting with tom homan this week. are these countries offering enough concessions for trump to put out an e.o. saying the 25% will not go through? kelly ann: what i'm picking up are positive signals from the canadians and mexicans how those conversations are going. however, it's very clear what the president wants is a reduction in deaths related to fentanyl and cooperation in terms of the border and border security. so what i think will likely play out over the next couple days is a high pressure situation in which the president is asking both canada and mexico for more so they could potentially announce on tuesday or monday night some sort of suspension for an additional 30 days or period of time. but you cannot fix these issues overnight. i think it will take several months if not years to resolve some of these core concerns of the president. my expectation is best case scenario from the perspective of canada and mexico, we see another suspension that continues to get renewed periodically as these issues

continue to be resolved but hopeful there is that opportunity. ann marie: and tuesday night with a joint address to china, look at these concessions i got when it comes to immigration which i was elected to clean up and that's the president's words. when it comes to china, is this additional 10% real? kelly ann: i think so. i don't see scope for the united states and china to resolve the president's core fentanyl concerns between now and tuesday. i see canada and mexico here as the active negotiations. they have a representative from almost every agency and province from their respective governments and those conversations are not happening and those conversations will happen after april when we have the report on the phase 1 compliance and the report on the biden administration $18 billion of additional tariffs and china's report on i.p. practices all due to the president with recommendations. and that's what i think will tee

up a broader conversation that involves fentanyl and these other issues with china. ann marie: china responded overnight and what the commerce ministry said, if the u.s. insists on having its own way, china will defend its legitimate rights and previously, though, in february the responses were we'll take corresponding steps. counter versus corresponding. what kind of reciprocal action could we see from beijing? kelly ann: you're egan uptick in the rhetoric and response, 10% to 20%. you're doubling the tariff impact. i do thinking that both sides have an interest in not driving the relationship off an economic cliff before those talks begin after april 1. that said, china will have to respond and we've seen it play out for the first four years of the trump administration and i think we'll see the same pattern play out in the second four years for every action there's an equal and opposite reaction on the side of china and the united states. i think we'll see retaliation and could be more tariffs or

additional entities added to the unreliable entity list or export controls and a number of things china will do but will be fairly moderate in terms of response because there is an opportunity to resolve these things in the short term. ann marie: you were in the room in the trade deal trump did on 1.0. what do you think he wants this time? kelly ann: it's not as clear. during the first four years what was clear is the president was looking for china to stop stealing u.s. technology and stop engaging in unfair trading practices and stop subsidizing industries at the impact of exporters and third country markets. but what was challenging for us is the fact china has a state directed economy and they're not backing away from that. they're not going to stop doing these things so impactful for the united states. so it's not really clear what the president will ask of china this time. certainly living up to phase 1 and certainly help and cooperation on fentanyl.

but beyond that, it's not clear what the asks will be on the administration side and china's side as well. they're interested on the u.s. backing off on export controls and potentially backing off on some of these national security measures and not sure there's a runway there. ann marie: if you're in the administration now and negotiating this, does it help or hurt there's a barrage of trade headlines every single day? kelly ann: i think this is just the way it is. president trump ran on inflation and immigration and tariffs. he has only four years to do it and he's looking to fundamentally change the global trading system and enact some of these policies he's been talking about for decades before he was elected president. all of it has to happen quite quickly and what you're seeing play out and why i think this will be a very full plate the next several months. kelly ann: when it comes to the april tariffs, they're indicating the full reciprocal

action will take longer than the april time line to implement, up to six months or more. even if we get the direction of travel april 1 or 2, when do you think the tariffs when it comes to the baseline reciprocal tariffs come into play? kelly ann: it depends how they want to structure it legally. the president has a number of statutory authorities to impose tariffs and can do reciprocal, baseline tariffs, supply chain tariffs and he talked about them over the past couple weeks and can do it through the section 232 investigations like we saw for copper this week, he can do section 301 investigations which is the type he used for terrificking china the first -- tariffing china the first term and they can do it in a statutory maximum of a year but it will be up to the team how they want to structure some of the tariffs and some will be overlapping and involve not just the entire economy of a country

or a universal baseline style tariff but product specific. kelly ann: it will be a very long week. all week we've been talking about canada and mexico and the united kingdom will be a trade deal and the european union. what should we look at next, where do you think he'll target next? kelly ann: i think he's starting with north america. it's clear. we have the largest trading relationships and trade deficits with mexico and canada and i think china will be fast on the heels of north america but he's talked a lot about europe and his plans for europe the past several weeks as well. in addition to the major trading partners he's mentioned, the u.s. trade representative issued a request for comments last week in which they specifically identified a number of countries the administration is concerned about, the g-20 economies as well as countries with whom we have a large trade deficit. so i also have vietnam on my list and south korea and japan and india on my list as major priorities of the trump administration throughout this first year.

ann marie: thanks so much for joining us this morning, your insight so useful. she was in the room during the phase 1 trade negotiations and reading the tea leaves and what i take away is there is an opportunity before tuesday for mexico and canada, given officials are in washington right now, to potentially forego that 25%, but with china it's going to be a bit more complimented. jonathan: appreciate the update, ann marie. nobody really believes this is going to happen and if it happens, then i think it will last very long and is a dangerous position to be in going into next week. lisa: especially if the market was to ultimately provide a check on this president. jonathan: next up from barclays as trumhreats begin to hit foreign eange. ♪

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jonathan: living from new york city this morning. good morning. welcome to the program. equities bouncing back, a small bounce, up by .40%. on the russell 2000, not getting a bounce this morning, down on the month by more than 6%. lisa: this highlights the growth fears that are really underscoring the weakness because you're seeing yields lower and the russell 2000 is underperforming and there's a question whether it's momentum trade or a bigger question about whether anyone will respond be

it the fed or president trump p. jonathan: it's not a big move but you can pick out pockets of the equityies market and the slow down people are worrying about p. lisa happened what happened in the bond market, the u.s. yield is down 25 points. the bond market at the moment happens like this, the two-year and 10-year about unchanged. 10 at the moment, 4.2520 and if we hold these levels we're headed to a second consecutive week of lower bond yields on a 10-year maturity the longest run back to june 2019. lisa: and the wrong reasons which is the reason it's not supportive of equity valuations and people were thinking of slower growth but then yesterday the word stagflation kept coming back to the floor the fed

officials say they have a dual problem of slowing growth and a sticky inflation. yesterday there was a huge drawdown going into the close and why didn't bonds rally more and that's something to keep looking at. jonathan: they've already rallied a lot over the past six or seven weeks. but i'm with you, it's worth paying attention to and the fuller quote that came from the fed official, president smith on the process of stagflation, while the risks to inflation appear to be to the upside, with contacts at my district as well as recent data suggest the elevated uncertainty might weigh on growth and the fed would have to balance inflation risk against growth concerns and is a very different space and moment for this fed to be in. lisa: it keeps getting highlighted from a number of guests that come on the show and core p.c.e., the key inflation metric the fed looks at and will be coming out in 120 minutes' time will be key in underscoring whether sticky inflation is something that can dominate over

fierce of growth. jonathan: p.c.e.8:30 eastern time. let's go to foreign exchange and pick out two currency pairs and look at the trade affected stories, the euro story, china. i want to talk about dollar cap, dollar max because these two currency pairs have shown strength on the other side of the trade so far this month. very minimal strength but strength nevertheless but the peso, for the looney at a time we're facing down the very real prospect of 25% tariffs on imports from mexico and canada. lisa: the market is not buying what the president is selling and adds to belief this will go on. mexico's president came out yesterday and said, i hope we can reach an agreement on march 4 and announce something else. canada's main negotiator comes out and says we're quite convinced the efforts we made thus far should satisfy the u.s. administration. on all sides people are anticipating a punt, a pushback.

the president himself seemed to do that and yesterday sort of walked it back. a real question here. jonathan: let's talk about china. china threatening to retaliate after president trump announced an additional 10% tariff on chinese imports. the spokesperson said china will counter with necessary measures to defend its legitimate rights and interests. lisa: the concern is a full blown trade war and they're saying that is what you see come out of the market with these currency pairs and there's been a somewhat measured response from chinese officials though they're saying in response to the latest round of tariffs, the department will take corresponding steps. in the past china has not responded until the tariffs go into effect. they have a wait and see approach. still, this is coming right before their annual meeting where they set economic targets and is something that will show whether there will be a full blown trade war. jonathan: the president said a lot and hasn't done much but put 10% tariffs on china and to see the additional 10% come again not even a month later was a

surprise to a lot of people including the chinese for that matter. i remember when secretary besten was not secretary bessent and he sat around as a hedge fund manager and talked about tariffs as trade deals and you do 2% or 5% here and ramp it up and keep putting on the pressure and weren't sure we expected them to start in the 10's and go another 10% and another 10%. lisa: there's nothing we're seeing slow and measured and deliberate that gives anyone a sense of what the ultimate destination is other than higher and why people aren't taking it seriously because they're putting a lot of work and emphasis on the negotiating aspect and not so much on a longer game that no one can really see. jonathan: need to talk about foreign policy as well. the ukrainian president volodymyr zelenskyy set to meet with president trump at the white house this morning and he is expected to sign a deal with the united states to develop ukraine's minerals and the question remaining whether ukraine will receive security guarantees. lisa: really interesting to hear

some of the walkback by president trump basically coming out and saying, did i say that about him being a dictator? i can't believe i said that and we'll get along really well but hasn't provided any security guarantees. the key question is how much can volodymyr zelenskyy change the narrative against maybe doing a deal with russia while excluding ukraine? jonathan: it was a little smile when the president said that, a little wink, a little smile. i think he knows he said that. let's turn to the story. sit -- citi mistaken a client's account. it was missed by two employees and detected and reversed by a third and no funds left the blank. lisa: we expressed a disbelief. and these numbers are not similar and it shows the

emphasis on automating processes because this was a manual processing error and is a pretty big messup if you think of transferring $81 trillion. if you want to mess up again, i'll give you my account number and just contact me and see if it works. jonathan: it came from a citigroup spokesperson and this size could not have been executed. and we reversed the entry and preventative controls would have stopped any funds leaving the bank. that's reassuring from citi. fantastic reporting from the financial times. foreign exchange, the u.s. dollar kampfing a bit as president trump's trade agenda weighs on other currencies. skylar montgomery writes the f.x. market is assigning a too small tariff premium and this in turn implies we're in pullbacks. where do you think the tariff premium needs to be built up a

little more? skylar: i think pretty much everywhere aside from this week, prior to this week there was very little tariff premium in euro cat and dollar c.n.h. and we had so many false starts on tariffs, the deadline for mexico and canada has moved once already and the market is betting it likely will move out again and because of that there's not a lot of tariff premium anywhere and you had fundamentals move in favor of the dollar at the same time and the baseline you're measuring what kind of downside you'd expect tariffs on versus has also moved. jonathan: for a lot of people in the market are embracing a concept that traditionally relates to foreign policy which is mutually assured deinstruction and they won't go through with this because it would damage each side so much. do you get the pushback from clients? skylar: absolutely. but you need to be aware of the

trade policies put forward. maybe we don't get 25% tariffs on every import in canada. there's obviously an awareness on that by saying we'll only do 10% on energy exports which the u.s. is dependent on. there's an awareness of that and you could get sec tearal tariffs which could be impactful and little bits and pieces here and there and little premium baked in means even that needs to come to the floor and to not have any kind of premium, you need to be ensured none of these policies will be enacted or a premium is automatically baked in and those are high bars we're not already achieving and makes it quite hard to reshort the dollar. lisa: you're talking about how maybe people aren't taking tariffs seriously enough and more needs to be baked in. i was reading a goldman sachs note the clients aren't seeing it. and maybe they're not baking in

that these tariffs are going on. why is the f.x. market the key barometer of risk and fear when it comes to tariffs much more than any other market? skylar: i think because it's not only tariffs we're thinking about. trump's policies across the board have a very clear directional aspect in effect. fiscal positive for the dollar and immigration policy in terms of tightening inflation and leading to a more hawkish fed as well as tariff policy, they have a clear bullish dollar aspect to them and is serious play and at the same time we have worse about yields in the u.s. and worries about inflation. those kinds of bits and pieces that have much more directional impact on equities, for example, impacted by the strong level of growth in the u.s. means f.x. is really the place where trump's policies are showing up the most. lisa: right now are you saying tariffs are still going back to the playbook in the currency world of the u.s. being strong

and everybody else getting hit harder? the reason i ask is there's a shift in tone at least in other markets in the u.s. which is towards weaker growth and potentially stagflationary trends and why are we not seeing that more in the currency space? skylar: i give two reasons why tariffs maybe don't affect the u.s. as much as other places. the first is the u.s. a more closed economy and able to generate its own growth the way other places aren't. if the u.s. starts a global trade war, that means all of those countries will have downside in growth including the u.s. but the u.s. perhaps less so depending on where it goes and how it's targeted. the second point is the u.s. is less dependent on exports and that means that if you have a tariff that's retaliated, there's less of an impact there and maybe will finish off, too, by the fact until the last couple weeks, tariffs were feeding into higher yields and the u.s. has less interest rate activity than other places and if you have yields pulling up

globally because the u.s. is rising it has more of a negative impact on these economies with lower baselines on growth in the first place but also are more impacted by the fact yields are rising despite it being triggered by the u.s. lisa: sounds like you don't buy the argument that what trump is doing will spur other countries into action especially when it comes to fiscal, is that right? are you basically discounting some of the discussions around spending more on military and things that could prompt real growth and real strength in the currency as well? skylar: it depends on the scale testify. i'm not completely discounting but we had a turn in the macronarrative in u.s. growth worries coming to the floor and european growth worries going to the background and we really don't know what kind of spending it will be over what time frame. for example, on defense spending, our economists estimate that adds 1.6 percentage point to the g.d.p.

and that's a great number but over 10 years and is a long time to get that boost and feed into the f.x. market. at the same time, europe doesn't have the defense industry that the u.s. has so where is that money actually going? will it be spent in europe or the u.s.? i have questions over these things. yes, it is overall growth positive for europe but there's still a question of how much it feeds in and over what time frame. jonathan: appreciate the view, skylar montgomery of barclays, not the only person with this view from jordan rochester pushing this out, short euro-dollar by the end of march. at the moment trading around 104. tariff risks are underpriced. we heard that from barclays and tends to run to 415 and date surprises to improve the middle of march, 5% on year end. really a story of two halves for 2025. lisa: keep your eye on the prize is what the word is from jordan rochester as well as skylar just there.

they both nod to this idea of flooding the zone, jordan rochester talking about president trump's attempts at flooding the zone has led to a lot of conflicting narratives that leave people really tired but if you look through that tariffs are underpriced. a mental death. jonathan: equity futures up by 0.4%. with an update on your stories, dani burger. dani: china constructed drills testing trump's commitment to regional security. taiwan and others expressed concerns over the exercises. the state department said the u.s. will work to counter increased threats posed by its adversaries. tesla is seeking approval to offer ride hailing in california and applied for permission to own and control a fleet of cars. musk previously said tesla would roll out driverless in june and

planned to offer in california by the end of this year. bitcoin's slide is deepening, just trading above 80,000 dollars. investors fleeing from risky assets with tariff threats. the crypto hit the lowest since november and down 27% from the all time high. michael hartnett noted crypto assets saw a record outflow over the past week. that's your "brief." jonathan: more from dani in 30 minutes' time. next, the state of the consumer on the program. >> the incoming data is really strong but how long can we have this uncertainty about both consumer confidence being weak and policy uncertainty being elevated. jonathan: torsten said if the unemployment rate begins to go up, i think the fed will put more weight on growth risk and get the view of greg daco from e.y. next on the show. ♪

>> do you think people misunderstand a few things in industry given it's private and don't see the marks every day, do you think it means that things don't move around much in price, that they are inherently safer? >> don't get me down the marking rabbit hole. just because i think the asset class doesn't trade doesn't mean i think it doesn't actually move. with private credit, the biggest challenge is your ability to create liquidity when you make a

mistake is more narrow because you're the owner of that asset and likely maybe the sole owner of the asset but few owners and there's not that many following the asset and you own all your mistakes and ultimately when you generate that return, it will be whatever your return is, less losses.

jonathan: nasdaq getting hammered going into the close because of this name, nvidia, 8% move slower. this is the bounce in the premarket and i'm sure you want to know where it is, up 0.90%. and the nasdaq and russell, s&p up .30%. the russell can't get off the map, down by more than 6% so far in february. lisa, it's down this morning by .10%. lisa: you think of the margins and how susceptible these companies are to the changes in the overall cost structure and are the more vulnerable ones that add into maybe the fed will be constrained how much they cut, because of inflation it becomes a dicey scenario. jonathan: it's been a tough

month for the equity market and consumer sentiment. the state of the consumer. torsten: people flying on airplanes is strong and going to broadway is strong and spending is strong and how long can we have this uncertainty about both consumer confidence being weak and also policy uncertainty being so elevated? we'll figure out whether is this uncertainty just talk or will it be something that will impact spending decisions by businesses and households? jonathan: the latest this morning, investors looking for core p.c.e. to be out and comes after a strength of sentiment surveys and greg writing contrary to consensus short term inflation dynamics are concerning. and consumers showing preemptive inflation and anxiety. good to see you, greg. greg: how are you? jonathan: i'm good.

this came from fed president schmitt, while the risk of inflation appears to be the debt to the downside, discussions with contacts in my district as well as recent data suggests elevated uncertainty might weigh on growth going on to say the following. the fed will have to balance inflation risk against growth concerns. sounds a little bit like stagflation. what's your response to that? greg: the very delicate balance the fed will have to navigate because we have preemptive inflation anxiety and what does it mean? on the business side, businesses are looking ahead at potential tariffs though only 10% tariffs on china have been implemented as of today. they are ready to front load orders and front load imports and is inflationary and puts upward pressure on supply chains and leads to preemptive inflation. the other element is they're ready to price their way out of this environment. we surveyed a number of business executives in a recent survey at e.y. and found that essentially

half of the businesses are going to pass on 2/3 of the higher input costs. that is a big share of the input costs that are going to be passed on and that in itself is inflationary. jonathan: you think the prices get paid and speaks to the stack and this time around consumers just hold back? greg: there will be demand deinstruction. we see them push again and again on the tariff threats 10% additional tariffs on china are likely to be materialized. the tariffs on mexico perhaps not but on canada we're likely to see targeted tariffs and not forget in the background 25% tariffs on steel and aluminum and threat of reciprocal tariffs and i think european tariffs are likely to come. all that will lead to some deconstruction.

lisa: even if we don't get all these tariffs there still is p.i.a. which should be some sort of diagnosis code, preemptive inflation anxiety, i'm coming down with a terrible case of preemptive inflation anxiety. how much are you seeing a sense inflation will rise even if these tariffs are negotiating tools because of preparations made by consumers and by companies looking to take advantage of that? greg: i think it's very important because a lot of private sector actors have been through this unusual cycle of high inflation over the past three years. even though today inflation is not worrisome, it's the 2.5%. we'll get the final numbers and 2.5% will not be extremely worrisome. what is worrisome is the fact we have consumers seeing a lot of prices and paying close attention to all these prices. it's inflation seeing higher

prices for cars and eggs and inflation and as a result they're pulling back on demand and saw that in the latest sentiment engages we see the lowest expectations in three years. there is much more anxiety anticipating the shock on higher prices, whether it's due to tariffs or other factors is leading to it. lisa: there is a theory the past two years, if you allow inflation to be 2.8 or 2.9, that's preferrable at keeping rates down and you've seen reports from a number of economists, why is it different? greg: don't know it's different today. what is the risk if you look out over the horizon in an environment where policies are likely to be inflationary that can become the risk. in normal conditions, i would not be afraid by 2.5% inflation.

it's only about 50 basis points higher than the target. it does not impact the way consumers spend and the way businesses invest. but in an environment where you have preemptive inflation anxiety, that is where it becomes a big risk. that is where it can actually feed off of itself and lead to a self-fulfilling prophesy of inflationary dynamics even before the tariffs are put in place. that's what the fed has to be concerned about. and unfortunately, i think the fed is going to be too reactionary in this environment and is going to wait to see the data before it acts up or down and that's always going to be too late in this environment. jonathan: march 19, new forecasts, how do they change? greg: they essentially have higher inflation expectations and there's been a slow filtering of incorporating different policy changes and it's been very disorganized and

inconsistent across the different policymakers, so you have a forecast that is internally inconsistent because some have policy assumptions in there and some don't and some we don't know whether they do or don't. we have a lot of inconsist in there and that's going to be the difficulty going forward interpreting what the fed is going to do. right now the fed policymakers are likely to find comfort in a winter pause and they're going to be essentially sleeping at the wheel now, not worried about any further easing of monetary policy but come later, this year, they are going to be keanly focused on this balance between growth and inflation and stagflation is very difficult to deal with. jonathan: afraid so. b.n.p. paribas said the fed was comfortably numb. not sure how comfortable they're being in this time. greg daco of e.y. we'll catch up with black rock,

hbsc and the second hour of "bloomberg surveilance" is just around the corner. ♪

>> i expect inflation to become a back by the second half of this year. >> there is a whiff of stagflation creeping into the narrative as confidence kind of weakens. >> the consumer is downshifting from the strong momentum we saw at the end of last year. >> we are in the midst of a seasonal slowdown. >> you could both have at the

same time innovation and weaker growth, the definition of stagflation. >> this is "bloomberg surveillance." jonathan: so many equity bulls waving goodbye to february for the equity market. equity futures on the s&p bouncing by 131%. nasdaq 100 -- one third of 1%. 90 minutes from now, pce data at 8:33. the fed's preferred read of inflation. data pointer next week to watch, not just payrolls. it is trade. we have to talk about the tariff deadlines. tuesday, march 4. 25% on canada and mexico. 10 percent on china. lisa: people are not taking this as seriously as a number of guests were saying they ought to

with pricing and the risk. some tariffs could stick. what is notable as you are hearing for the mexican and canadian leaders saying we think we have something that could postpone these tariffs from going on. president trump wants to be taken seriously. that's why he seems to be doubling down. jonathan: such a fascinating moment. the real threat of the president doubling down. no one believes it is going to happen. if it does, they don't believe it will stay on. tariff risks are underpriced. wells fargo. sensory overload. they believe the tariff risk premium in euro-dollar will remain limited unless trump implements significant tariffs on the eu, with euro short positions extended. everyone is waiting and waiting. lisa: sensory overload. flooding the zone. manic headline relet from goldman sachs this -- roulette

from goldman sachs this morning. it is difficult for people to seek out narratives. the only narrative people are looking to is what you said last hour. the idea that maybe people aren't going to be scared away by mutually assured destruction and they will assert punitive damage. that said, it's unclear. these have gone on when it comes to china. jonathan: the waiting can do damage to consumer sentiment, consumer activity, to businesses as well who would have hired and made investment decisions. that is the stag in stagflation. do we have to start talking about stagflation more going into that march 18-march 19 fed meeting? lisa: companies will probably pass along about two thirds of the cost from these tariffs to consumers. i keep going back to a point that mohamed el-erian made. companies have taken price tags baked into the labels off their

product. remember when he went in and you would get bread. i remember the days when they would charge you $2.99. now they don't have the tag. dynamic pricing in response to the trends. jonathan: this is from a multipack and not to be sold separately. they are being sold separately. lisa: like a drink that is not the right size. jonathan: i know where you are going. lisa: consumers have pia and need a severe remedy, presumptive inflation exciting. they need to adjust expectations accordingly. jonathan: you can see it in the soft data. payrolls are weak today. we will catch up with russ koesterich, taking risk off the table. edward fishman of columbia university. the former world bank president david malpass on trump's latest

trait that's. stocks looking to recover from yesterday's sellout. russ koesterich making adjustments. "we are still overweight equities. we have trimmed overall portfolio. risk" -- risk." let's get to the headline. where you trimmed the risk in the portfolio? russ: we have done a bunch of things. they generally fall under bringing equity risk down. we are still overweight stocks. we have moderated deposition. we started months ago. there has been a rotation in the market since last summer. we think many of the ai plays, technology, the long-term are things you want to be exposed to. we have been bringing down that exposure.

many trees got crowded in the back half of 2024. jonathan: one piece of the stories that is somewhat contrarian. overweight discretionary. consumer discretionary has had a tough go and february. down 11% on the s&p 500. why do you want to stay in the pocket of the equity market? russ: one thing worth pointing out. consumer discretionary is a sector dominated by a couple of things. it had a tough time, including tesla. if you look at the broader sector, we like consumer names. yes, we see some moderation. yes, we had a bad retail sales print. we have a household sector benefiting from the unemployment rate around 4%, solid job growth, income growth, and some of the best balance sheets in decades. we think there is a moderation going on.

don't chase names at any price for the household sector seems to us like a place you want to be. lisa: how active are you treating right now given the fact there's a host of uncertainty, plenty of volatility if you have conviction? are you getting in and out everything old? russ: -- everything will day? -- every single day? russ: let's take a step back and look at some of the underlying issues we think will drive the market. growth is likely to moderate. we are in an economy growing or slightly above trend. in that environment the earnings estimates for 2025 are very achievable. this will not be like 2023 and 2024. it's about multiple expansion. it's a year likely to be driven by earnings. we are trying to keep the risk may be a little less. keep risk in the sectors and market segments we like. really emphasize stock selection.

this is one of the keys for the year. we brought down the macro risk. we are leaning into taking idiosyncratic risk and names that are durable. lisa: ignore the noise is a theme we hear a lot from investors on the show. between ignore the noise and ignore the freight train coming straight at you. it is difficult to understand which it is. on one hand there are threats of tariffs. on the other hand, they could get implement it. it could profoundly change valuations and how do you know which it is? russ: a couple of things. valuations are cheap. we have seen a fairly significant adjustment this month alone. the s&p is down 5%. semi's are down 10%. early growth down 20%. you have had some reasonable adjustment and prices compared to where we were a few weeks ago. in terms of the policy, we are all trying to figure this out. the lens is economic growth. if you believe that growth is

going to remain solid and off the back of the growth you will see decent earnings, you want to stay long equity risk. maybe not to the extent you were in july of last year. unless you think we are going into a much deeper slowdown and as a result earnings estimates are unattainable, i think there's a case for ending the year with a decent return to equities. jonathan: do you believe the tariffs go on? russ: we are all trying to figure out what is going to happen. i think you are likely to see tariffs. we don't yet know the magnitude. we don't know if breath or the timing. this is upsetting markets. with that uncertainty the impact on growth, where it will hit, what countries, that is something investors are trying to figure out. jonathan: china trying to figure out how trade dependent your call is. if you end up with 25% tariffs on mexico and canada, 10% on

china, does your call change? russ: tariffs impact the economy and the impact it trading sector. that is something you have to be cognizant of. another point to bring up. this is much more of a service-let economy than it was 30 to 40 years ago. when you think about last year, what drove the economy? it wasn't the surgeon goods that we saw in the pandemic and the aftermath. it was the service economy. the taylor swift economy. it was driven by experiences. entertainment. those are not part of the consumer space that is subject to tariffs. lisa: at the same time it raises the question about whether donald trump will respond to weakness on the heels of preemptive inflation anxiety or whatever else comes around tariffs. hold back if it starts to become too painful. how much of that is baked into

your call? that there will be some sort of response from the white house if things get carried away in terms of the selloff? russ: it is hard to discount how investors are handicapped. it is fairly unprecedented. i would say is it not baked in? we have gone through a pretty decent correction in large parts of the equity market. consumers. a lot of the ai space. it is not just about policy. there has been a pretty obvious mean reversion trade. if you look at year-to-date, defensive companies, health care. these are places you mount to be if you're worried about tariffs. another character is that they lag significantly in 2024. -- characteristic is that they lagged significantly in 202 4. jonathan: looking forward to

next week and what policy changes we might get. russ koesterich of blackrock. you have to bite. there's a lot of things on the table next month. we could see some bites. 25% on steel and aluminum. out of the three, that will probably be a yes. reciprocal tariffs on europe and the firing line? without a doubt. 25% on mexico and canada feels like to many people on this program a stretch, which is why it is so dangerous going into next week. that is the overwhelming consensus position. where there is the most scope of surprise. lisa: incredibly well said. tom narayan talked about negative infinity and why pricing in negative infinity, something that is unpossible for u.s. auto manufacturing. if that is your bite, how much does the market alarmingly respond? jonathan: blackrock.

they viewed trade is one piece of a bigger policy mix. the mix is still progrowth, pro-risk. in 12 months time, that is the conclusion for a lot of people in the equity market. lisa: that seems to be what people that are more bullish believe. there are two diametrically opposed outcomes. you can have a really good outcome where people bring back some of the dynamism to the u.s. or really bad outcome with the trade war and stagflation. how do you price in between? the market is trying to and is just exhausted. jonathan: the journey is a difficult one. futures positive by a quarter of 1%. with stories elsewhere, here is dani burger. dani: china vowed to take all necessary measures after president trump unveiled an additional 10% tariff on the country that would take effect on tuesday. the new measures took both u.s. and chinese officials by surprise. neither knew the additional tears were coming.

tencent is joining the ai model race and unveiling a new model designed to respond as instantly and as possible -- as instantly as possible. deepseek uses a deep reasoning approach. costs have fallen sharply. they join openai and alibaba releasing models at a rapid pace. hp shares are lower by 2.7% in the premarket. rising component cost and tariffs on chinese goods will impact profits. hp charitable cap between 1000 and 2000 workers, saving roughly $300 million a year. that is your bloomberg brief. jonathan: more from dani and 30 minute. president zelenskyy comes to washington. >> i think we will have a good meeting. we will get along really well. we have a lot of respect. i have a lot of respect for him. i believe we are going to get it done and it will be very important, very historic, and we will save a lot of lives. jonathan: up next, annmarie in

washington, d.c.. plus, edward fishman joining us from new york. ♪ ♪

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to connect on a deeper level. i've been waiting for this... [wind blowing] [zip up] time to get wet! thanks. with the caribbean sea. ♪♪ jonathan: equity futures on the s&p 500 positive by .2%. one hour and 13 minutes, 830 eastern time -- 8:30 eastern time, core pce. 10-year, 425.39. under surveillance, presidential and he goes to washington. -- president zelenskyy goes to washington. president trump: we have a lot of respect. we have given him a lot of equipment and money.

they have fought very bravely, no matter how you figure it. someone has to use that equipment and they have been very brave. i think we have come a long way. i believe we are going to get it done. i wouldn't say that if i did not think so. i think you will be very important. very historic. we will save a lot of lives. jonathan: trump softening his tone on ukraine ahead of the meeting with the president zelenskyy. zelenskyy expected assign mineral deal with united states in an effort to end the war with russia. annmarie joins us from washington, d.c. describe what the next few hours will look like in washington. annmarie: for volodymyr zelenskyy this is probably the most important meeting he will have with a u.s. president and his political career, given the fact that last week president trump had called him a dictator. he saw the acrimony really playing out in the press. we heard a little about it from her interview with the treasury secretary scott bessent, who was

the first want to introduce this mineral deal in kyiv to zelenskyy. what you have is a bit of a softening of a tone. he heard from the president they will be signed this mineral deal. for them, this is the start of potentially a closer alliance between trump 2.0 and zelenskyy. zelenskyy once this to be potentially the start of security agreements. reading between the lines of the president's comments yesterday beside the fact he said, did i call him a dictator?, he said the minerals deal means workers are in ukraine and it's a backstop. u.s. workers would be there. jonathan: annmarie down in washington. we will catch up with david malpass in about 30 minutes from now so look after that. let's extend the conversation with edward fishman from columbia university and the author of the book "chokepoints." good to see you, sir.

let's build on some of that. what is at stake today for -- stake today for ukraine? edward: it's the most important of zelenskyy's political career and probably his last chance to pull trump back from the brink. in the last two weeks the trump administration has been drifting dangerously close to moscow. we have seen extended conversations between trump and putin. between steven witkoff and putin in the kremlin. you have not seen any like that in terms of engagement with ukraine. it's been happening at a much lower level. i think zelenskyy's goal today is just getting some face time with trump in trying to persuade him it is in america's interest to back ukraine. lisa: how much is it crucial for him to get to get economic ties between the country if the economic tie includes resources and land already claimed by russia? edward: it is critical. zelenskyy is a smart politician.

he understands we are living in economic warfare. china is weaponizing things like critical minerals against the united states and we are vulnerable to chinese economic warfare. what he's doing is trying to couch support for trump. this is speaking to trump in a way that appeals to liberal order or america's alliances don't really work. lisa: is there a historical analog to how much some of these trade relationships are changing from these are our friends to a more mercenary approach of what are you giving us and how much does that really affect us in a way that makes us want to help you? edward: unfortunately there are some scary echoes from the 1930's. the last time we saw the breakdown of global trade relations after the great depression, the smoot-hawley tariffs after the great depression in 1930. that is when you see states

really worried they could not secure markets through open trade. you see things like hitler deciding he needs to acquire territory and resources to control them as opposed to just trade for them. i worry in a world where you don't feel you can just freely trade and invest in other countries, the temptation for things like invasion or conquest goes up quite a bit. jonathan: wasn't that merkel's theory with putin? that didn't work out. edward: what merkel got wrong -- good point -- she wanted to make europe 100% dependent on russian natural gas. if they had built nord stream 2 and doubled capacity of pipeline gas from russia to germany, that would have made germany at a complete damocles sword putin is holding over their head. her mistake was to say we need to be complete dependent on russia because cheap gas is important for our industry. what you need is interdependent in a broadway.

more diversified interdependence. merkel was handing putin a chokepoint that he could weaponizing's europe, which he did in 2022. jonathan: after president trump warned them repeatedly in his first term on some of these issues. i want to believe this could be a force for good. maybe the outcomes could be positive. can we see things that way? edward: i do. i'm cautiously optimistic if the mineral deal gets signed and trump moves back from this probe putin tripped -- pro-putin drift, we could be in a better place. if you have american companies invested in the ukrainian mineral resources, critical for america's position in the age of economic warfare. without access to critical minerals from places like ukraine we are at the mercy of beijing. this could be a masterstroke. some people have talked about is

trump trying to pull a reverse nixon and go to russia to split off china? what could happen is more plausible is maybe trump can go to ukraine to try to get sideline china and russia from their critical mineral dominant. lisa: but what you have to here today to think this is more of a stroke of genius and less of a warning shot? edward: we will know a lot during the joint press conference at 1:00 p.m. i think the mineral deal will be signed. it has been telegraphed this will happen. if it is not signed, that would be a bad signal. i'm looking for what is the tone president trump strikes when he's up there with zelenskyy. as we have seen we could go he's calling zelenskyy a dictator, saying he has to leave the country. he softened his tone yesterday meeting with keir starmer and the white house. if he has a more friendlytown towards zelenskyy, maybe the ukrainian former comedian worked his charm. lisa: given the fact euro this book about the age of economic

warfare, how do you understand the ultimate goal of some of these tariffs and these rearranging of geopolitical relationships? edward: there is a structural underpinning to all this. it is not just that trump is a tariff man. we are still living in a global economy designed for this benign geopolitical environment of the 1990's. when we thought economic relationships were win-win. they are not. economic relations between the u.s. and china are not win-win. between the u.s. and russian, they are certainly not win-win and have not been for a long time. the u.s. is not feeling country that feels this way. china feels this way. that is why they have spent hundreds of billions of dollars in domestic self-sufficiency. what we are moving towards is an unraveling of interdependence. the big question is, do we move towards a world where there is a democratic block on one side and an authoritarian block on the other, or autarky, when everyone is trying to invest in their own

countries? jonathan: major questions we need to answer the next few decades. congratulations again on the book. edward fishman of columbia university. next, steve major of hsbc on a riproaring bond market rally. seven consecutive weeks of lower yields on the 10-year maturity. equities struggling to bounce this morning. we had towards another week of losses on the s&p 500. ♪

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jonathan: two hours away from the opening bell. equity futures positive by .25%. nasdaq debt by 4% in february. the russell down by more than six percentage points so far in the month of february. this morning, no bounce at all. two hours until the cash open. yahaira: we start with dell lower nearly 4%. dell says the high cost of nvidia chips will hit its gross margins for the fiscal year. they predict a one percentage

point decline from a year earlier. that overshadows what was otherwise a strong outlook from dell. it expects to ship $15 billion worth of ai servers, which represents a 50% jump from the earlier. next up, another tech stock that disappointed. hp down 2.8% right now. they say rising component costs and tariffs on items from china will weigh on profits. analyst at morgan stanley think hp's guidance feels ambitious at a time when they are still seeing market uncertainties in pc. we have monster beverage up 2% after beating in the fourth quarter. margins came in z expected because monster was able to implement rice hikes on some of its products which is interesting at a time when consumers have become more sensitive to pricing.

monster is working for now. jonathan: thank you. on the radar, president trump confirming 25% tariffs on canada and mexico are set to go into place on tuesday. trump sang the drugs from the countries are still entering the united states at high and unacceptable levels. lisa: we were talking with russ koesterich. you have to ignore the noise, get bigger ideas and wonder if it it is ignoring the noise with a freight train when this is damaging to valuations. most analysts think the market is not pressing this in. jonathan: we have seen the move in bond yields and discretionary stocks. most people point at that tesla is a big chunk of that. this is what neil debtor wrote in moments ago. -- neil dutta wrote in moment ago. "how can it be a growth scare when europe is outperforming?" this is not the growth scare part of the selloff, which means there is more downside to come. lisa: the real declines i have

taken note of was yesterday. nvidia down 8%. when you look at the magnificent seven stocks, they are down within 13% from december. this has driven the decline. look at bitcoin and the other momentum names that had benefited since donald trump's inauguration. a question of what is going on. is this an unwind? is this really a growth scare tied to tariffs. if we get negative economic data, how much more can you see down? jonathan: payrolls are a week away. let's talk about china. donald trump calling for 10% tariff on china set to go into effect also on tuesday. chinese stocks taking a big hit with the china enterprises index sliding the most since october. lisa: the reason this matters is because, as annmarie points out, chinese tariffs have stuck. the others have been threats that were walked back.

an additional 10% tariff is significant given this is a different scenario. the rhetoric from chinese officials was we will retaliate. if you put an additional 10% fee on those goods, you might end up with a trade war that has been off the table. 1 not everyone --jonathan: not everyone can turn up to the oval office with a letter from the king. lisa: the president does not love the commonest party of china and this -- communist party of china the same way he appreciates the royalty. jonathan: a state visit to china is not something he is too interested in, but who knows? lisa: he wanted a military parade so maybe he will get one. jonathan: a federal judge ordering the trump administration to pause mass firing of federal employees. the office of personnel management's order to fire probationary employees is illegal. lisa: this was interesting for a

couple of reasons. a lot of the cuts have been tied up in the court system. the trump administration has gotten a lot of wins. a lot of judges have signed up and said doge can do what they are doing and these cuts make sense. there is a question, and the fundamental fear people have. if you get a battle between the court system and legacy judges appointed by democratic presidents, do you end up with some sort of fear the administration will not comply or how do you get around it? there's questions that come in. more interesting than this particular ruling. jonathan: i am interested if the government will comply from the gove -- wanda president mason order to do something. malicious compliance that would make things worse than they could be. lisa: you could say, who is the government? in the sense that it goes to the whole judicial versus executive power. if the judge is signing off,

it's another point about whether they are complex about how dysfunctional things are getting as a result of people not being there. are we getting reliable reports? jonathan: people might use the phrase "deep state." when an institution is that bid, the institution pushes back in and makes it difficult to achieve the things you are trying to achieve. lisa: that's why a lot of people say doge has been very popular. the idea being popular and efficient is popular. jonathan: with the public. lisa: do it in a way where there is a predictable type of methodology people can understand. that really is what people are looking for. there are a lot of details to this. jonathan: a lot of details we can talk about in the next year or so. 10-year government bond yield lower on this week for a seventh consecutive week. the longest streak in more than five years. steve major of hsbc joins us in new york. good to see you.

what is behind that rally of almost two months on 10-year government bond yields? steve: you touched on some of it in the preamble. jonathan: you can call it the preamble, the set up, the main course. steve: how do you disaggregate the bond market? it probably started with something simple. it could be the market was just too cheap. there is a valuation angle. you can see it in swap spreads and u.s. bond yields versus the rest the world. you conceded real yields being above two. then you get some trigger events. you get something that starts the spark. i think it may be that there was a bit more confidence in the fiscal position. you mentioned doge. that could be key. in between the date of the election in november and the inauguration, the markets were sensing the regulatory shift which meant there could be some

pre-positioning which was more favorable towards -- that was coming in the treasuries versus swap spread. there's a bunch of things that were happening. you talk about seven weeks of bond rally. it has been helped by some of the forward-looking data. atlanta fed, gdp, now the survey data. think about will happen to confidence when uncertainty goes up. uncertainty is not volatility. uncertainty in the real world means people sit on their hands and they don't do stuff. it means investments already made. decisions aren't made. that is not good for growth. uncertainty in markets normally means a big dispersion in opinion about what is going to happen. in the real world is consistent with the survey softening ahead of the real data. jonathan: completely against the grain compared to where we were at the end of last year. that is what is intriguing for us. last year when donald trump won

the presidency we saw a curve steepen and yields push higher at the long end of the curve. people were talking about tax cuts, issuance, heavier supply to come. have we parked that story? steve: positioning is important. we came in the year with a consensus position and position being a bear steepening of the curve. i did an interview with manus at the start of the year. i'm not meeting any bond wars. there weren't any. when you get momentum, people become more confident. it is a bit scary the bias in the markets. people like a bit of a mental. -- bit of momentum. the first move was positioning and the consensus and then some trigger points. for this to be continued, to be sustained, you have to get something in the data. you mentioned payrolls. it is real economy data. the economy is being retrofitted

to where the fed already talks rates. does that make sense? maybe they cut too much. nobody was saying it but at the time it seemed they were cutting into a window where there was an opportunity to cut. bond yields went up a lot and policy rates have come down 100 basis points. something was wrong. the bond market is moving back into line with the economy has to be fitted to where the policy fates are. there is a lot of this going on that explains the rally move. we can get to 4% on the tendons in the next few weeks with this momentum continuing -- tens in the next few weeks at the moment and continues. -- momentum continues. lisa: if we get weaker economic data we get to the bond rally accelerate. the 10-year below 4%. real growth concerns pleading for the entire treasury space. how much do you buy the idea the bond market and the federal

reserve will be constrained by stagflationary fears? how much does policy play into this? steve: you are right to qualify it with stagflation light. we are nowhere near either of those at the moment. you are right to qualify that. it strikes me that inflation between two and three is not a problem for anyone. it is probably what is desired because there is too much debt. dissolving the debt requires inflation to be a touch over target. i don't think anyone worries about 2% to 3% on inflation. the fed pivoted to a growth focused last year. now we are seeing validation of that pivot. as i said, the economy needs to fit to where the path of lower rates needed to be. that may semi-give reverse in the causality. this is sometimes how it works. i'm not that worried about inflation. famous last words but -- lisa: fed officials are.

they are talking about potential for having to choose. having to weigh the evils of inflation is sticky or even accelerating modestly, and some sort of downside to growth. as bond investors, how do grapple with it? steve: it is part of their job. there are some of the fed who don't completely worry about inflation so much. you have a range of use, just like in any central bank. the fiscal policy is dominant. you have heard of fiscal dominant. for the bond yield to be at the right level for the fiscal policy it needs to be at 4% or below. cbo, the budget office, is budgeting for .10% on the -- 4.1% on the 10-year. to afford this level of debt on the interest payments we need the yields to move. by having a fiscally responsible

treasury set up and the expense cuts coming through and the economy duly, you don't have to worry about inflation so much. it is their job to be a bit hawkish on inflation. i don't really think it is a problem. jonathan: a simple weston with a thoughtful answer. you have given this some thought. go supply matter? steve: no. next question. jonathan: why not? steve: right. i had this conversation every day with clients. from a traders perspective it does matter. they have to take down all this auctions and syndications. there is a concession around supply. that should not be confused with a strategic view. the bond yield is a function of today's policy rate and expectations for the policy rate and where it ends up in the future. it strikes me that it could be a double counting on the yields if

you start adding too much additional term premium to what is in the price. if the federal reserve things the deficit is a problem and causing inflation, they will not cut rates. they will be hiking them. if the federal reserve things the economy is cooling down and the stock debt and interest rates are paying on future growth, and there is a path to lower rates in the second half of the year, they are cutting along that path. it strikes me that it is dangerous to say there's a lot of supply in the yield goes up, because there is no empirical evidence for that. look what is going on in china and japan. look at the bond yield, which is above 4%. around 4.25%. the policy rate is 4.25%, 4.5%. there's not a lot wrong if it stays unchanged for a long time. if the fed is back on the path of lower rates, the bond yield should come down.

i don't know. there is intuition that supply matters. it is informed by the auctions and syndications and concessions the dealing rooms have to take into account. not to be confused with the strategic view of where bond yields should be. jonathan: i knew that would provoke a good response. good to see you as always. appreciate it very much. 10-year, yields lower by two basis points. 424 at the moment. nvidia rolling over. none negative in the premarket. down by 1.7%. an update on stories elsewhere with your bloomberg brief. dani: canadian politician doug ford won a third election to lead the province of ontario. he campaigned on the promise to protect ontario's economy from president trump's trade policies, threatening retaliation. tariffs are scheduled to begin on tuesday. netflix is considering moving from hollywood.

sources tell bloomberg one option includes buying the landlord's interest in the buildings. the headquarters is and within california. senior leaders in the ceo live in los angeles. citi excellently credit weighted $81 trillion -- credited $81 trillion to a customer instead of $81 last april. it was reversed hours after. it maintains echoes of one citi sent $900 million to a group of creditors five years ago for which citi has continued to fix operational issues. jonathan: more from dani and 30 minutes. up next, trump the dealmaker. >> did our print minister persuade you not to put tariffs on the u.k.? >> he tried. [laughter] he was working hard, i'll tell you that. we could very well end up with a real trade deal where the

tariffs would not be necessary. jonathan: that conversation just around the corner with david malpass with annmarie from washington, d.c. this is bloomberg. ♪

jonathan: equity futures just about positive by a quarter of 1%. an eye on nvidia. it is down 1% in the premarket. down 1.1% in early trading. trump, the dealmaker. >> mr. president, did our print minister persuade you not to put tariffs on the u.k.? donald -- president trump: he tried.

he was working hard. we could end up with a real trade deal where the tariffs would not be necessary. in all fairness and seriousness, we have a good chance of a writing at a good deal -- of arriving at a good deal. jonathan: the president suggesting a deal could happen very quickly. annmarie joins us now with a special guest. annmarie: good morning. i'm joined with a friend of the show, david malpass, former head of the world bank. he was the head of the bank when trump was in office in 2019. thank you for joining us. we were talking about the trait anxiety going into the weekend. trump yesterday said it comes to the pause on canada and mexico at 25%, those tariffs will go through and added an additional 10% on china. how should we be reading this? david: big change in the direction of trade, but the

trading system was not working. annmarie: you think those tariffs hold? david: at this time the tariffs will hold but that also begins the process of trying to adjust the global trading system into one that works better and specifically better for the u.s. this is going to quickly get into intellectual property rights and the other trading practices china has been involved in. also transshipment and the issues of backdoors into the united states with trade. those will go on for months. annmarie: we know those conversations are happening in terms of the back door between mexico and china. 60% of u.s. adults -- bloomberg did a survey with harris. almost 60% of u.s. adultery spectrum's tariffs -- expect -- u.s. adults expect trump's tariffs to lead to higher prices. david: products are going up and

down all the time. some products will go up. the question is, what does the u.s. economy, this amazing economy that we have, what does it do to react? they will be a huge rush by u.s. companies to make things in the u.s. and also defined other sources. they are already doing that. companies are preparing. they have known this is coming. there has been some preparation time. they will make adjustments. that will create jobs in new areas, which is the point. on net, you get that plus the bigger changes that president trump is doing on the regulatory side, on the tax side. those are positive for output in the u.s. one of the important spots is energy. there really will be a lot more energy produced by the u.s., which also is stimulative for growth. annmarie: you see the economy now in good place.

should the fed be on hold for the rest of the year? david: i would like to see a lower yield curve across the board. that is on the short and in the long end. you have to exude confidence in the u.s. dollar and in your ability to control your spending. that was not being done in the previous administration. there are opportunities now to get a lower yield curve across the board. they are not embarked on that yet. it is maybe a little early. annmarie: the treasury secretary says he wants a lower yield and that seems to be a key point in the markets the administration is watching. what do you think they would to it how can they achieve it? david: eye on the prize that is abundant and you want common sense. if you apply those two things, you will get a lower yield curve. that is because the u.s. economy is so strong. we are talking about with treasury rates, both short end and long end, is your confidence

in your ability to pay. to pay on that and be consistent. the u.s. can i[ -- up that. it can be lower if you create confidence in the economy and within the dollar. annmarie: you think the fed should be cutting into a good economy? david: we can hope that the regulations implement it -- de- regulation is implemented in the fed can cut into a de-regulating economy, yes. annmarie: we have seen with the doge affect take the u.s. out of the who and usaid commitments. the think the world bank is next? david: they will look at all the international organizations. what is the u.s. getting for them? what is the governance structure of them? are they doing work that is

actually necessary for governments to be doing? one challenge for the imf and world bank's they were created in 1944. you can imagine their mission has grown vague. they served the purpose they were originally set up to. one of the challenges for all these organizations is to stay small and stay on mission. i think that needs to be done. annmarie: david, thank you for your time. the former head of the world bank under trump 1.0, david malpass. the world bank maybe next when it comes to how much the u.s. might support them. jonathan: of update. equity markets shaping up as follows. posited by a quarter of 1%. the latest read on inflation about 34 minute away. coming up, tracie mcmillion, of wells fargo tom narayan of rbc, andrew hollenhorst of citi and michael kushma of morgan stanley. ♪

>> the big picture has not changed it here in the market is concerned about growth. >> the resilience of corporate

earnings. >> we have struggled domestically to meet the bar of high valuation. >> the broadening of her earnings in the s&p is the most important question to watch. >> the level of concentration is dangerous. when you look back in history, when we have been close to this, it has ended badly. jonathan: heading toward a second lease of losses on the s&p 500, staring down the prospect of the biggest weekly loss going back to september of last year. equity futures at the moment just about positive, up 5.2%. barely positive on the nasdaq 100. nvidia turning negative in the premarket. coming up later this morning, 8:30 eastern time, core pce, the feds prefer read on inflation. lisa: it comes at a time when people are talking about stagflation, fears of slower

growth ahead while sticky inflation remains. i wonder if we are still data dependent. are we in a regime where we are looking at the data and trading off of it or are we narrative dependent, saying just wait? some analysts saying that these policies may be disinflationary now or inflationary later, or vice versa. jonathan: i would say we are headline dependent. 25% tariffs on canada and mexico going in place on tuesday and an additional 10% on china. lisa: another question, just to add to the headline roulette that goldman sachs was talking about, how much is it shaking up markets? are we seeing the real threat of terrorist being baked in across the board? he saw a pullback in general motors and ford shares yesterday but not necessarily getting priced in to the degree that you would expect if they were going through. it raises the question, can you ignore this or is this something

that could have a much bigger bite than people expect? jonathan: how does it hit markets, in foreign exchange? are to argue that it has. the canadian loonie, mexican peso, just about positive. neal dunn is suggesting for the equity market, if you believe there is a growth scare on the back of these growth headlines, why would europe be outperforming? lisa: why would nvidia be the biggest underperformer after delivering better than expected earnings? this is a momentum on wind. that is what we heard from karen dawson, essentially people retracing their steps, back to levels that we saw before the election. for it to take a look further, you would have to see economic weakness. core pce will not be it. payrolls, more important to watch. jonathan: seven consecutive weeks of lower 10-year bond yields. lowest weekly run going back to

june 2019. yields this morning unchanged, 10-year, 4.26. we will catch up with tracie mcmillion of wells fargo with equity struggling to balance payment tom narayan on how auto tariffs will hit the sector. andrew hollenhorst with citibank. the biggest weekly loss of the year so far. tracie mcmillion is still constructive, writing iteris portend an ongoing and noisy backdrop for investors. still, broader risk opportunities will develop and foresee higher u.s. equity prices by year-end. welcome to the program. give us some of that optimism. what takes stocks higher toward year-end? tracie: thank you. what we think takes stocks higher by year-end's earnings growth. we did have a very interesting earnings season for the fourth quarter earnings.

what we saw was that over the last four weeks, earnings have been revised lower. they started out higher than our target which is 275 on the s&p 500, lower than the target, but we are still comfortable with that number. that means about 12% upside in terms of earnings. we think that will drive prices higher by low double digits. jonathan: the earnings are one thing, how the market responds is another. let's take nvidia as an example. most of the analysts on the sell side he said the numbers were ok, the ceo thinks everything is amazing. then the stock sells really hard into the close and it is lower in the premarket. what is the signal that you can take away from how the market is responding to the information? tracie: that is an interesting case. we saw somewhat similar reaction

last quarter even though the company reported a good earnings and decent forward guidance. what is happening there is the growth of her earnings is starting to slow. we think the narrative that continues to be positive for the ai theme, it is just moving away from semis. we are broadening out our exposure to things like energy and industrials. that should also benefit from the ai buildout. lisa: at the same time, those elements of the market got bid up at the end of last year as well. the ai trade had many tentacles, boosting tech as well. when do you know when the momentum on want takes on a life of its own? you can be excited about the earnings of the broader index but if you have the leadership over the past year getting hit very hard, that is going to lead

to outflows. at what point do you take note? tracie: i think some perspective is probably warranted here. last week we were hitting all-time highs on the indices. down about 4% on the s&p 500 this week. relatively quickly but drawdowns usually do. it is related to what we think is a soft patch. we don't see it developing into anything more at this point. obviously, we will be watching the hard data pretty closely, mostly coming in soft data right now. some taking of gains is to be expected after such a strong fourth quarter. consumers starting to pull back on their spending, after spending so heavily in the fourth quarter. all to be expected and could be attributable to seasonals. lisa: you sound incredibly calm, which is refreshing.

this is an economy which is strong and some of the policy noise will eventually fade later this year. we were speaking earlier, talking about preemptive inflation anxiety, the idea that consumers were beginning to adjust their inflation expectations and potentially expectations for job growth ahead. at what point does that lead into your outlook, even if these policies are noisy, the noise is having an effect in its own right? tracie: it is having an effect, you are right. sequencing matters, as well. there are four major policy initiatives of the trump administration, two are relatively negative, two are positive. negatives are tariffs and immigration policy, tax cuts and deregulation are positives that are likely to follow. what we are seeing now is some of the more negative policy being implemented, consumers reacting to that.

in terms of inflation, we think tariffs will add to inflation and we have a 3.3% rate by the end of the year, higher yields, growth of about 2.5%. we think all of that can support equity markets through the end of the year. jonathan: appreciate your input. still constructive. echoing what we heard from black rock early this morning, echoing what we heard from federated hermes. lisa: there is a question between ignore the noise and be excited about something coming down the pike, and just block your ears because it is too confusing to pay attention and miss something potentially pernicious. it is almost like people are lined up. either the market is complacent and looking past tariff risks at their own peril, or the market is so wise, they don't need to pay attention. jonathan: this potentially is

just noise or a freight train. 25% tariffs on canada and mexico so to go in place on tuesday. let's get to your bloomberg brief with dani burger. dani: president trump and u.k. prime minister keir starmer discussed a potential trade agreement. trump says a deal could take shape very quickly and administration officials have begun working on it. a deal would mark a win for starmer, exempting the u.k. from tariffs. the securities and exchange commission has expressed concerns about state street and apollo's private credit etf, concerned about its ability to comply with valuation rules. the etf launched on thursday. citi accidentally credited $81 trillion to a customer's account instead of the correct amount.

that is your bloomberg brief. jonathan: more from dani in about 30 minutes time. morning calls, tom narayan of rbc. we will catch up with ann marie on the other side. ♪

jonathan: the opening bell about one hour 17 minutes away. nvidia negative again by 2% in the premarket. equity futures just about positive on the s&p. unchanged on the nasdaq 100, down by .1% on the russell. 17 minutes away, core pce, the

fed is preferred read on inflation. cpi came in hotter than expected, so did ppi. components of ppi softer, so people might be comfortable with the data that we get. lisa: got that? good. this will be at exercise in math where people try to back to the narration of stagflation, potentially inflation picking back up, or everything is fine and you can have a weekend again. more interested in the market responds that the actual number. jonathan: that sounded personal. mike mckee will be here to break down the numbers. novavax with a buy rating. deutsche bank downgraded walgreens. the stock is down by 3.5% in early trading.

morgan stanley alarm its price target on hp to 35, saying guidance feels ambitious amid market uncertainties. lisa: this was one of the more interesting stories that we got over the earnings cycle. they came out and said rising component costs, u.s. tariffs are weighing on profit. this is a tangible response to the proposals that are real. that to me really stood out. jonathan: a whole lot more if this happens. carmakers bruising for 25% tariffs on canada and mexico set to begin on tuesday. annemarie is back with us in d.c. a lot of these people don't believe this will happen. annmarie: and they don't, and they are seeing some of the signals we are seeing in washington every day. you had canada's fentanyl czar here talking to tom homan,

mexico's economy minister sitting down with ustr ambassador jamieson greer. today, meeting with howard lutnick, the commerce secretary. also a number of initiatives we've seen from canada and mexico. the question is, is that enough? speaking to officials, they say the president is keenly focused on the amount of fentanyl coming into the country and the american deaths from that. they want to see that come down. the issue for market participants, specifically executives in the auto industry, like jim farley, is the auto space. what went this mean, 20 5% on canada and mexico to a highly integrated supply chain amongst the auto sector between these countries? jim farley said funny 5% across the mexico and canada borders would blow a hole in the u.s. industry that we have never seen. jonathan: jim farley, earlier

this month, we are seeing a lot of cost, pushback. lisa: gm also coming out saying you will kill this industry, you will make it impossible. if you want to celebrate american manufacturing, this is not the way to do it. donald trump has said this will redevelop places like michigan, bringing production back to the united states. jonathan: tom narayan says investors expect their monopoly --expect there will not be permanent tariffs. tom is back with us at the table. good time for a $6 billion buyback? tom: for g.m.? it would appear so. it was telegraphed they would do that buyback. it is indicative of what we are seeing from investors. there is no expectation these will be permanent.

they say they can handle short-term tariffs that lasts a few weeks. that is what people are baking in, but they will eventually end in some sort of a deal between governments. jonathan: so many people don't believe it happens, and then if it does happen, it doesn't last long. where does that come from, why don't we believe what the president is selling? tom: when the initial announcement happened, the market tanked. immediately you had, actually it is delayed. there is an expectation that the administration doesn't want to take the economy, market, and maybe cooler heads will prevail. just like what we saw in the first trump administration. and that is what investors are thinking, also rationalizing, saying, who are you helping with the tariffs? which industries are actually helped? ultimately, the administration will be more pragmatic and look for a deal between governments, as opposed to trying to penalize

the auto industry. lisa: can you quantify how much of these tariffs are priced into shares? tom: a very small amount but some of it is factored. if they are permanent tariffs. i use the example before of the negative infinity case. it would be disastrous. we are not having that in our earnings estimate from the sell side, consensus, but we do see some downside. a few percentage points. if there are no tariffs, there is reason to be constructed on this space. if they are permanent, the opposite. lisa: if you really think armageddon is happening, you may as well buy a bunch of stocks because you have nothing to lose. for these car manufacturers, why don't they all buy back their shares, keep dry powder when you cannot prepare for armageddon?

tom: i think gm is in a different position from some of these other automakers. we saw stellantis. very healthy balance sheet from gm, selling stuff that people want with very high profit margins. they didn't go crazy with high pricing. they can manage a near-term tariff issued by keeping stuff in the u.s. i think that may be a different story. to your point, why not overlook this? i think investors are overlooking this. for the most part, they are staying in the sector, hoping that cooler heads will prevail. jonathan: they say they will be responding to policy changes. what does that mean in practice? tariffs on steel and aluminum couldn't go on even if we avoid canada and mexico. it will take time to get that supply side domestically. what does that mean for

manufacturers, being agile? tom: for steel and aluminum, it is not as bad as people think. 2022, we had a huge spike. the auto industry held firm, they were ok with it. the way the supply contracts are structured, it is basically a one to two-year delay, lag effect, and hedges. it is not as big of an impact as these tariffs. jonathan: why is tesla getting hit so hard now? tom: you have to put things in context. with the election, the stock doubled. it has now pulled back to close to a trillion. definitely pulled back quite a bit, but nowhere near to where it was pre-election. i think some of that run was animal spirits. recently, i think people are looking too much into this europe data that came out.

jonathan: let's go there. why is that the wrong way to look at things? sales were dreadful. tom: here is the math comment on the day. three of us here, if one of us left the room, that is a 33% cut? what a big number, right? people are looking at the numbers down 45%. but that is like 17,000 going to 10,000 in europe for january. they sold 1.8 million cars in 2024. by the way, they also had intentional shutdowns because of this model y refresh. lisa: ok, but if one of us leaves, that person is important. jonathan: you are important. lisa: here is the issue that i have. there is this feeling that may be some of elon musk's

personality is becoming an increasingly liability, and his mind is distracted with all of his additional duties. why do you completely reject that and say keep your eyes on. driving and what is coming down the pike? tom: that company is not one man, i promise you. there are a lot of really amazing, brilliant people, friends of mine that work in this company. he is also brilliant, by the way. jonathan: of course. tom: it is more than just one person. the things the company is doing, there is proof. the robotaxi market here in my evaluation is huge. it will transform societies significantly and they have the best offering right now, fsd, which will be leveraged to do this effort. . i am a believer. i look at the math around that.

i am not too worried about the numbers, small part of my evaluation. they have this new model coming out, h125, whatever that means. lisa: we had an analyst on yesterday, and he has a sell rating on tesla. he says that when they come out with this model, it will be a selloff, risk off moment, because people will realize it is much further off than we are currently bidding in the idea. the idea that we will all have cars that drive us around and tell us how great we are. what is your evidence that you think we can bring this forward? tom: two different things. one is this more affordable car. i agree there is a lot of pessimism, because the ira credit is gone. definitely appreciate the concern there, but consensus numbers for car sales this year is up midteens.

that is doable when you have a lower-priced model. why i think you can be constructed, first of all, there has been a big pullback. this stock is not tied to fundamentals. shocking. potentially, you look at the yo-yo effect of what could happen with the stock. you do have this june unveil of that service in austin. yesterday, they announced a california permit request. there is some overhang there. what if there are some delays in austin? i am not denying that there is not hair on this, but i think people need to look past this delivery number, people need to appreciate the fact that autonomy is happening. to give them credit, they did this permit in california, austin, the timetable israel. -- is real. people look at robotaxis, fsd,

how sure are we that the software can handle a robotaxi? i don't know if you have been in one, it is very boring. a slow-moving urban environment, usually in good climate cities. it is not as difficult as going on the highways and arterial roads. i think it can be managed sooner than folks fear. jonathan: tom the reign, thank you. the prospect of auto tariffs. tesla has been absolutely flying. breaking pce data and personal income and spending. we will catch up with andrew hollenhorst of citi and michael korgan stanley.

jonathan: another read on inflation coming up. equity futures on the s&p 500 positive by a little more than .1%. down .3% on the russell 2000. cpi came in hotter than expected, ppi came in hotter than expected. components going into pce a little bit softer. so no drama anticipated. mike mckee will break down the data. good morning. mike: waiting for the pce numbers to drop. advanced trade ballast, terrible

news, -$153 billion. let's put it this way, if tariff man is unhappy about the trade balance, he will be unhappy about this number. inflation data, pce index comes in bidding on line of expectations, up .3%, same for the core, which pushes us to 2.5% year-over-year on the headline. 2.6% for the core on a year-over-year basis. soccer inflation then we saw in the cpi and ppi. very much expected by the markets and the fed. probably not going to have much impact other than to show we are still making progress. the good news, personal income up .9 over the month. we were expecting a .4 rise. we will have to look into the details of that. what happens at the first of the year, we tend to get the increases in things like social security and other things adding

to people's checks. personal spending falls .2. it was up .7 in december. much worse than expected performance there. real personal spending after adjusting for inflation is down by half a percent. some bad news on the consumer front. that will only reinforce what people have been talking about in terms of maybe there is a slowdown out there. i will try to break down all the numbers while you get the reaction. jonathan: thanks for breaking that down. equity futures on the s&p still positive, up by 0.4%. 10-year higher by a single basis point, 4.27. the dollar against the euro, 1.0411. andrew hollenhorst of citi's with us to break down the economic data. let's start with personal income versus personal spending.

income up, spending down. what gives? andrew: this is interesting because we have had such strong personal spending which has been the resilience in the u.s. economy but we are staying that we can. we saw that from the retail sales reading, seeing more and personal spending this morning. you had to take that with all the positive data we have had the last several months but this could be the start of a slowing trend. jonathan: soft data has been soft. . umich was soft. the confidence board, week. i want to know if that will translate into weaker hard data. is that what you are forecasting? andrew: we think we will see some slowing in consumer spending. i think you have to because we have had the savings rate at such a low level, you cannot continue to have spending above that level. the question is, is it slowing more sharply? you see this across the soft

data, consumer surveys, and other services pmi. that number came in below 50, into contraction, and now we are seeing it in some of the hard data. we have strong consumer spending in december, so maybe february we will go back to expanding again, but if we get a week reading in february, that is a trend, and that lines up with what you see in the survey data. lisa: this whole preemptive inflation anxiety. is this the evidence right here, people are stockpiling more cash and spending less? going forward, we will have to see. you have generally been calling for a weakening of the economy even before this. what are you looking at now that gives fuel to than even amid the pretty benign outlooks we are hearing from companies? andrew: it has been a consumer spending story supporting the

economy, fiscal stimulus, equity prices up 20% year on year, house prices that were up much faster than is typical. none of that is happening now. fiscal is coming off, equity markets are moving more sideways. house prices are still increasing but not at those really rapid rates. all of those tailwinds to growth are diminishing, so i'm not surprised to see some slowing. to your point, are we seeing a sharper pullback because there is uncertainty out there? we could be seeing that but it is premature to say that. lisa: you were calling for more cuts, talking about the generally weak economy paired with real disinflation. this has come under challenge recently with a policy overlay, may be the tariffs, rejiggering of the trade sphere would end up in different situations. how much do you think that is

kind of what we may see? andrew: no question there are concerns and should be concerns about longer-term structural inflation if we are going to a more fragmented trading environment. that will be more inflationary for the global economy. what i'm looking at is the cyclical story we are seeing in the u.s. what we are seeing in those cyclical categories of inflation, shelter inflation, that has cooled persistently. that is what we are seeing in the market also. not that we have reached where we are trying to get to, the fed, 2% inflation, we are currently above that, but the pathway is there. if there is less concern about inflation staying elevated, inflation can shift to these other concerns. we are still in the early innings of that but maybe that is what the market is doing. jonathan: a lot of people are blaming the trade deadlines. neil. s as that was an ex post

rationalization for a slowdown that has already started. would you agree with that? andrew: some of the consumer sentiment data, you are seeing those anxieties reflected, so that can affect the soft data. but spending in january, i doubt this is being affected by trade uncertainty. lisa: you say this is a cyclical weakening, others say maybe the momentum is moving away from services back to goods. you might see the weakness in services paired with some of the strength we are seeing in the physical world. why do you reject that? andrew: i don't necessarily reject that. you see that to some extent in the data, you see this sub 50 services diffusion index, so maybe we are actually contracting in the services sector were as manufacturing has moved above 50. what i would say about manufacturing, number one, it is a smaller share of the u.s. economy than services.

services are the more important driver. we still have high interest rates, strong dollar. jonathan: first rate cut? andrew: may. we think that fed officials will have seen enough to conclude that inflation is slowing, growth is slowing, resolves the uncertainty around tariffs and trade. jonathan: is march 19 a snooze or not? andrew: probably a wait and see meeting. i don't know if i want to say snooze, because it's my job to make these interesting. jonathan: we will be here. i hope others tune in, as well. we will have a special program, march 19. lisa: we will all just sleep through it. jonathan: mike mckee is back with more. you've had a few more minutes to go through the data. mike: we will get new economic projections. this will all feed into it. the interesting thing about wages and salaries, up .4%.

the money that came into this 0.9% had to do with two things. farm income, transfer payments from the government to farmers up 39%. a year ago, only 10%, so a big change there. social security payments up 2.8%. everyone gets a raise on that. then the money that comes in from the markets, dividend income up .7%. we had a revision to spending in december, up .8% instead of 0.7%, so marginally worse than it appears, but still not a great performance on any of these things. jonathan: thank you. the latest economic data came out nine minutes ago. core pce in line with expectations. economists are getting very good at forecasting the number once

they see what goes into ppi. looking at personal income and spending, that is where the debate is in the economy. income was higher than expected. personal spending was lower than expected. that gets a lot of people talking about maybe some nervousness out there for the consumer. lisa: if you are uncertain about your future, worried about your job, prices going up and you have not been saving, what will you do? you will save some dollars. one month can be messy. everyone will tell us that we can put it in our personal dot plots, which i'll be doing tonight. jonathan: michael kushma of morgan stanley joins us now for more, jumping into the studio. i mentioned bnp paribas who said this month of the federal reserve was comfortably numb. how uncomfortable will they be in a few weeks time? michael: it may be uncomfortable

but they will have more information about how serious the trump administration is on imposing these tariffs. we know the use of tariffs is to extract other issues, their second is to raise revenue to achieve their budgetary goals. how that is balanced, the inflationary impact versus the negative growth impact, we are not sure how they will weigh those things. the fed has to wait and see how they will judge those factors. jonathan: underlying assumptions about how the year will play out. what is your base case? michael: in general, macro economics, tariffs are stagflationary. it is a tax on the economy with stagflation. it is not good short-term before longer-term adjustments can occur. in some ways, this puts the fed in an uncomfortable position with stagflation outlooks uncertain. how big of an impact will it

have on the economy versus how inflationary it will be. you think about the trump administration's policies, there are positive things about it, negative things about it, but the headlines in the short term, with the trend in spending and the economy a little bit weaker than expected, it is putting more downward pressure, which makes us a little more nervous that maybe the next couple of months the economy is softer than expected. lisa: difficult to have conviction at a time when, as goldman sachs put it, you end up with headline roulette. how can you have any conviction when you're dealing with potential threats that are unclear at different moments? do you have any conviction yet? michael: the underlying momentum of the u.s. economy has strong but narrowly based. the biden administration was a lot of government spending, driving the economy, employment was strong but inflation was high.

we knew what to do with that. the fed would cut rates if inflation was slowing. going forward, it is much more uncertain as to how the economy will play out. you have to wait and see. we have adopted a wait and see attitude. corporate fundamentals are really strong. they could deteriorate at the margin, so we are leary about taking big bets in the credit markets. on the other hand, no signs yet of weakness. january and february were weird months, in terms of fires in california, really cold weather, tariffs, trump policy. the headlines are not very conducive to be confident about the future. laos, falling spending -- layoffs, falling spending, reduction in government spending. lisa: what would it take for you to get bullish on long-term

bonds, to think this will be a growth impact? michael: we have to see the unemployment rate change. the fed has an employment and inflation mandate. it could be better in the next couple of months or go sideways. but it unemployment stays where it is, the fed will find it tough to change policy from where we are today. we have seen big swings in fed attitudes toward policy in the last few months. the summer of last year when inflation was going up, the fed said maybe no rate cuts. by september, lots of rate cuts. now, maybe not so many. we are going to wait and see how did it evolves, data dependent. but they seem to be very responsive to short-term fluctuations in data which have been fairly erratic. jonathan: risk assets getting hit over the last week or so. is the fed put constrained given

the two-way risk that they face, as some have described? michael: it is the problem of responding immediately to weakness in equities. spending has been led by the high income part of the distribution. while the effects have been very positive for high income people in terms of the equity market, housing market, crypto, it has all been up. even if income growth has not been great, you feel wealthier, you spend more money on durable goods, holidays. if people are starting to worry about that -- there was a story that the fed is indirectly targeting the equity market. inflation cannot slow unless the equity market does worse. that will slow spending of high income people. jonathan: does that help or hurt the 10-year? michael: it helps. there was a story that i have seen, maybe the trump administration is not measuring

the s&p as a sign. lisa: apologize for my throat clearing. i am turning into t.k. i am curious, next week on march 4, if the tariffs are put on, what happens to the 10-year, rallies or cells off? michael: i think it rallies. lisa: significantly? michael: markets are more concerned about downside growth than upside inflation surprises. lisa: what shifted from last year? michael: the data has been weakening prior to all of this tariff, stuff when people were not sure if the administration was serious. just a negotiating tactic that will go away. but the data has been weakening into this environment. the economy is more fragile, not weaker growth, but weaker growth

. if we fall below 2%, i think the fed puts start to become more operative again. jonathan: lots to think about, thank you. we had some economic data here stateside. no big surprises on pce. let's focus on two surprises, downside on personal spending. the goods-trade balance much more negative than anticipated. maybe some frontloading going into the tariffs. lisa: how many companies are starting to stockpile ahead of what may happen? they may hear it as noise but you need to put some insurance on. jonathan: equity futures to positive .75%. here is your bloomberg report dani burger. dani: the fifth preferred measure of inflation slowing in line with expectations. core pce rose .3%, the lowest since march of 2021. at the same time, consumer spending fell .5%, the first

decline in a year. that drug record despite the data showing a surgeon income. apollo is in talks to lead a roughly $35 billion financing package for meta, helping to develop data centers. the conversations are in early stage in there is no guarantee that a deal will be completed. kkr also a part of that investor group. meta plans to invest $65 billion on ai projects this year. blackrock has ended its diversity goals. executive said it will abandon specific target to increase representation and no longer require managers to interview a diverse slate of candidates. teams devoted to d.e.i. will be subsumed into one culture group. the memo cited changes to the u.s. legal and policy environment related to dei. that is your brief. jonathan: next on the program, setting you up for the day ahead, getting some movers with

a day ahead, catching up with ann marie in washington. looking ahead to a day full of action. this is bloomberg. ♪ (♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

jonathan: like .2% on the s&p. nasdaq 100 done by more than 4%. the russell down more than six. small caps negative by more than .1% this morning. here is your hackers. yahaira: nvidia lower by 1.6% after falling like a rock yesterday, down nearly 8.5% yesterday.

the earnings were just not enough to assuage investor concerns, especially the one that deepseek highlighted, which is that you can optimize your ai models to require lower compute power, meaning you may not need nvidia's high power chips. those concerned still lingering. next we have shares of alibaba also lower down 3.5%. it is one of those chinese stocks listed here in the u.s. that is getting hit due to trump threatening tariffs. that could affect their e-commerce platform. operates here in the u.s., ali express. if items get more expensive, may be american will turn to amazon or walmart, which could hurt alibaba. last, we have shares of bloom energy rising 3.8%. the electrical power equipment company revenue in the fourth quarter blew past analyst estimates.

it is one of those companies that is benefiting from the growing demand for power due to ai. jonathan: thank you. three of the movers too much going into the opening bell. what a week coming up. tuesday, trump'ss tariffs go into effect potentially on canada and mexico, and additional 10% on china. wednesday, adp payrolls. bmi. another round of claims friday. this time next week, the big one, the payrolls report just around the corner. before we get there, president donald trump meeting with ukrainian president volodymyr zelenskyy. amh joins us from washington with more. annmarie: at 11:00, volodymyr zelenskyy will be arriving at the white house. they will spend a few hours together including a bilateral lunch which will culminate into a press conference. i think the press coverage will

be incredibly important. you were talking earlier about the fact that the tone of that press conference will be incredibly important. we have seen trump in the last 24 hours really soften his tone when it comes to president zelenskyy, says he is looking forward to the meeting. he talks about the fact that they will sign this minerals agreement that scott bessent told us, bringing closer economic ties between kyiv and washington in and of itself is a security agreement. how president trump talks about these negotiations, potentially the next step being more talks with putin and a cease-fire, will be incredibly important. for zielinski, this has to be the most important meeting of his political career right now. jonathan: we will see you after the weekend. amh with the latest in washington. one a week coming up. we have this amazing situation, 25% tariffs potentially going on

with two of the biggest trading partners of america, mexico and canada. nobody believes that it will happen, and the few that do don't believe it will last long. lisa: as tom said, why would this administration want to torpedo the auto industry? that would be what would happen in the short term should these go on. we have to keep going back to it. are you ignoring noise or the freight train? you have to think some of these things are real. at what point can you remain sane while also being aware of risk? jonathan: everything is relative to expectations. expectations for tariffs are so high we are just ignoring 10% on china here, 10% there. it is happening. lisa: headline roulette. we have another round of it coming up. jonathan: coming up on monday, mohamed el-erian of queens

college, liz young of sofi. tipp from pgim fixed income. have a wonderful weekend. our xfinity network is built for streaming

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>> tariffs hitting hard but stocks not really reacting. 30 minutes until the start of the cash trade. >> bloomberg open interest starts right now. ♪ matt: beijing's morning. china vows to hit back with all necessary measures, as president trump buyers new tariff threats. and all of that tariff talk is rippling through