>> we are beholden to the data at this point. >> we are at unprecedented times. >> we are stuck in this range and the market continues to grind sideways between all these levels of resistance and support. >> i see evidence of labor market softening everywhere i look except in economic data. announcer: this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: good morning. for our audience worldwide, this is "bloomberg surveillance"

alongside tom keene at least -- and lisa abramowicz. s&p of 0.2%. for once, the bond yield behaving. tom: doing better here. for me, the big thing was the moonshot lift in the nasdaq yesterday. bottom to top, not complete, was a 2% equity move. given the gloom, that got my attention. jonathan: you can thank the atlanta fed president. he says you can hope for a pause in late summer. lisa a: i am going to editorialize. this makes no sense. he basically came out and set up the data comes in hot, they can change. . , that is where people changed.

he was dovish. jonathan: the governor said the same thing overnight. ultimately, if data confirms -- lisa a: it was relatively hawkish. perhaps people -- i am wondering, why the market is reading this as dovish when it is absolutely not. jonathan: you cannot go there without going there. [laughter] i will go there. the program that was hosting the speed with governor waller said it was the of a teleconference seeing hijacking. the fed just said this. there are technical difficulties with governor wallace. tom: so they fired the president of zoom? is that why he is fired? not funny. jonathan: not funny for the fed

trying to deliver a serious speech. tom: not funny. this is new technology. they are going to get run over. the three of us live in mortal fear of this every day. can you imagine if we had commercial breaks. jonathan: let us not something i have a moral fear of. lisa a: it is really disrespectful to a body of the government and this administration that is important but it is kind of funny. it is a little bit funny they had to shut the whole thing down. i am not going to try to pretend to have the high moral ground. jonathan: and i had to deliver a speech in the didn't have to do it anymore, i would be happy. lisa a: i will say i wish he had the chance to elaborate on his thoughts because maybe people would not have taken what is otherwise status quo on the market as hawkish, as somehow

dovish. jonathan: let me go through price action for you. equities positive by 0.25 percent on the s&p 500. will the february data confirm the january boom? yields coming back in by five basis points. 10-year yield hanging onto 4%. tom: what is the difference between this ism and two days ago ism? jonathan: that was manufacturing. this is services. tom: and services is the inflation angst we feel? jonathan: that was perfect. the pricing on the manufacturing story can spook this market. lisa a: do we get a similar kind of read from the ism and the services and to beget the same kind of strength we saw last month? people wondering if the january boom had a huge spike up in the services and next. other this is sticky, it will

confirm this field we fall -- this feel we saw. inflation of ism of 255%. today, joe biden and german chancellor olaf scholz have a meeting at the white house. i'm very curious what the next apps are on ukraine and whether there is any discussion about bringing ukraine in curtail format into the eu. what next steps for this conflict that otherwise seems like a quagmire. today, the fed is talking about this. a reprisal perhaps. atlanta fed president raphael bostic can hopefully clarify whether his comments were actually dovish. curious to see what the terminal rate is and what the key issues are they are watching. we heard from chris waller and raphael bostic about the key focus on the labor market.

if we get a hot read on the jobs figure, that could push the terminal rate at nations standley higher. i do agree with you john. the fireworks. tom: speaking of fireworks, she is fired up today. jonathan: that is the promo today. will not miss much which is payrolls friday. and the 14th is the cpi data. those two dates are pretty good for governor waller. tom: this is important. you are rewriting your 270 day outlook for march 31. but this weekend, you have to think about what is your beliefs, what is your conviction? that is a key point. jonathan: let's see what kind of car we have. let's talk about yield convictions. the equity strategist over at berenberg.

off the lows of last year, that's an next -- index, euro is your today up within 20. what is going on with those names that have been left for dead for so long? >> some of the contrast is interesting. it is not just eurozone banks but eurozone equities. if you look at this property against the u.s. in local and dollar terms, and the same story for banks, you see an outperformance. and this year, year-to-date, very different market conditions. you have to go back many years to get consecutive years of outperformance. obviously, this is closely tied together very broadly. we like banks since the end of 2020 and we still like banks because valuations are supportive and balance sheets are supportive. it is a higher rate when much of the market has negative

hearings. there are three ongoing positives for the bank sector. tom: i want to focus on the banks which jonathan ferro mailed over the last few months. what i would suggest is bmp has a reduced book value to the american banks. at the same time, the dividend yield is shockingly un-american. translate the future for a bank like bmp with a payout like that. >> it is a key discussion. i goes back to a lots of work we have done on this series called brave whale -- brave new world. we have clearly left the post financial crisis. when interest rates were nothing to negative which is not great when you are writing a aching business. we are in this brave new world

where we have political risks and more fiscal higher inflation rates which is better news for banks generally. but also in this brave new world , valuation matters much more and income matters much more than in the free money era when is all -- it is all about return. anyone able to deliver income at an innovative level and grow the income become much more valuable assets for investors in this brave new world. a lot of european banks take the bosses -- boxes very well. lisa a: the rally we have seen has been incredible in european banks so far this year. we have seen the movie you are talking about with people coming to your view pretty dramatically. how do you know, after a 20% rally in european banks so far this, whether we have seen it all put in?

>> a couple weeks ago, we were looking at cyclicals against offensives. cyclicals have also performed very well relative to the fences. the macro valuations telling banks to take a strong position against cyclicals. the valuation signal has now neutralized. if you track the signals, you are putting exposure back from cyclicals. the cyclical discussion is not include banks. you look at banks against offenses, as a portfolio decision, thanks continue to look extremely cheap and still have portfolios on their side. then also capitals, balance sheets and positive during rates which in the u.s. are still high over coming quarters. jonathan: to state the obvious, high rates are good for banks until they are not. the not is why am interested in.

is there a point when you say this will slam the brakes on the u.s. economy? i do not like this sector anymore? >> i think all concerns would be more tilted to the u.s. the u.s. yield curve, we all know very well, as a signal force. one of the things that interest me as a strategy is when i look at the nominal growth and the gdp plus inflation forecast from economists and to 2024, which is an recovery year, economists are expecting a recovery year, global and nominal growth will slow substantially. that has never happened before. there is a conundrum there. sirs about this are much more challenging in the -- concerns about this are much more challenging in the u.s. then your. the european economy is looking set to actually outperform the u.s. this year and next year for the first time in many years.

jonathan: jonathan stubbs, thank you, of berenberg. when year ago, -73 basis points. right now, pushing 320. one ecb of the shore earlier this morning talking a 4% rate over the ecb which is absolutely unreal. lisa a: it is not just short-term but longer-term. people are gaining out what longer inflation looks like at a time when we have not seen anything like this in decades. jonathan: i know we have to get through this morning but saweetie of just a flavor of monday? this weekend, on monday, it will not be george clooney but he is the george clooney of the paddock. kristin warner. tom: jonathan ferro will lead this interview because lisa and i did not know what we are talking about. lisa a: i am going to be watching drive to survive all this weekend.

[laughter] tom: the guy from canada is trying to buy the sport. jonathan: he is going to sound like an expert, i hope anyway. christian horner, red bull. 6:30 eastern time. lisa m: keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. fed policy officials are warning they may need to raise rates to a higher peak. this said they watched inflation data cool out of after being stronger than january. raphael bostick says he is open to raise rates higher than he envisioned if the economy is robust. germany's chancellor olaf scholz may be put on the defensive when he meets president biden at the white house. he is coming under pressure over the struggle to produce enough ammunition for ukraine. there are likely to discuss ways

to step up manufacturing. the biden administration has put dozens of restrictions for chinese companies. they cited national security. among the couple -- companies on the list, computer maker and spur. they are considered key to china's efforts to replace foreign technology. in hong kong, fire raced through a 42-story hotel being built near the waterfront. it took hours to put it under control. there were no casualties. it is a 492-room luxury hotel that will be operated by intercontinental hotels group . global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪

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>> with what we are worried about, is chinese backed companies being on tens of millions of american bones, including members of the military. privacy concerns, data concerns, disinformation concerns. that is not just implied tiktok. jonathan: if you are concerned, what are you going to do about it? gina raimondo, the u.s. secretary on tiktok. the last administration talked about this. the kind administration is talking about this. what has happened? not much. lisa a: tiktok is trying to get ahead of it saying they are going to limit the type of people on -- a people under the

age on tiktok to just 60 minutes. i am sure people will just be lying about their age. this is basically lipservice. tom: one day, a guy who moves terminals worldwide said the same words my dad set around television. he called it the "idiot box". why is tiktok any different than our parents complaining about the idiot box? jonathan: let's go through gina raimondo's concerns. privacy concerns, misinformation concerns. that is not just apply to tiktok. that is not about social media rotting the brains of youth. it goes on beyond that. tom: thank you for getting us back on the rails. show us the proof.

the moment that there is evidence china is pulling our data value, the story changes. has it changed yet? i do not think so. lisa a: it is also this idea that social media networks are the curators of news. if they are actively manipulated in a certain direction, it room -- it raises a lot of questions over potential security concerns. jonathan: german chancellor leading -- visiting the white house today. we think he may face heat from president biden over providing ammunition to ukraine. tom: it is hugely complex. my history on this is to read it is always complex from visiting german authorities domestically. he is going to be playing to the domestic german population just as much as he is playing to be president of the u.s. annmarie hordern joins us.

says he get a steak dinner? how is that chosen? how do we choose the stake dinner? annmarie: this trip is incredibly under the radar. they will probably has a pool spray at the topsail will see them in the oval office for these two individuals spending a lot of time together. he is not making the rounds in terms of a big fanfare. there will not be a joint press conference. but there are two things to focus on when you look at his visit. i think that this time last year, he gave this huge speech and it was called in german "the turning point". this was a massive shift in terms of energy and defense. he is facing criticism now. there is a lot of pushback on european allies in general because there is an issue that the zelenskyy government is

confronting right now with ammunition. i go back to what dmytro kuleba said at the munich security conference which is the first year of the war was about weapons and we need more weapons . now it is about making sure they get shells and ammunitions at a sustainable basis. i spoke to the polish about this. about a procurement of ammunition and potentially this is what they will discuss today. tom: you are so well-versed on this. i am not embarrassed to ask this question. do we play the french off the germans and the germans off the french? does washington do that? annmarie: i am not sure i want to comment exactly on that. i do not think it would be there. i think what you have seen over the course of the past 12 months is the u.s. has a two-pronged approach when dealing with europe.

one, they definitely consult ursula von der leyen as a leader of the entire group. of course, behind the scenes, they are each consulting the every country's leaders and those officials in all the countries. the divide is not france and germany. the issue you have, and he is 30 and prime minister had a conversation about this with the financial time -- estonian prime minister had a conversation with this overnight, the issue is east and west. you have estonia and latvia who have putting pressure on germany over the concerns they had about moscow's overreach and their concerns about prior incursions from the to before the mass scale invasion last year. i would say germany and france are more easy to align. it is more of a east-west divide.

lisa a: and a lot of people are focused on the weapons provisions to ukraine and what the alliance is agreeing to and producing. there is also a question of how does this and and what is the endgame? it is clear vladimir putin will not give up even at the loss of a law of russian soldiers. what is the thinking in terms of a roadmap and framework to end this? annmarie: this is the question everyone has been asking. this time last year, the headline whiskey he was going to to fall in hours or days -- he he's -- kyiv was going to fall in hours or days. this is not something new to ukrainians. obviously, the scale is different but the fact this is a protracted, prolonged conflict. publicly, what you hear from officials is they will stay by ukraine until the end, including

until russia leaves crimea. so far, it does not look like peas has been pushed, even though there are conversation potentially in the background about what point do you go to a peace negotiation but so far he has not been pushed into that. this is the question everyone is asking and the reason why you have the cranium foreign minister saying to officials that we need sustainability when it comes to this. jonathan: let's get to the elephant in the room. olaf scholz visited beijing back in november. the administration is very concerned beijing will provide legal aid to russia to engage in the war. how will that play out in this meeting today? annmarie: olaf scholz address this yesterday to the parliament. he warned china are not condemning the invasion and said china should be using its power to put pressure on moscow to

withdrawal russian troops. he did say there would be consequences if china were to provide legal aid. with the u.s. has been doing is talking to their allies about making sure that if this was to happen, if china was to cross this line, there would be some sort of consensus to really make sure they put some sort of penalties on china. of course, this is going to be a major discussion with the two meet. because this is concerning everyone. also, olaf scholz mentioned yesterday because we have the g20 foreign ministers meeting in india, that he was very disappointed that china last year was able to cite out to this communiqué and is now backpedaling. jonathan: we keep talking about consequences. he said, what consequences? lisa a: we did see some potential sanctions on a number of other non-tiktok companies overnight from the u.s.

export bans. it is a question. what a real tangible consequences? certainly, the market is not feeling any. jonathan: what do you do if you are in this market right now? there is always something in geopolitics to worry about. there is always some geopolitical risk. lisa a: what did holland say yesterday? this is the reason why we like it. for the first time in a month, investors were net buyers of chinese equities in the past week. people are starting to see opportunity there. there is also td securities. he basically said cash is a legitimate alternative to stocks and will be for a while. jonathan: it is when you can get 5% on the two-year and 4% on the 10-year. ♪

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jonathan: trying to snap a three week losing streak on the s&p 500. poised to's these out a weekly game. up zero point 3% on the s&p 500. the nasdaq up 0.4%. we hit new highs on the bond market in yesterday's session and then retreated a little bit. down about two basis points. get two-year yield at 4.85. 10-year yield clinging to for percent, down five basis points on the session.

the ism in the united states of america. will the february data can from the january boom? that is important to the fed and the ecb as well. we had an ecb speaker earlier from the belgian central bank that said the governor talked about 4%. he said looking at rates of 4% would not be excluded. that gives to her attention. positive about 0.1%. on the euro-dollar. what a week and a day. it follows hawkish comments from atlanta fed president rafael bost. he said, "i want to be completely clear there is a case that we need to go higher. dogs -- jobs of come in stronger than we expected. inflation is remaining separate at elevated levels". there was more than met the eye that was just they hope we pause in the summer.

lisa a: i do think the market reaction is telling. this market wants to rally and look past any potential hysteria around inflation and say we are going to get past this, it will be ok. i do think that is the take away because otherwise, there is nothing in that speech that struck me as dovish. tom: i would frame it as that environment. senator warren could have written the same statement as raphael bostic that that is a separate story. jonathan: i don't know where you are going with that. tom: additive i, it is friday. leafy alone. i would argue it is nominal gdp is what this means for corporate revenues. people are saying, our earnings flat? our earnings up? is there any growth enus -- gr owthiness on the statement? jonathan: i think fed speak is

always relevant to the market speak beforehand. clearly behind a decent selloff in the market. then he came out and maybe that was unexpected to people who thought he was going to double down on the hawkishness but the data has been strong. these guys are economists. on the other hand, if the february data confirms we have to do more but if it does not, maybe we deal with but we projected in december. lisa a: maybe they do not know either. jonathan: i think they are very fed up with looking silly. i do not think you will hear about the disinflationary process in the same way that determine how will did. unless on march 14, we get a confirmed that the january trend was not the start of a new one. lisa a: how do you make any definitive statements in a moment that is incredibly uncertain? tom: you wait for the data. what you do this weekend is

recalibrate across bonds, equities, entity foundational belief based on flows. this is the global head of expert analysis at citigroup. with a senior report, there is so much cash. where is the cash going and what are we going to do with so much cash across this globe? >> thank you very much think the role of abundant liquidity is still critical. number one, we still have extremely abundant liquidity. whether you measure that by the amount of money in money market funds or excess reserves or household deposits, there are still a lot of excess buffers in financial markets and among households. in terms of flows, we are seeing them move more in the direction of safer assets. we mentioned earlier shorter --

short u.s. yields being extremely high. there is a move toward safer assets. there is this growing drag away from risky assets, which we think will be increasingly important as the year goes on. tom: to triangulate, i guess there is a long euro within the stew we are in. to me, the euro-yen dynamics could speak volumes. what's is a signal of a stronger euro versus yen that we have seen recently? >> for the euro-yen, we have very interesting dynamics because it is no also a global interest rate pair. there has been so much focus on the boj and policy changes but global interest rates have gone up on hundred points which is beyond anything that can happen in japan in the short term. as the rest of the world hikes, i think the yen will continue to be in the background but we know something will change in japan

eventually. for now, the upsetting euro-yen reflects the global trade change. jonathan: when you say something will happen in japan eventually, we all know. i questions are what are the conditions to which something does change? >> in the near term, it is almost just the choreography that needs to change. we know conditions that were there in december that got them to change the target. they are still there so at a minimum, they need to make a change to the financial infrastructure. it is really just about the leadership that is standing in the way. the biggest course is simply whether japan needs to tighten policy and raise policy rates in number of successive steps. all of the signals we are seeing so far as there is going to be that much pressure. for now we did it is just leadership getting to why tc

change. i would not rule out surprise change this coming week. down the road, more open-minded of whether they get to a hiking cycle but that would really be the game changer for global rates market and the yen. otherwise it is global interest rates. global interest rates coming back down. lisa a: i am going to ask a stupid question. you are talking about the flows and how flow driven everything has been, and that there is a lot of cash on the sidelines. what does that mean when cash is an alternative when cash is an asset class to his? >> we think over time that will end up being the drive on risky assets. if you look at there is not much differential between treasury market rates or interest rates or long-term bond yields and the earnings yield activities of equities. we think that means that when equities are not going up, the money will continue to be pulled into safer securities.

that will eventually be a weight on risky assets. for now, there is enough to go around for everyone. the bank of japan and the pboc and to a degree what is coming out of facilities in the fed are contributing to this. lisa a: this is the question people have when you look at the euro versus the dollar. which bank is going to type tomorrow? it's bank has the upper hand when it comes to attracting flows at a time when people are looking for more income? do you think people have gotten over their skis in terms of euro strength? >> do not think they have gotten over their skis. to the end of the year, we do see the appeal for the euro. we do think the euro-dollar will be above 1.10. in the short-term, we think relative differentials will be more tilted toward the u.s. investors are getting more comfortable with the general idea that rates globally have

repriced enough and inflation concerns have been addressed in this window to the end of march. it is a question of what the rate volatility and sentiment remains orderly. that is a critical additional barrier for the euro-dollar. for the next couple weeks, we think this is the case. there is a short-term practical case for the euro-dollar of side. but it is a year of transition for the euro-dollar. into the end of march, bonds how upside, probably some back and forth, and it will end the year stronger. jonathan: the question lisa keeps building back to, are more hikes for the ecb bullish or bearish for the euro? >> for now, we think they are bullish. really depends on nominal growth holding up. but we think they will go to 4% while the fed will go to 5.5. at the moment, that is a euro-dollar positive scenario. jonathan: is that there are

things up for you bramo? for now? lisa a: for now. then it is volatile but ultimately we enter the year stronger. people have been asking these questions of which they will raise rates more? the bank of europe or the united states? pretty much everyone you talk to said europe but the question is who has to go further than expected? they did it comes out we reassess and everyone has to hike more. jonathan: on the first side of things, this was address last night of what she thinks risks are a skewed lower. she said with the sharp selling and repricing of hikes, upcoming payrolls and inflation friends are already in the price. she went on to say that hence we continue to believe risks are asymmetrically skewed toward your -- toward lower yields. tom: this is really important in

terms of taking an equity equation and bring it to fixed income. someone who agrees with her in td securities who has a lower yield call, i can say this really conviction on that. she really feels we drive lower. lisa a: is this a reason we saw a rally yesterday? people believe we have already imagined so many rate hikes into this market and price it in that there is an asymmetry of risks? tom: there are two rules in this game. you always have to believe -- to know there is a bid and an ask. when there is a vengeance, markets look out. they look out six months. we can argue about it. but the media looks now and some of the media looks past. no one does that in the real world. are looking right now at august. jonathan: and lots of people --

subscribe to that theory. by love when you say that. you have to find somebody dumb. tom: when you are sitting there in the bid position and the bid walks away? jonathan: to make it simple, we have really raised the bar going into next week. tom: because of the shocking numbers of january. jonathan: we have responded to january as if the is the start of a new trend and we need to wait and confirm with february. tom: cnn, the f one spend per race is $5.9 million per car. it is stunning. each race, they spend that. jonathan: you are excited for this season, aren't you? tom: i know nothing a lot -- about this. in honor of ken prewitt, he used two throw cigarette bus at me.

you would be happy. jonathan: futures now positive. 0.33% of on the s&p. jonathan: 50 minutes away from catching up with this guy thierry wizman. lisa m: keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. the u.s. and south korea are planning to hold large-scale military drills later this month. those exercises are certain to anger north korea which has threatened to unleash an unprecedented was bonds. the u.s. and south korea defense officials say the drone will bolster a "joint defense posture in the face of north korea's nuclear and missile threat". the u.s. is running companies against doing business with those trying to evade sanctions on russia. this is a should watch on transportation points where

goods are usually -- legally purchased but then sent to belarus. the ecb governor counsel says markets best for interest rates to reach 4% may prove accurate if the underlying price pressures remain elevated. she told reporters in brussels that if it is not clear core inflation is going down, the central bank will have to do more. apple is stepping up its shift away from china. the company will spend $700 million near india to build a new factory to make iphones. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. ♪

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goals have been very disparate and not related to economic growth. it is just a multifaceted suite of policy changes that are more progrowth. i think this makes the sales pitch easier. jonathan: luke kawa, wonderful to hear from him. we got a lot of feedback about that. tom: i think it is a heartwarming story. his dog was named after an iconic player for toronto. this is ice hockey. hockey samurai has a photo of the old maple leaf gardens. i stood at the top of their when i was 16 years old, completely empty, completely silent. it is like the vatican. jonathan: beliefs are like the tone hive of ice hockey? tom: yes. i think that is really accurate. the leafs are the richest team

in the world as a stereotype so they do not have to win. jonathan: sounds like the cowboys. tom: it is like the cowboys to an extent. it is like religion. and ubs has never invited us up there. jonathan: rosenberg hasn't either. tom: luke kawa is hockey royalty. his father was in michigan. his father did little better than mr. keene. jonathan: can you imagine tom keene coming down towards you on the highest? tom: i can point out that there are is 400 22 people my height playing the game right now. the only thing that is the same is the puck. the puck still says made in czechoslovakia. jonathan: i like that they are

still allowed to fight. we can talk about ice hockey for as long as you like. tom: chief asia economics correspondent driving us now. i must ask an update on the opening of china and hong kong. >> there is actually a big concert on tonight for the first time since before the covid crisis. i believe it is sold out. i am getting messages are enjoying it. it still has a long way to go because of the legacy from both covid and the political backdrop. tom: the political backdrop is extraordinary. the congress coming up, laying out the new regime of xi jinping , and i go back to a brave article in foreign affairs six months ago. is it just mr. xi jinping's friends that will run the

economic policy of the nation? >> these signals are that he will again tighten and consolidate control of the financial sector, for example. some key allies will be appointed to key roles. possibly the central bank governor and a new security chief regulator. yes, it would appear that he is getting his allies now. from the outside looking in, that would be offputting to the markets world seeking the removal of those western facing globalist kind of reformer types that you have had in key market positions in china over the years with the replacement of people pretty close to present xi jinping. the counterargument is these individuals are capable in their own right. shanghai is one of the biggest cities and biggest economies, known for bringing foreign

investment. but there is a shanghai lockdown as well. there are two ways of looking at it. a regressive back percent for china or appointing key accolades -- key acolytes to china. lisa a: there is a transformation when it comes to china but also in the business community of china. the latest bloomberg's reporting is foxconn, which produces ipo's is building a 700 million dollar plant in india. that is their plan as they diversify some production out of china. we have seen this from others as well. is it just anecdotal at this point? how much of this is significant that is starting to gain the? >> it is definitely the movement. the american chamber said their own executives in china are exhausted by the covid road years. the sentiment toward investing in china is the worst it has

been in decades. plenty of them are based here in hong kong and say the same message. it does become more complicated. certainly, some plants and factories are if not pulling out, expanding their bases in vietnam or india. that is happening but is it happening on a skill that will transform china's manufacturing sector? it is not there yet. it is not showing up in the data. data does lag but there is not any evidence of a vast scale withdrawal from china. even the american chamber said the fact that despite the fact -- said despite the fact there are indications, no one is really going to pull out. there are people moving in the margins. the question is will this get accelerated over the next few months? lisa a: on the flipside, we saw tesla reporting their sales in china rose despite some

skepticism from xi jinping's standpoint. the leadership of the communist party in china, they want foreign business or do they not? >> i think they do. they want the know-how, investment, capital employment. they absolutely do but on their terms. it is usually a joint venture operation and there is usually a technology transfer, technology sharing as they would put it. it is not like a foreign business coming in and setting up wholesale and eroding chinese competitors. they are making a point that they will continue to expand in china. i had a meeting this week with a german allegation going to hong kong this week to drum up business for the manufacturing base. there is plenty of interest in china is welcoming that business. like today, with the export control news out of the white house, it remains very tense politically and it is hard to see how major investment decisions will be made in this

climatic. lisa a: i am curious how this dovetails into china prevent -- potentially providing aid to russia in their war in ukraine. what is the view in terms of the chinese message from the communist party of why this is getting out there the way it is? what would trigger them to provide more material support to russia? >> there has been a lot of surprise. china has not been as definitive to the western world as they wanted it to be. they appeared to be coming down probably on the side of russia. economically, there has been a boom in trade between the two parties. it does not seem as explicitly, deliberately trying to end the war or even to acknowledge ukraine's position in that war. i think it would be met with suspicion by the west. but china would careful. they do not want to get caught up in the sanctions.

it will probably be pretty cautious. jonathan: kailey finished with bankers. one is the top tech banker is being detained since february by the countries anti-graft investigators according to the wall street journal. there is a story this morning that banks in china are being told to clean up their acts and avoid the headedness and lifestyle. it is happening there? >> that language is not unusual. the point is there is no doubt the authorities are tone deaf when it comes to the optics of dealing with businesses. i used to deal with him myself in hong kong and he has been missing for several months. the company how to put a statement into the exchange that they do not know where the chief executive is. that is obviously not a good statement. it comes down to being tone deaf. saying we are open for business. on the other hand, they are

smacking bankers and executives. jonathan: the optics are pretty terrible. thank you, as always. enda curran out of hong kong. to enter this point, there is a contradiction there. we are open for business but at the same time, you are a company in china and have to put out a press release saying we lost our chief executive into not know where he is. tom: this is the conundrum. i go back to what was revoked 20 plus years ago joint venture. how can western companies, the executives rubric speaks to each day, to any form of joint venture given that backdrop? lisa a: what is the incentivize asian to bring in some id -- incentivization to bring in investors to a formation? jonathan: you have to give up your head and misted lifestyle. coming back from a full

lifestyle of not sleeping. jonathan: futures positive. this is bloomberg. advancing flight for future generations. ♪ welcome to a new era of flight.

>> we are certainly beholden to the data at this point. >> we are in unprecedented times in terms of volatility. >> we are stuck in this rain when the market continues to grind sideways between all of these levels of resistance and support. bikes i see evidence of resistance often everywhere except economic data. announcer: this is bloomberg surveillance with tom keene,

jonathan ferro, and lisa abramowicz. jonathan: and other phrase i cannot stand. happy friday. lisa a: happy friday, both of you. i am so excited it is friday. tom: you get more work done on saturday in the office that you do three other days. jonathan: that is just sad. nothing to do with that. tom: welcome to america. jonathan: people get annoyed with me when i say weekend mid-day on a friday. [laughter] equities up positive by 0.4%. tom: the data, i did not think it was that important. i stand corrected. you told me services has a weight that usually given to manufacturing sets us up for further data. it is not jobs day-to-day, that

is the real headline. jonathan: payroll next week. next we, as well, slipping below the radar, chairman powell next week. i wonder if he texts the governor waller script and just turns around and says payrolls friday, then a cpi print. then it confirms the trend in january. we will reassess that at the end of the month. lisa a: i am praying that a congress member turns to determine powell and says, do you still believe in the disinflationary process? is it continuing or over? jonathan: we always t of the semiannual meetings if they will go our way and we know what happens. there are basically making a youtube video for their constituency and staring down the barrel and then asked chairman powell a question. let's go through price action briefly. lisa will go to the data in the morning ahead for you.

yesterday, held down by a couple comments from raphael bostic by common sense were quite selective. he hopes we might pause later in the summer than apparently -- then apparently put a rocket under equities. equities up 0.4 percent. yields back and away, down five basis points, just about holding onto 4%. tom: what a week for yield. if this was the yield three days ago, it would be major headlines. 4.00% on the 10 year yield. we look at economic data, to be break out the new higher yield? our guests coming up will talk about that. jonathan: it was pretty remarkable yesterday to see all the yields up 4%. lisa a: it raises a question is this an accommodation and a rollout from the federal reserve or a suggestion of where

prolonged inflation? that is not very clear. perhaps the data will give more information we talk about services and the data we get out at 10:00 a.m. the question is what's -- is was it just one month? is it continue? is it does, it starts to feel stickier and people cannot dismiss list is noisy data. today we are tracking what we hear out of president biden and german chancellor olaf scholz who is meeting at the white house. also, how to be and this quagmire? what is the road out? i am not hearing much about what the collective willingness is to give and take some sort of negotiation on either side. we are not talking about that anymore which is concerning, especially for people who see populations losing political will to continue financing a war that is profoundly outside and depressing. today, fed speak includes dallas fed president lori logan, raphael bostic, and more.

will raphael bostic's comments be considered dovish today? even if he says we have to go to a higher rate? i do not know. is it going to be simply raising rates to a higher level in a terminal state or are they going to talk about accelerating rollout? we heard that from the ecb. how much does this influence? jonathan: happy friday. thank you, lisa. fridays are just the best. kaminski joins us now. you have been phenomenal the whole of last year and into this year. everyone turned around. a lot of people turned around and set it is the year of bonds and fixed income. you went sort. why? >> let's focus on the fact that inflation is looking stickier. if we look at last year, we like to see it this way.

the stock market and bond market do not agree right now. the stock market thinks everything is great and the bond market says this could be dangerous, look at the curb because it is inverted and we can have problems. we think that last year, the bond market was right. this year, it is trickier, and we think the stock market is a little weaker saying that we might pause. either way, we are not there. this means that even if the stock market is right and we pause, we can the end of the curve severely and that would cause negative trends to the long end of the curve. or if the bond market is right and we look at recession and a deep inflation environment, we are looking at higher rates in the short term. bonds are tricky this year. jonathan: talk more about this short. where across the curve is a short spread? is it evenly or a specific pocket of the yield curve? >> it is generally sort of class

-- short across the board across global economies. that tells us we have further to go in terms of raising rates to where we can either fight inflation and get it to be less sticky or where central banks throughout their hands and say we are going to tolerate a higher inflation level. either of those will be strictly -- will be tricky for cash flows. on the fundamental side, people are trying to get interested. tom: let's channel wells while curve who invented so much of this in 1970. katy, the answer is there has been a magnificent trend of higher yield. i was shocked to go to bloomberg. in one technical study, adx/the mic technical trades that we are in a good position to continue out there. how do you use that mumbo-jumbo

to stay in trend once you have profited ako >> that is a good point. i will be honest that january was a time when we saw consolidation. people thought yields would not go higher and it was about balancing long-term and short-term. longer-term term used to say we are in a secular move toward higher rate and not there yet. the equity market also likes to say things are over quickly. it is about balancing multiple perspectives and seeing things over time as opposed to reacting too quickly. lisa a: what are you looking for? to unwind or short bets? >> if the stock market wins? if central bankers step back that we saw commentary yesterday and say we are going to tolerate more inflation, what this means is we are going to see a steepening of the curve. we are going to see the bottom of the short end of the curve. shorter-term rates will be

stickier and then you will see people take on higher yields and that will be longer-term yields will have to go up to compensate for that risk over longer terms. i think that is where you are going to see shorts disappearing on the short end of the curve but you will still see long end of the curve as the market moves to high higher inflation tolerant environment. lisa a: can you talk more about the long and? we have a great number of bond strategists say we are possibly at the peaks and you are suggesting we are far from them. how far? >> if we had a healthy yield curve, which we could see, and we were to tolerate higher inflation, you can imagine we had longer-term rates going up several percent above what you see on the two-year. that was sort of signal every stable environment with higher inflation whereas i do not think you are seeing that yet, but that would be an environment where we give up on trying to

fight inflation down to 2% and risk premium on the longer and that has to go up. then you have to get a longer yield if you do not expect inflation to go down in the longer term. jonathan: thank you for being with us this morning. let's catching more often. katy kaminski from alphasimplex. let's make this more real for more people. get the fixed mortgage rate at 6.65. above seven back in november but we are back to 6.65 on a 30 year fixed. tom: there are different mortgage rates quoted. i use bait rate. when you use is quoted more by mainstream media. that this week, the bank rate 30 has gone 7.04. 10 basis points away from a recovery high. jonathan: that data comes from a survey of lenders from freddie mac. tom: yes, that is what you will

see in the mainstream media and it is so untenable, no question. help me here. i look at this arguably as what is your buying power? how much house can you buy? the answer is a given income and cash flow, the answer is a lot less than months ago. jonathan: every time i see that, i think about the pandemic mortgages. tom: you have a 2% 30 year fixed? jonathan: i wish. the consensus to speak right now is to look at the housing market and say 6.65 is the problem. the way i see this is the problem was the pandemic mortgage. that will be the problem for a long time. lisa a: this goes to the question of rv cleaning out the pandemic excesses or the excesses of decades of low rates because evaluations of the houses were built up over this

idea of ultra low rates and got even more ultralow during the pandemic. to top points, how most evaluations have to reset completely if we are truly in a higher rate regime? tom: making a splash this week was research from dallas, really good research. a chart back to 1870 on home prices. priced rent is a fiction right now. jonathan: rental prices are nice. but we have been saying, where is supply going to come from? lisa a: the offices will convert. but how much money is it going to take? tom: you know what the constraint is there? windows. everybody wants windows. in an office hour, where are the windows? jonathan: -- funded the construction of some accommodations but no windows. lisa a: my dormitory was the largest concrete structure in

north america. it felt a little like living in a prison cell but that is ok. jonathan: futures positive, this is bloomberg. lisa m: keeping you up-to-date with news from around the world. with the first word, i am i am -- i am lisa mateo. fed officials where they may need to lift interest rates to a higher peak. governor christopher waller said the key would be whether payroll and inflation data cool after being stronger than expected in january. atlanta fed president raphael bostic says he is opened to raising rates higher than an division the economy remains robust. germany's chancellor olaf scholz may be put on the defensive today when he meets president biden at the white house. he could come under pressure over the struggle to produce enough ammunition for ukraine. the two leaders are likely to discuss ways to step up manufacturing. the biden administration has imposed export restrictions for dozens of chinese companies.

among the companies on the list are computer server maker inspur and lung song. they are considered key to china's efforts to replace foreign technology. in hong kong, a 42 story hotel being built near the waterfront cause fire. it took hours to put it under control. there were no casualties. it is a 492-room luxury hotel that would be operated by intercontinental hotels group . global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. ♪ ♪ every day, millions of things need to get to where they're going. and at chevron, we're working to help reduce the carbon intensity of the fuels that keep things moving. today, we're producing renewable diesel that can be used in existing diesel tanks. and we're committed to increasing

our renewable fuels production. because as we work toward a lower carbon future, it's only human to keep moving forward.

>> we are trying to engage in -- engage china in support against russia. if they were to send aid to russia, there would be a serious problem. jonathan: that was antony blinken after bumping into and having a short conversation with his russian counterpart sergei lavrov earlier in the week. later today, the focus is chancellor scholes alongside president biden in the white house. we will get details on that in a moment. s&p positive 0.4%. there is a little going into the end of the week if we could end up with a week of gains on the s&p 500. the obstacle for that may be the ism later on. ism services index, data in

america over how well the services sector is doing. important because this is for february and we had a decent month of january with payrolls and all of the above. the tenure is on 4%. tom: we have come a long way. on a friday, maybe it is positive refreshes. i thought the conversation with katy kaminski was riveting. she is clearly modeling out higher yield. we have to, on this right away. moments ago, deutsche bank, the remarkable resilience of italy. it is cool. they have a new leader. btp's are well-behaved and they seem to be getting it done post-pandemic. jonathan: i wonder if they are well-behaved because of the ecb or the italian government or the weather? tom: tourism is back. jonathan: and do not want to get

too excited about how well behaved spreads are. especially when it is up 4% on the 10-year yield rate. that was the perfect transition. we should do a show. tom: help me folks. where is monza? lisa a: can i point out that neither one of you wanted to see a wood desk later at macy's but go cfo rory, absolutely. jonathan: that is a shock? you think i would prefer to go to macy's? lisa a: from a journalistic perspective. [laughter] jonathan: you are flying solo. tom: jonathan ferro and lisa abramowicz have about 10 topics are annmarie hordern but i want to go do something you were percolating.

i catch you unawares but you are so ready and you are going to mail it. san francisco, the chicago stunning elections completely pushing against an existing mayor. now, yesterday in washington, d.c. as republicans puts the president in the crime timeout chair, what is going on with the topic that never goes away. crime in america. annmarie: what you are seeing in washington, d.c. at the moment is democrats are frustrated because the president said if republicans send this to his desk, he is going to allow it. this is a log regarding washington, d.c. let's read what the president's tweet was because this is getting a lot of attention. he said "i support d.c. home rule by do not support some changes d.c. council but ford of the mayor's objection such as lowering penalties for carjacking". democrats are upset because the

president was going to be hands off on this. hit the nail on the head. when you look at what is happening with mayor lightfoot in chicago, the first time since the early 80's, that a mayor was not able to win an election. all of this has to do with people being upset and frustrated with crime in chicago. his is going to be a huge talking point. tom: i agree. this goes back to nixon and the "war on crime". are we going to have a talk about this on the sunday shows? annmarie: this sunday and what we have seen over the past two years during the biden administration and this was a hot button issue during the trump administration. what's a campaigned on during midterm elections and will campaign on during 2024 is that democrats in blue states cannot get crime under control. are you safer or not now than you were in the past? that will be there main question

to constituents. tom: lisa, i think this is a huge percolating deal across the path of this election. we underestimated by the elites. lisa a: i do not think this was highlighted with the potential unity between president biden and the gop in terms of interfering in something that is very unusual, local d.c. politics. this highlights aspects are brought to the floor in -- ahead of the selection. we were talking about this tension between the republican party and corporations. and with both parties, how corporations deal with the crosscurrents and bipartisan nature. walgreens not sell abortion pills in 20 states after working for publications. basically selling, -- basically saying, we will not sell them even though they stuck child -- stockpiled after partial abortion betas were put into place. what is the sense people have in terms of how much states will go

after corporations for policies they view as social? annmarie: we talked about this yesterday with esg. none put it well when he said these companies are being squeezed from both sides, he left and right. it comes to esg, you have texas saying to money managers that you need to look into blackrock and ubs and other firms to make sure you are not using the because they are not supporting our oil and gas economy. meanwhile, you have the new york city comptroller saying we are going to reassess or use because you are doing nothing for sustainability. we have seen the same play out with walgreens and this abortion pill. republicans for state law are saying we are going to sue you if you sell them so the companies immediately want to de-risk. it is becoming incredibly difficult for these large corporations, especially ones being pushed internally, usually for more progressive changes at the company, to navigate this

political environment. that is coming for them -- becoming very challenging for them. lisa a: we are looking at a scenario where the polarizing sides for both parties have gained a bully pulpit. how much has there been a shift to the center? how much do the views on one side of the other -- or the other actually represent what the average american generally wants? annmarie: that is a great point. what you see whether it is washington, d.c. or on the national scene, is usually the most extremes of these views. from a birds eye view, what you saw this year, and even today, with the president agree with republicans in terms of what is going on in washington, d.c., you have seen move toward the center. as we go into 2024, there is a huge republican play for who is going to be there nomination. you will see a lot more

extremist views and then they come back to the moderate center. what you see in american politics time and time again is the center decides he was going to be the president. who is going to be elected officials. there was supposed to be a huge red wave in the midterms and there was not. i think this speaks to the fact that by and large, the country mostly is more in the moderates and not in these intense extremes that get blown up on social media. jonathan: that is what we see play out in bc quite a lot. annmarie hordern with the latest. this new york post in the last couple days. from the nypd, they have a running requirement to be a recruit. it is 1.5 miles and you have to do it in 14 minutes and 21 second. they scrapped it. the training she said it would help more women athletes make the cut. what is ridiculous about this statement is in the quest to

become more inclusive, they often become more sexist. my wife back home would kick my asked in a run -- my but in a run. lisa a: i run home. i literally put on running and run home. i do not want to get too much into the commentary but this is ridiculous. what a smokescreen. [laughter] they just basically need more applicants. they basically want to say they are lowering their standards and they're going to blame women for that. that is ridiculous. jonathan: and leave the chief trainer is a female as well. futures are negative, this is the bird. ♪ (robot whirring) want smarter factories? that's the internet of things business. accelerating r and d? data science business. hey. have a look. managing global supply chains? shrink our carbon footprint business.

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jonathan: should have seen lisa in the break, so fired up. tom: we could have a little window showing us. lisa: just do not blame women for whatever you are going to do, ridiculous. i dare people to a race, a foot race. donovan popped i would not do it. we come back from breakfast, and lisa is like this. having none of that. equity futures look like this,

s&p positive by about .3%. nasdaq .3% also. we have talked about how this equity market has to confront fixed income. we back away little bit today, down four basis points4.01. back lower again this week, 4.8648 on the two-year. at the ecb, the central bank governor floating the risk at 4%. 1.0608 on euro-dollar. ecb meeting have communicated 50, it is about whether they do that again and say we are not providing forward guidance anymore somehow, which i do not understand. lisa: especially since forward guidance is literally one of

their monetary policy tools. we will talk about some single stocks. this will wind me up any -- even more, actually. this company fired their president without cause, and people say this is a negative for zoom media. he was somewhat popular. it is strange after earnings showed they were making progress. now we're talking about this being downbeat. tom: we interviewed him in davos, and seemed hunky-dory. now out the door. lisa: another digitally it east -- idiosyncratic risk? or is it another story? they have some serious requirements at zoom video. hp enterprise up about 2.8% after beating expectations come

up their second-quarter net revenue forecast came in strong. this is a contrast to dell technologies, which are lower by 3.2%. i guess people are not buying personal computers and printers and stuff like that. they attribute that to a changing of the guard, difficult economic backdrop, changing of the phone, computer. jonathan: and thinking of governor waller's speech yesterday. lisa: we are going to bring that up again? ok, hold on a second -- for people coming in, chris wallace gave a speech but it was put out there and then the conference was canceled due to technical difficulties, which is actually someone who was zoom bombing with pornography, and that is problematic. it is, it is profoundly

problematic. jonathan: thanks for qualifying, profoundly problematic. lisa: it is -- never mind. jonathan: police, would you call it a zoom bomb? ok, it is the speech that did not happen. i love how the fed touted technical difficulties. ok. inflation on the ecb, that is what they have to face. markets betting interest rates will reach 4% in the euro zone. something serious to say at macquarie, here he was men. europe has had high inflation since the first half of 22, it can no longer deemed to be largely an energy issue anymore and has brought a nappy on energy in the fourth quarter of 2022 and first quarter of 2023. -- a broadening of energy in the fourth quarter and first quarter. tom: in some way, we're still in shock over 7% through even 9%

inflation over in europe. terry wiseman is from vassar and harvard, same corridors as benjamin friedman. i will go over to tim wizman from macquarie. sum up where we are, the consequences of pandemic stimulus that include that broadening inflation. >> in some respect, what policymakers did during the pandemic has turned out to be a disaster. i think that what they were thinking is, looking back on the past 10 years and saw very little relationship with inflation, and as a result of the big increase of monetary valances coming out of gfc, really know inflation. they thought they could repeat that experiment, and it was proven wrong. i thnk it was wrong because it

was not just monetary spending, but there was excessive fiscal spending across the world and at the same time expansive monetary policy in the emerging market and develop markets, so we have a global inflation mark -- problem. good news is there are ways to stop inflation. two ways, one to tighten monetary policy. the other way is to let the inflation happen. because when you do that, real monetary talents is start to shrink. when that happens, the consumer feels squeezed. you can see that in u.s. data, looking at real monetary balances measured by commercial deposits, commercial banks in the u.s., they are almost back to their trend level. part of that is the quantitative tightening over the last few months, but most of that is the inflation that has already happened. i virtue of having inflation, we slow down and reduce the real valances and there is a squeeze.

one of the reason why think we will see a resumption of the trend in this inflation in the u.s. is for that reason. europe is another story. they are just starting their qt. tom: go to chicago, how do you overlay the monetary balances, a stunning increase and then stunning decline. is that a valley to you -- a value to you to see that plunge? i might have been one of those that thought old money was no longer important, and the data out of the university of chicago did not supported, correlations not supported, trends do not support it. but now we see a resumption of validity in the story that money does matter, and we probably got to a point where those real monetary balances in the u.s. got to about 20% above the trend line. guess what, that would imply

that we're going to see a 20% increase in prices over and above the trend line for cpi. again, the good news is that it is being unwound. here, certainly. two talk about the unwinding process, there has been this question about unwinding the balance sheet with the ecb and the u.s. more quickly, and people thought that would be the primary tool over the next nine to 12 months, rather than rate hikes. how much higher does that push longer end rates, both in the u.s. and in europe. >> you can say that by virtue of quantitative tightening, we will see the central banks no longer buying bonds. we have been selling their bonds. but that is running up against another problem, the problem of a slowing economy. i am not sure which will dominate. i think over the next six months, we will probably see lower yields in the u.s., not higher. i know it is not the vogue thing

to say right now, the 10-year yield just reached a cyclical high of four point 1% yesterday. but keep in mind, my view is we will see a slowdown in the u.s. economy in the next few months, and it will be significant. technology is certainly in a recessionary environment right now. all of the economy sectors are, finance, housing certainly. so that is number one. and i think we are looking at peak 10-year yields right now, and i think they will start heading down. not by a lot, mind you. lisa: it has important applications for the yield curve that has been deeply inverted. does it get substantially more inverted? >> potentially. depends how you measure the inflation. if it is 2's to 10's and the fed signals that will stop hiking rates, than that in version. on those. -- that version will stop on those. jonathan: what about foreign

exchange? >> you could see higher yields in europe still because they have been late to address the inflation issue and inflation is higher there on top of that. you could even make the case is that the european economy is actually stronger than the u.s. economy right now. yes, believe it or not, it may be. look at the pmi's this morning, coming in line with the u.s. remember, europe is coming out of the funk it expensed in q4. it has china backing it up all of a sudden with its stimulus. it is possible to european economy is doing a little better than the u.s. right now in terms of growth, and that supports higher yields in the euro area. lisa: how long could europe remain stronger economically than the u.s.? >> until we start to see some real tightening by the ecb, and we have not seen that yet. tom was talking about 9% inflation, headline basis, in the euro area.

i think the positive rate is 2.5%. that is something you would expect from a rogue central bank, turkey, for example, i hate to use that term. you can make a case that the ecb has gone rogue and it is finally starting to get back in line. it is december that was team has emphasized the need to -- address inflation. it was two months ago that she started to realize that it was a broadening. jonathan: at the last meeting, she talked about the risks of inflation. i wonder if that gets revised. >> there are structural problems that point to problems in the euro area, as well. labor action and strikes have been tracked in the u.s., and it peaked in the summer. now it is less agitated in the u.s., less strike-oriented. look at the u.k., they are worried about more strikes and

are getting through wave of them. wage pressures are higher in the euro area right now it was not the summer. jonathan: euro-dollar is 1.06. everything you said screen stronger euro. target? >> next two to three month, i think we get back to that 1.10 or nothing too dramatic. if the world goes into recession, that tends to be good for the dollar, so you have to consider that will offset the upward pressure. jonathan: this was great, fantastic. pretty original. lisa: stronger than the u.s., actually. the rogue central bank, love it. jonathan: not sure christine lagarde will love that. macquarie, thierry wizman, wonderful. futures up on the s&p 500. coming up, liana fix, fellow for europe on the council of foreign relations. lisa m: keeping you up-to-date

with news from around the world with the first word. the u.s. and south korea are planning to hold large-scale military drills later this month here those exercises are certain to anger north korea, winchester into threatened to unleash an unprecedented response. u.s. and south korean defense officials said the drills will bolster a joint defense posture in the face of north korea's nuclear and missile threat. the u.s. is warning companies against doing business with those trying to evade sanctions on russia. the commerce department says businesses should watch for transshipment points were goods are legally purchased but sent onto russia or belarus, including china, macau, and countries close to russia such as turkey and armenia. lufthansa has joined other major european airlines and predicting a travel rebound this year. the german flexion carrier says summer vacations to the mediterranean and travel on north atlantic routes will be strong.

bloomberg spoke with the ceo. >> looking forward to strong demand for the year 2023, starting easter and going through the summer. not just general but also focused on premium classes. not just by corporate travelers but to a much larger degree by individual leisure individuals. lisa m: they are forecasting significant improvement in earnings. global news powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo, and this is bloomberg. ♪

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>> after united states interest germany and u.k., they are delivering the most weapons to ukraine, and we will continue to

do so. we are discussing with friends and allies, with the u.s., what is the right thing to do. jonathan: a brilliant conversation earlier this year between the german chancellor speaking to bloomberg on emanation and supporting ukraine's war efforts. that could come under the spotlight later with the germany chancellor visiting the president of the united states at the white house. the conversation about providing more emanation -- more ammunition seems to be front and center. tom: not sure what it actually is, rifles or things like tanks, big stuff. jonathan: before it was about taking down american stocks, now it is about procuring much more. tom: what i know for certain in my studies over the years of german politics, you always need to go deeper. thank you to adam posen and richard clarida to, young estimate -- young academics,

experts and german political economics. joining us now is liana fix, council of foreign relations. the radar is up on what the german leaders are doing when they go abroad. they play to domestic politics in germany. who will the german chancellor speak to in washington back in germany? liana: two audiences. the first is the american audience, which he wants to convince that germany's big transformation of the policy announced one year only three days after the invasion is actually going on. the second audiences the domestic audience at home, and he wants to convince this audience with exactly the same message, that he is not the chancellor who is cautious and hesitant that he has a lot of resolve and is just side-by-side

with the u.s. president on supporting ukraine. tom: our listeners and viewers are familiar with chancellor merkel. discuss the shadow of merkel upon scholz as he visits washington. liana: merkel had this legacy, and comparing them is a bit unfair because you have the status she had, this icon she became only after 16 years in power. in her first year, she certainly had more difficulties. scholz wants to continue the legacy of merkel in the way he wants to be seen as a leader who is reliable, stable, and he was able to lead in germany and beyond. but circumstances are not easy for that. he has a three party coalition back home where there a lot of disagreements between the three parties on defense, on energy, but he also has international

expectations, especially in europe, and sensual eastern europeans demand him to do much more than he is already doing on security and defense. lisa: when it comes to giving a message forward and legacy challenges that olaf scholz has inherited, what do you expect his comments to be to president biden about the potential for china to provide aid to russia in the war in ukraine? liana: that is the second big topic next to ukraine, the possibility that china will deliver lethal weapons to russia. the chancellor has been quite strong in his speech in the german parliament about this. he warned china, do not do that. it was a strong message. at the same time, olaf scholz was the chancellor who went to beijing and got china's leader to say that they would not find russian nuclear threats acceptable. so there is a kind of balance between train to bring china into a dialogue but at the same time pressuring china not to get

too close to russia. lisa: this is raising the stakes in terms of and do the conflict in ukraine so that some of the geopolitical tensions can come down and so the tragedy in ukraine can end. what is the roadmap that is being developed to get there? liana: the first phase is to give ukraine the ability to mount another successful offensive. it is not only about pushing back a russian offensive, which is slowly but relatively unsuccessfully already going on, but it is giving ukraine another last push to liberate its own. then it depends on the situation, very much depends on whether putin will be willing to negotiate or whether a forever war is seen by putin as a means to stay in power. tom: the president, with the

pomp and circumstance in warsaw, explain scholz's and germany's relationship with the near allies along the eastern front. liana: there was this one moment when the war broke out when everyone was on the same page and had the same threat assessment of russia, but that was not the case before. eastern europeans were considered as the cassandras in the european unions, always warning against russia. now after the war, we see that some member states go back to traditional thinking. so some see europeans as too hawkish. on the other side, central europeans see germany is too cautious and too aware, basically buying putin possible of spirit tom: you are incredibly holistic on your

knowledge of foreign affairs in this matter. it is completely unfair, but where do you perceive we are going to be a year from now? liana: first of all, we will be in the u.s. election season, and i think it will make a difference in the way ukraine is supported. support will not stop even though congress looks different than it looked when the war started. that it will be more difficult to have these kind of very big pushes of support for ukraine, financial support that we have seen in the past. it will also be difficult for europeans to compensate for that. so i do think we will have some sort of more or less dynamic line in ukraine reestablished, depending on how successful ukraine was this year in its counteroffensive. then it might be a difficult process going on, or not. that means if putin is not

willing to negotiate, ukraine needs to be armed for the next year so we can continue to be a shield that protects europe and nato. jonathan: have you noticed correlation between the performance of the european economy and the support europeans are willing to offer, rather, european electorates? liana: one big element was european nation states with subsidies supporting the energy sector, much more than germany will spent on security and defense. so this element to keep the economies afloat with -- energy prices were very high but not letting them skyrocket entirely, this was an important effort to communicate and signal to the domestic population that support for ukraine is important, but at the same time ukraine economies have to stay strong because otherwise they will not be able

to sustain this effort of sanctions against russia and decoupling from russian energy. jonathan: economic outlook better now. liana fix, thank you very much. in the last week or so, a member of the bank of england, a more hawkish member of the central bank in the u.k., mentioned that perhaps some of the fuel energy subsidies for complicating the effort of the central bank to hit its inflation target. ultimately, energy prices have come down. according to the times in the u.k. this morning, the chancellor is poised to extend the energy price guarantee. so i wonder, if energy prices continue on the downward trajectory and then they start to spend elsewhere, which is arguably what is about to happen in the u.s., as well, whether it makes the job at the central banks even more difficult, because in europe specifically, there have been these energy relief programs which have supported the economy supporting

consumer spending. lisa: and it highlights the complicated nature of this moment. there are people in the lower and middle income brackets seeing real income destruction. honestly, look at real wages, and they have not kept up in europe any more than the u.s. so when you see higher prices, even if they come back down a bit, getting a subsidy is good for people who cannot afford their rent and also stimulate the economy. tom: and there is ambiguity, i do not understand a 4% ecb yield with any working knowledge of nominal gdp. i need a real adult in macro to explain to me how their economy handles 4%. jonathan: big debt piles. tom: i need to see the literature. jonathan: they have really pushed out the maturities, a big effort. the longer it goes on, it is not

about the highs. the longer it goes on, you imagine it starts to buy even more. lisa: imagine so. ♪ accelerating r and d? data science business. hey. have a look. managing global supply chains? shrink our carbon footprint business. thank you. (in foreign language) that's where deloitte comes in. with a potent blend of acumen and technology to help advance and connect all that it takes to excel in business ... to the business i'm in. deloitte. every day, millions of things need to get to where they're going. and at chevron, we're working to help reduce the carbon intensity of the fuels that keep things moving. today, we're producing renewable diesel that can be used in existing diesel tanks. and we're committed to increasing our renewable fuels production. because as we work toward a lower carbon future, it's only human to keep moving forward.

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>> the fed gets the sink bit area rate hikes.

we've seen a lot of speakers clean in two more hawkish narratives some of them are teasing that 50's could still be on the table. >> it's pretty hawkish stuff. it's or going to be here and to 2020 >> four. inflation expectations have gone up dramatically. >> they're going to have to harden up or someone's going to break. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. >> good morning, everyone. on a friday staggering into your weekend reading backwards from march 14 cpi a delayed jobs report march 10, and mortgage applications wholesale, trade sales, on we go to 10:00 a.m. this morning. jonathan: chairman powell this is the last big data point

before his semiannual testimony next week and the one question he has right now with january just a blip or will that be confirmed by strength in february? how are you doing in the services sector? that's going to carry some information we're going to find out in a couple of weeks. tom this is we got this a couple weeks ago. it's all about inflation and every single politician doesn't matter how the politician is. jonathan: yougov the breakdown country to country france, germany all-time high but i think europe is just there's a different timeline here europe is six months behind where the united states was we get great acceleration the economy and when it started just for a

moment when it started to look like the trend was starting to fight it flip the other way. tom: the volcker era 12.7% need .1% down to 6.3% then we cratered out at a 4.13 that's the mortgage you got, john. 6.85 percent. jonathan: who didn't remortgage your house during the pandemic? i wouldn't be giving at that at all. if i was living and house i didn't like i would give living in it anyway. tom: goldman sachs made a claim mortgage equity withdrawal lisa, that's a reality whether it's what were living here in the surveillance bubble or nationwide the housing dynamic is just gone. lisa: it's hard to understand

the transition mechanism that isn't taken up by the individuals who really would be transmitting it essentially. if people don't take up the markets does it matter? i think that really is the conundrum what are like and law and variable effects if we are looking at a market that has immunized itself from higher rates for a decade, two decades? tom: or going to go to a wonderful guest here for substantial interviews this morning. i'm going to say the data sort of, i have a vic's under 20. jonathan: hoping for a summer pause, a pause in late summer. we'll look at market pricing. doesn't really mean anything. every fed official is saying basically the same thing. if february confirms january we may have to go forward.

maybe that's where we'll stay. we will find out going into the next month. they're just why we priced yields some much higher the tenure just north of 4%. tom, equities with a lift, a third of 1% on the s&p. the big data point. tom: two hours away and we will see what it does to the tenure. jerome schneider i think he inherited bill gross's trader. 4.87% two year yield and joins us this morning just an open question on your desk, what is the focal point within the short-term space? >> there's a couple of focal points. bonds of that, yields are higher, we can find a lot of attractions that is sort of a new note that the minutia that

investors need to think about depository rates are low they need to be incentivized to look at the move out. even into t-bills, to your notes, things like that. the second thing is clearly the fed is independent but that's going to involve a process now that we are approaching the 5.4, 5.5% terminal rate people expect. the cutting mechanism is focused less on supporting growth and that goes with the ecb too. as well as focused on the supporting growth that focused on fighting inflation. that's a fundamental change where we were over the past few decades. and the final thing to think about, don't necessarily be worried about liquidity conditions. there's plenty of reserves but the higher nominal rates we are experiencing within the broader our commentary -- the economy

have proliferation's. investors have to think about maintaining their high degrees of freedom and more importantly embracing these higher yields. be a more acceptable place to be over the next year or so. going from effectively the deflationary utopia where we were just a few weeks ago to the inflationary dystopia, that's a strong art. jonathan: this is a process, takes a while. whenever i speak to you or see you now jerome must be so busy. how long does it take to get away from their bank accounts and come to you and give you the money? >> for the short-term desk at pemco, it's very quick. for the investor, even the most sophisticated investor, they're really not moving as quickly as you would expect. sure a lot retail investors are focused on but sitting in their accounts.

that's making an attraction to the bonds are back is a well-known thought process over the past few months but the reality is it's still an evolutionary process it does take time. we are talking about even a 10% -- 4% 10-year note. we need to think about the construction of portfolios in a much more widespread criteria than simply the past six weeks and that's really what were going to do so this is much more protracted evaluation of how to create different investment approach over the term. jonathan: one phrase that has popped up his investment risk. if you go to short-term and make them in much longer how do you advocate for where people should be on the curve in the treasury market? >> you have to think about it, you can look at it from an economic point of view. what are neutral rights going to

be? there are inflationary expectations coming into that as well. inflation is going to be higher you have to think where the neutral rates are going to be. and that in an avid is a point. more microscopically it cuts both ways. when you think about it, the 2-year note has a negative return this year and if you bought it last year it's a negative return. it does yield almost 5% so that is attractive. that also beckons what is your investment horizon? is it liquidity management? buying a house? mortgage rates are higher. there is a variety of circumstances. imagine your needs with the investment itself. that's probably going to be the main drive. lisa: people are trying to game out higher rates as we have seen

ongoing surprises with respect to inflation data how disruptive would it be if rates were to rise from here? >> the framework is not necessarily supporting growth at this point time it's fighting inflation. it's going to be a bit of a lock and dusting red we should expect more volatility. ultimately it's a question if the fed takes the high road or the low road and understand where it's going to go. so if you did have a shock to the system, sure. what we recommend is the risk aversion you would have would be focused on the center of those concentric circles meaning the safest areas and the outer realms would move whiter in terms of prices and spread and yield to compensate for that. what i suggested where we are now what you are suggesting by

moving to the higher rate is a more methodical, more drastic rationalization of return expectations. so there is very much a recalibration that will go on tightening conditions and you might actually see some breakage at that point time. i also think what you're hearing from the fed, the process which is going to be a digestive situation where they're going to just just the data. not necessarily that there's a lot more rate hikes to calm but there is let's -- bless cuts to come at there's a big difference in that. we shifted our expectations of a recession this year, possibly pushing that out to 2024. modest growth in 2023. that something that actually creates a longer road for the fed to really rationalize decisions, be more data dependent and maybe doesn't necessarily create the shock to the system that you're so jesting. jonathan: we'll get the higher

piece of this you touched on the for longer bit of it. how long for? >> you're going to have, ultimately, when you see pce coming down and you may not get that data until late this year, early next are the longer is an eternity. maybe a pensive thought process that puts us into 2024. jonathan: and a figure feels like years of way. you had two years and two months. where the price to go with it. lisa: biggest february loss. jonathan: unreal. lindsay joins us from stay focused she will be here with us in new york. from new york, this is bloomberg. ♪ >> keeping you up-to-date with news from around the world with first word, i'm lisa mateo. german chancellor may be put on

the defensive when he meets president biden at the white house. he could come under pressure to produce ammunition for ukraine the leaders are likely to discuss ways to discuss manufacturing. fed policymakers may need to raise interest rates christopher waller said the key would be whether payroll and inflation data cool off after being stronger than expected in january. atlanta fed president said he's open to raising rates higher than he vision if the economy remains robust. the biden administration imposed restrictions on chinese companies. the u.s. cited activities adverse to security. cpu maker and considered key to china's effort to replace foreign-made technology. is ceo of barclays is in remission after being treated for non-hodgkin glitch from a.

-- one,. in a letter to stuff he plans to be working more from the office over the coming weeks and in the u.k. the markets regulator is investigating the london metals exchange. nickel prices spiked 250% and a little more than 24 hours last march. the market was suspended for a week. global news 24 hours a day on air and on bloomgerg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo and this is bloomberg. ♪ if your business kept on employees

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>> i think the way the fed is pursuing policy here, i know the fed gets a laugh because of missing the early rate hikes but 25, the going to keep on 25's and level off and at a certain point in time this degree of tightening has got to hurt. jonathan: a conversation not just about where were going but where were not going back to. he doesn't think were going to go back to sub 3% rates over the next several year and that is a new reality. the bond market did not look like this take a snapshot of the price section right now equities up by 2/10 of a percent. yields lower on the session puts much higher over the last month

and year to date. the fx market 614 what a week it's been for europe. tom: stunning. it is the high point of the week. i still don't know what to do with it. jonathan: ecb has to figure out what to do with that. tom: it is a joy to have jerome slider with us. undiscovered jerome, this week was but i'm going to call the eyes of october. off the ides of march but the bloomberg total return index reached a low and october of last year. very quietly this week we slipped below the december between october and now is there a possibility we retest priced out yield up that we saw in october and what will be the consequences? >> default to the -- at the

reality there is one thing very different than the calculus today that october. yield. when you think about total return whether it's a total term bond fund, it's the composition of capital appreciation plus yield and that yield and kerry component is worth 500 plus basis points depending on the strategy. that can alleviate a lot of the capital depreciation. when i said be careful on the 2-year note, yes we are looking at a cost of a couple of months. if you are holding it to maturity people make those yields. tom: that's where i wanted to go because senate pemco they make a successful trade that the same this is the way. you're the only two people that

read it from cover to cover and keep it real simple here tomorrow together a 10 year success by taking five, two years out? is that where we are right now? >> i think what investors are looking to do is navigate the next one or two years with uncertainty. typically you're having an inflection point. you out equities because you believe it's going to be stable. owning an equity is owning a longer bond with a profitability earning a risk free rate. what we ultimately want to think about investors have a vote of reinvestment to do over the past two years and then they're faced with uncertainty, wars, pandemics these are factors that change the psychology of investors that we have to think about things we haven't seen in

many years many traders on wall street, get people haven't seen the phenomenon we are witnessing today. an obvious example, inflationary expectations, these are things we haven't seen in 40 plus years. so the calculus is right for a pause it means that traditional mechanisms put the baton firmly in the hand of savers and that those that mean you need to make these bold predictions in terms of making these risks having some optionality is what investors want to do at this point in time. lisa: people have got a little hysterical this week and i admit i understand why this feeling that maybe we have totally underestimated inflation and how sticky it is globally what terminal rate actually look like? what gives you the pemco confidence that we are not at that point? that the market has gotten ahead of itself but the fed doesn't need to do that much more in the

data that's coming in shows progress even if the headline big numbers aren't necessarily screaming that message? >> we look at the next year is so i where were headed for the economy i think one of the healthy debates is not just where the natural rate will be. but really how sticky they're going to remain and i think unfortunately were on this long road and were not knowing where the end of the road is going to be. the consequences, the fed is going to be faced with pce, core pce's that are from above the 2% number. we don't see that coming down until 2024, possibly 2025 at the earliest. there is a lot of unknown right now and that's perfectly fine and investors have to be prepared for that uncertainty as a result. what we want to do and as a practitioner's prepare portfolios for the resiliency that we think is going to be necessary to survive the uncertainty of the next few years. lisa: can you give us a sneak

peek into the committee brought with the range of use and terms of terminal rates and terms of inflation over the longer term? >> i wouldn't get the depiction of the gladiator set but it is a healthy debate and we put all of these variables and and we want to understand how it can behave in a variety of circumstances. and then ultimately rationalize it for an example we think about this environment were faced with a multitude of things which create difficult levels of uncertainty. higher rates create different outcomes. we have to think about the construction and the confidence we think, as i said previously were not going to see a recession in 20:23 a.m. my get pushed at 2024 have has a in a situation where the fed probably has a little bit of a longer runway for a little bit longer at doesn't necessarily create a saying that this is fair market value.

it involves term premiums and that's obviously affect her. a 4% 10-year note poser different than owning bonds with -- which makes it interesting to buy them. tom: this is what we were talking about two hours ago you get a higher rate, make you get nominal gdp makes actually work out better giving powell and lagarde breathing room. jonathan: i'm not sure i think about what's happening now gives powell breathing room. is that a correction? tom: surveillance correction. jonathan: jerome, thank. get ready for this, next hour on bloomberg tv great lineup. we will be catching up with jim karen of morgan stanley, on the bond market and that on the equity market taught a just

versa -- tom: this is a great set up you have lifetime conviction. jonathan: doubling down you got her on the program yesterday. tom: we go buy wholesale, bond guys never do that. did you see my austrian peace? ? what's that? tom: long-lived the boat. loaded the boat at 110. i'm -- jonathan: that was the longer piece. tom: i decided to buy that at the piano bar in dallas. that guy was talking to me and said you need this. lisa: so that bond traded as high in 2020 of $139. and now it's trading below 40

tom: tom:. we, losing 71% most of the world thinks you can't lose money and bonds. lisa: can i just say here, because, you don't with this. honestly, i want to be a fly on the hall at some of these investor meetings. i want to hear the debate and the parameters. i'm saying i want to go from one to the other are they the same debate? what's the range? jonathan: what's the food like? lisa: what's the window situation. jonathan: have a scotch. 7:00 in the morning. [laughter] lisa: surveillance correction. ♪ from freight brokerage to transportation management, truckload capacity and dedicated trucks and drivers.

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>> bloomberg surveillance on friday preparing for your weekend reading good and in two incredibly busy week next week right now we need to go to the economic data with michael mckee 10:00 a.m. is so important futures up nicely or is 10:00 a.m. suddenly your front and center? >> i'm tempted to see. i is some services comes out and arguably the last i and i'm services report was more important than the markets or

caused more paving live in the market that they don't report it went significantly higher and because the fed has said surfaces arbor inflation is right now everybody was watching. it went from -46 to over 50. not yesterday, two days ago neil said seeing many signs of a slowdown in services. they're going to want to see what happens with this number today. lisa: can you explain the distinction between ism services index versus the prices paid component? >> it's still sort of the key component but the things about services overall the primary cost of the service possesses labor so if service industries are picking up then probably likely to see costs go higher. that's the way the fed is looking at it. that's one of many indicators

that it is one that is in the area they have identified as important. tom: please tell me how does housing fit into services? i don't think of housing, as housing good? or is housing services? >> what you're talking about in housing construction goes to investment, the investment side but the mortgage business those are surfaces. they go into that. that's been where the weakness in services has been. overall, -- divine tom: well lisa is doing a kitchen. if your in wisconsin and expanding the kitchen out because things are good, i mean does that -- is that services? >> you can argue that the people

who designed the pension and may be the contractors as services but the lumber is going to be under investment. things like that. you really have to slice and dice to get onto that but we can see the effects. tom: on see is under the 43 do -- fourth redo. in new york we clearly get this effervescence that's out there, you know the drill as well is it legit nationwide? >> we did see that pump in consumer activity at the start of the year but we also saw consumer confidence take down so it doesn't appear as the consumer is confident in their financial fitting it's where we are seeing the consumer less extent as households ramp-up credit card debt this doesn't mean it's a one month off we

could see continued strength in february, maybe even marge but this is not a lasting trend of robust activity on the consumer part. lisa: some people will push back inevitably and saying well if you look at all of the inflation data it's coming in surprisingly hot again and again why can give us concert us -- confidence? i more protracted decline. >> i don't think we have the confidence right now and we are not saying that on the inflation data. are going to have to see a market decline transferring to significant job description in order to see confidence in the sense that wage pressures are coming down. earlier we were talking about services and for the fed that's where the focus lies in core services they want to see the proxy show improvement and we haven't seen that yet so while

we are confident as the fed continues to raise rates the economy will slow and the consumer will slow there's still a considerable amount of work to be done. lisa: let's talk about variable lags when we will start to see the bulk of some of the raises. potentially declining for 20% in valuations and a response to what receiving any mortgage rates can you talk about how long those likes are before we start to see some significant pricing? they got locked in mortgage rates, they're not moving. >> the metrics take about 6-9 months to filter into financial markets. now, arguably the leg is much shorter. if you think about all the transparency we have with the fed we didn't have a press conference of every meeting in the past. we didn't have every fed

official taking the stage at every opportunity to explain not only with the fed has done but what they're going to do. arguably there is a participatory nature and i do think that has significantly reduced the like or the need for the fed deposit take a look back. tom: economic foundations here is one example. the carryover, high inflation consult high inflation. didi collin, published moments ago that he observes cosco seeing finally food disinflation . in america, does high inflation solve high inflation? >> they could on the supply side but on the to mind -- demand-side were saying and and balance on that will not be solved behind inflation. that becomes the wage price spiral that the fed greatly fears were high inflation leads

to higher inflation so i don't think simply standing by the wayside and allowing natural markets to clear itself will be a long-term solution. lisa: do you think it's realistic that the fed can get to 6%? >> absolutely. lisa: at one point do they say, to market because that is above for the market has retraced to and we have seen the pricing this week. >> i think they're slowly making the play but they don't want to overpromise in terms of the terminal rate if in fact inflation does so -- doesn't show market improvement. they consistently underestimate the sticky nature of inflation. 230 basis points higher than the initial forecast in march of lester. tom: help me here. we are so honored to have christian horner with those from red bull with us on monday after

the race. did i miss the memo that we had to dress for marie today? -- ferrari today? on radio we have two lovely ladies in red. >> dressing for is red. tom: coy do you think of this? inflation solves high inflation? >> that's an old line high commodity prices as high commodity prices. prices come down. i think that's probably what's going to happen, i eventually. the question is how long it takes for inflation to come down and how sticky it is and how long the fedex it can affect epic continuing to raise interest rates. they are pretty close to restrictive enough. they are right on the line. so do they go to 6%? i think it will be a slow process for them to do that and

to talk about it because as lindsey says, you don't want to overpromise. if suddenly we things start to turn around. lisa: i want to go back to something jerome schneider was talking about. if we get to 6%, it gets us that much closer to a hard landing the further the fed has to go you're almost securing a very difficult situation for this economy is that what you're saying? that's almost the base case for you at a time people may be pushing back the rescission calls but not increasing the depth of them? >> if we do get to a 6% rate and half to hold at 6% i think for increasing the probability of a hard landing. if the fed pushes up to 6% and then come back to a five, 5.5% from the fed's point of view a period of pain is not only likely but necessary for

the economy. lisa: to that point, time, and you're right or kind of damaged bc to housing valuations that haven't been gamed into the dallas fed's point? >> we're going to see a significant decline but when we talk about this housing market cycle i think it's a very superficial analysis to percent that because it's the most sensitive sector the housing market pulls off a cliff this time around we went into the cycle with the multiyear deficit in terms of housing stocks or even with demand coming off of peak we still have a disconnect in the market that should provide somewhat of a four to this housing market cycle even if we continue to see downward momentum from here. >> there is an interesting thing going on in the housing markets too. a lot of builders are subsidizing mortgage funds right

now. they are doing buydowns for people because they want to keep the business going. something like that we side with automobiles coming out of the great financial crisis the auto companies offered in 0% wants to keep people buying cars. it might hard to model out what's going to happen. >> one of the most complicated environments you could imagine. always wonderful to get your comments. if you lease rates, nobody has to take them doesn't matter? how long for a visit -- fortitude trickled on into the economy. that's a game changer. tom: i learned from a wise american from officer microeconomics matter. to macro at your peril it's just critical and right now is really critical.

lisa: people are finding a way around it people are finding a way to avoid some of the punitive bills but for how long? tom: you won't see this with the politicians but what's really necessary is with the word ambiguity you need a lot of humility in times like this about which way things cross, which were the track way they go. lisa: i think there has been more humility than usual people come in and say we have no clue. tom: mckee has the humility measure. lisa: four chance of a percent in the humility measure just a 4000 retracing some of that with you also some of the highs we saw yesterday. this is bloomberg. >> keeping you up-to-date with news from around the world with first word, i'm lisa mateo. the u.s. and south korea are planning to hold large-scale military drills later this month those exercises are certain to anger north korea which has

threatened to unleash an unprecedented response. u.s. and south korean officials say the jewels will bolster a joint defense posture in the face of the nuclear threat. the u.s. is warning companies against doing business with those trying to avoid sanctions on russia the commerce department says businesses should watch for points where goods are legally purchased but then sent to russia those locations include china and countries close to russia such as russia -- turkey and armenia. that taiwanese company will spend about $700 million on a new factory in india to make parts for the iphone. it's expected to create about 100,000 jobs and after placing a disappointing outlook a demand for computers and office

equipment revenue full decrease about 19% for the quarter that ends in may. the forecast overshadowed expected earnings. global news 24 hours a day on air and on bloomgerg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo and this is bloomberg. ♪ (upbeat music) there's more to business than the business you're in. (robot whirring) want smarter factories? that's the internet of things business. accelerating r and d? data science business. hey. have a look. managing global supply chains? shrink our carbon footprint business.

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they were brought about to protect the investing public against fraud and schemes and manipulation and it was through this idea of, fair, disclosure. it's pretty straightforward. that's common sense to help the public investing. tom: he's been very busy the last couple of weeks there with bloomberg technology great to see that interview yesterday. i would respectfully suggest that many people who have been looking for regulators to step in have been saying what took so long and in the last couple of weeks it has been a very active sec. briefing us this morning on crypto, on coin but a really twisted view is created great for -- katie greifeld for those addicted to the story. i had a christmas club account

at silver kate pink in the early 1990's. i got a toaster. silver gate bank, am i right? that's a real bank? >> it's a real pink it's been operating since 1996. it has over 300 employees and for a long time it was just a big bet in the last decade it took this hard to fit into crypto saying basically to these companies we'll provide you baking surfaces that was the pitch to differentiate themselves and for a while it worked. they went public at the end of 19. the swordplay will over 300% and they were not as the crypto bank. tom: the dalton brothers, and seeking major crypto? lisa: i haven't gotten over the toaster and at christmas club. fantastic. i am curious this sort of, take

us to where we are now which is a massive punch in the shares, a growing concern, a fear that they don't have the capital they need to fulfill all of their obligations is this just the first, second, third process or is it just one of the mean contenders that had seen the massive losses since what we've seen? >> i'm lost count of the different shoes but it's a surprise shoe because this is a real pink. it's been in business for decades but how we got to today gets back to the pitch that it made to the crypto companies that basically we'll take your deposits, we'll hold it for you, we'll do traditional baking stuff they had clients such as gemini, ftx, and after ftx -- event tom: i have to interrupt. they help cash like a normal

bank? >> when you go to a crypto exchange you would give them your money and they would have to do something with the money so they would give it to a silver gate for example to hold those deposits. when ftx went under you had this crisis and confidence. they had all these clients trying to pull their money out at once and that was damaging. the news this week vic plunged because they weren't able to file their 10k and the reason was they still need more time to assess the damage. tom: i'm believe 40 years ago when the crisis was a tangible thing, we literally woke up every day, eight banks in maryland or for libby six banks in texas? are there other silver gates with crypto? >> there is that really it was

silver gate i can't stress enough this was the crypto pink if you wanted to go to a pretty much reputable institution that you could be pretty confident that they would have your money. there fdic insured. to see them go under really, not under, of course they're still evaluating where they can remain in business but it was surprising. lisa: for those not part of the crypto market and try to understand what it means the regulation that might come up, what's been the take away so far? what is the significance? >> listed radel the price of bitcoin that was one of the narratives was what is at the price of bitcoin moving and you look at bitcoin today it's down 4.5% so it plans to release deplete overnight and that is because it has missed payments systems. companies can send many back and

forth to each other and have that compromised it really brings it to a question of liquidity, however going to send money around. that becomes more difficult. lisa: there's been a discussion and institution saying there's a reason for it to exist in terms of just having oe to transact -- a way to transact. our institutions with a moving away from that? >> if you think about the problem crypto and bitcoin was trying to solve was exactly the emaar efficiently to send payments without having to pay high fees. feels like me be we took a step away from that i would say you're probably not going to see companies coming out and adding bitcoin to their balance sheet. in terms of the investment

appetite, i still talk to asset managers who say maybe it's a 1% allocation. tom: i look at this moment, today seems to be a watershed where other baking institutions, banking regulators step in. that is what happened in the 80's the adults showed up to shut down banks is this that they were adults show up in crypto baking? >> the adults will tell you think been trying to show up. you had the occ, the fed saying banks should be careful about they handle crypto. tom: jimmy is not involved. >> this is the whole conversation around percolation. where have regulators been? they have been very behind. it so quickly it's been hard to keep up with. a conversation were having is

perhaps another fire under the space about how banks are handling digital assets but this story is being written right now. lisa: just as we talk about regulation are we going to be talking about the shift from certain speculative crypto assets to the embry say of stablecoins and using a and back by an audited amount of cash held is that we are removing is that where lenders heads are? >> it's were i spent a lot of brainpower thinking about it is the safe haven asset it's like the treasury of the crypto industry. the fact that they hold reserves. it's been audited, theoretically. that's where you see the money going. we saw a lot of funds tether after the news yesterday. i would imagine they are top of the list because we are talking about billion's of dollars. tom: it trades 24/7 does our

audience, as our audience into this? >> may just for fun. tom: that's what i do it for. >> i use to like to watch bitcoin over the weekend it was so tightly tied to the u.s. stock market the correlation has come a little bit undone because crypto has all these india syncretic issues but it was fun. tom:. a stranger, katie greifeld with a serious reporting here. i think i'm as guilty of this is anybody it's wicked generational. fossils like me are going are you kidding me? but the answer is a lot of people are either in this or affected by it or believe it. lisa: there is one venture capitalist has said to me about why he supports certain crypto

assets and he was saying if you spent time in a third world country or somewhere for the currency doesn't have stability the idea of having some internationally accepted exchange is appealing. what's the best instrument for that? to have something that's away from western union or the banking industry that is it going to have that friction if the price were to stay the same it has a purpose that makes sense the question is how is being executed in some of the creativity that came up around it outright fraud? tom: we are going to see on that and certainly it's going to focus on the research work as well. not showing is futures up a solid 20, 4000 on spx as does --

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jonathan: live from new york, good morning equity futures positive 0.5% and inching toward gains. the countdown to the open starts now. announcer: everything you need to get start for the -- get ready for the start of u.s. trading, this is "bloomberg the open" with jonathan ferro. jonathan: live from new york, the fed wants to know is strong economic data is signal or noise. president