>> our core review is still one where you will see economic growth resilience. >> the yield curve is a powerful signal that we might be seeing a slowdown in the economy. >> i'm not sure the disinflation the market was grabbing onto at the start of the year will come through. >> in the second half of this year, you will see the consumer pause. >> i think the markets are ready to get past it. >> this is bloomberg surveillance. jonathan: you know that seen in

love actually where they get him to say awful? lisa: we can't say our t's. jonathan: that's beautiful, that's lovely. from new york, this morning, this is bloomberg surveillance on tv and radio. the s&p 500 is positive 0.2% and the jerome powell will testify in front of the senate banking committee. tom: i think he will be careful to -- as to what he does not say. it will be interesting to see the scenarios he lays out. jonathan: it's difficult because he's up against it. on friday, we've got payrolls and next week cpi and if it falls in the quiet. , they cannot undo anything and that makes today more complex. lisa: the data has been coming in taught and there was a story about payrolls came in over

expectations for the longest streak in the long time. how much is a concern that they are trying to kill jobs? people will ask him about inflation that continues to surprise to the upside. tom: we are all data dependent in the market is walking away from the bears. most of this is buried in the news flow. jonathan: maybe in the short term, we can have a lift in equities. tom: it's not that they are rationalizing a bull market but they are saying let's revisit our caution and when that clicks in. jonathan: the pushback coming from chris harvey of wells fargo. he says it not a bear market.

the q1 strength does not carry over to the second half the analysts say. lisa: people were expecting softer earnings and they got it in the response and markets is not what they were expecting. we saw earnings expectations come down but marcus did not follow. jonathan: leadership came from tech to start the year. meta is cut -- is set to cut thousands of jobs perhaps as soon as this week. i will go through the price action briefly, up 0.2% on the s&p 500 and yields are slightly up. yesterday, the austrian central bank governors of the ecb teed up half a percentage point hikes . tom: austria has their own voice with the conservatism of the central nations.

what were you talking about with him? tom: he said it's 99 years. that is yield up price down. jonathan: do you want to hold that for maturity? we won't be around for that one. lisa: if you end up with yields that much higher, you will have to hope to be around in 3010. we are talking about mike wilson coming out and buying into the bullish sentiment. he's got in right so many times but the issue is he has been

right about a lot of the economics and yet he has been right about the market response to it. who is driving the market action? is it something that will reset his expectations? fed chair jay powell as testified before the senate banking committee on capitol hill and tomorrow he goes to the house. i think the bigger concern for him is explaining how far they have to go to fight inflation and whether they want far enough and whether they done enough to dampen financial conditions because that will be some of the bigger concerns on the main group of senators. employment is strong so that's not a concern and we get consumer credit later on and i'm wondering how many people are reducing their credit card bills versus the opposite. we talk about the consumer and how long they can remain resilient and keep spending.

consumer credit might give a sense of where sentiment is on that front. jonathan: let's take up the conversation with the head of u.s. equity at bnp paribas. later this morning, we catch up with chairman powell on capitol hill. what are you looking for there? >> i think everybody will go through this with a fine tooth comb. you made the point that there is really a problem in terms of sequencing of the data. the real problem is the fed is looking for data and jay powell will not have that. the friday payroll numbers will be key as -- after we saw a massive positive surprise in january and we are looking whether there is some seasonality or there is a more sustainable hawkish narrative coming through the labor market. tom: one outcome is a goldilocks

outcome. what do central banks do and what to the equity markets respond? >> i think the goldilocks scenario that we see is the least probable of the outcomes and that's what the market has been pricing this year. it's the idea that we get this gradual fading of inflation and the faded can engineer this no landing or soft landing. it seems a challenging runway to land on. tom: fold it into derivative strategy. there seems to be a shocking division between profit and free cash flow generators and nonprofitable companies. how do you see that within the derivative market? >> one of the things we have

seen this year has been price action that i think has been divorced from fundamentals. we've seen the deterioration in terms of the unexpected but we've seen some strong outperformance for the least profitable, quality parts of the technical growth spectrum in the market. we have a tracker and bnp that consists of the names of the largest interest in the names that have seen the largest interest in call options increase on a monthly basis and this basket peaks in january and we've seen a little reversal since the rates market has started to reprice and we are seeing slightly higher rates. we think this was largely technical. lisa: let's lean into the idea that the fundamentals are divorced from what we are seeing in the market. i was reading article about the increased use of funding and momentum traders and how they

are leading the charge so far. how do you game that out with a forecast of when they hit a wall and can reckon with fundamentals that you say are different? >> think about -- the thing about quantitative strategies, what you tend to find is these things don't tend to set the direction of the market or amplify the moves when we get them so momentum trend following is exacerbated by moves we see in the market. it's fair to say the strongest part of equity markets has been triggered by better growth we saw that the backend of washington and strong data this year but it has snowballed into a more technical rally that has seen a squeeze in the least love names.

we look at how that data it will manifest into central bank policy. stronger data drives a more hawkish fed and ultimately will be challenging for the equity market. lisa: if you talk with analysts who have changed their views on what will happen this year, how have your views changed? >> are equity market view is unchanged from where we were at the start of the year and we expect to see a recession this year and economists have pushed back on that but we now expect the recession in a backdrop of higher terminal rates. the expectation is that the fed gets 575. when we look at valuations, we already have a risk premium. if we are going to have a more hawkish reaction and a recession

, as the tightening we have seen , we think it creates a difficult environment for the equity market in terms of valuation and we think in terms of fundamentals. that will be a difficult backdrop. jonathan: you've got carlriccadona and where are you? >> we see that around 3400. the biggest difference that we've had all year versus our peers is our peers have been looking for some kind of capitulation that sees the market trade down to the lower 3000. ultimately, many of our peers have the market recovery and having a strong back end of the year and they finished closed where we are now. the big differences we see the market getting down to 3400 but

then flatlining through the second half of the year. if we get the recession that is forecast, we don't get to we don't expect to get a super accommodative fed and fiscal stimulus to bail the market so we think we get a different type of equity reaction function to that bear market capitulation then the v-shaped recovery we saw almost three years ago. jonathan: thank you. 15% from here downside? tom: lisa is doing the math. lisa: 15% from yesterday. jonathan: 575 from carl ric caddona, that's a big number. mike wilson of morgan stanley at eight :00 a.m. -- at 8:00 a.m. and don't miss that conversation and futures are just about positive with chairman powell

coming up later this morning. lisa: keeping you up-to-date with news from around the world with the first word -- president biden will propose raising taxes on wealthy americans to help avert a medicare funding crisis. his plan would boost medicare taxes from 3.8%-5% on certain kinds of income above $400,000. it would allow the government new power to negotiate drug prices for medicare. bloomberg has learned more job cuts are on the way at meta platforms. the parent of facebook will cut thousands of employees as soon as this week. that follows a 13% reduction in november. meta has seen a slowdown in advertising revenue and has shifted focus to a virtual reality platform called the metaverse. the new foreign minister china warns the u.s. approach to beijing is a reckless gamble. he says the u.s. is trying to contain and suppress china get the two countries locked in a zero-sum game.

he accuses the u.s. of creating a crisis over taiwan and the sizing sanctions of the russian war in ukraine. unions in france are hoping to bring the country to a standstill in a six date of protest. there protesting against the president's plan to raise the minimum retirement age. transportation is likely to be severely disrupted. only one of every five high-speed trains will be running. global news, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

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>> we made a lot of progress but there's so much more to do. you don't leave until the fire is out. i keep telling my colleagues, we don't leave until we finish the job. we have more to do and i'm determined to finish the job. jonathan: the president of the united states there at the fire fighters conference, live from new york city this morning, good morning. chairman powell will speak later this morning at 10:00 a.m. eastern time in front of the send it -- the senate banking

committee. a three winning streak on the s&p 500. it's the longest since early february. that's have dicey things have been with equity futures right now positive 0.2%. yields are two or three basis points up after reaching that milestone last week for the first time since november. on china, some interesting comments this morning from various officials including xi jin ping but this from the foreign administered -- the foreign minister. tom: i don't know where it ends up. i think it's important the speaker of the house will meet

taiwan authorities in some form on the west coast. it's very delicate now on multiple fronts. jonathan: look at the language -- the approach taken by the u.s. to beijing is a reckless gamble risking the fundamental needs of the people and the fundamental needs of humanity. tom: it's dramatic language and maybe it's less in translation but this is a new china. i would suggest something we will watch. lisa: the official translation was watered down. i wonder who they are talking to raises the question of them using the u.s. as a political hot but issue to garner attention. tom: and i've been told there's a lot of idiomatic phrases where there is nuance and body language. in english, we translated verbatim.

lisa: how do you bring the two nations together that may have common ground but don't necessarily have a reason to express it publicly? tom: we will digress with a note and it was shocking how he addressed was going on ukraine. he goes back to leningrad of 1942 and the emotions of a one mile charge of the can better see. anne-marie hordern joins us now on ukraine. i was thunderstruck by the use of history right now. what exactly is going on in the

viciousness of this war? annmarie: this is the epicenter of the fighting and most brutal fighting in eastern ukraine. you see all forces at play. president zelenskyy was out last night saying no one will be abandoning ukraine even though you have a proper offense of coming from the russians. you have the defense minister saying why this is important for the russians and he says this is a link of ukrainian defense so if they can capture back mahmut, it's the only way they can control eastern ukraine but the russians are fighting amongst themselves in the eastern parts and you see this from the wegner group who says to the russian military, you are not giving us enough to succeed.

potentially, you can see the ukrainians try to divide the russians in this city and this is one thing a former vladimir putin advisor was explaining to the world. tom: with the reporting, are the allies on the same page of the immediacy of supporting president zelenskyy and the ukrainians? annmarie: i think they are at this point. let's potentially see what happens friday. the united states is making it clear that they want to continue to support and defend ukraine to the end what you hear from ukrainians decide to ask for more weapons and obviously it's f-16s at the top of their agenda is that they need sustainable renewals of ammunition. this is what it has come down to. jonathan: last week, we talked

about the c-suite in america, financial institutions being called blue states and red states. it's not just the c-suite of america but [indiscernible] . last week he was about banks and whether they could do business with states like new york or whether they could do business with states like texas based on their views on fossil fuels. this week, it's about walgreens and birth control. what's happening with california and walgreens and gavin newsom and how this is going to look going forward? annmarie: there is a back-and-forth between the blue states and red states and how it's becoming incredibly difficult for her part america to navigate. last week, walgreens that they will not sell this abortion pill in some 20 states because those attorney general said they will get sued because this is illegal in those states following what happened with roe v. wade.

now you have governor gavin newsom of california saying that the state of california will not do business with walgreens because what walgreens is doing in these red states. corporate america's finding it very difficult at this moment to figure out the laws and legalities in these days but also what the pushback will be from the other side. this is just the latest in a string of many to come because these issues are really being politicized. jonathan: will they ask corporate america to choose between doing business with the states? annmarie: from a state level, that is what you were seeing, whether or not it's a comptroller or attorney general or a governor, you are seeing these states basically telling companies that they have to choose. from a federal level, that's not

happening yet. that's what it does feel like. it feels like they are being pushed and pulled in either direction. at some point, this is going to hurt every day americans. with this particular instance, and stopping business with walgreens in general, this will come down to hurting every day americans and i imagine they will be many legal battles for this particular situation. jonathan: thank you for the latest. it's difficult to assess how much business the state of california does with walgreens but you can chart the direction on several fronts. lisa: risk mitigation will be the argument for the c-suite. the risk is do not sell in those states in california is saying that we will ban you if you

don't sell this which creates a quagmire of the ultimate size for many of the executives of the companies, who do they cater to? tom: jamie dimon loves florida so will he get wrapped up in this? jonathan: it won't stop walgreens from operating in california. states like texas have to pull that lever as well. lisa: how does corporate america deal with a very polarized america? jonathan: we look at the red tape and europe but it's happening here in the united states. from new york, this is bloomberg. ♪

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jonathan: equity futures with a little lift on the s&p 500, up just a 0.1%. for the team at bnp, carl riccadona is looking at 575 on peak funds. it's about 16% from the close yesterday. lisa: what is the trigger for

the reversal? we price and higher rates and earnings expectations that are coming down with margin compression we have seen. what's the trigger now. jonathan: 575 and growth decelerates, that's the view. they don't believe that the numbers we saw in january will carry on. tom: i would suggest there is a bet we will have disinflation. it's still in the market. jonathan: do you need growth to get hammered? tom: the growth slowdown is not so much and maybe disinflation is not that much. lisa: if you get declining

growth for the rest of the year and then people say maybe inflation is not so bad and maybe we can ask to go down then reit's come in and you have the beginning of a new cycle. the bulls are arguing that it takes the pressure off the fed and accelerates some sort of pause. jonathan: if you've got that backdrop, many people would be screaming. can you get bullish earnings? it's hard. lisa: especially when you've had negative surprises and there is still optimism. jonathan: let's look at the bond market -- 485.48 after hitting 490 last week. at one point last week, the whole curve was 4%+.

chairman powell's later in front of the senate and can committee at 10:00 a.m. and after that, you will see him and of the house financial services committee tomorrow. payrolls are freddie and cpi is next week. that falls in a quiet period for the fed. fed speak at the end of this week. tom: michael mckee is in washington waiting for what we will see. you and i are the only two within the beltway that call it the humphrey hawkins testimony. how will this be different than the others before when he's up against brown of ohio and scott of the south? michael: it won't be significantly different because every hearing the fed chair attends is an effort by members

of the parties to get him on their side. there will be some dispute about how far the fed has to go and whether or not they will sacrifice american jobs and bringing down inflation. i would and elizabeth warren and we should hear from her on that. one thing we haven't talked about is whether or not he will say interest rates are going up and that's the debt ceiling and the idea we might see a government shutdown in october. i'm sure those topics will come up and he will be asked to take sides and he will do his best to avoid doing that. tom: who is opposite from the senator of massachusetts, the republican who is the opposite of elizabeth warren? michael: probably any of them would take the view that the inflation rate is something that needs to come down. no one will endorse losing jobs

but they will point out the unemployment rate is 3.4%. inflation takes a toll on everybody including the lowest paid in the primary goal of the fed to be should -- should be to bring that down. we've gone from zero to 575 basis points in one year. we are not seeing the economy slow. we have to go higher and i've only taken away accommodation at this point. it hasn't hit the idea of some sort of effort to slow the economy. we haven't gotten restrictive so we may have to go further. tom: thank you so much. much more coverage as we hear from the chairman. he is with deutsche bank and they have nailed recession delay call. outfront on it, alan ruskin

joins it. -- joins us. let me talk about one of your glide paths. we don't get the outright disinflation back to the romance of 2% we get back to moderately inflated, then what? >> then we have a problem. fed credibility i think is on edge. i think they are committed to the 2% inflation target and if it looks like it's not achievable, eventually, you expect they would have to raise the target or place much more additional pressure on inflation. it's the latter course of action that they would tighten up that much more.

it means probably a higher terminal rate and greater risk of a recession. ultimately, inflation will come down. lisa: as inflation comes down and as we see recession calls start to the more serious or more imminently, you will see the long end of the yield curve stabilize and yet they were talking about the bank of japan and they will see 2% inflation and they will raise rates more significantly. how does that translate to a longer-term u.s. debt? >> i think the japanese role in funding the u.s. fiscal deficit and the current account deficit is much exaggerated. the boj has not been a major player for some time. i wouldn't worry on that score. what will be interesting is that you could build a scenario by

perhaps the end of this year where you start to think in terms of the fed rate cycle turning over and the japanese rate cycle just beginning and that makes for a much stronger yen. the market has been may be premature in thinking in those terms. the yen appreciated quite sharply toward the end of last year. it performed less well recently. i think there is that scenario out there toward the end of this year where you have the battle between the boj and the fed that could be helpful from my yen exchange standpoint, but i would not suggest that just because the japanese might be buying somewhat less in the way of u.s. debt that u.s. yields will be much higher because of that. lisa: friday was the bank of japan last meeting and people assume you will get some peaceful transfer of the

monetary regime they. where does the next disruption come from as we look out in this idea of the reopening trade in china past having possibly run its course and this feeling of disinflation? >> i think japan is still a potential source of market dysfunction. the boj has tried to prime the market and allow the market to effectively get out of some unhealthy long bond positions. there is all the possibility that eventually, 10 year yields jump substantially. you could envisage that before normalization, you could have the 10 year yield climbing from 1.5% over to and the long-term equilibrium rate in the short term where they get into a

proper tightening cycle. it still feels like a lot of room for disruption from the boj standpoint. i don't think that's the story for the next month or so. right now, we are focusing in other areas. jonathan: how do we function with balance sheets how do we make the central bank policy boring again? >> these may be are the old days. the old days or a sense of change in a sense of short-term rates, a sense in which rates are well above zero and interest rate differentials drive currencies and volatility. to some extent, i think we are somewhat normalizing.

we hope we come out of the cycle within equilibrium interest rate that is higher than it was pre-covid. in that sense, this is a return to the old normal, as it were. jonathan: thank you. do the balance sheet normal to you? lisa: they don't and around the world, we have had quantitative easing, there is a question of going back to smaller balance sheets and shrink them or let this be the new normal amid a backdrop of boring central bank policy? jonathan: i would love for it to be boring again. lisa: alan ruskin said he doesn't think the japanese will fund the deficit or the uso will not have as big effect on treasury yields. i don't know, this has been one of the big trail risks i've

treasury yields going over 5% if japanese buyers only have 2% yields on the 10 year. jonathan: a peaceful transfer of power from one central bank to another. that's where we are at. tom: i think you will get back to what we remember 20 years ago is to daily calculate for the u.s. 10 year should be but it's not because foreigners did the price. we haven't had that conversation for two decades. a three-quarter yield is huge. jonathan: the 10 year is just short of 50 basis points. that would make for major changes down the road and we will talk about that later. it's their last meeting at the boj. lisa: it's been a transformative two years. jonathan: this is bloomberg.

lisa: keeping you up-to-date with news around the world with the first word -- the job cuts are not over at facebook parent meta-platforms. the company is planning a new round of layoffs and will cut thousands of employees as soon as this week. in november, it eliminated 11,000 jobs, 13% of its workforce. the taiwan president reportedly persuaded kevin mccarthy to me in the u.s. due to security concerns. they shared intelligence with mccarthy about threats was by china and mccarthy said he wanted to visit taiwan at some point. the powerful sister of north korean leader of kim jong-un has issued a new warning to the u.s. and south korea. she is threatening severe consequences if the two countries go ahead with joint military drills next month last month, north korea threatened to turn the pacific ocean into a fiery rage.

president bynum is reportedly considering reinstating the detention of micro families that cross the border illegally. his admission -- is the administration is preparing for the end of title 42. no final decision has been made in the more restrictive measures would be reversal for the president who wants a more humane immigration system. global news, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪ ♪♪ experience the exhilaration of the performance line at the invitation to lexus sales event.

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the economic migration is serious on a day-to-day basis. jonathan: always good to hear from jamie dimon. equity futures right now on the s&p 500 are a little positive. a three day winning streak on the s&p 500, making for three days, the longest since early february. i can't believe it, it's been a month and change since we put together three days of gains on the s&p 500. yields are down about three basis points. we are camping down to chairman powell later this morning at 10:00 a.m. in front of the senate banking committee. tom: he will tell these people the moment they want to get in the chairman will say i look at

the data and you should as well. there just they are that worried about that, they are worried about what happens at dinner. this is the reality for every central bank. jonathan: will they have a bigger move next if the february data confirms what we saw in january? does that encourage a bigger move? tom: no one cares about my opinion i will say that without question on a risk basis to be measured gives you less error than to be jumpy. we went to silence there. jonathan: we thought you had more to say. you are finished? tom: i'm not finished, i'm saying greenspan invented measure because he was risk-averse and powell is no different.

let's say this could be my last interview. we are thrilled to have her back and begin our coverage of what the international monetary fund will be doing in one month. we have a lot of planning on the imf spring meetings. let's start at the beginning. there are two em's, greatly beleaguered and another one of great prosperity. could there be three worlds, which is it? >> i think em is extremely diversified right now and you hit the nail on the head in terms of the frontier he connie's, especially the low single b high-yield economies that are facing stress and some have financing needs and they need imf programs or natural lines from creditors like the

gulf states and china. then there is the rest of em, investment grade portion or the bb portion and they're in there is a lot of diversification and differentiation in terms of the balance sheet and how these economies are coming out of this covid and growth cycle. tom: do you look at it country by country or by asset class or subsets of that? >> you have to look at all, unfortunately. i don't think em is one size fits all. really thinking about asset classes and regions makes a lot of sense right now as well as countries that perhaps will benefit in a secular way from the re-structural shifts that are occurring on the global and macro playing field for em. lisa: i was reading the fiery

rhetoric coming from leaders talking about the increasingly fractious relationship between the u.s. and china. what is the investment consequence of this? many people are saying chinese debt, chinese equities are a buy. >> the main investment implication for risk is to think about em in terms of the very centers of global growth. for em as a whole, this fractionalization that we are seeing more of from the u.s. and china trade relations and geopolitics is going to be a headwind for many countries within their asset class, slow globalization as the imf has corn the term -- has coined the term is not a positive. many countries will benefit like mexico and countries like india

and smaller emerging markets that perhaps have access to parts of the supply chain. i think the investment implication is to start from the bottom up and really focus on country by country selection in terms of thinking about investment opportunities that are out there. lisa: with shana, i think about mark mobius who complained he had money in china that he would not get out because of the red tape he had to go through. in your view, is china increasingly a fraught investing proposition but is not recognized in pricing recently? >> when you look at the fixed income opportunities in china or the cyclical horizon, we are more cautious given the opportunities elsewhere within the fixed income world and within emerging markets. if you look at the level of real

rates, you're getting better opportunities elsewhere whether it's brazil or mexico. if you're looking at currency plays, perhaps cny is not the play right now. you may see capital outflows resuming. from an investment perspective, there are more interesting opportunities from a risk-adjusted perspective within em. jonathan: thank you. when you saw the rate up -- the reopening in china, it seemed like the opportunity. you said a disappointing chinese growth outlook. lisa: i had to wonder about that especially as we read about the changes to the structure in the

government that took people out of the main bucket and they put them into higher regulation for the financial industry and more data oversight and the tightening of the screws of the corporate existence in china at a time when that valance between the economic side of things in the social side of things is changing. tom: i think that's well said. i don't understand the triangle of beijing in the so-called state of enterprises in china. i just don't get it, where that news is. we can say thank you to all of you on radio on -- on radio and television for massive response. we will do a victory lap with jonathan. we will break the champagne out and start spraying each other. that was a lot of fun yesterday. jonathan: he used to be a

driver. tom: i got lots of emails of asking wire this is why they are so good? adrian newy this guy makes $12 million a year and nobody knows who he is jonathan: he's an absolute genius. he started with emerson for paul the -- emerson fittipaldi, it's the airflow. i don't get why they have an edge over 10 over teams? tom: everybody wants to buy. jonathan: it's a talent acquisition over the winter. lisa: the kardashianization of formula one, is that for america or something that plays in europe? jonathan: it plays in europe as

well and it goes beyond saying it's a male dominated motorhead audience. it's not just geographic with the types of people that follow the sport that wouldn't traditionally. you've got to know the drivers but also the ones at the back of the rig dish of the grid because it can be boring. on a race like sunday, you would have looked at that. when you've got an interest in what the other guys doing -- lisa: he was clinical about his win. as a woman, i find the mechanical stuff fascinating, especially driving a jet engine. tom: the saudi courses radically different. jonathan: are we taking that trip? tom: yes. we will be in jetta.

jonathan: chairman powell is a few hours away. ♪

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>> our core view is still one where you are going to see economic growth resilience. >> yield curve is a powerful signal we might be seeing a slowdown in the economy. >> i'm nostra that disinflation in the market with grabbing on to the start of the year is going to come through. >> you are going to see the consumer pause. >> i think markets are trying to start ignoring 2023. i think people are ready to get

past it. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: coming up, chairman powell later this morning on capitol hill. good morning. for our audience worldwide, this is "bloomberg surveillance." equity futures up by .1% on the s&p 500. jay powell later. tom: always interesting. the two testimonies, he answers the senate will be more collegial even the senator from massachusetts will speak with grace. less yelling and screaming. at the house tomorrow, i think you will see more emotion. jonathan: says it comes down to this, perhaps the hawkish or dovish takeaway may depend on how strong he endorses the path of hikes priced at -- what are we looking at now, 5.40?

let's see what friday brings. lisa: it has been hovering around there by september. how does he endorse it? what is he looking for, how long can he hold rates at that level? how much does he expressed concern about the fact inflation data and employment data has come in the hotter than expected for many consecutive readings? tom: if we just said what you just said a year ago, 99% of our audience would say doubt 20,000, s&p 3280. jonathan: i think we should frame where we were 12 months ago. rates at zero. if someone would have said 5.40 and you joked about seven. people would scratch their head, maybe. 12 months ago, that was unthinkable. lisa: it was a far-fetched idea. if you follow the phillips curve, we would get to eight.

the point is, we are in a different reality. even with yields where they are, even with inflation surprised to the upside. are we going to hear about long and very bold lags, trying to -- financial conditions and his concern stocks are resilient? tom: long and variable lags was team mercedes. jonathan: there were longer and variable lags. two minute lags which in central bank speak is two years. equity futures positive .1%. three-day winning streak into tuesday, you hear from the chairman three hours from now. yields come in a couple basis points, 10 year 3.93. negative .2% euro-dollar. ecb speak later, we heard from so many hawkish voices in the last day or so. lisa: ecb expecting we forget --

we get to 3.25 ecb main rate, unfathomable based on where we have been in that region. in :00 a.m., we talk with mike wilson of morgan stanley on tom's question. why aren't stocks reflecting what we had expected they would do in the face of rates that are much higher? why have we not seen a reality between the fundamentals and the price action, or are we? we talked with greg at bnp paribas. he said we could see a 16% outside in equities. mike wilson is sympathetic with that. 10:00 a.m., we hear from chair powell testifying in front of the senate banking 9:00 a.m., we get comments released ahead of it. perhaps we will get indication of where he plans to go. 3:00 p.m., u.s. consumer credit. are people still borrowing to spend? this to me is one of the main

questions, how much more dynamism is there left in the consumer spending and fueled economic growth and inflation in services, and particular? is there a beginning of restraint as rates go up and people get more concerned about what is to come? jonathan: in the equity market, and a ham -- anna ham joins us now. i want to start with that line you started the week with. do not trade as if we are in a bear market. we are not. what does that mean? >> what we spoke about earlier this year, how there was a fear of the bear market. another repeat of 2022. we do not see the same signs the fed has slowed down considerably. the consumer considering -- continues to spend. wages continue to stay strong. this is not a typical bear market. we are not expecting this massive bull rally either

because we do not quite see the catalyst there. rather than trading are fully and to defensively, we are on the offense looking for opportunities in equity markets. jonathan: this is another way of saying october was the low for you. anna: we will not to say it is the ultimate low. we think equities can drop lower. for us, it would take a lot to see those october lows again. you would have to be quite -- it would be an extreme case. we do not see it lining up that way. we love to talk about tail risks. our base case scenario is in the near term, we see more upside for equities. tom: i want to go away from your quantitative analysis and go to what you think is going to fundamentally happen in corporations. you want to go faster. are corporations going to be able to go faster, given high interest rates? are they going to adapt and adjust constructively? anna: i think they are still

going through growing pains and are wondering if the consumer starts to weaken, can they make those changes effectively and in time? for us right now, what they are showing is they are passing along price. almost across every industry except for very select few, you are seeing that volumes are down and that price elasticity is biting into margins consecutively quarter over quarter. tom: i want to talk to you about price elasticity, i know you like mid-cap growth a lot. there seems to be a massive skew in the market i am using as a general phrase, between those making money, the haves, and many others, the have-nots. is that how you see it? anna: you are seeing industries especially now that we are a couple years out of the pandemic, they are not so much that stay-at-home trade. we are seeing structural changes

in people's preferences now coming out of the pandemic. not as many people working full-time in the office. these structural changes need time for corporate's to swallow and learn and grow from that. at the same time, even with swallowing earnings and corporate growth, we are seeing positives for the equity market. we continue to see in the yields market people continue to believe in growth. you are seeing real yields continue to go higher as inflation expectations are repricing. these are the kind of good and bad things you are seeing that you mentioned. lisa: what is the shakeout in terms of ramifications for equities going forward as we see rates perhaps go higher and stay there? are you on the great battle idea of things where you can see 3400 and the s&p, or are you saying we are going to retrace that much, we are seeing a new reality, people have adjusted? anna: i think 3400 you mentioned, you need to see some shock to the system. you need to see some very spike

in credit spreads or in yields. you need to see a spike in inflation readings or an aggressive drop in the labor market. right now, that is not our base case scenario. something we are cautious of and looking left and right and watching the indicators for. we are not seeing it. in the new year -- near term, we think things line up for the equity markets. we need to see as inflation expectations continue to remain sticky, that still gives the fed room not to overdo it. we see fed communication continue. these are the things we want to see persist. persist in consistency is what is going to make us feel more courage -- encouraged. lisa: at 10:00 a.m., we are going to be hearing from fed chair powell. at 9:00 a.m., we are not going to get that sneak peak. i am wondering if there is

anything he could say that would make you rethink your more positive tilt. is there something in particular you are looking to understand more directly that you do not have a full handle on yet? anna: consensus wise, you hear a lot about the 6%. suddenly, the sentiment on fed funds and where they can go with the terminal rate. if chairman powell comes out and says something overly aggressive, which we think is unlikely, but potentially something could be interpreted as confirming that 6%, i think that could be shocking to the equity markets. that is unlikely, but something we consider if we are talking about sale risks. on the other hand if chairman powell comes out dovish, that could encourage the market to flip back towards retreating yields. if we see at the end of this week the labor market signs, or next week's cpi print, all these together are showing a mixed message rather than a coherent and same direction message. i think these are the things the

markets are going to have to reprice for. jonathan: it is not the bear market, that is the call from wells fargo and team. they mentioned that, two years into months, january and february, radically different. the change in february was on the back of the payrolls data, cpi, retail sales. we get another sneak peek of february in the march data that gets released. lisa: what is important is adults -- tom: he comes out with the goldilocks three scenarios now, i am not saying he is optimistic that he is looking at hard, soft or no landing. i cannot remember a time where adults like anna han are so narrative driven. we are making jokes about goldilocks. i do not remember this in the past. lisa: if you look at some of the reports that have come out about quantitative trading and how

much that has taken over and how you are seeing individual bond and stop traders pullback -- stock traders pullback, traders say perhaps that trend following strategy is -- more than anything else. jonathan: said this yesterday, the day to day of investor speculators, systematic investors could produce strong rallies. the risk assets are in a bear market and will not bottom until central banks start cutting rates. we get a mike wilson view of this at morgan stanley. as we count you down to chairman powell in front of the senate inking committee at -- banking committee at 10:00 a.m. this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world with the first word. president biden will propose raising taxes on wealthy americans to help a medicare

funding crisis. this plan would boost medicare taxes from 3.8% to 5% on certain kinds of income above $400,000. it would allow the government new power to negotiate drug rises for medicare. bloomberg has learned more job cuts are on the way at meta platforms. the parent of facebook will cut thousands of employees as soon this week, that follows a 13% reduction in november. meta has seen a slowdown in advertising revenue and has shifted focus to a virtual reality platform called the metaverse pitch china shaking up oversight of its technology sector in the wake of a tech at a with the u.s. a national bureau will manage and police data resources while the language china's digital planning. the ministry of science and technology will be strengthened to formulate strategic policies and orchestrate nationwide initiatives. bloomberg has learned deutsche bahn has selected goldman sachs and morgan stanley to advise on the sale of its db schenker logistics unit.

a sale could fetch up to 21 billion dollars. the chairman railroad -- railroad operator is trying to modernize its to mastic operations. the is expected to file an antitrust lawsuit this week to stop death blues -- jetblue's takeover of spirit airlines. that suit is likely to claim the takeover would harm flyers by leading to fewer choices and higher fares. the department of transportation will try to block the transfer of spirits airline operating certificate. global news powered by more than 2,700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪ this is ge aerospace,

advancing flight for future generations. ♪ welcome to a new era of flight. your supply chain and ryder makes sure you're ever delivering with freight brokerage to transportation management, truckload capacity and dedicated trucks and drivers.

>> there has been quite a hawkish tone on the federal reserve. you will hear more about that in due time and from the ecb. one of the things about changing the target is, it is a challenge when you are below it. it is a bigger challenge when you change the target when you are above it. jonathan: catherine mann of the bank of england, the monetary policy committee member catching up with bloomberg earlier this morning. we have known catherine mann a long time from city back to the days of the oecd. it has been amazing to see her transform into a real hawk on

the mpc bank of england. tom: people who know dr. mann know the rigor from massachusetts institute of technology. what is great about her, excellent in one world scope of economics like trade is one thing. she owns a high ground on two points. one is the trade or classic book is the trade deficit sustainable , which was hugely influence a lot the time. the other witches hugely timely and she cannot comment on it, she is the expert on the codependency of america on china. this is something she and michael rosenberg minted. she cannot talk about that because of her position. jonathan: so, she cannot talk about tiktok now? tom: no. she cannot talk about it at all. maybe we will see her again. right now, our chief washington correspondent annmarie hordern joins us.

it is simple. republican, democrat, everybody inside the beltway knows only one relationship. interest rates goes up, the interest on our debt goes up, as well. the wonderful g peterson foundation codifying this for us in february. how grim is it, rates are up, how bad is the interest we pay on our debt? annmarie: people are complaining if they are buying a new home. this will become front and center today. jay powell is going to testify in front of the senate banking committee and tomorrow, the house. there is going to be a lot of trying the lawmakers, to politicize everything he says. whether or not it is rates, unemployment, inflation, potentially about his number two pick we are waiting for the biden administration to announce. this is going to be a moment where likely, powell is going to have to say i am waiting to see more of the data. it is going to be difficult for

him. maybe not as difficult as his last appearance. that was june of 2022. inflation was almost at 9%. this potentially may be an easier one for him. tom: net interests are going to rise. cdo, he's got out 1, 2, 10 articles that talk about the mathematics behind the politics of the budget. is anybody down there actually reading what the cbo is putting out? annmarie: i think a lot of lawmakers are reading what the cbo is putting up. we are going to hear what the president has to say about his budget on thursday. you have behind the scenes everybody working on the budget for the next fiscal year. let's see what powell has to say. all of this is getting politicized. the fed decisions on whether or not you are on the republican side or the democratic side. jonathan: this is the senate banking committee. i want to talk about the senate intelligence committee chair,

set to unveil a bill that involves tiktok that -- i may not mean it -- they may not name it directly. what is in that bill? annmarie: another tiktok bill. this one is interesting, it looks like the white house may throw in support behind it. what this will do is extend this executive order to the trump administration that gives more leeway to the commerce department to go after some of these technology. this would put it in the hands of the commerce department while the one that got through, the other bill through the house of foreign affairs committee, representative by mr. mccall of texas, that would allow the president to ban it out light. notably, this does not name tiktok by name. a lot of these bills do not name tiktok by name, but it gives either the president, the commerce department, its authority to go after tiktok. under the service we have to remember, tiktok right now is in

negotiations with sify's. it is looking into this with the u.s. government. tiktok is racing against the clock to come up with this plan called project texas that they can isolate u.s. user data and make sure it is safe. they want to maintain in america and continue to operate in this country. lisa: we talk about trying to create middle ground between the two polarized americas. i wonder not just with respect to democrats and republicans, but how much is perhaps the unity around issues surrounding china masking some of the increasing fissures particular for president biden when it comes to the crime bill in washington, d.c. and some of his social policies of late? annmarie: the crime bill has a lot of pushback. biden said basically he is going to side with the republicans. in d.c. at the moment, you have the council trying to withdraw the crime bill. this has gotten messy. there are democratic issues that

have gotten messy for the president. you make a good point. whether or not you are in the democratic party or the republican party, china is this constant thread in washington that absolutely unites the forces within parties and across aisles. this is something where everyone seems to agree that more needs to be done. clearly, the biden administration at the g20 in bali was trying to put this for "guardrails" on the relationship. what we did hear from the foreign minister today, he asked -- is explicitly taking aim at the u.s., saying what they are trying to do is in pro -- encroach on china and make the relationship difficult. this is going to be more difficult for the white house to deal with while they are pushed to a hawkish stance by congress. tom: if they ban tiktok, you

enrage a entire generation of americans. lisa: i wonder realistically if they could ban tiktok based on the children in their home and potential voters are like, we just want to dance. i wonder how much that will play to a tone deaf audience even if it sounds good on paper and if it is justified by some of the data concerns. annmarie: it is a great question. when you talk to lock -- lawmakers about tiktok. the secretary of commerce talked about this. if they have access to anyone under 30, they know this could potentially be a very difficult decision, especially as you gear up for 2024 and try to embrace the youth to come out and vote for you. it is potentially wipe politicians -- why politicians may in-depth striking a deal with tiktok to make sure they can isolate some of these data. if you have a child at home that uses tiktok, you are not like

that home if you are liked and washington, d.c. jonathan: what a ridiculous moment. that right there. describes the difference between an authoritarian country like china, who could not care less because there is no vote, and the u.s., a democracy that is worried about real intelligence risk around a social media company, but at the same time, is worried about the youth turnout. that is bizarre. lisa: [laughter] jonathan: beyond ridiculous. if you truly believe it is an intelligence threat, the fact that 20-year-olds might not come out and vote should not be part of the question. lisa: you can see this modern day version of food loose. we just want to dance. -- footloose. we just want to dance. you have never seen that? jonathan: never mind. lisa: [laughter] how do you bridge what has been accepted norm in this society, stroh scholl -- social

structures have been built around this? jonathan: until we get to the issue of reciprocity, can tech companies get to the mainland? lisa: i would guess u.s. companies would be happy if they could -- jonathan: you mentioned crime in d.c. is there a carjacking problem in washington, d.c.? amazing. lisa: have you seen pushback from democrats because they feel blindsided by president biden potentially joining the gop? there wasn't necessarily visibility. it is an interesting senator fischer. jonathan: futures unchanged. -- vishy tirupattur of morgan stanley next.

it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

jonathan: three days of gains on the s&p 500. can we make it for the fate of? today's price action maybe in the hands of chairman powell in front of the senate banking committee later today. a promo for chairman powell later. lisa: [laughter] jonathan: in front of the senate taking committee. sometimes, it is a bit of a dove. lisa: [laughter] sometimes. tom: who writes the senators and representatives questions? they do not come up them them selves. jonathan: i am sure they have a team. some of them you ask, that one was smart.

lisa: the one that comes from the audience, they analyze the monetary policy. jonathan: i've got a friend, i know where that comes from. let's whip to the bond market. twos, tens and 30's. to year backing away from where we were last week. 4.87 at the moment. 10 year, 3.93. ecb speak, one ecb official from the austrian central bank governor was talking 4 50 basis point hikes. another 200 basis points in the tightening of the ecb. the efc is the biggest talk on the es -- ecb. the fact someone is willing to go into the meeting and make that argument tells you where some of the committee is at and what the debate might sound like. tom: i agree and i would agree the bloomberg terminal is deceptive. you mentioned yields are

churning, they are lower. maybe the curve is doing this thing. the fact is, the vanilla twos, tens spread is breaking out to a new, greater version. we are not quite there. in the broader three-month 30 year piece is back under a full one percentage point inference between three-month paper and 30 month paper. there is tension in the data check today that is maybe not that evident. jonathan: that tension was evident yesterday. we had a 10 basis point move on the front move of germany on the back of those ecb comments. what i am paying attention to, the talk about dropping forward guidance and offer big guidance for the next meeting, they will save we will go 50 at this one. it is whether they do the same again coming out the march meeting and what we hear so far, might be a good chance of that. lisa: and what they say about the balance sheet after they sell off what they have accumulated. let's take a look at stocks moving ahead of the open.

makes ordering goods -- dick's sporting goods seeing $13.80, same-store sales -- sales up 5%. those shares up 4.3%, a tale of the haves and have-nots within the retailing sector. i am not surprised people who buy cleats and bats for their children are fueling the sales. meta-shares up -- [laughter] jonathan: have we got a champlain of export. [laughter] sounds like someone was deeply disappointed with stocks over the weekend. how much is the bat now? lisa: if you get a good one, it can cost over $100. tom: no. lisa: and the batting gloves. it depends. tom: i've got two words for you. ice hockey.

jonathan: [laughter] real money. my knees to last me a season. lisa: what about shin guards? your socks? jonathan: i played for teams. we got given the jerseys. tom: does your offspring bring out a bag with the bats in it? lisa: i do not want to talk about it. meta-, doing more layoffs in light of november. 13% of the workforce, the announced cut back then. at the time, mark zuckerberg said it was the last of it. now, we are hearing thousands more cut. shares up 1.3%. rivian shares down more than 7% because they are offering $1.3 billion of green convertible bonds that could potentially dilute shares. the bigger point is they are raising more capital to plug the fact they are burning through cash as they try to compete with the behemoths. tom: it is brilliant.

we cannot do it right now. we've got to get to vishy. i think this ev thing needs more chat. i am a complete amateur. i think you are dead on to rivian. vishy's chief income strategist at morgan stanley. synthesizing in all of the historic fixed income. i love what you say. we are feeling it every day at bloomberg surveillance. it is a data haze. there is no question. where out there is the clarity you write of? vishy: there is a data haze, it is conflicting signals. on the one hand, we have -- just now, that is giving a different signal. the pmi orders giving a new signal. the signal weakness, the leading economic indicators on the conference board. on the other hand, we had a

gangbusters taylor number. we had strong retail sales. we had many conflicting data. this, i think this weekend the next week, are performing weeks for getting some sense of when is this data, what are the data telling us? tom: on a blended basis, can you use the new, ample coupon to protect yourself if we get further priced down, yield up? vishy: in fact, that is the case. we are recommending to our clients neutral duration so it doesn't feel like -- in lieu of 20, 50 basis point on either side can happen this week and next week. we are basically saying until we have greater clarity on the trajectory of economic growth, are we headed towards a soft landing, which is a base case of

our economies, or this constructive landing which we are not big fans of? we need -- until we get clarity, we need neutral duration, neutral dollar and stay high-quality at much lower duration at the front end. jonathan: that is interesting, given everything we have priced over the last month or so. now, a terminal rate priced at something like 5.40. you think the risks around the bond market are that balanced? vishy: i think this week and perhaps next week, i think there is -- risks are balanced. i think the data from january was affected by a number of things. it was affected poorly by seasonality factor adjustments and will probably not help the february numbers as much. on the other hand, we also had a

warm february. putting those two things, it is conflicting. our base case expectation is a below consensus expectation for our economics team, below consensus expectation for our petals. based on what we have seen in the recent past, whether we end up in a downward trending labor market, more prominent -- toward the front end, or was january not a blip? the -- either of those outcomes can mean if only for the bond market. lisa: let's talk about what the potential market responses would be to either of those outcomes. if we get a hotter than expected print on friday, what does that do in terms of your expectation of how high rates could go? on the flipside, how much could the market retrace the hawkishness they have placed in?

vishy: in either case, or at least depending on the extent of the surprise, it could be bigger than that. that is what we would expect to say. -- c. if we have a 3.50 type of number four nonfarm payrolls, that would significantly blame the probability over 50 basis point hike higher up. it would increase the odds of a 50 basis points hike in march. not our base case, but i think we will hear chairman powell reiterate the data dependency on position making. as he speaks today, he will not have the full knowledge of the friday's employment report coming in. he will be in the same level of uncertainty of data as we are. lisa: before we let you go, i love your thoughts on what happened with the bank of japan on friday. how much does that matter for

the u.s. bond market? we were talking about this with alan ruskin of deutsche bank. he said it might not have that big of an impact on longer-term u.s. yields. do you agree? vishy: my personal expectation is on the ninth, we will not see a change of control. i think my expectations over the course of the year, we will see changes in control. not on march 9. if -- whether the control goes away or moves towards higher path of rates, it is not directly so much on the u.s. rates itself. the incremental demand for the credit, -- those print products hedged in the in terms will not look as -- as they do today.

they did some time ago. it is not the direct effect on the rates themselves, but i would be concerned about what it means toward incremental demand for these other products. not so much directly jonathan: jonathan: -- supplements. always great to get your view on this fixed income market. later today, 10:00 a.m. eastern time, you will hear from chairman powell in front of the senate banking committee. you will hear from him again tomorrow in front of the house financial services committee. sometimes, the questions are different on wednesday compared to tuesday. tom: what is important, humphrey hong giddens communicated -- invented to give more communication in a time of dramatically less communication? i do not think it was nearly as important as it was 20 years ago. these people speak nonstop. we do not have fed speakers today, do they have a quiet period now?

jonathan: not until saturday. tom: how do you know that? jonathan: the meetings are on the 22nd. it is usually the whole week before is clear. tom: what about sundays? jonathan: they can talk on sundays. lisa: [laughter] news you need to know. jonathan: you will not hear from them again after friday. tom: on an airplane for the saudi arabia one, i may have to cancel my trip. jonathan: who are you flying with? tom: united. francine has a gulfstream. i am flying united. jonathan: in two weeks. lisa: what kind of wheels do they use? i am kidding. [laughter] tom: they are really. jonathan: very expensive. tom: they want to be on soft wheels. jonathan: depends on what kind of track it is and your strategy. tom: they rarely have grooves like we have. i am learning.

jonathan: we can have intermediates. tom: i am learning. jonathan: that is good. welcome to the show. futures up .1%. this is bloomberg. lisa: always learning something new. keeping you up-to-date with news from around the world with the first word, i am lisa mateo. job cuts are not over at meta-platforms. bloomberg has learned the company is planning a new round of layoffs and will cut thousands of employees as soon this week. in november, meta-eliminated 11,000 jobs. that is 13% of its workforce. taiwan's president reportedly persuaded house speaker kevin mccarthy to meet in the u.s. due to security concerns. according to financial times, his government shared intelligence with mccarthy about rats posed by china. mccarthy has said he wanted to visit taiwan at some point. the powerful sister of north korean leader kim jong-un has issued a new warning to the u.s. and south korea.

cameo junk is threatening severe consequences if the two countries go ahead with joint military drills next week. last month, north korea threatened to turn the pacific ocean into a firing range of the exercises took place. consumer expectations for eurozone inflation have receded significantly according to the european central bank's monthly survey. expectations for three years ahead plunged to 2.5% in january from 3% in the summer. it comes after a week of ecb policymakers do to set interest rates. global news powered by more than 2,700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪ liable grid. go emerson software. go science people. go breakthrough meds and safe science. go space age welds for super silent cars. go big. or go home. from software that delivers new cures at warp speed,

to technology that makes clean energy reliable, emerson innovation helps make the world healthier, safer, smarter and more sustainable. go boldly. emerson. 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. >> what the story is of 2022, where we started to see unusual market conditions, currency changes, we started to see

inflation. that is when 2022 was not like 2021. the surge of unemployment and the things we did to invest for 2022 that never really showed up. we have made changes to our company to reflect current market conditions. jonathan: very cool to hear from marc benioff, the salesforce chairman and ceo, trying to look forward to a better year at salesforce. this is what meta-is looking forward to eventually. they are reportedly planning a fresh round of layoffs as early as this week. this coming on top of a 13% workforce reduction in november. ceo mark zuckerberg saying at the time, i view layoffs as a last resort so we start -- so we decided to resort to other layoffs. this will add up to a meaningful cultural shift in how we operate. we will roll out more cost-cutting changes like this in the coming months. that might mean this week, we do it again, just more. tom: the reality is look -- is

to look at the history of it, including apple. i am stunned by this. meta-number of employees pre-pandemic, 45,000. now, 86,000. did not know that. jonathan: it did the same with amazon. tom: i think amazon, we get it is a last mile, it is warehouses, trucks, whatever street. with meta-, what are they doing? they are all in offices or working from home. doing instagram, facebook. i had no idea that went from 45,000 to 86,000. jonathan: demand went off the roof. tom: we turn to the senior technology analyst at bloomberg. an amateur like me looks at that and says, they over hired. did they over higher? >> they probably did in hindsight. what they probably saw was

revenue accelerated. the deviled -- double their revenue at this time period. if revenue growth is 25%, 30%, they will expand their company growth with revenue growth. that is what a lot of tech companies end up doing. the timing of this cut, given it is coming after a few months of the last cut, suggest they have probably not seen the end of this downturn especially in terms of topline acceleration and i think that is where you could question how much is the pivot responsible -- metaverse pivot responsible for this? right now, it is 2% of their revenue but 20% of their employee base. tom: what i think is so important is a broad look at technology is the digital lad growth party over --digital ad growth party over?

there was this assumption there would be digital ad growth forever. is this finally done? madeep: no. i think it is still cyclical. right now when you look at the advertisers, it is mostly e-commerce, gaming, these advertisers have pulled back a lot because they are seeing slowdown in their businesses. you compare that to financial services, they are aggressively spending on ads. when it comes to digital ads, they are more targeted than your linear, tv ads. i think given we are talking about chat gdp, it is going to make those ads more targeted over time. that signal in print will remain. the question is, who has the engagement? where people are engaging, those platforms whether meta-or something else, that is what needs to be figured out. lisa: or, tiktok. i wonder if tiktok gets

segmented off by the u.s. government. who benefits the most? is it meta? mandeep: i think it is going to be all of the digital platforms. meta-, probably more on the instagram site. youtube, we think that is going to be the biggest beneficiary. you came as a scale to billion monthly active users. now, a lot of those streaming when it comes to your core cable tv channels are being viewed on youtube. that is powerful. when you view targeted advertising on that platform, showing different ads for different, graphics, that is -- a lot of that secular shift in ad spending to digital platforms will happen on spending. lisa: we started talking about the layoffs at meta and how facebook is doing another round of cuts potentially this week on top of what they did in november. how far are we from seeing the

end of tech job cuts? mandeep: this in particular suggests the fact meta, which is 85% of social media times spent doing another round of layoffs suggests we are probably not seeing the light at the end of the tunnel. it has probably got more room in terms of this downturn. the topline acceleration is 2024 at this point in time. jonathan: are some tech firms taking a different approach, we made a mistake, let's try to grow into it the next few years? mandeep: you can say that for software companies that have a recurring subscription model. it is harder for ad companies, which are more transactional. there ad pricing is determined, so an option. clearly, it will be harder for them to have a control on their topline. for companies that have a recurring model, this is the time they think they can get more talent and make sure we --

make sure morale stays high. they will come out stronger if they show cost is a plan. jonathan: i was thinking about amazon. they basically doubled the workforce during the pandemic and have come out with minimum, marginal cuts to headcount. why do you think that is? mandeep: one thing is, when you look at the last month of review of the things they are trying to build on the e-commerce site, these are sick you learn trims -- trends. the world is trying to go back to pre-pandemic ways, a lot of behavior is going to stay. where will be the rebound in terms of growth? if they have scale and continue to operate with cost-cutting, they will be at a point where the scale will eventually did on the internet site. jonathan: wonderful to get your thoughts. meta, almost flat the next --

last 12 months. year to date, it is up 4%. absolutely fired. you get 5% on t-bills? you should be happy with that. tom: i do not know what to make of this. i respect where he said it is not about a digital ad slowdown. coming out of the pandemic, what is the new digital? i do not mean justmeta, i mean the complex of huge revenue growth, dominant, west coast companies. jonathan: 5% on t-bills. hello. finally. cds. lisa: i think more than a dozen banks are starting to offer 5% on cds. it is not major ones. jonathan: dragged kicking and screaming. lisa: major banks are saying we have plenty of deposits, we do not need to attract them. if you are capping a blood, you can offer a 5% ecb, but you cannot compete with us. that is what you are seeing,

incredible competition. jonathan: the toaster is not coming back -- the toaster has been making a comeback. you happen waiting for this. he just wants the competition. lisa: [laughter] tom: good morning, mr. solomon. 3.75% apy. it is four times the national average. no fees, no minimum. it is net gain, they are slow to raise rates, aren't they? lisa: a lot of these banks have so many deposits. bank of america, j.p. morgan. we were talking about they didn't want so many deposits because it became liability. until we see them lose deposits that a fast enough pace, they may not raise rates as much as other banks. here is the issue i am wondering about. when do people start to realize they are losing a ton of money they could otherwise get in just flat cash in a bank account?

there is this inertial force. is it going to right size, there are people who think like that. jonathan: are you describing yourself? lisa: [laughter] theoretically. jonathan: are you all right, lisa? lisa: move on. moveon. [laughter] tom: i talked to her yesterday. simple answer is, if we get 6%, three month libor, we get a two and 20 pay on the triple leverage. we get finally back to -- jonathan: we get bonuses? tom: you guys are not directors. you are not on the board of directors. jonathan: i hope mike wilson is not listening to this. i want him to stick around. he is going to join us in a moment. we will catch up with him as he acknowledges, maybe, you can get a pick in this market. tom: this is important. jonathan: he said equities

survived a crucial test of support, that suggests the bear market rally is not to end yet. mike wilson, next. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. and it's easier than ever to■ get your projects done right. inside, outside, big or small, angi helps you find the right so for whatever you need done.

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>> i think inflation is complicated when it comes to the

u.s. equity outlook. >> it is hard to say that you will get inflation down to the 2% target. >> the fed can get inflation to wherever they wanted to be and growth to wherever they wanted to be. >> right now the market is putting a 30% chance that the fed will go 50 basis points at the march meeting. it would not take much to push that over 50%. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning everyone. on radio and television, a must-have half hour for global wall street. mike wilson will join us in a moment and within the data haze that we heard, john it is a data haze going into the chairman's discussion. kenneth: will -- jonathan: will he validate market pricing, he give that the official seal of approval going

into the payroll friday and cpi? it will be difficult because the narrative switched so quickly after the report in january -- for january and herb -- in early february. he said the dish inflationary -- disinflationary process has started. though he repeat that phrase? tom:? to the physics of it and will he be so brave to say i do not understand how he can do that. not only the headline data but that minor data adding into it. jonathan: i think you phrased it well, the two way risk. payrolls friday and cpi the 14th. you either get confirmation of the buoyancy or you do not, and we flip aggressively the other way pretty quickly. tom: 1991, the dell dell -- the dow jones just real average 2900 now it 33,000. i need you not -- i know you need to know that to get a benchmark. jules westheimer, mike wilson

was another -- was a little kid at home with popcorn in his hand watching jules westheimer and mr. westheimer said gloom rules on wall street which is where we are until we do not like mike wilson. lisa: i disagree. i think right now there is an optimism that has been ruling and there is a feeling that the u.s. can get past .5% rates for a year without seeing some sort of major recession. how many people are full on deeply unapologetically bearish right now? tom: for all of you on radio and television, stop what you are doing, and extended coverage with michael wilson. i am looking at curve inversion that will not go away. jonathan: it backed away from the levels of last week it was 3.4% and we are down another two

basis points 39382 at -.10 percent at 106.68. in the equity market, but four k and we are positive .2% on equity futures. there was one quote that stood out it was from mike wilson and morgan stanley reading "equity market survived a crucial test of support that suggests this their market rally is not ready to end just yet. how much of a change was that? tom: we will dive into that right now. john -- jon wants to dive into this. help me out. ralph was on a while back and he said look, there was an october bottom. we have heard this from a few other select people. with this more optimistic call, can you call and out tober bottom -- an october bottom?

mike: thank you for having me. we did call the bottom in october, and we thought it would be a substantial rally of 15 to 20% and we got that rally and then we decided it was no longer attractive and we backed off and we said we would retest the lows and finally take it out which is based on the fundamental view that the earnings sanction is in place people acknowledge that that is a wide range from how deep that session will be with us in the deeper end of the range. the past weekend we looked at the chart and we have to be objective about what we see. we are technicians and fundamental strategist and we looked at the price action and we actually talked about it. the week before we said we would test this to see if it was a constructive marker at least in the short term and it is a short-term positive.

i do not think it changes the intermediate term view that the and reward is still lousy because of what we have on the fundamental side. we remain in a traders' market. jonathan: how different is this called compared to the call for a tactical rally you made in october? mike: it is different because we were treating 3500 of the valuations at 15 to 20% lower. entrance rate -- interest rates were higher. we had a lot of catalysts and china reopening was a reason to believe for a very tradable low and it turned out to be the case. we do not always get that stuff right, it is impossible to every time. this is much more tactical. this is saying that acknowledge that the tactical picture held and we did not expect that to be the case. they could turn down this afternoon for all i know depending on what jay powell

will say. i have no idea. maybe that triggers people to get negative. one thing that i will say that we are pretty confident between now and the next earnings season is when the next bear market decline happens. a more meaningful decline, 10%. jonathan: i just want to sit on the early part of this year. it is difficult to get everything right and you said 3900 was easy. what is more difficult about it now besides the technical point that you have made. mike: i think there are a couple of things to acknowledge. the economic data has been better. china's reopening is getting going. they have held back but they can gather steam. those are things you have to say look you came into this year feeling the recession was inevitable and that is no longer the case, it is a 30 to 40% chance at best. that can keep spirits alive. the other thing that has

happened that we have talked about multiple times as a liquidity picture outside of the u.s.. the fed is trying to tighten financial conditions and the problem is that we have the bank of japan adding liquidity for any dollar softening up which is kind of neutralizing the fed's goals of tightening financial conditions and that is breathing life into risk assets. ultimately we think valuations and the fundamentals meaning earnings will determine where stock prices trade and that set up is not particularly great. lisa: given some of the changes, how much does that change what floor you could see in the scenario for equities? mike: look, we have to be flexible and we also want to service different types of clients, whether we are talking about traders or asset owners. we have been pretty adamant, that the fall was a good entry

point and we had a longer time rise and if you added risks you could stay with it. i do think that people are getting a little bit carried away, so given the rally that we saw in the fall which is the rally we have seen this year, we have different complexions. the rally was different in fundamentals with economic data getting better with china and that will help the cyclical type areas in the market with a more speculative rally that started in january complying -- combining last year's losers. and that is just getting out of control again in the context of higher rates. there is a lot going on and there are two ways to think about it. if you have names that you want to own or underwrite through what we think will be a difficult time for earnings and say there is value in this security for the next three years, great. however there is a lot of stuff that is gotten dragged along that is while terribly -- wildly

speculative. and that is the stuff you have to be careful. because that stuff has to reevaluate in a way that does not make a lot of sense. lisa: what kind of downside are you talking about. i think you're talking big tech names and meme stocks. mike: for big tech i do not -- i think some of them will go bankrupt and that is not the whole stock market. overall with the growth of the stuff and even the cyclical names that have gone too far, they could have 20% downside no problem. our evaluation work could suggest that the valuations are out of bounds again. it is a stock rocher's market and that is usually what people say when they are having a hard time calling the direction of the market. we do it too. it is a stockpicking market and that is hard, that is not an easy game to play, that is a

stockpicking market and the stocks are likely to go up versus down with less than 50%. it is a stockpicking market with not a great macro backdrop. jonathan: always appreciate it. i like how unique knowledge -- how you acknowledge some of this. we will come back and talk about that conversation in a moment. tom: it is just critical, mike and i have been through this a million times. all of a sudden with gravity returning and interest rates that we have not seen in 16 years, it is not that the party is over, but we have returned to normal dynamics, and the key dynamic and this is off of my mentor, you know -- matters, profit and free cash flow and there is a lot of people out there without free cash row -- class flow. jonathan: this is about earnings , he does not think earnings will impress this year. lisa: we have already seen

unimpressive earnings. let us be clear, we did not see gangbusters results, but things that disappointed more than usual. how bad do things have to be to kind of get us in a different mindset on a market level? we will be picking stocks. jonathan: we will continue to chat with mike wilson in a moment. just to give you the lineup of things, 10:00 a.m. ease in time you hear from chairman powell phrasing off and grilled by, they are always a same aren't they, by the senate banking committee and then it starts and is just like ok, how any as of this? looking forward to that. that starts at 10:00. if that is not enough, it is again from the house financial services committee on wednesday. lisa: usually last 2.5 hours. jonathan: what do you make the quality of the questions of the house on wednesday? lisa: i think it is stock picker kind of quality. jonathan: your bond market,

yields at two basis points. futures up .2%. this is bloomberg. >> keeping you up-to-date with news from around the world with the first word. president biden will propose raising taxes on well thing americans to help avert medicare funding crisis. it would boost medicare taxes from 3.8% to 5% on certain kinds of income above $400,000. it would allow the government new power to negotiate drug prices for medicare. bloomberg learned that more job cuts are on the way with meta platforms. it will cut thousands of employees as soon as this week following a 13% reduction in november. meta saw a slowdown in advertising revenue and shifted focus to the metaverse. china is shaking up oversight of its technology said there in the wake of a tech battle with the u.s.. a national bureau will manage

and police resources while building up digital planning. the ministry of science and technology will be strengthened the formulate strategic policies and orchestrate nationwide initiatives. in france, unions are hoping to bring the country to a standstill democrat -- demonstrating against the plan to raise the minimum retirement age. transportation is likely to be severely disrupted with one out of every high-five -- one out of five high-speed trains running. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lissa matteo and this is bloomberg. ♪ what does it mean to be ever better? its your customers getting what they ordered when they expect it. discover how ryder ecommerce makes your customer's experience ever better.

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>> we could still of soft landing, a mild or moderate recession is possible. there is a good chance at inflation will come down but not enough by the fourth quarter and the fed might have to do more. a lot of things could happen in the world and some of the bigger trends are inflationary. jonathan: tom's favorite thing is when ceo of financial institutions start sobbing -- start talking. we hide a lot of comments from brian moynihan overnight and i was like yes, that is what mike

was saying. not great news but anyway. tom: i am going to cut james dimon some slack. because this guy is brilliant. he synthesizes it and i am guest 200 people right -- help him write his annual level -- annual letter and i wish that many bankers did short or long. i find them valuable and they touch on different tones or themes. i wish it was more like that than what you think about why equals c plus g plus next? -- n x? lisa: everyone is a stock picker until it is macro. if you are a stock picker arranging your business how do you make decisions if the macro is so uncertain. jonathan: i believe we will continue this situation -- this conversation in a moment and

mike has been explaining the difference between the real economy and what develops in stocks. the earnings are different and in broader gdp. tom: i am a huge believer that the linkages are suspect and the financial media likes to move in lockstep. let us get back to mike wilson who is hugely influential as a chief equity strategist and cio at morgan stanley. i want to go to the great divide, the gravity has returned to the system and you were studying this in ann arbor years ago. when you get a normal interest rate structure, all of a sudden down the income statement matters. divide for us now how you look at those that profit from those that do not profit, that seems to be a new metric. mike: i do not think this is a new metric, i think it is a forgotten metric, which is the cost sits on the balance sheet until they hit the income

statement and this whole idea of a accrual versus cash accounting and it did seem like we learned that 40 years ago. and i have a history of studying accounting and it is a great tool to kind of see through the noise and this is why this past week we highlighted a great report done by our global tax evaluation team highlighting this spread between cash flow and none of this being reported. it ties into everything we have been talking about for the last year year-and-a-half which is the pandemic law downs which have put people on this incredible period of over earning by corporations because the costs were slower to increase in the revenues were back. and now we have the opposite of these companies accrue the costs on the balance sheet at a time when inflation was running hot and they thought this would be strong. and it has not actually happened

until now and that has to flow through the income statement and that will hurt margins. that is a story. the question is will markets look through that and suggest that this is temporary and companies get their head around it which we agree with, but our experiences at the markets will not work through it if the situation is as severe as i think it will be. jonathan: you see a difference between the real economy and what could happen with earnings. how well received with -- how well-received is that with clients? mike: investors appreciate that. the problem is that it is noisy, and we live in this world now where there is sort of almost like hand to mouth guidance, the fed doing it the bond market and companies do it for the stock market. it is a process that takes longer than it should. and that is what is frustrating for some investors who are in the weeds. it is like my goodness, it is

obvious what is about to happen, why is the market taking so long to price this, that is just the way it is. that is not a new phenomenon. you get an earnings recession it takes longer than you think. jonathan: do you get questions about single names and what single stock ideas do you want for them? lisa: we do but i think most clients are good at that job. they do a good job and that is their job essentially. we help them and run a mild portfolio and we have had great success with that. it is a helpful tool and then we run a lot of screens based on work from a macro standpoint saying these factor variables should be in effect and this is what you want to put in your portfolio and that is how we go at it. we do not talk specifics necessarily with clients around individual companies like our analyst team does. lisa: let us talk about sectors

and margin compression. if the service sector is possibly seeming more weight pressure and the need to pay more to people to bring them in the door the and say tech stocks. how do you look at where margin compression will be the greatest and what could get hit as people realize this new kind of reality? mike: one of the other features that we have to touch on for a second is that the recovery itself was two stage, goods and then services. in a normal recovery everything comes back at the same time so you have this rolling recovery and recession. tech is in a recession, they are seeing negative growth and they are laying people off more aggressively than other sectors. the big question for the economy is that does it spill over into the services sector where employment lives. small and medium companies employer -- employee a lot of

people. we think this entire economy, and services will get it later in the year when other businesses are showing weakness. it is sort of a circular argument clearly this idea of operational efficiency is what the market is paying for. companies that show good controls and labor costs that are followed -- that are smaller. this word efficiency has been popping up and i find it very interesting that we are hearing it around different companies we have been talking about it 12 month. people are catching on. think the market will pay for companies that are very efficient with their expenses and can get the revenue to the bottom line. lisa: are you saying that in the months to come the good sect there is that perhaps have already seen the downturn will outperform as margin pressures start to hit the later recovering sect errors such as leisure and hospitality? mike: that could be the case.

that is not a high conviction view but we think that a lot of the good sector stocks in particular and the earnings forecast have come down because it is obvious, we had a pull forward of demand that the question is what does the demand profile look like businesses? are they winners in the long term? and services is -- there have been demand as prices are out of control. it is just messy. in our view we do a lot of work on top-down earnings and we do not have to focus so much on the economy which is a much trickier thing to do. calling a recession is hard because you never know when the light switch goes off, but when it does it is immediate. there is no leadtime and it hits you. the earnings picture we can see out and that is when we have conviction. jonathan: well said and fantastic to catch up with you. thank you very much for being

with us. a difficult moment in this equity market. tom: tough to call because as he said, he said this is not a new regime, we have returned to an old regime and there are semi people on radio and television right now who have never lived this new world and here we are. jonathan: and anna ruch skin said something about a different asset class didn't he? tom: is a whole new world after all. jonathan: are you going to sing that one? tom: no. lisa: it is from "aladdin." jonathan: grumpy, honestly. tom kennedy and jp morgan. there we go. lisa: is this grumpy? ♪

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tom: bloomberg surveillance and an interesting tuesday with a continued market lived, great to hear from mike wilson with some of the nuances for us and some real good equity conversation to just dust to juxtapose with what anas said. lisa: and to come up with a cohesive narrative and that stands out to be in general how hard it is to plan out something when you have already seen a recession in tech and good sectors and the services sector

is booming. how do you put this together? lisa: we will talk to dana peterson for a look at the overall american economy. because there is been so much talk about chairman powell speaking we would get not a history lesson but where are we with michael, our chief international economics and policy correspondent this morning. michael, you and i remember augustus hawkins of california, together 45 years ago and interesting bit of legislation that had hope in it. part of that was to force the fatah nonpoint to come out -- the fed at god point to speak more often. the hawkins testimony was illuminating leaking when we rarely heard from them. now they speak every 15 minutes and your life is chaos. do we need to hear from the

chairman this morning? mike m.: not particularly. i do not think anybody in the markets will hear anything they do not know from the fed. and because we have jobs and cpi, powell cannot be very determinative in what he is saying because everything could be upset by what is coming. in the olden days you and i used to walk two miles in the snow to capitol hill listen to -- to listen to alan greenspan, both ways it was a big deal and everything he said was parsed closely. in one of those hearings the famous time when he said if you understood what i was saying that i must have been missed taken. lisa: we have seen a shift in markets, the fears of one of -- of runaway inflation tempered by this process darted in january and less so last month. how much in d.c. has the

narrative shifted to economic growth later in the year. mike m.: it has really not shifted as much as it has fallen into silos, and those are based on politics. the democrats on the hill are very concerned about growth and the idea of unemployment rising. the forecast is for something like 4.6% and it is about 1 million and a half job losses. republicans are focused much more on inflation and trying to score political points arguing that joe biden is responsible. for the fed it is a question of how do you know what will happen because a pandemic upset so many of the rules of thumb they use. it is hard to know whether we will see that kind of slow down that would create a million and a half job losses or whether inflation can come down more quickly than it has in past episodes. lisa: do these hearings tend to

reveal anything. how newsworthy have they been in the past? mike m.: every once in a while you get a statement out of the fed chair that is either illuminating or something that is a slight mistake that the markets will jump on. it really does not get you a lot. i was kind of wondering when you were talking to mike wilson, no argument against ike wilson. if you are an analyst do you have to say you got something out of the fed or is it fair to send out a note that said he told us what we already knew. tom: this is really important. mike is busting my chops because he knows it is a third rail issue for me. for global wall street folks no news is news. i cannot emphasize that enough. when there is no earthsea -- there is no earthshaking news that is news within the continuum of moving forward. i do not want to turn this

question into a fancy economic is rotation. so much of this is based on a theory of what we will do post-pandemic with inflation. and in this theory there are optimists like olivia who say we will work this out and get down to a regime that represents what we used to know. there is another group like ken rogoff of harvard that says maybe we will sit at a higher level. as the fed thinking about that? mike m.: the fed is definitely thinking about what comes next and the timing of when it is is up in the air. do we go back to an old normal or a new normal? what does it look like. the best guess is that we end up with a slightly higher inflation. they do not want to be zero again. they would like to be 2% to 3%.

if they can get down there without causing a lot of we say disruption to the economy, that is what the target will be. all of this has to play out over the next year or so. tom: thank you so much. michael mckee leading our coverage with the testimony of the chairman and i will tall -- i will call it the humphrey hawkins testimony. dana peterson listens to every single word two days running, and she is chief economist at the conference board. what i love about their work it is a consumer foundation with a little bit of business investment. you said that measured is not 50 basis points and we have a measured fan -- measured fed that will stay at 25. this cross -- discuss the nuance of a measured fed despite -- and the jump conditions? dana: i think a 50 basis point

height -- hike is inflammatory and will raise concerns among markets and consumers and businesses that the fed is losing control over inflation. i think the fed will opt for more 25 basis points, perhaps three more and may be greater than that. we will get close to something like 6% but it will depend upon inflation and the labor market in whether wages are cooling at all. i think certainly the fed will not want to cause alarm and will probably go with 25 basis points in terms of interest rate hikes going forward. lisa: you have unique visibility into consumer confidence and spending which is the engine of the economy. are you seeing signs of softening materially or not really because we are seeing the wage increase? dana: it is interesting, consumers are divided. in terms of the present situation they are saying we are fine and most of us who are

working and many who switched jobs are seeing wage increases and we might have a little bit of savings that we can spend. we have credit cards and we are continuing to spend. looking at the future they still say we expect a recession at some point and we are concerned about job prospects and the business environment and about our own income. it is really a mixed picture in how consumers are feeling. jonathan: how -- lisa: how divided are the higher and lower income sector there is? companies increasingly cater to wealthy individuals. they have hundreds of dollars of savings in their checking accounts and than others who are looking at shrinking spending capabilities. how much do you see that reflected in sentiment? dana: it is interesting in the last reading, folks making between 35000 and 75,000 were

the most concerned about the outlook, and when we look at what consumers will say regarding spending, they are not going to buy cars or homes and they are pulling on -- pulling back on expectations on going on vacation. that is important because that is a harbinger of what will happen in the services sector. tom: with all of the uncertainties out there the great divide is the domestic economy versus foreign dynamics and we look at that subdivided into domestic final sales. does domestic final sales indicate that we are near a recession? dana: it is a mix, consumers did spend a lot of money in january. we are pulling back on consumption late last year but then there was a big spurt. business investment is starting to roll over and investment in structures and the residential investment environment are all

weakening. the last shoe to fall will be the consumer. tom: do you see the tea leaves of a consumer that could fail? dana: well, i think that is the tough part. the leading indicators continue to signal a recession and said that recession should be happening right about now. consumers are defying all expectations. i think we really need to see the data for february. certainly january was a good month in terms of the weather. february was horrible and march was worse. we will see if that is borne out. tom: that is going to be in all of our ads going forward. february was horrible and march was worse. dana peterson, thank you. i think it is so incredibly important to take the algebra and subdivide out that this is the american economy and that over here is exports, imports,

inventory build and dynamics. lisa: i love that she was saying the leading indicator should say that we would be in recession and consumers should play along. consumers are spending and that is continuing the growth and inflation. what does that end? tom: i go back to microcosm and that each story will be its own story and not aggregated together, and you will have a select group of people that means money even in recession no matter what the level is and a lot of others flat on their back which is a very scientific term. we are getting there now with moldy numbers up. and then there are others that are like let's go, china, 5% gdp onward. tom: lisa: i am -- lisa: i am watching jobs. in the number we get on friday,

we have gotten 10 upside surprises consecutive. the longest freak on late -- streak on labor markets going back decades. when you look at that kind of surprising upside momentum some, when do we start to say we are misunderstanding something in a labor market that is unique? tom: i would suggest is the third tranche, what is called the biden stimulus. the fact is that we had a big pop and it is there and it is still there as it fades out over time. you know. that is all there is to it. futures up 16. the vix under night teen 18.79. stay with us. ♪ lisa m.: keeping you up-to-date with the first word. the dow cuts are not over at meta. bloomberg learned that the

company is planning a new round of layoffs and will cut thousands of employees as soon as as week. in november meta eliminated 11,000 jobs, 13% of the workforce. kim -- the sister of kim jong-un issued a new warning to the u.s. in south korea. she is threatening severe consequences of the two countries go ahead with joint military drills. last month north korea threatened to turn the pacific ocean into a firing range if the exercises took place. hif global has agreed to develop tech knology -- technology to capture carbon directly from the atmosphere. they say it will produce barrels of efuels. >> we are creating a whole new industry, it is very simple, we are taking water and extracting

hydration from it, taking air and extracting the hydrogen and combining them. lisa m.: this could be used to keep cars with internal combustion engines on the road. nissan's rating was drops to junk. this is a blow for the company. the industry's turn to electrification -- it is unlikely that nissan could make a strong recovery. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪ whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most.

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policy would be a superior strategy. on the other hand we have to remember just how strong external forces of inflation are or have then. although i am vindicated i also recognize that the external forces would be there anyway. tom: an american in paris, well, london, catherine mann of the bank of england and superb international economics in america, just a bank up job. -- bang up job. she has been a hawk given her efforts at m.i.t. i would not be surprised that catherine mann is towing a tough line. lisa: it is interesting that these people that aired on the side of not doing much saying it is a different scenario. tom: it is important to understand that if you do currencies and commodities all sorts of good things will happen.

what is great is that any given firm, the guy who is the "fixed strategist," it is always their fault. if it is equities you can put mike wilson and partition that. if you are a fixed strategist every day it can be your fault. lisa: and you are supposed to know what is going on. ian understands the angst. he has the international cio for a fixed income at morgan stanley and i am so glad that you are here because i am struck by what robert has said. the ecb governing council member. he potentially backs raising rates in europe by 200 basis points more this year, potentially 450 basis point rate hikes, how outlandish is this? ian: he is probably at the more hawkish end of members. the reality is that the ecb still has inflation problems to

deal with. everyone is aware that core inflation is coming down slower than the fed would like it, that is not the case in europe. core inflation moves higher. the way the mix is likely to be calculated will be continuing to move higher. the ecb who were behind the curve and were slower to the party of rate hiking is playing catch-up. it feels like they will have to go harder, although we need to be clear that this is probably the top end of expectations. lisa: extreme top end and this comes at a time where so many people have been bullish in europe. they have seen the surprise of a warmer than expected winter with more growth in tandem with inflation. do you push back against that? iain: i think that is right. there were big concerns about europe last summer with the gas problems and the hikes in the bundesbank. at one part -- point we were saying that germany could fall 5% and now you have an

environment where europe is coming out the other side and people are seeing a good cycle out of europe, and that goes into the problem that the ecb has to deal with. they have the growth but they also have the inflation and they have to keep going. lisa: coming out of the pan -- tom: coming out of the pandemic you have one of the toughest jobs looking across all of commodities and currencies and fixed income. what to the correlations look like for next year and how predictive or tight are the relationships of extent,, commodities, and currencies. iain: if you are going to see, obviously we saw a big correlation last year, in fixed income and equity is, everything was going down will see a difference this year because of the huge repricing that we saw in fixed income. and then you have some central banks who are much further of

said -- ahead like the bank of canada and we had a more debit -- dovish message out of australia and then there is the ecb and other banks. tom: whatever the relationship is an we do not have time to go into fancy talk. do you assume that the dampening going through 2023 and 2024 is sign odo -- cynodal dampening or are we going to see more jumping conditions within the relationships of the extent, and commodities? iain: we will have a slower or smoother journey than last year. outside of the european central bank i think they wanted to slow down the pace of hiking which will bring down market volatility and that it is a case of later in the year how high do rates get and then do we have to do's sharp decreases? tom: this is just critical the extension of the x-axis look

like. and the real question is what does 2025 look like? lisa: especially when you have worked through some of this reset. going back to the idea of the rate hikes, how -- why have we not seen more spread risk or contagion really feeding through to the peripheral spread and bond yields. this would typically blowout? iain: firstly we did see that concern around spread risk in europe last year and last summer when we had big concerns around the slow down, and as we have come through that and the slowdown has not materialized in growth and strength expander. -- looks better around europe and we have seen that in high yield spreads they have come back down to being in line with where the u.s. is trading. you have a much more joined up europe than i can remember with the recovery plan in place and

the coordination that we have seen. it feels like we have not gotten that sort of spread risk, the periphery risk that we saw through previous cycles and have come to know over the past decade. if that goes away there are decent yields on offer. jonathan: that is -- lisa: a lot of our guests say that people have overplayed the euro and are overseeing what will happen with the dollar and the potential strength later on, do you push back against that and say do you have upside risk with respect to ecb rates and resilience can maintain that? iain: i would say both and i would add the flow dynamic. if you think about what has been the case with europe, negative yield and bonds. who wanted to invest or buy? that is not the case. you have a two year germany out of 3% and north of 4% over the italian curve and 7% across the

european high-yield mix and that is before you get into equities. there is a lot of demand that will come back into fixed income, people who have not wanted to own european fixed income for a long time. tom: where are you on a global basis, is there comfort? do you have to go short-term? can you actually be brave like the equity people? and extend out duration? iain: we are still playing for the curve to flatten, and we think there is still concerns of the central banks around the world doing more. although the repricing we have seen over the last few weeks has been very helpful. and then really it is the back end of the curve that gives you the ballast in a portfolio. that is a bit of the curve that will do well if things go badly and fixed income yields move higher and in the capital gains could come from that. tom: i am asking for a friend

and you are allowed to vote on the 97 year austrian piece down 71%, you extent duration out 97 years? iain: last week, i think that is at the lowest price on 100 year bond. tom: we did notice that, continue. iain: obviously you have to take into account that is the european curve where there is more still going through from an ecb standpoint and in the u.s. if you want to look at the 10 year part of the curve and 4%, those two 4.25 but i cannot see amounts higher than that. and over the next few years that looks like a decent vestment. buying bonds is more attractive than at any point last year and thankfully the rally that happened in january has reversed a bit. tom: do not be a stranger, lovely to see you in our new york studios. was that enough for you?

lisa: i am looking at the austrian 100 year bond and it is trading $.41. it was up there at one point and it is no longer. tom: there is a lot of people doing that. we had folks a couple of days ago saying that fossils are going out and buying coupons and being maximum yield hogs and saying the kids take the price decline down the road. it is not a small issue. lisa: i remember my grandfather gave me some treasuries and basically handed me the certificates and said -- tom: you got a 14% treasure. lisa: it was a great deal, it was not that was bad and it was a good thing. tom: you shall you sold it because you needed a new transmission. it is an interesting day, in an hour a testimony and the important headlines at michael mckee will give you have the testimony of the chairman of the federal reserve system. the vix 18.79 and i cannot look

at the ice -- the austrian price. this is bloomberg. ♪ three kids?! this was never part of the plan! these kids order the lobster mac 'n cheese! what if she wants to play golf? we're going to have to outlaw golf. absolutely no golf in this house! not under my roof! since we started working with empower, all of our financial questions have been answered, so we don't have to worry. so you never- nope. always part of the plan. join 17 million people and take control of your financial future to empower what's next. it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. these days,

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jonathan: good morning. futures positive a 10th of 1%. the countdown to the open starts right now. >> everything you need to tip set for the start of u.s. trading. this is bloomberg, the open with the jonathan ferro. jonathan: live from new york. chair powell facing down